Ayerst (Inspector of Taxes) v C & K (Construction) Ltd

[1975] 1 All ER 162

Categories:        COMPANY; Insolvency, Shareholders        

Court:        COURT OF APPEAL        

Lord(s):        STAMP AND SCARMAN LJJ, BRIGHTMAN J        

Hearing Date(s):        25, 28 OCTOBER 1974

Income tax – Discontinuance of trade – Carry forward of trade losses – Company – Transfer of business by company to subsidiary company – Liquidation – Effect – Transfer of business by company in liquidation – Ownership of share capital of subsidiary company – Beneficial ownership – Creditors and contributories – Business belonging to person as trustee to be treated as belonging to persons for time being entitled to income of trust – Business belonging to company to be regarded as belonging to owners of ordinary share capital – Whether before transfer transferor company trustee of business for benefit of creditors and contributories as persons entitled to income under trust – Whether after transfer creditors and contributories beneficial owners of ordinary share capital of subsidiary company – Finance Act 1954, s 17(4)(5).

Mactrac was a limited company which carried on business as a builder and civil engineering contractor. The taxpayer company was a private limited company which had an issued share capital of £100 divided into 100 ordinary shares of £1 each. Mactrac was the registered holder of 99 of those shares and the beneficial owner of all of them. On 4 June 1962 an order was made for the compulsory winding-up of Mactrac. On 8 January 1963 the receiver and the liquidator of Mactrac sold the whole of its business as a going concern to the taxpayer company. After the sale Mactrac continued to be the registered holder of 99 of the taxpayer company’s shares. The taxpayer company claimed that it was entitled to set off the unrelieved losses and capital allowances of Mactrac against its profits for the years 1962–63 and 1963–64 on the ground that, under s 17(1)a of the Finance Act 1954, Mactrac’s business

Page 163 of [1975] 1 All ER 162

was not to be treated as discontinued by reason of a change in the persons carrying on the business. The taxpayer company contended (i) that, immediately prior to the transfer of Mactrac’s business, the business had belonged to Mactrac as trustee and that the creditors and contributories of Mactrac, as the only persons interested in the assets falling to be dealt with in liquidation, were collectively ‘entitled to the income under the trust’ within s 17(4)(b), and were, therefore, to be treated as the beneficial owners of Mactrac’s business; and (ii) that, after the transfer, the creditors and shareholders of Mactrac collectively were the beneficial owners of the ordinary shares of the taxpayer company and that accordingly, under s 17(4)(c) and (5)(a), the trade transferred to the taxpayer company was to be regarded as belonging to the creditors and shareholders of Mactrac. It was common ground that, for the purposes of s 17(5) the taxpayer company was not a subsidiary of Mactrac since the liquidation had had the effect that Mactrac ceased to be the beneficial owner of the shares in the taxpayer company.

Held – The creditors and shareholders of a company in liquidation were not the beneficial owners of its assets under a trust of which the company was the trustee since (a) the company, stripped of all its rights, powers and obligations in relation to its assets, could not be a trustee of those assets for the creditors and shareholders and (b) the creditors and shareholders, having no rights or powers even collectively to deal with a single asset of the company or to direct how it should be dealt with, were not the beneficial owners of those assets. It followed that the creditors and shareholders of Mactrac were not the beneficial owners of the taxpayer company’s shares immediately after the sale of Mactrac’s business to the taxpayer company. Accordingly the sale had effected a discontinuance of the business and the taxpayer company’s claim failed (see p 165 j and p 166 a to e and p 167 f, post).

Pritchard (Inspector of Taxes) v MH Builders (Wilmslow) Ltd (1969) 2 All ER 670 approved.

Decision of Templeman J [1974] 1 All ER 676 affirmed.

Notes

For company reconstruction not treated as a discontinuance, see 20 Halsbury’s Laws (3rd Edn) 135, 136, para 238, and for cases on succession to a trade, see 28(1) Digest (Reissue) 110–114, 312–329.

For the Finance Act 1954, s 17, see 34 Halsbury’s Statutes (3rd Edn) 296.

For the year 1970–71 and subsequent years of assessment, s 17(4)(5) of the 1954 Act has been replaced by the Income and Corporation Taxes Act 1970, s 253.

Cases referred to in judgments

Knowles v Scott [1891] 1 Ch 717, 60 LJCh 284, 64 LT 135, 7 TLR 306, 10 Digest (Repl) 1047, 7257.

Oriental Inland Steam Co, Re, ex parte Scinde Railway Co (1874) 9 Ch App 557, 43 LJCh 699, 31 LT 5, 10 Digest (Repl) 903, 6137.

Pritchard (Inspector of Taxes) v M H Builders (Wilmslow) Ltd [1969] 2 All ER 670, 45 Tax Cas 360, [1969] 1 WLR 409, 47 ATC 453, [1968] TR 429, 28(1) Digest (Reissue) 114, 328.

Cases also cited

Barleycorn Enterprise, Re, Mathias and Davies (a firm) v Down (liquidator of Barleycorn Enterprises Ltd) [1970] 2 All ER 155, sub nom Barleycorn Enterprises, Re, Mathias and Davies (a Firm) v Down [1970] Ch 465, CA.

Calgary and Edmonton Land Co Ltd v Dobinson [1974] 1 All ER 484, [1974] Ch 102, [1974] 2 WLR 143.

Smith v Anderson (1880) 15 Ch D 247, CA.

Wood Preservation Ltd v Prior (Inspector of Taxes) [1969] 1 All ER 364, 45 Tax Cas 112, [1969] 1 WLR 1077, CA.

Page 164 of [1975] 1 All ER 162

Appeal

C & K (Construction) Ltd (‘the taxpayer company’) was a private company with an issued share capital of £100 divided into 100 £1 shares. Ninety-nine of those shares were registered in the name of another company, Mactrac Ltd (‘Mactrac’), which carried on business as a builder and civil engineering contractor. On 31 March 1962 a debenture-holder of Mactrac appointed a receiver of all the property and assets of Mactrac. On 4 June 1962, following a creditor’s petition presented to the court on 21 May 1962, an order was made for the compulsory winding-up of Mactrac and a liquidator was appointed. It was common ground that at all times until the commencement of Mactrac’s liquidation Mactrac was the beneficial owner of all the shares in the taxpayer company. By an agreement dated 18 January 1963, made between the liquidator, the receiver and the taxpayer company, the whole of the business of Mactrac was sold as a going concern to the taxpayer company. At the date of the sale, Mactrac was still the registered holder of 99 shares in the taxpayer company. On 6 April 1964 the taxpayer company was assessed to income tax for the years 1962–63 and 1963–64 in the sum of £350 and £1,000 respectively. The taxpayer company appealed to the Special Commissioners contending that at all material times it was a subsidiary company of Mactrac within the meaning of s 17(5) of the Finance Act 1954 and that accordingly it was entitled to set off the unrelieved losses and capital allowances of Mactrac against its own profits for the years 1962–63 and 1963–64 by virtue of s 17(1) of the 1954 Act. The commissioners upheld the taxpayer company’s claims on the ground that the shareholders of Mactrac were the legal owners of the business both before the sale and after the transfer of it to the taxpayer company. The Crown expressed dissatisfaction with that determination and required the commissioners to state a case for the opinion of the High Court. On 27 November 1973 Templeman J ([1974] 1 All ER 676, [1974] STC 98) allowed the appeal holding that the taxpayer company was not a subsidiary of Mactrac within s 17(5) of the 1954 Act since at the date of the sale of Mactrac’s business to the taxpayer company, Mactrac, being in compulsory liquidation, was not the beneficial owner of its shares in the taxpayer company. The taxpayer company appealed.

C N Beattie QC and George Bretten for the taxpayer company.

Leonard Bromley QC and Peter Gibson for the Crown.

28 October 1974. The following judgments were delivered.

STAMP LJ. This is an appeal from an order of Templeman J. The case is reported under the name Ayerst (Inspector of Taxes) v C & K (Construction) Ltd ([1974] 1 All ER 676, [1974] STC 98). Because the facts, so far as they are known, are fully stated in the report, I need not refer to them in this judgment; nor need I refer to the terms of s 17 of the Finance Act 1954 which are stated in the judgment of Templeman J.

In this appeal counsel for the taxpayer I have no doubt rightly felt unable to quarrel with the conclusion of the learned judge that Mactrac had by the effect of its liquidation ceased to be the beneficial owner of the shares in the taxpayer company, which company was accordingly not a subsidiary of Mactrac at the time of the transfer of the trade. He advanced a wholly new argument in support of the appeal, submitting that the persons carrying on Mactrac’s trade as well before, as after, the sale to the taxpayer company, were, within the meaning of s 17 and by the effect of sub-ss (4)(b) and (4)(c) and sub-s (5) of the section, which were not relied on in the court below, the same persons: namely, the creditors and shareholders of Mactrac, who it is submitted were collectively the beneficial owners of each of Mactrac’s assets within the meaning of the section.

Counsel for the Crown did not object to the new point being raised. The new

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submissions were, as I have indicated, based on the provisions of sub-ss (4)(b) and 4(c) and sub-s (5) of the section. Subsection (4)(b) provides:

‘For the purposes of this section—… (b) a trade or interest therein belonging to any person as trustee (otherwise than for charitable or public purposes) shall be treated as belonging to the persons for the time being entitled to the income under the trust.’

Looking at the situation immediately prior to the transfer of Mactrac’s trade, it was submitted that the trade belonged to Mactrac as trustee and that the creditors and contributories of Mactrac, as the only persons interested in the assets falling to be dealt with in the liquidation, were collectively entitled to the income under a trust. It followed, so it was submitted, that these persons were for the purposes of the section the beneficial owners of Mactrac’s trade.

Looking at the situation immediately after the transfer, reliance was placed on para (c) of sub-s (4) and sub-s (5) taken together. Paragraph (c) provides that for the purposes of the section—

‘a trade or interest therein belonging to a company shall, where the result of so doing is that the conditions for subsection (1) or subsection (2) of this section to apply to a change are satisfied, be treated in any of the ways permitted by the next following subsection.’

That takes one to sub-s (5), which provides, so far as relied on by counsel for the taxpayer company:

‘For the purposes of this section, a trade or interest therein which belongs to a company engaged in carrying it on may be regarded—(a) as belonging to the persons owning the ordinary share capital of the company and as belonging to them in proportion to the amount of their holdings of that capital … ’

Relying on the latter subsection, counsel submitted that after the transfer the creditors and shareholders of Mactrac collectively owned the ordinary shares of the taxpayer company and that accordingly the trade transferred to the taxpayer company may for the purposes of s 17 be regarded as belonging again to the creditors and shareholders of Mactrac. So it is said the trade can be regarded as belonging to the same persons immediately after the transfer as it did, by the effect of sub-s (4)(b), immediately before. I emphasise in passing that the analysis of the situation immediately after the transfer so advanced depends on the proposition that, notwithstanding that Mactrac was in liquidation, the creditors and shareholders were ‘the owners of’ Mactrac’s shares in the taxpayer company within the meaning of sub-s (5)(a) and also that the reference to ownership is, by the effect of sub-s (6)(a), a reference to ‘beneficial ownership’.

Similar submissions to those so put forward were rejected by Cross J in Pritchard v MH Builders Ltd, in circumstances not dissimilar from the facts in this case. Counsel for the taxpayer company accepted that in order to succeed in this appeal he must persuade us that that case was wrongly decided.

Now, a liquidator in a liquidation has the duties imposed on him by the Companies Acts. The creditors and contributories are entitled to require him to carry out those duties and to deal with the company’s assets in accordance with the statutory provisions. But I cannot equate that right with the beneficial ownership of the assets or of any particular asset falling to be administered in accordance with the Acts. It does not, in my judgment, in the least follow that because a person or collection of persons have the right to have a collection of assets sold and the proceeds applied indirectly for their benefit, he or they are the beneficial owners of each asset. Basic

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to counsel’s submission is the proposition that a company in liquidation holds its assets on trust for its creditors and contributories, and accordingly that the creditors and contributories are the beneficial owners of those assets. Cross J, in the Pritchard case, took the view that once a company is in liquidation, the beneficial ownership of its assets is in suspense. With that view I whole-heartedly agree. To describe those for whose benefit the assets of a company in liquidation fall to be administered as beneficial owners of each of those assets is, in my judgment, a misuse of the English language. The creditors and shareholders in such a situation have no rights or powers, even collectively, to deal with a single asset or to direct how it shall be dealt with.

There is some language in some of the cases—we were referred in particular to Re Oriental Inland Steam Co—to the effect that after liquidation a company’s assets are subject to a trust, which no doubt is a convenient way of saying that the assets cease to belong to the company beneficially and become subject to the statutory provisions contained in the Companies Acts. I share the view of Romer J in Knowles v Scott that a liquidator does not hold the company’s property on trust for its creditors and contributories; and the company itself, stripped as it is of all its rights, powers and obligations in relation to the property, cannot in my judgment be a trustee of it for the creditors and shareholders. The attempt to apply the conception of trustee and cestui que trust to the law relating to the liquidation of companies so as to fix a company as a trustee of its assets for its creditors and contributories must, in my judgment, fail.

It follows, in my judgment, that the shares in the taxpayer company did not, immediately after the transfer of the business to that company, belong to the creditors and shareholders of Mactrac collectively, so as to bring the case within sub-s (5)(a) of the section.

That, by itself, if right, would be an end of the case. There is, however, another way of approaching the case. The conception of the creditors and shareholders of Mactrac collectively owning the share capital of the taxpayer company according to their respective rights and words of para (a) of sub-s (5), providing that the trade may be regarded as belonging to the persons owning the share capital ‘in proportion to their holdings of that capital’. The latter words are no doubt included for the purpose of the computation required to determine whether the condition of sub-s (1) is satisfied that at some time within two years from the change a three-fourths share of the trade belonged to the same persons as it belonged to a year before the change. In the instant case the problem is obscured by the fact that the comparison of ownership sought to be made is between the situation existing immediately before the change and that existing immediately afterwards. But once the conception of collective ownership of creditors and shareholders, as counsel for the taxpayer company put it ‘according to their respective rights and interests’, is introduced into the section, it would, as I see it, be in many cases impossible to undertake the necessary enquiry. If sub-s (5) and sub-s (4)(b) are designed, as I think they are, to assist in the determination of the question whether a specified proportion of the trade belonged at some date to the same persons as it belonged to at some other date, and if the trade were to be treated by the effect either of sub-s (4)(b) or sub-s (5) as belonging at each date to the shareholders and creditors of the company in liquidation collectively according to their respective rights and interests, I know not how the enquiry could be answered in a case where between those two dates there had been dealings with those interests by the creditors or shareholders or where, for example, the preferential creditors had been paid in full. In the instant case the problem is, as I have indicated, obscured

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because the comparison sought to be made is a comparison between the persons owning the trade immediately before and immediately after the transfer. But it would, in my judgment, be contrary to the scheme of the section to introduce the conception of a single collective beneficial ownership of a fluctuating body of persons according to their respective but unspecified and unknown rights and interests in the assets of the company. To do so would, as I see it, make the section unworkable.

Counsel for the taxpayer company attempted to deal with the difficulty by referring to sub-s (7) of the section. That subsection provides as follows:

‘In determining for the purposes of this section, whether or to what extent a trade belongs at different times to the same persons, persons who are relatives of one another and the persons from time to time entitled to the income under any trust shall respectively be treated as a single person … ’

So counsel, reiterating his submission that the creditors and shareholders are collectively entitled to the assets, submitted that they were ‘the persons from time to time entitled to the income under any trust’ and so fall to be treated as a single person for the purposes of sub-s (1). I can only say, with all respect to that submission, that in the context of the section it would, in my judgment, be a misuse of language to describe a fluctuating body of persons who were collectively entitled as well to capital as income under a trust as persons from time to time entitled to any income under the trust. Even if the assets of the company in liquidation were correctly described as held by the company on trust for the creditors and shareholders collectively—a view which I have rejected—that trust must relate to capital and income alike. In my judgment, sub-s (7) is clearly not directed to meet such a case.

I would add, for completeness, that a similar objection applies to the construction sought to be put on sub-s (4)(b) of the section, which likewise is concerned with persons for the time being entitled to the income under the trust.

For these reasons I would dismiss the appeal.

SCARMAN LJ. I agree.

BRIGHTMAN J. I agree.

Appeal dismissed. Leave to appeal to the House of Lords refused.

Solicitors: Masons (for the taxpayer company); Solicitor of Inland Revenue.

Rengan Krishnan Esq   Barrister.

Barclay’s Trustee v Inland Revenue Commissioners

[1975] 1 All ER 168

Categories:        SUCCESSION; Administration of Estates        

Court:        HOUSE OF LORDS        

Lord(s):        LORD REID, LORD MORRIS OF BORTH-Y-GEST, VISCOUNT DILHORNE, LORD WILBERFORCE AND LORD KILBRANDON        

Hearing Date(s):        2, 3, 7 OCTOBER, 27 NOVEMBER 1974        

Estate duty – Aggregation – Property in which deceased had an interest – Insurance policy – Policy subject to trust – Beneficial interest of assured – Exclusion – Policy expressed to be for benefit of assured’s wife and sons – Beneficial interest in policy in event of wife and sons predeceasing assured – Whether policy to be held in trust for benefit of estate of one or other of beneficiaries – Whether assured effectively excluded from benefit of policy – Married Women’s Policies of Assurance (Scotland) Act 1880, s 2 – Finance Act 1894, s 4.

The deceased desired to effect a policy of assurance on his own life under s 2a of the Married Women’s Policies of Assurance (Scotland) Act 1880 in the sum of £15,000. For that purpose he entered into a contract based on a proposal form signed by him, a letter of request submitted by him to the insurance company and a letter of acceptance from the company. The letter of request stated, inter alia: ‘I desire the Policy to be issued under the provisions of the Married Women’s Policies of Assurance (Scotland) Act, 1880, for the benefit of: My Son … Stuart Lothian Barclay, whom failing My Son … Norman Veitch Lothian Barclay, whom failing My Wife … Mrs Florence Winifred Barclay.' The deceased died shortly after the contract had been completed. The Inland Revenue Commissioners assessed his estate to duty on the basis that the proceeds of the contract of life assurance had, by virtue of s 4b of the Finance Act 1894, to be aggregated with other property passing on his death and could not be separately assessed to duty under the proviso to s 4 as property ‘in which the deceased never had an interest’ because he had not effectively divested himself of all interest in the policy in that if the sons had predeceased him and the wife had predeceased one or both of the sons, the right to dispose of the benefit of the policy would have reverted to him.

Held – The deceased had never had an interest in the policy for the clear intention of the deceased was that the whole of the benefit of the policy should go to one of the three persons named in the letter of request and to no one else, and that the policy should be for the ‘benefit of his wife or children’ within s 2 of the 1880 Act. That intention was in no way negatived by the words used in the letter of request for, on the true construction of that document, in the event of the wife and sons dying before the deceased the trustees would be bound to hold it either for the estate of the last of them to die or, if the words ‘whom failing’ meant that the interests of the sons were contingent on surviving the deceased, for the estate of the wife. In either case the deceased could not in his lifetime have had any interest in the policy (see p 170 j, p 171 b, p 172 d, p 173 g to p 174 a and g to p 175 b and j to p 176 a and d to f, p 177 e and j to p 178 a e and g and p 181 d to f, post).

Page 169 of [1975] 1 All ER 168

Notes

For aggregation in connection with life insurance and property in which the deceased never had an interest, see 15 Halsbury’s Laws (3rd Edn) 63, 64, paras 125, 126.

For the Finance Act 1894, s 4, see 12 Halsbury’s Statutes (3rd Edn) 461. The proviso to s 4 was repealed with savings by the Finance Act 1969, s 61(6), Sch 21, Part V, in respect of deaths on or after 16 April 1969.

Cases referred to in opinions

Cousins v Sun Life Assurance Society [1933] Ch 126, [1932] All ER Rep 404, 102 LJCh 114, 148 LT 101, CA, 27(1) Digest (Reissue) 167, 1112.

Dickson’s Trustees v Elliott 1949 SLT 359.

Galloway v Craig (1861) 4 Macq 267, 23 D 12, HL, 27(1) Digest (Reissue) 169, *655.

Haldane’s Trustees v Lord Advocate 1954 SC 156, 21 Digest (Repl) 53, *79.

Hicks v Inland Revenue Comrs [1973] STC 406, sub nom Hicks’s Trustee v Inland Revenue 1974 SLT 62.

Taylor v Gilbert’s Trustees (1878) 5 R (HL) 217, HL.

Vandervell v Inland Revenue Comrs [1967] 1 All ER 1, [1967] 2 AC 291, 43 Tax Cas 519, [1967] 2 WLR 87, [1966] TR 315, 45 ATC 394, HL, 28(1) Digest (Reissue) 438, 1576.

Vandervell’s Trusts (No 2), Re, White v Vandervell Trustees Ltd [1974] 3 All ER 205, [1974] 3 WLR 256, CA.

Walker’s Trustees v Lord Advocate 1955 SC (HL) 74, sub nom Walker v Inland Revenue Comrs 1955 SLT 185, [1955] TR 137, 34 ATC 135; rvsg 1954 SC 156, 21 Digest (Repl) 53, *79.

Appeal

This was an appeal from an interlocutor of the Second Division of the Court of Session as the Court of Exchequer in Scotland ([1974] STC 320) (Lord Kissen, Lord Fraser and Lord Keith) dated 31 January 1974 refusing an appeal by the appellant, Norman Veitch Lothian Barclay, the trustee of James Barclay deceased, against an assessment to estate duty made by the Inland Revenue Commissioners on 5 January 1973 at the rate of 75 per cent on the value of a policy of life assurance issued by the Sun Life Assurance Society. The facts are set out in the opinion of Lord Reid.

J P H MacKay QC and G W Penrose (both of the Scottish Bar) for the appellant.

W D Prosser QC, J A D Hope (both of the Scottish Bar) and Peter Gibson for the Crown.

Their Lordships took time for consideration.

27 November 1974. The following opinions were delivered.

LORD REID. My Lords, James Barclay, on 22 December 1962, submitted to the Sun Life Assurance Society a proposal for three whole life policies of £15,000 each. This was accompanied by requests one of which was in these terms:

‘I desire the Policy to be issued under the provisions of the Married Women’s Policies of Assurance (Scotland) Act, 1880, for the benefit of: My Son … Stuart Lothian Barclay, whom failing My Son … Norman Veitch Lothian Barclay, whom failing My Wife … Mrs Florence Winifred Lothian Barclay … ’

The other requests were similar but the beneficiaries were placed in different orders.

This proposal was accepted and the first premiums were paid on 4 January 1963. Mr Barclay died on 31 January 1963. It is common ground that a contract was completed on payment of the first premium so that the three sums of £15,000 became payable on Mr Barclay’s death. The question at issue in this case is whether estate duty falls to be paid on the basis that they must be aggregated with the rest

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of Mr Barclay’s estate in which case the rate of duty would be 75 per cent or whether they are to be treated as estates by themselves in which case the rate of duty would be eight per cent.

It is clear that it was contemplated that if Mr Barclay had lived longer policies would have been issued in terms slightly different from those in the requests, superseding the contract made on payment of the premium, but we are not concerned with that. We must take the destinations set out in the requests. This case is only concerned with the destination which I have quoted but we are entitled to bear in mind the existence of the other two.

Section 4 of the Finance Act 1894 requires the property to be aggregated unless the deceased ‘never had an interest’ in it. It is common ground that the appellant can only succeed if he can shew that in no possible event could Mr Barclay have become beneficially entitled to the policy. Section 2 of the Married Women’s Policies of Assurance (Scotland) Act 1880 provides by s 2:

‘A policy of assurance effected by any married man on his own life, and expressed upon the face of it to be for the benefit of his wife, or of his children, or of his wife and children, shall, together with all benefit hereof, be deemed a trust for the benefit of his wife for her separate use, or for the benefit of his children, or for the benefit of his wife and children; and such policy, immediately on its being so effected, shall vest in him and his legal representatives in trust for the purpose or purposes so expressed, or in any trustee nominated in the policy, or appointed by separate writing duly intimated to the assurance office, but in trust always as aforesaid, and shall not otherwise be subject to his control, or form part of his estate, or be liable to the diligence of his creditors, or be revocable as a donation, or reducible on any ground of excess or insolvency … ’

It is admitted that the effect of the request which I have quoted being incorporated in the contract is that so long as any of the beneficiaries mentioned in it survived Mr Barclay had no interest in the policy. The case for the Crown is that in at least one possible event—the death of his wife followed by the deaths of the two sons during his lifetime—Mr Barclay would have become beneficially entitled to the policy. If that is right then the appeal fails. But the appellant maintains that even in that event Mr Barclay would have acquired no interest in the policy. So I turn to consider the meaning and effect of the destination in the context in which it appears.

This raises a question of vesting. If there were no vesting in anyone until Mr Barclay’s death then the Crown succeeds. It has always been said that the time of vesting depends on the intention of the maker of the deed, derived from reading the deed as a whole. But at one time in the interests of certainty when dealing with destination in terms well known to the law, courts were reluctant to seek the real intention of the testator: they deemed that he must have intended a result based on a long series of decided cases. More recently there has I think been more flexibility but we must still say that in the absence of any clear indication of a contrary intention the normal meaning of a destination established by the authorities must prevail.

I agree with the Crown’s contention to this extent. When a gift is payable at a date later than the date when the deed takes effect, and it takes the form of a gift to A whom failing to B whom failing to C the normal rule is that vesting is suspended or delayed until the date of payment, so that if A, B and C all predecease the date of payment none of them takes anything.

So the first question here must be whether it can be shown clearly that Mr Barclay had a different intention. In my view it is clear from the terms of the bequest that he intended the whole benefit of these policies to go to one or other of the three named beneficiaries. The policies were to be issued under the provisions of the 1880 Act for the benefit of one or other of the three named beneficiaries and of no one else. The purpose of the Act is to protect the beneficiaries against the donor’s creditors. It only affords protection to gifts to the donor’s wife or children, so a gift over to

Page 171 of [1975] 1 All ER 168

issue would not be protected. In the case of a gift by will there may be a competition between the institute or conditional institute and the residuary legatee and it may be proper to interpret strictly the gift to an institute or conditional institute. But here if the gifts to institute and conditional institute all failed the result would be that by virtue of his residual right the donor himself would become entitled to the policy. In my view it is quite clear that Mr Barclay never intended to retain any interest in any event. But it is possible that by unskilful conveyancing his intention has been defeated. That would be so if it is not reasonably possible to construe the destination so as to avoid the possibility of total failure of the gift.

Three constructions of the destination have been suggested, any one of which would avoid this result, (1) vesting subject to defeasance, (2) immediate vesting in the last survivor if two of the three beneficiaries should die during the donor’s lifetime, (3) the implication of a further conditional institution of the estate of the last mentioned conditional institute, the donor’s wife.

There have always been two schools of thought with regard to vesting subject to defeasance. One regard is as an anomaly introduced into the law of Scotland by this House in Taylor v Gilbert’s Trustees and opposes any extension of the doctrine beyond existing authorities. The other regards it as an acceptable principle to be applied, as all principles should be applied, to new cases which appear to call for its application. I would support the view of Gloag and Hendersonc:

‘There are three types of cases in which the application of this doctrine is now definitely recognised, and beyond which it will not readily be extended.’

The key word is ‘readily’. I would not lay down hard and fast rules. For example, I think it at least unwise to say ‘there cannot be a vested right in a conditional institute so long as there is an ascertained prior institute in existence’ (Dickson’s Trustees v Elliot).

In Hicks v Inland Revenue Comrs arguments put forward in the present case were not adduced. I am doubtful whether the doctrine of vesting subject to defeasance ought to have been applied. In my view the case ought to have been decided in favour of the trustees on grounds similar to those which I shall later explain as my reasons for allowing the present appeal.

The present case is so far removed from any in which the doctrine of vesting subject to defeasance has hitherto been applied that I would not be prepared to apply it here.

In my view there was here no immediate vesting in any of the three named beneficiaries because the donor intended that only one of the three named beneficiaries should take and so long as more than one of them remained the matter was still in doubt. But if two of them died during the donor’s lifetime the doubt was resolved. He intended to benefit one or other and there was only one left. The only reason for postponing vesting would then have disappeared.

In an ordinary testamentary disposition if there is no vesting a morte the presumption is that vesting is postponed until the date of payment. Often the gift takes the form of a direction to pay at that date. But even where it does not the presumption is that survivance of the date of payment is a condition attached to the gift. Vesting at a date intermediate between the death of the testator and the date of payment is certainly unusual but it is not impossible. Professor Henderson dealt with the matter in his book on Vestingd and I can see no reason why, even in the case of a gift in a will to X in liferent, and in fees to A whom failing B, there should not be vesting in B on the death of A during the life of the liferenter if that will best achieve

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a purpose which clearly appears from the will. Normally if both A and B die before the liferenter the fee falls into residue. But that must depend on intention presumed or expressed and presumed intention must give way to expressed intention or intention clearly to be inferred.

There is a further element in cases like the present case. The donor is under no obligation to go on paying premiums. If he should cease to do so it must be the duty of the trustee who holds the policy to realise what he can. If there is a surrender value he may surrender and get a sum of money in his hands. If at that stage there were only one of the three named beneficiaries alive I do not think that we would be forced by the terms of the destination to hold that still there could be no vesting until the donor’s death. In other words, there is no provision explicit or to be implied that the gift to each of the three named beneficiaries is subject to a personal condition that he must survive the donor before he can take.

Counsel could find no authority which throws light on this matter so it appears to me that I have to choose between making the law depend on technicalities and making it depend on the intention of the donor appearing from the relevant source. I have no doubt that vesting in the last survivor during the lifetime of the donor would best carry out the donor’s intention and I see no technical reason to prevent me from so deciding. If that is right then there was no possible event in which none of the three beneficiaries would take and the beneficial right to the policy would therefore belong to the donor. So Mr Barclay never had an interest and the appeal must succeed.

I do not propose to deal with the third ground argued for the appellant further than to say that I would find great difficulty in supporting it.

LORD MORRIS OF BORTH-Y-GEST. My Lords, in the Court of Session ([1974] STC 320) it was agreed between the parties that the question at issue fell to be decided on the basis that when on 4 January 1963 there was the payment of the first premium, a policy or contract of life assurance came into being. It was agreed that it came into being in terms of (a) a proposal form signed by Mr James Barclay dated 27 December 1962, containing statements declared to be true and complete, (b) a form of request by Mr James Barclay to the assurance society, and (c) a letter of acceptance from the assurance society dated 31 December 1962. It was agreed that though the form of request was in fact unsigned it was to be accepted as having been the request of Mr James Barclay. It was as follows:

‘MARRIED WOMEN’S POLICIES OF ASSURANCE (SCOTLAND) ACT 1880

‘Form of request regarding the proposal for a Life Policy in my name dated———

‘I desire the Policy to be issued under the provisions of the Married Women’s Policies of Assurance (Scotland) Act, 1880, for the benefit of: My Son … Stuart Lothian Barclay, whom failing My Son … Norman Veitch Lothian Barclay, whom failing My Wife … Mrs Florence Winifred Lothian Barclay.

‘I desire to appoint—————as (Trustees) of the moneys payable under the policy dated this———day of———196——.

‘Signature of Proposer———

‘Address: 966 Great Western Road, Glasgow W2

‘T.S.

‘G.R.R.

‘NORMAN VEITCH LOTHIAN BARCLAY, ROCKFORT, HELENSBURGH.’

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It being agreed that on the terms to which I have referred there was a policy of assurance it becomes necessary to consider the application and effect of s 2 of the Married Women’s Policies of Assurance (Scotland) Act 1880. I turn then to the consecutive words of that section. Was there ‘a policy of assurance effected by any married man on his own life?’ Undoubtedly there was. Was it ‘expressed upon the face of it to be for the benefit of his wife, or of his children, or of his wife and children’? The answer would appear that it was. But here there lurks an enquiry which must be considered. The policy which we are considering is undoubtedly expressed on the face of it to be for the benefit of Mr Barclay’s wife or of his children or of his wife and children. No others are mentioned as being persons for whom the policy was issued. But what would be the position if a form of request though only mentioning a wife and children was so worded that in events that could conceivably happen there would not be complete provision for the devolvement of the benefit of the policy? To that question I must return.

Continuing to apply the wording of s 2, if there was a policy of assurance effected by a married man on his own life and expressed on the face of it to be for the benefit of his wife or of his children or of his wife and children then the section provides that such policy ‘shall, together with all benefit thereof, be deemed a trust for the benefit of his wife for her separate use, or for the benefit of his children, or for the benefit of his wife and children’. So there would by statute be a deemed trust. The section then goes on to provide that such a policy ‘immediately on its being so effected, shall vest in him and his legal representatives in trust for the purpose or purposes so expressed, or in any trustee nominated in the policy, or appointed by separate writing duly intimated to the assurance office’. Nothing arises in the present case as to the nomination or identity of the trustee or trustees of the policy.

Having dealt with the question as to the vesting of the policy in a trustee the section then continues with the important words ‘but in trust always as aforesaid, and shall not otherwise be subject to his control, or form part of his estate, or be liable to the diligence of his creditors, or be revocable as a donation, or reducible on any ground of excess or insolvency’. There follow words which by common assent have no relevance in the present case.

From a consideration and application of the wording of the section it seems to me to follow that if the policy in this case was ‘expressed upon the face of it to be for the benefit of his wife, or of his children, or of his wife and children’ then a trust was deemed to have come into existence. The policy vested immediately in the trustee or trustees. They held the policy ‘in trust always’ as expressed on the face of the policy. Unless Mr Barclay was himself a trustee the policy would not ‘otherwise be subject to his control’. It would not ‘form part of his estate’. It would be property in which he ‘never had an interest’ (see s 4 of the Finance Act 1894). It would not be aggregated with property passing on his death. I think, however, that the section contemplates the situation where what is ‘expressed upon the face of’ the policy deals with the entire benefit of the policy. The section uses the words ‘together with all benefit thereof’. So the result of what is expressed on the face of the policy must be that all the benefit of the policy must be ‘for the benefit of his wife, or of his children, or of his wife and children’. It will not do, therefore, if the matter is so left that the ‘benefit’ of the policy may pass for the ‘benefit’ of persons other than those within the statutory words.

On this analysis it seems to me that the present case falls to be determined on a consideration of the meaning and effect of the form of request. It constituted the terms of the trust. In that request Mr Barclay definitely stated and expressed his desire that the policy was to be issued ‘under the provisions of’ the 1880 Act. He contemplated the appointment of trustees who were to be trustees for the purposes of s 2 of the 1880 Act. The question arises whether by some inadvertence or positive error he failed to do what he undoubtedly set out to do. There is no reason to question his expressed desire which was that the policy that he was taking out was

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to be held on trust for others with no right left in him to control it. He was expressly saying (by stating that the policy was to be issued under the provisions of the 1880 Act) that the policy was not to be a part of his estate and was not to be liable to the diligence of his creditors. So I think that the question that arises is whether the words that he used in his form of request must when properly construed produce the result that he failed to create a trust in which he had no interest; and that, contrary to his intention and desire, he set up a trust which in certain eventualities did not prescribe any recipient of the trust property with the result that it would enure for his or for his estate’s benefit.

We are, of course, not concerned with the events that actually happened. The policy came into being on 4 January 1963; Mr Barclay was then 77; he died on 31 January 1963. There probably was no difficulty in deciding who was to benefit under the trust. But in considering whether Mr Barclay himself ever had ‘an interest’ in the trust property it becomes necessary to consider whether there could have been circumstances under which the disposition of the trust property was not provided for by the terms of the trust; in other words might there have been some resulting or remaining benefit which would be beyond and outside the benefit referred to in the words ‘for the benefit of his wife, or of his children, or of his wife and children’.

The eventuality to be considered is that of the death of both sons and of the wife in the lifetime of Mr Barclay with variations of that eventuality dependent on the various possible dates of the various deaths.

A policy which is issued under the provisions of s 2 vests in the trustees of the deemed trust. The policy being one of life assurance, in normal circumstances the time when the trustee would have to determine who was to benefit would be the time of the ending of the life assured. Thereafter the trustee would receive the sum assured. In some circumstances the time could be the time of the receipt of a surrender value. Taking the present case the trustee in normal circumstances would have to consider the facts as they existed on whatever date it was that Mr Barclay died. He would then have to carry out the trust terms. Were there any possible circumstances under which the trustee would have to pay or account for the sum assured to the personal representatives of or as part of the estate of Mr Barclay? Interpreting the terms of the trust the trustee would first enquire whether Mr Stuart Lothian Barclay was alive. If he was there would be no difficulty. If he was not then the words ‘whom failing’ would apply. Those words would direct the trustee to enquire whether Mr Norman Veitch Lothian Barclay was alive. If he was then he would take. If he was not then the benefit would not pass to his estate because in his case, as in the case of his brother the words ‘whom failing’ showed that the taking of benefit was conditional on his surviving his father. If they were both dead then the trustee would have to hold ‘for the benefit of’ Mrs Barclay. In reference to her there was no provision covered by such words as ‘whom failing’. There is a marked contrast between the presence of those words in reference to the sons and the absence of such words in reference to her. There was therefore no provision requiring that in her case the benefit for her was conditional on her personal survival to the date of Mr Barclay’s death.

In my view, the policy and the sum payable under the policy were, in the event of neither son being alive at the time of Mr Barclay’s death, to be for the benefit of Mrs Barclay, and in the absence of some provision introduced by such words as ‘whom failing’ that meant that the trustee was to hold for the benefit of Mrs Barclay whether she was alive or not. If she was not alive her estate would take. That would, in such eventuality, be the way in which it would be for her benefit. (See Walker’s Trustees v Lord Advocate.) It would make no difference whether she had died before the sons or after.

If in the lifetime of Mr Barclay both sons and Mrs Barclay had died and if the

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trustees and the insurance company knew such facts the position would merely be that in advance of the time of Mr Barclay’s death they would know what would be the disposition of the policy money when payable. They would know that there would have to be accounting and payment to Mrs Barclay’s estate. Mr Barclay, of course, in that state of affairs could not vary the trust disposition.

In my view, the analysis of the words of the trust leads to the conclusion that Mr Barclay did not fail to do what he clearly intended to do. Accordingly he never had any beneficial interest in the trust property. I would therefore allow the appeal.

VISCOUNT DILHORNE. My Lords, I have had the advantage of reading the speeches of my noble and learned friends, Lord Reid and Lord Wilberforce, and I agree with them that this appeal should be allowed.

The question at issue does not arise under any testamentary disposition of the late Mr James Barclay or in relation to any gift made by him in his lifetime. It arises under a contract he entered into with the Sun Life Assurance Society Ltd  On 27 December 1962 he submitted to them a proposal for the insurance of his life for £45,000 under three policies of £15,000 each. The proposal was accompanied by three requests to the Society that the policies should be issued under the Married Women’s Policies of Assurance (Scotland) Act 1880 for the benefit of his wife and his two sons. The request with which this appeal is concerned was that the policy should be held for the benefit of his son Stuart, ‘whom failing’ his son Norman ‘whom failing’ his wife. The other two requests named these three beneficiaries in different orders, one that it should be held for the benefit of his son Norman, ‘whom failing’ Stuart, ‘whom failing’ Mrs Barclay, the other for Mrs Barclay ‘whom failing’ Norman, ‘whom failing’ Stuart.

The insurance was to commence and did commence as soon as receipt of the first premium was acknowledged by the issue of the society’s official receipt. That happened on 4 January 1963. On 31 January 1963 Mr James Barclay died. So to determine the terms of the contract between him and the society, one can only look at the proposal and the request that accompanied it.

While I presume that the moneys due under the policy were after Mr James Barclay’s death paid by the society to Stuart, directly or indirectly, for we were not told that Stuart had not survived his father, the Crown contend that the late Mr Barclay had not divested himself of all interest in the policy for they contend that if his sons and his wife had died during his life, the right to dispose of the benefit of the policy would have reverted to him. If they are right, the policy moneys will have to be aggregated with the rest of Mr Barclay’s estate with the result that estate duty will be payable at the rate of 75 per cent. On the three policies for £45,000 the Crown claim £33,611·46 for duty and £7,551.09 in interest, in all £41,162·55. If this appeal succeeds duty is only payable on the policy moneys at the rate of eight per cent.

I think that the first question to consider is to whom the society were obliged under their contract with Mr Barclay to pay the policy moneys on his death, ignoring for the moment that the policy was to be issued under the Married Women’s Policies of Assurance (Scotland) Act 1880.

It is clear beyond doubt that if Stuart was alive on his father’s death, the moneys would have had to be paid to him; that if he was not then alive but his brother was, to his brother and if both sons were then dead, to Mrs Barclay. Payment to them was conditional on their surviving their father. Payment to her was not conditional on her surviving her husband. In the event of the sons failing to take, the society were under an obligation to pay her and no one else. If she also died before the moneys became payable, I fail to see that they had any right or were under any obligation to pay anyone else. In that event the moneys would on her husband’s death have been payable to her executors. I cannot see that under his contract with the society any term is to be implied that in the event of all three dying before him,

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Mr Barclay had any right to require the policy to be held for the benefit of anyone else. So if the Crown’s contention depended solely on the construction to be placed on the contract, it would, in my opinion, fail for Mr Barclay did not have and never had under the contract an interest in the policy.

It was not disputed that s 2 of the Act of 1880 applied to the insurance effected by Mr Barclay. Under that section the policy—

‘shall, together with all benefit thereof, be deemed a trust for the benefit of his wife for her separate use, or for the benefit of his children, or for the benefit of his wife and children’

and the policy immediately on its being effected is to vest in him and his legal representatives in trust for the purposes stated or in other trustees nominated or appointed by him. The section goes on to provide that the policy shall not otherwise, ie save as trustee,

‘be subject to his control, or form part of his estate, or be liable to the diligence of his creditors, or be revocable as a donation, or reducible on any ground of excess or insolvency … ’

The language is clear and unambiguous. Where a policy to which the section applies is taken out, a trust is engrafted on the contract of insurance. It is a trust for the ‘purpose or purposes expressed’ in the policy. In this case that has to be interpreted as the purposes expressed in the contract of insurance. I see nothing in the section to justify the conclusion that by virtue of it a term has to be read into the contract giving Mr Barclay a right in the event of his wife and sons dying before him to give directions to the society as to the disposal of the policy moneys. Indeed, the provision that the policy is not to be subject to his control save as trustee and is not to form part of his estate goes far to negative any such implication.

If, on a proper construction of the contract, it was the case that the payment to Mrs Barclay was conditional on her surviving him, then it might be said that on her death and that of her two sons in his lifetime, there was a resulting trust in favour of Mr Barclay or there remained in him a radical right but I cannot see that the request in this case is open to that construction.

My approach to this is somewhat similar to that of my noble and learned friend, Lord Wilberforce, and I do not wish to add to his observations as to the relevance of Cousins v Sun Life Assurance Society Ltd and in particular of Romer LJ’s judgment. Nor do I wish to add anything, save to say that I agree with what he has said, about the two Scottish cases to which he referred and about the Scottish law as to vesting subject to defeasance.

In my opinion, this appeal should be allowed.

LORD WILBERFORCE. My Lords, the claim of the Crown is for estate duty at the rate of 75 per cent on the proceeds of a policy of assurance for £15,000 taken out by Mr James Barclay on his life shortly before his death. The rate of 75 per cent applies if, and only if, the policy money has to be aggregated with the rest of his estate. The appellant, who is entitled to the policy money as trustee, claims that it should be treated as an estate by itself as being property in which the deceased never had an interest (Finance Act 1894, s 4). So, did Mr Barclay have an interest in the policy money? In the events which happened he had none since he was survived by at least one of the beneficiaries, but it is not disputed that he must be treated as having an interest if the trusts declared by him of the money fail to exhaust the beneficial interests in it in any event which might have happened. As in similar

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cases (cf Vandervell v Inland Revenue Comrs, Re Vandervell’s Trust (No 2)) this issue gives rise to some rather refined arguments.

The form of request signed by Mr Barclay has already been set out as have the terms of s 2 of the Married Women’s Policies of Assurance (Scotland) Act 1880. Two things can be said about these. First, there is similar legislation (Married Women’s Property Act 1882, s 11) in England, and similar forms of request are used. The insurance company has, in fact, its principal office in London and does business throughout the United Kingdom. The law as to estate duty is common to both legal systems. Therefore, the same result ought to be produced on whichever side of the border the policy is signed and it should not depend on niceties of the two countries’ trust laws. Secondly, the destination of the policy money, the subject of the trust, is fixed by a combination of request and statute—a kind of hybrid mechanism not therefore necessarily to be governed by the rules applying to private trusts. Thus, the disponer’s simple request, which is expressed in popular language, is given its legal effect by s 2 of the 1880 Act. The initial phrase is satisfied since the policy is effected by a married man and is expressed on its face to be for the benefit of his wife and children. By force of the following provisions of the section, the policy, together with all the benefit thereof, is ‘deemed a trust for the benefit of wife and children’; it vests immediately in the nominated or appointed trustees in trust as aforesaid. Then follow imperative words: it shall not otherwise (ie except as trustee) be subject to his control, or form part of his estate.

My Lords, I accept at once, as did the appellant’s counsel, that if the expressed purposes do not extend to the whole policy, or to the whole beneficial interest in the policy, the statutory trust would only operate over such part or such interest as would be included in the purposes expressed. But where, as here, the expressed purposes extend to the whole policy, and where the disponer’s apparent intention was that wife and children should have the whole beneficial interest, the statute, in my understanding, operates in aid and, if necessary, in reinforcement of that intention.

There is one case, at least, in which this seems to be so, the case, which cannot be very uncommon, where the designated beneficiary dies before the date of payment, ie (normally) before the death of the disponer. Such a case must, in one way or the other, be governed by the statutory words—either his estate must be allowed to take, and be protected, or it must not. Indeed, this case has come before the courts. In England the Court of Appeal had to consider the situation where a husband effected policies under the English Act of 1882 for the benefit of his wife named therein and the wife predeceased him (Cousins v Sun Life Assurance Society). Reversing the decision of Eve J and doubting, if not overruling, previous decisions in England and Ireland, the Court of Appeal held that the policy passed to the wife’s personal representatives as part of her estate. Lord Hanworth MR said that an absolute interest was taken by her by virtue of the statute and a trust created in her favour. (It is true that the English s 11 contains a phrase ‘so long as any object of the trust remains unperformed’ which is not present in the Scottish enactment, but I am unable to perceive that the absence of these words gives rise to any difference in result—at least any difference against the interest of his wife.) Romer LJ ([1933] Ch at 140, [1932] All ER Rep at 410) said this:

‘In the policies themselves I cannot find the remotest indication that the husband intended the wife’s interest to be contingent on her surviving him. If he had so wished nothing was easier than for him to have said so in the policies themselves … there was a trust created in favour of the named wife …

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that trust did not come to an end on her death, but persisted and remains to be performed in favour of her personal representative.’

The lord justice’s comment is applicable—a fortiori—to the present case, since words of survivorship were used in relation to the sons and deliberately not used in relation to the wife.

In Scotland there are two relevant authorities. In Haldane’s Trustees v Lord Advocate policies were effected by a father for the benefit of three children. Each policy was for the benefit of one child if living at the date of his father’s death, but, if that child was not then living, for the benefit of such of the other two children as should then be alive, and, if none of his three children should be living at that date, the whole benefit of the policy was to vest absolutely in the last of such children to die. It was held by the Second Division that if all three children predeceased the father the benefit of each policy would vest absolutely in the last survivor.

In Walker’s Trustees v Lord Advocate the policies were similar to those in Haldane’s Trustees v Lord Advocate but differed in that the final destination carried the policies to the benefit of the estate of the last to die. This House held that holding for his estate of a deceased child was holding for the benefit of that child within the meaning of s 2.

My Lords, I appreciate that the present case may be seen to differ from each of the three authorities I have mentioned. It differs from Cousins v Sun Life Assurance Society in that here the interest of his widow is preceded by contingent gifts to the two sons and may be said not to emerge until they are dead. It differs from Haldane’s Trustees v Lord Advocate and Walker’s Trustees v Lord Advocate in that the person to whom the absolute interest is given (the named wife) might not be the last survivor, but might be the first or second of the three to die. But, in my opinion, the sense of these decisions is clear in showing that the intention of the Act is to enable a wife (or a child) to take the benefit of a policy effected under it, provided that the donor’s intention to benefit her (or him) is not clearly limited or circumscribed, whether or not she (or he) survives the donor and that a gift which would carry the benefit of the policy to her (or his) estate is within the purpose of the section.

We heard an interesting argument on the Scottish law as to vesting subject to defeasance. I admired its intricacies and I am willing to believe that there are difficulties under the Scottish law of gifts in defining the wife’s interest under this policy as either a vested gift, or as a gift vested subject to defeasance. Such difficulties would not arise in English law. But I do not think that these specialities ought to dictate the decision in the present case, and for that reason I do not think it is necessary for us to reconsider Hicks v Inland Revenue Comrs in which the argument which I would accept in this appeal was apparently not developed. In my opinion, the words of the section warrant an untechnical approach such as would best give effect to donors’ wishes, and I think that the trend of court decisions in Scotland and in England endorses this. I understand that all of your Lordships are in agreement that this is the right approach, though there is some powerful support for the view that, in the event of all the named beneficiaries predeceasing the donor, the last survivor or his or her estate would take. I would say no more as to this than that a choice between this result and that which I would—with all deference—favour would, if necessary, have to be made in a suit between the competing beneficiaries; it does not need to be made here and now because either solution excludes any interest of the donor. The appeal, in my opinion, must succeed.

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LORD KILBRANDON. My Lords, the late Mr Barclay made provision for his wife and sons by taking out simultaneously with the same underwriters three policies of assurance, which he required to be written under the terms of the Married Women’s Policies of Assurance (Scotland) Act 1880. We are concerned with one of those policies only, namely, that which was to be issued for the benefit (to put the provision shortly) of the assured’s son Stuart, whom failing his son Norman, whom failing his wife. We have now to decide whether the proceeds of the policy must be aggregated with the estate of Mr Barclay for the purposes of estate duty, or whether they constitute a separate estate which is not so to be aggregated. That depends on whether this policy, or its proceeds, constitutes an estate in which Mr Barclay in his lifetime had an interest. If so, it is so aggreable. It is conceded that Mr Barclay had an interest in the estate represented by the policy, if in any situation which could arise during his lifetime that estate could, despite the trusts which he had imposed on it, have reverted to him free of those trusts. It is not necessary for me further to resume the terms of the statutes or of the instructions given by Mr Barclay, all of which have already been set out.

I would like to begin by looking briefly at a historical background. The 1880 Act was passed at a time when revolutionary changes were being made in the relationship between husband and wife, so far as this was concerned with property rights and obligations hinc inde. The rule as to donations inter virem et uxorem in the old law was stated by Erskinee as follows:

‘All deeds, whether granted by the wife to the husband, or by him to the wife, are indeed valid; but may, both by the Roman law and ours, be revoked or avoided by the donor, at any time of his or her life; lest either of the two spouses should, by ill-judged testimonies of their affection, undo themselves or their families.’

Fountainhall went further and applied the rule also to ante-nuptial gifts, ‘inter sponsum et sponsam in aestu amoris … there being a greater eclipse of the use of reason at that time than afterwards’. But aliter in Stairf. A gift to a wife which was revocable became, of course, available on his insolvency to the husband’s creditors, who could call on him to reverse a transaction which, while lawful, was not necessarily permanent.

On the other hand, one of the marital duties of a husband was to provide for the sustentation of his wife. In many spheres of life, that obligation might have been discharged by his giving to her a share of the accommodation and aliment which was appropriate to their own social standing. But in the case where a better provision was warranted, it was encouraged by the law inasmuch as it was recognised as being irrevocable if given in good faith and not on an obviously exorbitant scale; it thus became, in contrast to the mere donation, protected from the consequences of the husband’s indebtedness or insolvency. One of the important features of this distinction was, that a policy of insurance, taken out by a husband, who was liable in the premiums, the proceeds being payable to his wife, was regarded as a provision for the benefit of the wife, not as a donation in her favour. As such, it was unattachable by the husband’s creditors, even if he may have been at the time he took out the policy vergens ad inopiam. This was decided by the House of Lords in Galloway v Craig; it does not appear, from the posthumous speech of Lord Campbell LC, that the fact that the destination of the policy was to the wife and her heirs had any influence on the result. It is therefore, as it seems to me, impossible to accept a suggestion that was made on behalf of the Crown, namely, that, since a primary purpose of the Act was to provide to the wife a protected fund, little or no conclusion can be drawn,

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in an estate duty question, from the fact that the machinery adopted consisted of the creation of a separate estate. The Act clarified and in some sense extended the common law, inasmuch as a statutory policy could not be challenged for ‘excess’, ie exorbitance, but it did not for the first time make it possible for a husband to make for his wife a provision by means of a policy of assurance on his own life, which was inaccessible to his creditors.

The controversy before us was in the end really refined to this: whether, had Mr Barclay’s wife and sons predeceased him, the policy being still in force, he could have called on the trustee of the policy to denude in his favour. Would the trust purposes have failed, leaving the radical right in him, unencumbered? If the answer is in the affirmative, it is conceded that the policy was property in which Mr Barclay had an interest. It is also conceded that, in the contingency figures, the wife must predecease at least one of the sons, otherwise she, both sons being dead, would be left with an indefensible vested interest, on the authority of Cousins v Sun Life Assurance Society, which in its turn would be inconsistent with a radical right remaining in the assured.

Such a problem, being fundamentally one of vesting, was inevitably related in argument to the situation, illustrated in innumerable reported cases, where a testator makes a provision in liferent, then in fee either to survivors in a class or to successive institutes conditionally upon survivorship. The analogy is a fair one to a certain extent, because the trusts such as we are here concerned with are not revocable before the policy matures, as is a testamentary deed before the death of the grantor, so that mors testatoris in the case of a testamentary trust is in some sense comparable with the date of the writing of the policy. What would in a testamentary trust be vesting a morte testatoris becomes to that extent comparable with vesting in the life-time of the assured. On the other hand, the principles which the courts have laid down for determining the time of vesting of interests conferred mortis causa can have no higher status than this: the court declares that the use of a particular form of words by a testator indicates that he had the intention that a particular result should follow. Such a man’s estate is not distributed according to judge-made rules; it is distributed in accordance with the intention expressed by him in his testament, as that intention is deduced by the court from the language used by him therein and by others like him in time past.

The situation in the present controversy is special. The truster has expressed his intention with particularity and with reference to the language of the statute. I pause to observe that by our somewhat technical rules of construction or of evidence other even clearer expressions of his intention must—what might surprise a layman—be disregarded. After stating the trust purposes on which the policy is to be held, namely, for the benefit of his sons and widow, he goes on to state purposes on which it is not to be held, namely, that except insofar as he exercises the office of trustee, it is not to be subject to his control or to form part of his estate. It is difficult to figure language more apt to declare his intention that he was to have no interest in the policy, and it is against that declaration, contrasted with the words of any testamentary declaration with which the cases make one familiar, that one is to judge of the duties of the trustee of the policy in the imaginary contingency on which the Crown are here bound to rely.

There is one difficulty in coming to a conclusion on the analogy of the testamentary trust. The truster, as I have explained, is to be treated as analogous to a deceased testator. In the contingency figured, does the fee (to which the policy has been equiparated by analogy) vest in the representative of the last surviving son, or of the representative of the widow, or does it fall into intestacy? It is only if the last of those questions be answered in the affirmative that the Crown here succeed. The effect of a survivorship clause or a destination-over in a testamentary disposition as postponing

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vesting to the time of payment is hardly in doubt. It is set out in Henderson on Vestingg (a work of high authority). In the present case, however, the question whether, on the emergence of a last survivor before the date of payment, vesting in him is necessarily accelerated, although survivorship of the term of payment had been made a condition of his taking, on the ground that the individuality of the last survivor is by then settled, was not properly before us, as it would have been in the kind of competition I have just envisaged. I prefer to express no opinion on it, since in the view I have formed of this appeal it is unnecessary either so to do, or to review the large number of cases which were cited to us. I will only say that, while I have no doubt of the correctness of the decision in Dickson’s Trustees v Elliot, the dictum of Lord Strachan therein (1949 SLT at 359) which was relied on in Hicks v Inland Revenue Comrs cannot be accepted as a rule to which there are no exceptions.

The view which I take of the present case is this. We have to assume that Mr Barclay is alive, predeceased by both his sons, one or both of whom was predeceased by Mrs Barclay. What, then, on that assumption would be the duty of the trustee of the policy? I will also assume in favour of the Crown, though by no means deciding, that they could not hold the policy for the benefit of the representatives of the last surviving son, since the provision to both sons was fettered by a condition of survivorship of the date of payment. On the provision for Mrs Barclay, however, there was no such fetter; if after her death the trustee could continue to hold for her benefit, I think he would be obliged to do so. It was decided in Walker’s Trustees v Lord Advocate that one of the modes in which trustees may hold a policy under the 1880 Act for the benefit of a named beneficiary, he having predeceased the date of maturity, is to hold for his estate. In my opinion, it follows that the trustees could not denude in favour of the assured, but would be obliged to hold for the wife’s estate, thereby contradicting any radical right in the assured, who accordingly could not in his lifetime have any interest in the policy. This gives effect to his plainly expressed intention, and to the evident policy of the 1880 Act.

My Lords, I would therefore allow this appeal. I should add that I would have decided Hicks v Inland Revenue Comrs differently; as was pointed out by Lord Keith in the present case, however, the argument which, in my opinion, here succeeds was not put forward in the earlier case.

Appeal allowed.

Solicitors: Wilkinson, Kimbers & Stadden agents for Nightingale & Bell, SSC, Edinburgh, and Tindal Oatts & Rodger, Glasgow (for the appellant); Solicitor of Inland Revenue.

Gordon H Scott Esq   Barrister.

William Skelton & Son v Harrison & Pinder Ltd

[1975] 1 All ER 182

Categories:        LANDLORD AND TENANT; Leases        

Court:        QUEEN’S BENCH DIVISION        

Lord(s):        HIS HONOUR JUDGE FAY QC        

Hearing Date(s):        23, 24, 25, 26, 30 JULY 1974        

Landlord and tenant – Lease – Underlease – Term of underlease – Underlease for whole term of lease operating as assignment – Reversion sufficient to support underlease – Indefinite but defeasible term – Business premises – Term continuing after date of expiry by virtue of statute – Term liable to be determined by notice – Underlease for term expiring after date of expiry of lease – Whether sufficient reversion to support underlease.

Landlord and tenant – Business premises – Continuation of tenancy – Severance of reversion – Notice to determine – Part of premises ceasing to be protected – Tenants of business premises subletting part of premises – Sub-tenants occupying part for business purposes – Sub-tenants acquiring lease from landlord of their part of premises to commence on expiry of tenants’ term – Right of sub-tenants after expiry of tenants’ lease to give tenants notice to quit part of premises occupied by sub-tenants – Law of Property Act 1925, s 140(1) – Landlord and Tenant Act 1954, ss 23(1), 24(3)(a).

The plaintiffs were lessees of a factory under a 21 year lease (‘the headlease’) from S which was due to expire on 26 April 1970. The plaintiffs occupied the factory for the purposes of their business. In 1962 S and the plaintiffs desired to grant to the defendants a 21 year lease of part of the factory. For that purpose it was agreed that the plaintiffs should execute an underlease of that part to the defendants for a term to expire three days before expiry of the headlease and that S would execute a lease (‘the reversionary lease’) to the defendants commencing on the expiry date of the headlease for the balance of the 21 years. The grant of the reversionary lease was conditional on the underlease not having been determined otherwise than by effluxion of time at the date when the reversionary lease was to commence. By mistake the documents as executed provided for the termination of the underlease and commencement of the reversionary lease on 26 May 1970 instead of 26 April 1970. The defendants went into and at all times remained in occupation of their part of the factory for the purposes of their business. On 15 October 1969 the plaintiffs served a notice on the defendants under s 25 of the Landlord and Tenant Act 1954 purporting to terminate the defendants’ tenancy from 24 June 1970. Without prejudice to their contention that the notice was invalid, the defendants served a counter-notice under the 1954 Act but no application to the court for the grant of a new tenancy was made. On 27 March 1972 the defendants, purporting to act as the plaintiffs’ landlords under the reversionary lease, served on the plaintiffs a notice under s 24(3)(a)a of the 1954 Act terminating from 1 July 1972 the plaintiffs’ tenancy of the part of the factory occupied by the defendants. The plaintiffs brought two actions against the defendants: in the first they claimed possession of the part occupied by the defendants, mesne profits and dilapidations and rectification of the underlease by substituting a reference to 26 April for the reference to 26 May; and, in the second, declarations that the reversionary lease had never taken effect, and that the defendants’ notice under s 24(3)(a) was of no effect, on the ground that by virtue of Part II of the 1954 Act the headlease and underlease had continued after the dates on which they would otherwise have expired and the latter had been determined on 24 June 1970 by virtue of the notice under s 25. The defendants contended,

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inter alia, that since the underlease was for a term longer than the headlease it operated as an assignment.

Held – (i) The unrectified underlease did not take effect as an assignment for, at the time of the underlease, the plaintiffs had a term which, although expressed as a term certain in the instrument, would continue indefinitely by virtue of Part II of the 1954 Act, defeasible by notice given under Part II. That indefinite but defeasible reversion of the plaintiffs was sufficient to support the underlease, and, therefore, rectification was unnecessary (see p 187 d to g, post); Oxley v James (1844) 13 M & W 204 applied.

(ii) The reversionary lease had taken effect on 26 May 1970 since on that date the underlease had not expired otherwise than by effluxion of time. On coming into effect the reversionary lease had severed the reversion on the headlease in respect of that part of the factory occupied by the defendants. In consequence of that severance the plaintiffs’ tenancy of the defendants’ part of the factory ceased to be one which included premises occupied by the plaintiffs for the purposes of their business, within s 23(1)b of the 1954 Act, and furthermore the defendants were entitled, under s 140(1)c of the Law of Property Act 1925, to give notice to the plaintiffs in respect of that part of the factory as if it ‘had alone originally been comprised in’ the headlease. Since the plaintiffs did not occupy any of that part of the factory they had, on the severance taking place, ceased to be protected under Part II of the 1954 Act. Accordingly the notice given by the defendants under s 24(3)(a) was valid, the plaintiffs’ interest in the defendants’ part of the factory had ceased and the plaintiffs were in occupation pursuant to the reversionary lease. The plaintiffs’ action therefore failed, save for the claims to mesne profits and dilapidations (see p 189 c and g, p 190 c and g and p 191 j to p 192 d, post); Jelley v Buckman [1973] 3 All ER 853 distinguished.

Notes

For notices under Part II of the Landlord and Tenant Act 1954, see 23 Halsbury’s Laws (3rd Edn) 888–890, paras 1710, 1711, and for cases on the subject, see 31(2) Digest (Reissue) 949, 950, 7742–7745.

For severance of the reversion, see 23 Halsbury’s Laws (3rd Edn) 660, 661, para 1380, and for cases on the subject, see 31(2) Digest (Reissue) 747–750, 6169–6192.

For the effect of an underlease for the whole term, see 23 Halsbury’s Laws (3rd Edn) 477, 478, para 1102, and for cases on the subject, see 31(1) Digest (Reissue) 181–184, 1521–1547.

For the Law of Property Act 1925, s 140, see 27 Halsbury’s Statutes (3rd Edn) 556.

For the Landlord and Tenant Act 1954, ss 23, 24, 25, see 18 Halsbury’s Statutes (3rd Edn) 555, 557, 559, 571.

Cases referred to in judgment

Bolton (H L) (Engineering) Co Ltd v T J Graham & Sons Ltd [1956] 3 All ER 624, [1957] 1 QB 159, [1956] 2 WLR 844, CA, 31(2) Digest (Reissue) 944, 7722.

Bowes-Lyon v Green [1961] 3 All ER 843, [1963] AC 420, [1961] 3 WLR 1044, HL, 31(2) Digest (Reissue) 941, 7712.

Cornish v Brook Green Laundry Ltd [1959] 1 All ER 373, [1959] 1 QB 394, [1959] 2 WLR 215, CA, 31(2) Digest (Reissue) 967, 7800.

Curtis v Wheeler (1830) 4 C & P 196, Mood & M 493, NP, 31(2) Digest (Reissue) 184, 1540.

Dendy v Evans [1910] 1 KB 263, [1908–10] All ER Rep 589, 79 LJKB 121, 102 LT 4, CA, 31(2) Digest (Reissue) 810, 6715.

Jelley v Buckman [1973] 3 All ER 853, [1974] QB 488, [1973] 3 WLR 585, CA.

Page 184 of [1975] 1 All ER 182

Milmo v Carreras [1946] 1 All ER 288, [1946] 1 KB 306, 115 LJKB 278, 174 LT 223, CA, 31(1) Digest (Reissue) 183, 1531.

Oxley v James (1844) 13 M & W 209, 13 LJEx 358, 3 LTOS 222, 153 ER 87, 31(1) Digest (Reissue) 157, 1365.

Pike v Eyre (1829) 9 B & C 909, 4 Man & Ry KB 661, 8 LJOSKB 69, 109 ER 338, 31(1) Digest (Reissue) 187, 1579.

Walsh v Lonsdale (1882) 21 Ch D 9, 52 LJCh 2, 46 LT 858, CA, 31(1) Digest (Reissue) 78, 594.

Action

By a writ issued on 3 September 1970 the plaintiffs, William Skelton & Son Ltd, brought an action against the defendants, Harrison & Pinder Ltd, claiming possession of part of factory premises which the plaintiffs had let to the defendants by an underlease made on 8 March 1963, on the ground that the tenancy created by the underlease had been determined by notice pursuant to s 25 of the Landlord and Tenant Act 1954. The plaintiffs also claimed mesne profits and damages for breach of repairing covenants contained in the underlease. By their amended statement of claim, the plaintiffs claimed a declaration that the habendum of the underlease ought to be construed so as to refer to 26 April 1970 in place of 26 May 1970 or, alternatively, an order for rectification. By a writ issued on 3 August 1972 the plaintiffs brought a second action against the defendants claiming declarations (1) that a deed dated 8 March 1963 between Walter Skelton and the defendants whereby Walter Skelton had agreed to grant the defendants a lease of the same part of the factory premises to commence on 26 May 1970 had never taken effect, and (2) that a notice from the defendants to the plaintiffs purporting to terminate the plaintiffs’ tenancy of the same part of the factory premises under s 24(3)(a) of the 1954 Act was of no effect. By their defence in the first action the defendants denied that the plaintiffs were their landlords so as to be competent to give notice under s 25 of the 1954 Act in respect of the underlease. The two actions were heard together. The facts are set out in the judgment.

J Finlay QC and Bernard Marder for the plaintiffs.

Ronald Bernstein QC and Christopher Priday for the defendants.

Cur adv vult

30 July 1974. The following judgment was delivered.

JUDGE FAY QC read the following judgment. These two cases, which were tried together, arise out of certain leases of a factory at 66 and 68 Waldeck Road, Chiswick. The factory is owned by one Walter Skelton. He was, and is, a director of a family company, William Skelton & Son Ltd, the plaintiffs in both actions. In 1949 he let the factory to his company, by a lease which I shall refer to as the headlease, for a term of 21 years from 26 April 1949. This headlease was thus due to expire in April 1970.

In 1962 Mr Skelton and the plaintiffs wished to find a tenant for part of the factory, comprising about one-third of its ground floor area. Negotiations took place with Harrison and Pinder Ltd, the defendants, who wished to occupy that part for their business as signmakers. The negotiations were conducted between Mr Walter Skelton on the one part, and Mr Gerald Golding, a director of the defendant company, on the other part. Mr Skelton offered a 21 year tenancy. Mr Golding wanted a shorter term, but Mr Skelton insisted and got his way. He was a man of firm character according to Mr Golding in evidence. The parties settled on a 21 year tenancy. The matter was then passed to the solicitors for each side. One firm represented both Mr Skelton and the plaintiffs. The conveyancing was complicated by the fact that the property to be let was part of the premises comprised in the head lease which had then eight years to run. Apparently the solicitors considered a surrender

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by the plaintiffs of the relevant part, leaving the way clear for Mr Skelton to grant a 21 year lease. But this was not found to be feasible. By a letter dated 19 November 1962 the solicitors for the plaintiffs and Mr Skelton wrote:

‘It is not possible at this stage to grant the entire term from Mr. Walter Skelton on a surrender of the Company’s Lease, as there are intermediary incumbrances. There is, however, no question of the title of the Company to grant the said Sub-Lease.’

The alternative chosen was that there should be two instruments, first an underlease by the plaintiffs to the defendants from 1 December 1962 to a date intended to be three days less than the plaintiffs’ term under the head lease and, secondly, a reversionary lease from Mr Skelton from a date intended to be the date of expiry in 1970, of the headlease until 29 September 1983. The rental was £1,200 per annum under both instruments. These instruments, which I shall call the underlease and the reversionary lease, were duly executed and the defendants went into occupation. The plaintiffs were, and are, in occupation of the rest of the factory for the purposes of their printing business.

The defendants may be forgiven for having thought, at this stage, that they had security of tenure for 21 years. Unfortunately the underlease and the reversionary lease contained two major blemishes. The first blemish was caused by the plaintiffs’ solicitor getting it into her head that the headlease expired on 26 May 1970 and not, as was the fact, on 26 April 1970. Her draft underlease provided by its habendum for a term ‘until the Twenty sixth day of May 1970 (less three days)’. The defendants’ solicitor did not inspect the headlease, but assumed from the draft that 26 May 1970 was its expiry date. The error went undetected, and the instruments, when executed, provided for an underlease to 26 May 1970, less three days, and for a reversionary lease from 26 May 1970. These dates were of course one month after the true expiry of the headlease. The other blemish arose from the fact that neither solicitor spared a thought for the effect of the Landlord and Tenant Act 1954 on the transaction.

I have seen the two solicitors concerned—Mr Leonard Dark, a partner in the defendants’ solicitors’ firm, and Miss Anne Amphlett who conducted the conveyancing on behalf of Miss Storey the principal of the firm acting for Mr Skelton and the plaintiffs. Mr Dark said that he had no idea that the reversionary lease might be a species of trap. He thought the two instruments had the same effect as a lease for 21 years. Miss Amphlett said, ‘the fact that the Landlord and Tenant Act might nullify the second document was not present in my mind’. She had no idea how the error in the date had crept in. In the letter of 19 November 1962, from which I have already quoted, she said:

‘We enclose herewith draft of a Sub-Lease to be granted by our clients, Wm Skelton & Son Ltd., who hold under a Lease which expires in 1970. Our Client, the Freeholder, Mr. Walter Skelton, would, however, be prepared to grant a direct Lease to your Clients to start at the expiration of the said term …  We are not sending with this letter a draft of the Lease to be granted by the Freeholder to avoid delay, but the same would be substantially on the same terms as the draft submitted herewith.’

It was the draft of the underlease which gave Mr Dark the impression that the head lease expired one month later than it in fact did. And, in my view, he was fully justified in drawing that inference from the draft and that accompanying letter.

The next matter which I need record is that the defendants were, on occasions, late with their rent payments, and on 25 April 1969 the plaintiffs issued a writ claiming possession, on forfeiture, for non-payment of the rent due on 25 March 1969, within 21 days. The rent and costs were paid and the action abandoned.

Now, the changeover from underlease to reversionary lease was due to take place

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in May 1970, but on 15 October 1969 the plaintiffs served a notice under s 25 of the Landlord and Tenant Act 1954, purporting to terminate the tenancy from the plaintiffs to the defendants on 24 June 1970. Without prejudice to the contention that the notice was invalid, the defendants served a counter-notice on 27 November 1969 stating that they were unwilling to give up possession. This is ordinarily a prelude to an application to the court for a new lease, but the defendants have not so applied. Had they done so, of course, a new lease granted by the court would have been at a current rent; and rents have risen considerably between 1962 and 1970. They preferred to take their stand on the rights they thought they had under the reversionary lease.

Much later, on 27 March 1972, the defendants served on the plaintiffs a notice under s 24(3)(a) of the 1954 Act, terminating on 1 July 1972, the tenancy of the plaintiffs which—say the defendants—the plaintiffs held of them by virtue of the reversionary lease. The defendants, I may add, remain to this day in occupation of their part of the factory.

The plaintiffs now bring these two actions. By the first, commenced in 1970, the plaintiffs claim possession of the premises, mesne profits and dilapidations. And, by an amendment, they claim a declaration that on the proper construction of the underlease the habendum ought to be construed and read, ‘without any order for rectification’, as though a reference to 26 April 1970 was substituted therein for 26 May 1970, and, in the alternative, an order that the said habendum, that is to the underlease, be rectified by substituting for the reference therein to 26 May a reference to 26 April.

Under the second action, the plaintiffs claim declarations, firstly, that the reversionary lease has never taken effect; alternatively, that the notice given under s 24(3)(a) is of no effect. In outline, the plaintiffs’ case is that by virtue of Part II of the 1954 Act both the headlease and the underlease were continued after the expiry dates expressed in the documents; that the headlease is still in being, since nothing has occurred to determine it, and that the underlease was brought to an end on 24 June 1970, by virtue of the notice under s 25.

The defendants, on the other hand, advanced two separate lines of argument. The first is that since the underlease was for a longer term than the headlease, owing to the error of a month, it operated as an assignment; that in consequence the defendants were from the outset tenants of Mr Skelton, and that the plaintiffs had no right to give the s 25 notice. The plaintiffs meet this argument by claiming rectification, alternatively, that, as a matter of interpretation, the word ‘May’ be read as ‘April’ in the underlease, alternatively, by asserting that the effect of Part II of the 1954 Act is to give a sufficient reversion to the plaintiffs to support the underlease so that it does not have effect as an assignment. The defendants’ other argument is that the reversionary lease, when it came into force, severed the reversion expectant on the plaintiffs’ tenancy so that from that date the plaintiffs held the part of the factory they occupied from Mr Skelton, and the defendants’ part from the defendants. This, say the defendants, takes the plaintiffs’ tenancy of the defendants’ part out of the protection of the 1954 Act, and opens the way for service of a notice under s 24(3)(a). In addition to joining issue on the law, the plaintiffs claim to meet this point by referring to a proviso in the reversionary lease which, they say, has prevented it from coming into force at all. I will deal, in order, with these issues.

The defendants’ first line of attack depends on the underlease not being rectified either by court order or by interpretation. It is the clearest possible case of mutual mistake, not less so because it originated with the plaintiffs’ own solicitors. Prima facie I think it is a clear case for rectification. Counsel for the defendants says, however, that no equitable remedy should be granted in this case, because the plaintiffs come to the court without the necessary clean hands. He says that Mr Skelton and the plaintiffs have been acting in concert to defeat the bargain they made, and that equity should not assist them.

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I have some sympathy with this submission. In essence, the plaintiffs are seeking to avoid their own bargain by relying on a mistake of law; and there may be rough justice in allowing the defendants to defeat them by relying on the other mistake as to the date. I need not pursue this matter into these difficult regions however, because I have reached the conclusion that even if unrectified the underlease does not operate as an assignment. The doctrine that an underlease for longer than the underlessor’s own term operates as an assignment, was reaffirmed in Milmo v Carreras. In that case the underlessor had no reversion, but it was held in Oxley v James that a tenant from year to year has a sufficient reversion to enable him to sublet for a term of years; see per Pollock CB (13 M & W at 214):

‘It is clear, according to the cases of Pike v. Eyre and Curtis v. Wheeler, that, if a tenant from year to year demises for a term of years, and the original tenancy from year to year lasts beyond that term, such a demise is not an assignment, but there is a reversion, on which covenant may be maintained.’

Parke B (13 M & W at 215) referred to the matter as the grantor not assigning the whole of his interest, which was an indefinite period, subject to determination by notice to quit from his landlord. Counsel for the plaintiffs submits, I think correctly, that a tenant of business premises has a similar term for an indefinite period.

At the time of the underlease, in Oxley’s case, the underlessor had a term which would continue indefinitely, defeasible by notice given by either landlord or tenant. At the time of the underlease in the present case the plaintiffs had a term which, although expressed as a term certain in the instrument, would by operation of Part II of the 1954 Act continue indefinitely, defeasible by notice under Part II. It is to be observed that, even if events occurred which caused the tenancy to cease to be protected by the Act, it would continue until terminated by notice: see s 24(3) which I shall have to consider later.

I can see no difference, in principle, between this kind of indefinite but defeasible reversion, and that in Oxley’s case. It is not as though the contractual tenancy ceases and is replaced by a new statutory tenancy. The Court of Appeal has decided that under Part II of the 1954 Act the common law tenancy subsists, with a statutory variation as to mode of determination (H L Bolton (Engineering) Co Ltd v T J Graham & Sons Ltd ([1956] 3 All ER 624 at 626, [1957] 1 QB 159 at 168) and Cornish v Book Green Laundry Ltd ([1959] 1 All ER 373 at 382, [1959] 1 QB 394 at 409)). For these reasons I hold that the unrectified underlease does not have effect as an assignment, and for this reason the defendants’ first line of argument fails. In these circumstances it would be idle to consider rectification, and I shall not grant that remedy.

I turn to the argument based on the reversionary lease. Counsel for the plaintiffs claims that this fails in limine because the lease never took effect; this was because it was subject to a condition precedent which was not satisfied. Here I must mention that although, for convenience, I have been calling this instrument a reversionary lease it was in fact an agreement for a reversionary lease. It was by deed, and it had been stamped with the duty appropriate to a lease. I apprehend that I must treat it as a reversionary lease, in equity, following the well-known doctrine of Walsh v Lonsdale. Clause 1 reads in part:

‘SUBJECT to a lease dated the 8th day of March 1963 and made between WM SKELTON & SON LTD (1) RONALD GODFREY GOLDING (2) and GERALD DENNIS

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GOLDING (3) not having been terminated other than by effluxion of time and to the Agreement and other matters mentioned in Clause 2 hereof and in consideration of the Rent and Covenants hereinafter reserved and contained and on the part of the Tenants to be paid performed and observed the Landlord hereby agrees to demise … ’

The material words are ‘subject to a lease’ (which, although inaccurately described as to its parties, is the underlease)—subject to that lease not having been terminated other than by effluxion of time. And those words are repeated in cl 6(4) which reads:

‘PROVIDED always that this Deed is subject to the said Lease dated the      day of     One thousand nine hundred and Sixty Three not having been terminated other than by effluxion of time and if such Lease shall have been terminated as aforesaid then this Agreement shall not take effect and everything herein shall be null and void.’

Again, although the date is not filled in, in this carelessly drafted document, there is no dispute that it is the underlease which is referred to. Counsel for the plaintiffs’ argument is that the writ for possession, which was issued on 25 April 1969, represented an election by the plaintiffs to accept the forfeiture worked by nonpayment of rent, and, that from that moment, the underlease was at an end and, within the terminology of the proviso, had been terminated otherwise than by effluxion of time; and thus the reversionary lease was avoided.

With the first part of his argument I agree; the issue of the writ signifies the lessor’s intention to determine. But what followed the service of the writ is relevant. The defendants at once paid the overdue quarter’s rent and costs, and the matter was settled without even appearance being entered. On 30 April 1969 the defendants’ solicitors wrote as follows:

‘We refer to our conversation with you on the telephone this morning when we informed you that we had been instructed by the Defendants. It appears that the Defendants changed their Accountants recently and in so doing the fact that the rent was due on the 25th March last was overlooked. Our Clients have no intention of avoiding their obligation. We accordingly enclose our cheque for £311·15·0d. being as to £300.0s.od. the arrears of rent, and £11·15·od. the costs of the Writ. We confirm that you informed us that in the circumstances your Clients would not press for forfeiture and the payment would be accepted in satisfaction of the claim and that it was unnecessary for us to enter an Appearance to the Writ on behalf of the Defendants. Would you please acknowledge receipt of the enclosed cheque and confirm this agreement.’

On 5 May 1969 the plaintiffs’ solicitors replied:

‘We thank you for your letter dated 30th April and cheque. We confirm that our clients will not press for forfeiture and that payment is accepted in satisfaction of the claim and costs. We understand that your clients have now been in direct touch with Messrs. Skelton & Co. and that they are now arranging to pay the rent which will be due in June by banker’s order and thereafter to make a regular monthly payment by banker’s order of £100. This arrangement will be very agreeable to our clients and they are going to let us have a copy of Messrs. Harrison & Pinder’s letter informing them of the arrangement.’

In my judgment, the effect of this settlement was to waive the forfeiture. In such a case a court could, and certainly would, have granted relief against the forfeiture, and here the parties by their settlement are doing precisely that. Where the court grants relief against forfeiture—I quote Woodfalld—‘the effect is for all purposes and between

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all parties to do away with the forfeiture just as if there had never been any’. In Dendy v Evans Farwell LJ said ([1910] 1 KB 263 at 270, 271, [1908–10] All ER Rep 589 at 593):

‘The forfeiture is stopped in limine; so that there is no question of any destruction of an estate which has to be called into existence again.’

What the court can do by decree the parties can do by agreement, and I find they have expunged the forfeiture; this point fails. Counsel for the plaintiffs also sought to rely on the revised arrangement mentioned in the letter which I have cited, for rents to be payable monthly instead of quarterly, as some support for the view that the old underlease had gone and a new one with new terms had sprung up. This variation seems to me to be a neutral fact. Such an arrangement could equally operate as a variation of the old lease, and I do not think it affects the matter one way or the other. It follows that the deed containing the reversionary lease was effective on 26 May 1970, the day when the reversionary lease was expressed to commence. On that date the underlease had not been determined otherwise than by effluxion of time; indeed it had not been determined at all although a notice under s 25 was then running. Counsel for the plaintiffs argued that one must consider the effect of the proviso as at some later date after expiry of the notice to quit. I see no reason to do this other than by following a line of argument which was at one time advanced, but was abandoned. This derived from the character of the instrument as an agreement only, and would distinguish Walsh v Lonsdale. Counsel for the plaintiffs, on instructions, expressly abandoned this argument after certain correspondence had been referred to, and I say no more about it. I hold that on 26 May 1970 the defendants became tenants of Walter Skelton of the premises described in the reversionary lease. This does not however mean that the defendants were entitled to occupancy. As from this date there existed four interests in the property. At the bottom of the structure stood the defendants, occupying by virtue of their underlease not yet then determined under Part II of the 1954 Act. Their immediate landlords were the plaintiffs who, in turn, held from the defendants, and the defendants held from Walter Skelton, the freeholder. As regards the rest of the factory, the plaintiffs still held from Walter Skelton under the headlease. What has happened is that the coming into force of the reversionary lease has severed the reversion expectant on the headlease so that, in popular parlance, the plaintiffs, from that moment, had two landlords, although holding under one lease.

I now come to the nub of counsel for the defendants’ argument on this second branch of his case. He says that the severance of the reversion as governed by s 140 of the Law of Property Act 1925 has put an end to the application of Part II of the 1954 Act to this part of the tenancy, and that this fact brings into play s 24(3)(a) of that Act, under which effective notice to quit may be given. This is the notice which the defendants gave to expire on 1 July 1972. As from that date, says counsel for the defendants, the plaintiffs’ interest is gone and the defendants’ occupation is an occupation under what I have called the reversionary lease, but which, as from that date, ceased to be reversionary.

In order to deal with these submissions I must look, first, at the statutory provisions. Section 140 of the Law of Property Act 1925 reads as follows:

‘(1) Notwithstanding the severance by conveyance, surrender, or otherwise of the reversionary estate in any land comprised in a lease, and notwithstanding the avoidance or cesser in any other manner of the term granted by a lease as to part only of the land comprised therein, every condition or right of re-entry, and every other condition contained in the lease, shall be apportioned, and shall remain annexed to the severed parts of the reversionary estate as severed,

Page 190 of [1975] 1 All ER 182

and shall be in force with respect to the term whereon each severed part is reversionary, or the term in the part of the land as to which the term has not been surrendered, or has not been avoided or has not otherwise ceased, in like manner as if the land comprised in each severed part, or the land as to which the term remains subsisting, as the case may be, had alone originally been comprised in the lease.

‘(2) In this section “right of re-entry” includes a right to determine the lease by notice to quit or otherwise; but where the notice is served by a person entitled to a severed part of the reversion so that it extends to part only of the land demised, the lessee may within one month determine the lease in regard to the rest of the land by giving to the owner of the reversionary estate therein a counter notice expiring at the same time as the original notice … ’

I need not read s 140(3).

The effect of the first two subsections is to provide that the right to determine the lease by a notice to quit remains annexed to the severed part of the reversionary estate, that is the defendants’ interest, in like manner as if the defendants’ part of the factory had alone originally been comprised in the lease. So the defendants are entitled to give to the plaintiffs, in respect of the defendants’ portion of the factory, whatever notice the lease—that is the headlease as modified by Part II of the 1954 Act—permits.

Section 24(3) of the 1954 Act provides:

‘Notwithstanding anything in subsection (1) of this section—(a) where a tenancy to which this Part of this Act applies ceases to be such a tenancy, it shall not come to an end by reason only of the cesser, but if it was granted for a term of years certain and has been continued by subsection (1) of this section then (without prejudice to the termination thereof in accordance with any terms of the tenancy) it may be terminated by not less than three nor more than six months’ notice in writing given by the landlord to the tenant … ’

I need not read para (b). The notice given in this case complied as to length with this provision. The crux of the matter is whether the head tenancy, which was one to which Part II of the 1954 Act applied, has ceased, quoad the defendants’ part of the factory, to be such a tenancy. Counsel for the defendants says that the severance of the reversion has effected that cesser of protection. He says that, because by s 23(1), a tenancy to which Part II applies—which I shall call a protected tenancy—is one—

‘where the property comprised in the tenancy is or includes premises which are occupied by the tenant and are so occupied for the purposes of a business carried on by him or for those and other purposes.’

By virtue of the two words ‘or includes’ the plaintiffs initially enjoyed protection as regards the whole factory, because they occupied a part. But now they have a separate landlord of the severed part, and of that part they occupy none. So, says counsel, they have lost protection and the way is open for the s 24(3)(a) notice.

Counsel for the plaintiffs’ rejoinder is to cite the recent case in the Court of Appeal, Jelley v Buckman. That was a case under the Rent Acts where land had been let together with a dwelling-house. The reversion to the land had become severed from the reversion to the dwelling-house. The Court of Appeal rejected the argument that, by reason of the severance, the land had ceased to be land let together with the dwelling-house, and held that the whole still enjoyed the protection of the Rent Acts. Stamp LJ, giving the judgment of the court said ([1973] 3 All ER at 855, [1974] QB at 496): ‘In our judgment, however, a severance of the lessor’s reversion by conveyance does not bring two separate tenancies into being’ and, after dealing with s 140 of the Law of Property Act 1925, he said ([1973] 3 All ER at 856, 857, [1974] QB at 498):

Page 191 of [1975] 1 All ER 182

‘But it is one thing to say that each reversioner has rights and remedies similar to or even indistinguishable from the rights and remedies which he would have had if there had been two separate tenancies and quite another thing to say that this operates against the tenant and that he therefore has two tenancies; and we cannot read s 140 as producing the latter result. We can find nothing in the section to suggest for a moment that the legislature intended that following a severance to which the lessee was not a party, he should find himself holding part of his land under one tenancy and part under another.’

Now I see the force of counsel for the plaintiffs’ contention that just as the severed land in Jelley v Buckman was still let together with the remainder so here, in the words of s 23(1) of the 1954 Act, the tenancy is still, notwithstanding the severance, one which includes premises occupied for business purposes. If the question I had to decide was whether the two parts of the tenancy are let together with one another, the matter would be concluded in the plaintiffs’ favour. But that is not what I have to decide. The question here is whether or not the defendants may serve a s 24(3)(a) notice. There are words in s 140 of the Law of Property Act 1925 which govern notices. It may be significant that the 1954 Act, although it contains detailed provisions covering some specific situations such as ss 28 and 44 as to future tenancies and reversionary leases, has no specific provision as to the problem of the severed reversion. In passing the 1954 Act, Parliament must be taken to have the provisions of the earlier Act in mind; and it may well be that the 1954 Act contains no special provision because the matter is adequately covered by s 140 of the 1925 Act.

In any event s 140 clearly applies, and I must examine what it says about terminating a tenancy. Section 140(2) defines a ‘right of re-entry’ to include a right to determine a lease by notice to quit or otherwise. Section 140(1) provides, among other things, that every right of ‘re-entry’ shall be in force ‘in like manner as if the land comprised in each severed part … had alone originally been comprised in the lease’. Some meaning has to be given to these words. In the light of the 1954 Act there are three situations affecting the method of terminating the tenancy: firstly, it may never have been protected, in which case the rights of re-entry are those to be found in the relevant lease; secondly, it may have been protected, and may have lost protection, in which case the right of re-entry is that provided by s 24(3)(a); thirdly, it may continue to be protected; in which case the right of re-entry is that provided by s 25.

This cannot be the first case, since the plaintiffs enjoyed protection at one time because the relevant part of the factory was let together with the part they occupied. This may also be so because they may have, themselves, occupied this part before the underlease to the defendants. Whether or not they did so was not stated in evidence. Can this be the last case of the three, as counsel for the plaintiffs claims? If this is right the defendants can only terminate by a s 25 notice, and this contemplates a counter-notice, and an application by the tenant for a new tenancy. But he cannot get a new tenancy because the court, unless the landlord agrees otherwise, can only grant a new lease of the holding (s 32(1)) and the holding is defined in s 23(3) as excluding any property not occupied by the tenant. The plaintiffs do not occupy, and thus cannot obtain a new lease. While it is true that a s 25 notice would then effectually bring the tenancy to an end it is a clumsy method and does not seem to me to be what the Act intends s 25 to be used for. Its true use is as the opening move towards the grant of a new tenancy. But if this is the second case these difficulties disappear. And it is the second case, in my judgment, if full effect is allowed to be given to the words in s 140(1): ‘in like manner as if the land comprised in each severed part … had alone originally been comprised in the lease.’

This is a deeming provision; one must assume a hypothetical lease of the relevant land alone. But this is not occupied by the plaintiffs, and is not protected. But

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it once was, before the coming into force of the reversionary lease, and it seems to me that I here find the cesser of which s 24(3)(a) speaks. For purposes other than this deeming no doubt the fact that there is but one tenancy means that the two parts of the land are still let together. But for the purposes of rights of re-entry the deeming provision is required to be applied. And it seems to me that I could not adopt counsel for the plaintiffs’ submission without ignoring that deeming provision. This, in my judgment, is what distinguishes the present case from Jelley v Buckman. Moreover it explains why there is no special provision in the 1954 Act as to severed reversions.

I should mention that the recent House of Lords case of Bowes-Lyon v Green was cited. The chain of leasehold interests in that case bears a startling similarity to that in the present case. But it decided an entirely different point, and does not touch the issues in this case.

My finding on this part of the case, therefore, is that the notice under s 24(3)(a) was good, and that the plaintiffs’ interest in the defendants’ part of the factory has ceased. The defendants are in occupation pursuant to the reversionary lease. The effect of my findings is that the plaintiffs’ claims in both actions are dismissed, save as regards their claims to mesne profits and dilapidations. The parties sensibly agreed to postpone consideration of these until after my judgment on the major issues was known. These two claims subsist, and in case they need to be tried I reserve them to myself.

Plaintiffs’ claims in both actions dismissed save for the claims to mesne profits and damages.

Solicitors: Faull, Best & Knight (for the plaintiffs); Jacobson, Ridley (for the defendants).

Janet Harding   Barrister.

Wolkind v Ali

[1975] 1 All ER 193

Categories:        HOUSING        

Court:        QUEEN’S BENCH DIVISION        

Lord(s):        LORD WIDGERY CJ, BRIDGE AND SHAW JJ        

Hearing Date(s):        4 NOVEMBER 1974        

Housing – Overcrowding – Lodgings – Premises used as lodging house – Notice by local authority – Notice limiting number of persons permitted to sleep on premises – Premises subsequently ceasing to be used as lodging house – Premises used as home for members of one family – Members of family sleeping on premises exceeding number permitted by notice – Whether notice limiting number of persons permitted to sleep on premises still valid when premises no longer used as lodging house – Housing Act 1957, s 90(1)(4).

In 1967 the respondent occupied the ground and basement floors of a house. He used those premises as a lodging house. The premises comprised two rooms on the ground floor and two rooms in the basement. On 9 June the local authority served a notice on the respondent under s 90(1)a of the Housing Act 1957. The effect of that notice was to limit to two the number of persons who were permitted to sleep in either of the two rooms on the ground floor of the premises and to prohibit the use as sleeping accommodation of either of the two rooms in the basement. The restrictions imposed by the notice were observed by the respondent until 1973 when he was joined by his large family from abroad. From that time the premises were no longer used as a lodging house but were occupied solely by the respondent’s family. On 24 July 1973 the respondent was convicted by the justices under s 90(4) of the 1957 Act of causing the ground floor rooms to be occupied otherwise than in accordance with the notice in that the front room of the ground floor was occupied as sleeping accommodation by the respondent’s four sons, and the back room was so occupied by the respondent, his wife and ten year old daughter. The respondent appealed to the Crown Court and his appeal was allowed. The prosecutor appealed to the Division Court.

Held (Lord Widgery CJ dissenting) – Where a notice under s 90(1) of the 1957 Act had been served on the occupier of premises which were being used as a lodging house, restricting the number of persons who might be permitted to occupy those premises, the offence of contravening the notice could only be committed under s 90(4) so long as the premises continued to be premises of a kind to which s 90(1) applied, ie a house let as lodgings or occupied by members of more than one family. Since the premises had ceased to be used as a lodging house when the respondent’s family came to live there, the respondent was not guilty of the offence charged and the appeal would therefore be dismissed (see p 197 c to f, post).

Notes

For the control of overcrowding in houses let as lodgings or occupied by more than one family, see 19 Halsbury’s Law (3rd Edn) 614, para 992.

For the Housing Act 1957, s 90, see 16 Halsbury’s Statutes (3rd Edn) 184.

Cases cited

Attorney General v Beauchamp [1920] 1 KB 650.

Reed v Hastings Corpn (1964) 62 LGR 588, CA.

Case stated

On 24 July 1973 the justices for the Inner London Area acting in and for the petty sessional division of Thames heard two informations laid by the appellant, Jack

Page 194 of [1975] 1 All ER 193

Wolkind, Town Clerk, on behalf of the London Borough of Tower Hamlets. The first information alleged that on 17 April 1973 at 15 New Road (ground floor) within the borough the respondent, Nimar Ali, having been served with a notice dated 9 June 1967 by the Tower Hamlets borough council did unlawfully cause the ground floor front room of the premises to be occupied as sleeping accommodation otherwise than in accordance with the notice, contrary to s 90 of the Housing Act 1957 and s 20 of the Housing Act 1961. The second information alleged a similar offence on the same date, but in respect of the ground floor back room of the premises. The justices found the respondent guilty of both offences and ordered him to pay a fine of £20 in respect of each information. The respondent appealed to the Crown Court. The appeals were heard by the court sitting at Inner London Sessions House, Newington Causeway, London, SE1, on 19 October 1973. The appeals were allowed and the convictions quashed. The appellant requested the court to state a case for the opinion of the High Court. The facts are set out in the judgment of Bridge J.

J Blair-Gould for the appellant.

A Williams for the respondent.

4 November 1974. The following judgments were delivered.

BRIDGE J. This is a respondent’s appeal by case stated from a decision of the Crown Court for Inner London given on 19 October 1973 which allowed an appeal by the respondent in this court, Mr Nimar Ali, against his conviction by a magistrates’ court of an offence charged against him under the provisions of s 90 of the Housing Act 1957 of unlawfully causing the ground floor front room of certain premises to be occupied as sleeping accommodation otherwise than in accordance with a notice which had been served on him under s 90 of the Housing Act 1957.

It is convenient to refer at once to the relevant legislation before coming to the facts of the case. Section 90 of the Housing Act 1957 re-enacts a provision originally introduced into the corpus of housing legislation for the first time as s 12 of the Housing (Repairs and Rents) Act 1954. Section 90(1) provides as follows:

‘If it appears to a local authority, in the case of a house within their district, or of part of such a house, which is let in lodgings or occupied by members of more than one family, that excessive numbers of persons are being accommodated on the premises having regard to the rooms available, the local authority may serve on the occupier of the premises or on any person having the control and management thereof, or on both, a notice—(a) stating, in relation to any room on the premises, what is in the authority’s opinion the maximum number of persons by whom it is suitable to be occupied as sleeping accommodation at any one time, or, as the case may be, that it is in their opinion unsuitable to be occupied as aforesaid, and (b) informing him of the effect of subsection (4) of this section.’

Subsection (3) gives a right of appeal against the restrictions imposed by the notice to the county court. Then sub-s (4) provides:

‘Any person who has been served with a notice under this section shall be guilty of an offence if, after the notice has become operative,—(a) he causes or knowingly permits any room to which the notice relates to be occupied as sleeping accommodation otherwise than in accordance with the notice … ’

Subsection (5) provides the penalties for an offence committed under the section, and sub-s (6) deals with withdrawal and re-service of notices under the section and other such matters.

What happened in the present case was that back in 1967 the respondent was in occupation of the ground and basement floors of a house known as 15 New Road,

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London, E1, and was at that time using those premises as a lodging house. The premises comprised two rooms on the ground floor and two rooms in the basement.

On 9 June 1967 the local authority, the appellant before us today, served a notice on the respondent under s 90. The effect of that notice, which there is no doubt conformed to and complied with the Act at the time of service, was to limit to two persons the number of persons who could be permitted to sleep in either of the two rooms on the ground floor of the premises and to prohibit the use as sleeping accommodation of either of the two rooms in the basement.

Presumably the restrictions imposed by the notice were observed by the respondent during the period of time, some six years or more, that these premises continued to be used by him as a lodging house. But in February 1973 that state of affairs came to an end for the good reason that the respondent was joined by his large family from Bangla Desh.

On 17 April 1973, which was the date of the offence charged against him in the information, the occupation of the premises on the ground floor and basement of this house was such that the front room on the ground floor was occupied by four persons, namely, the respondent’s four sons, and the back room on the ground floor was occupied again also as sleeping accommodation by three persons, the respondent, his wife and his ten year old daughter.

The prosecution proceeded on the footing, and succeeded before the justices at petty sessions on the footing, that that state of affairs was in contravention of the notice under s 90 of the 1957 Act and, therefore, represented the commission of an offence by the respondent under s 90(4).

Before turning to the main arguments on which this appeal depends, it is right to mention that in 1969, by s 58 of and Sch 8 to the Housing Act 1969, the provisions of s 90 of the 1957 Act were amended in such a way that in the amended form of the section sub-s (1) now reads: ‘If it appears to a local authority, in the case of a house within their district, which is occupied by persons who do not form a single household … ’ For my part, however, I am not persuaded that that amendment is of any relevance for the purposes of the present appeal since this prosecution was for the contravention of the provisions of a notice served under, and taking effect under, the unamended provisions of the section as it stood before 1969.

The point in the appeal, which in the end is a very short one, is simply this. Read literally, the language of s 90(4), according to its ordinary grammatical meaning, and if not subject to any qualification, clearly leads to the conclusion that the respondent on the day in question, by permitting his family to occupy the ground floor rooms of the premises in the numbers they did, was committing an offence in that he was knowingly permitting a room to which the 1967 notice related to be occupied as sleeping accommodation otherwise than in accordance with the notice. That was the basis on which the magistrates’ court convicted him. That is the basis on which we are invited by the appellant to say that his conviction should be restored.

The Crown Court on the appeal from the magistrates’ court took the opposite view. They state their opinion to that effect without elaboration, and the basis on which they reached their conclusion is as a matter of inference by looking at the effect of s 90 in the context of the legislation in which it is found.

It is found in Part IV of the Housing Act 1957, which is concerned with abatement of overcrowding, and ss 76 to 89 may be said all to be concerned with the control of overcrowding in dwelling-houses generally. The most important provisions at the heart of the code for the control of overcrowding which apply to any ordinary dwelling-house in single occupation, or dwelling-house units in single occupation, are ss 77 and 78.

I will read s 77(1):

‘A dwelling-house [and I pause to observe in passing that that, by the definition in s 87, means “any premises used as a separate dwelling by members of the working classes”] shall be deemed for the purposes of this Act to be overcrowded

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at any time when the number of persons sleeping in the house either—(a) is such that any two of those persons, being persons ten years old or more of opposite sexes and not being persons living together as husband and wife, must sleep in the same room; or (b) is, in relation to the number and floor area of the rooms of which the house consists, in excess of the permitted number of persons as defined in the Sixth Schedule to this Act.’

Sub-s (2) provides:

‘In determining for the purposes of this section the number of persons sleeping in a house, no account shall be taken of a child under one year old, and a child who has attained one year and is under ten years old shall be reckoned as one-half of a unit.’

Then by s 78(1):

‘Subject to the provisions of this Part of this Act, if the occupier or the landlord of a dwelling-house causes or permits it to be overcrowded, he shall be guilty of an offence … ’

The subsequent provisions of the Act to which the words ‘Subject to the provisions of this Part of this Act’ draw attention provide many exemptions from liability for a state of statutory overcrowding in a single dwelling-house which may arise in contravention of the mathematical limitations laid down in s 77 in conjunction with Sch 6.

It is unnecessary to go through all of them but, to take one example of what I may call a statutory exemption, s 78(3) provides:

‘Where a dwelling-house which would not otherwise be overcrowded becomes overcrowded by reason of a child attaining one of the ages referred to in the last foregoing section, then, if the occupier applies to the local authority for suitable alternative accommodation or has so applied before the date when the child attains that age, he shall not be guilty of an offence.’

It seems to me that the Crown Court must have thought, and I think, that when one compares the statutory code for controlling overcrowding in dwelling-houses generally with the very different code specially provided for controlling overcrowding in lodging houses under s 90, it is evident that the latter was never intended to apply to any premises except for so long as they were let in lodgings or occupied by members of more than one family.

It will be observed that under s 77 what determines the point at which the numbers of persons sleeping in a house pass the limit and the house becomes overcrowded is a precise mathematical criterion laid down by the Act, whereas under s 90 the criteria to be applied in the case of lodging houses are entirely at the discretion of the local authority, subject to appeal to the county court. Again the way in which children under a certain age are to be treated in the calculations required to arrive at an answer to the question, ‘Is the single private dwelling house overcrowded?’ is precisely laid down in s 77(2), whereas in s 90(2) again the special criteria applicable in the case of persons under a certain age may be such as the local authority think appropriate.

If the argument addressed to the court by counsel for the appellant were right, it would lead to this, to my mind, remarkable and anomalous situation. A notice having been served on the occupier of premises at a time when those premises were in use as a lodging house would continue to apply so as to restrict the numbers of persons who may be permitted to occupy those premises after it had ceased to be a lodging house, with the result that whereas Mr Smith living in one half of a semi-detached house in a suburban road could legitimately house his whole family in it without committing any offence under s 78 of the 1957 Act, Mr Brown next door,

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occupying a house of identical size with a family of identical size to Mr Smith’s, would be committing a continuing offence under s 90 by reason only of the historical accident that at some remote date in the past he had used his premises for a short period to let out to lodgers, and during that period had been the recipient of a notice under s 90, which the local authority had subsequently refused to withdraw. That, to my mind, would be such an absurd situation that I am not prepared to reach the conclusion that that was a result intended by the legislature unless compelled to do so by the language of the Act.

As I have said, and I appreciate the force of the argument which is based on it, s 90(4) of the 1957 Act, if read quite literally and without qualification, does produce that result. Nevertheless it seems to me that this is one of those cases where one looks at a subsection in the context of the whole legislation in which it is found, and if it is necessary to cut down the ambit of the language used in order to prevent absurdity or an anomaly, then the language should be cut down. The restriction on the operation of s 90(4) to my mind which is appropriate is a restriction which limits the ambit of that subsection so that an offence can only be committed in contravention of a notice served under s 90(1) so long as the house continues to be a house of a kind to which s 90(1) applies; that is to say, in its unamended form, a house or part of a house let in lodgings or occupied by members of more than one family, and in its amended form, a house which is occupied by persons who do not form a single household.

For those reasons I have reached the conclusion that the Crown Court was right to allow this appeal by the respondent from his conviction in the magistrates’ court and I would dismiss the appeal to this court.

SHAW J. I agree with the judgment which has just been delivered and for the reasons stated by Bridge J. I would only add that for myself I find some support for the view which he has expressed in the fact that at the time the informations were laid against the respondent the notice under s 90 in its amended form would not have been competent at all. I, too, would dismiss the appeal.

LORD WIDGERY CJ. On this very short point I take the opposite view. Section 90(1) details precisely the circumstances which must exist before a notice under the section can be served, and it is not disputed that in this case those conditions were satisfied at the date of the service of the notice. Given that, in my judgment one has no further occasion to come back and look at the language of s 90(1) at all.

If the notice is a valid notice when given, and in this instance it was, its consequence, as I see it, is to be found in s 90(4), which is in perfectly plain and unambiguous language and contains no suggestion of the interpretation which Bridge J would put on it.

I can appreciate the anomaly which presently exists, or which would exist, if my view were accepted by the court, because it is true that on the local authority’s submissions in this case the respondent would be subject to the more stringent restrictions by virtue of the notice having been served than to the restrictions which would have applied under earlier sections of the Act to a single family dwelling-house.

I do not feel that Parliament necessarily applied its mind to this problem at all, or that if it had done so, it would have taken a different view. This legislation is of a kind which is often unenforceable unless expressed in clear terms, and I can well understand that Parliament might have hesitated to limit the effect of s 90(4) and produce a situation in which a breach of the Act would or would not occur from day to day according to the precise type of individual residing on the premises.

Under s 90(6) the local authority has power to withdraw the notice given under the section, and the only amendment to the Act which I would like to see would be a provision requiring the local authority to withdraw a notice once it is established that

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the initial circumstances justifying its circumstances no longer apply. But in the absence of such a provision, it seems to me the language here is too strong, and for my part I would allow the appeal. In fact the appeal is dismissed.

Appeal dismissed.

Solicitors: Edward Fail, Bradshaw & Waterson (for the appellant); Gerston & Co (for the respondent).

Lea Josse   Barrister.

Mountford and another v Scott

[1975] 1 All ER 198

Categories:        LAND; Property Rights        

Court:        COURT OF APPEAL, CIVIL DIVISION        

Lord(s):        RUSSELL, CAIRNS LJJ AND SIR JOHN PENNYCUICK        

Hearing Date(s):        16, 17 OCTOBER 1974        

Specific performance – Option – Option to purchase freehold land – Option granted gratuitously or for token consideration – Equity will not assist a volunteer – Exercise of option by purchaser – Exercise of option constituting contract of sale for agreed sum – Sum constituting adequate consideration – Refusal of vendor to complete – Whether purchaser entitled to specific performance or confined to remedy in damages.

The defendant was the owner of a dwelling-house. He signed an agreement with the plaintiffs whereby, in consideration of the sum of £1, he granted the plaintiffs an option to purchase his house at the price of £10,000. Subsequently the plaintiffs gave notice exercising the option. The defendant refused to complete the sale and the plaintiffs brought an action for specific performance. The judge held that the plaintiffs were entitled to the order sought on the ground that an option to purchase land constituted an equitable interest in land and it was immaterial that it had been granted gratuitously or for a token payment. The defendant appealed contending, inter alia, that, since the consideration for the grant of the option was a token payment equity would not enforce the contract, and that the plaintiffs should therefore have been left to their remedy in damages.

Held – The option agreement constituted an irrevocable offer to sell and once the plaintiff had accepted that offer by exercising the option, a contract had come into being for the sale of the house for £10,000. It was that contract which the court was being asked to enforce and the fact that the consideration for the option could be described as a token consideration was irrelevant to the question of the appropriate remedy under the contract of sale. The appeal would therefore be dismissed (see p 200 j, p 201 b to e and p 202 f and g, post).

Decision of Brightman J [1974] 1 All ER 248 affirmed on different grounds.

Notes

For options to purchase, see 23 Halsbury’s Laws (3rd Edn) 470–472, paras 1090–1093, and 34 ibid 206, 207, para 345, and for cases on the subject, see 31(1) Digest (Reissue) 160–170, 1403–1455 and 40 ibid 54, 347, 348.

Case referred to in judgments

Gilchrist Vending Ltd v Sedley Hotel Ltd (1967) 66 DLR (2d) 24.

Page 199 of [1975] 1 All ER 198

Cases also cited

Baker v Monk (1864) 4 De J & Sm 388.

Clark v Malpas (1862) 4 De GF & J 401, 45 ER 1238.

Evans v Llewellin (1787) 1 Cox Eq Cas 333, 29 ER 1191.

Fry v Lane, Re Fry, Whittet v Bush (1888) 40 Ch D 312, [1886–90] All ER Rep 1084.

Longmate v Ledger (1860) 2 Giff 157; affd 4 De GF & J 402.

Vivers v Tuck (1863) 1 Moo PCC NS 516, 15 ER 795, PC.

Worthing Corpn v Heather [1906] 2 Ch 532, [1904–7] All ER Rep 530.

Appeal

By an agreement in writing dated 12 December 1971 the defendant, Calvin Scott, granted to the plaintiffs, Frederick William Mountford and Hilda Beatrice Mountford, in consideration of the sum of £1 an option to purchase the freehold property known as 49 Enmore Road, South Norwood, London, SE25, at a price of £10,000. The option was to be exercised by notice in writing to the defendant at any time within the period of six months from the date of the agreement. On the exercise of the option the plaintiffs were to pay to the defendant’s solicitors, as stakeholders, a deposit of £1,000, and the sale of the property was to be completed, unless otherwise agreed in writing, on the first day after the expiration of six weeks from the date of the exercise of the option. By letter dated 29 March 1972 the plaintiffs’ solicitors served on the defendant formal notice exercising the option. The letter also requested the defendant to instruct his solicitors to deal with the sale of the property, and to advise the plaintiffs’ solicitors of the name and address of his solicitors so that the deposit of £1,000 might immediately be sent to them. No reply to the letter was received from the defendant. On 2 May 1972 the plaintiffs’ solicitors again wrote to the defendant referring to their previous letter and repeating the request. No reply to that letter was received from the defendant. The defendant subsequently denied that the agreement was binding on him and refused to perform it or take any steps to complete the sale to the plaintiffs of the property.

By a writ issued on 11 May 1972 the plaintiffs brought an action against the defendant claiming specific performance of the contract for the sale of the property constituted by the option agreement and the exercise in writing of the option thereby granted by the letter of 29 March 1972 and, further or alternatively, damages for breach of contract. On 24 May 1973 Brightman J ([1974] 1 All ER 248, [1973] 3 WLR 884) held that an option to purchase land constituted an equitable interest in land, it being immaterial that the option had been granted gratuitously or for a token payment; that when the option agreement had been signed, therefore, the plaintiffs had acquired an equitable interest in the defendant’s property and that, accordingly, subject to the payment of the purchase price, the plaintiffs were entitled to a decree of specific performance. The defendant appealed.

Harry Narayan for the defendant.

I H Maxwell for the plaintiffs.

17 October 1974. The following judgments were delivered.

RUSSELL LJ. This case is reported below ([1974] 1 All ER 248, [1973] 3 WLR 884) and reference may be made to the reports for the details of the case. Counsel, who has argued the case for the defendant with courtesy and candour allied to pertinacity, has taken a number of points, some attacking the validity of the option agreement itself, and a final point, in the alternative, if the option agreement be valid, asserting that specific performance should not be ordered of the contract, constituted by the exercise of the option, for sale and purchase of the property at the price of £10,000.

His first contention is that the option agreement was vitiated by a representation made on behalf of the plaintiffs by Mr Sambruck on the occasion when the agreement

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was signed by the defendant, the representation being to the effect that what he (the defendant) was being asked to sign was a document which he would be able to get out of at any time within six weeks of its signature. The judge’s finding that there was no such representation was, it was contended, against the weight of the evidence. This was indeed, with respect, a hopeless point, particularly in the absence of any transcript of evidence. The learned judge heard the evidence of Mr Sambruck and of the defendant; he preferred the evidence of Mr Sambruck where the evidence of the two diverged, and he came not only to the clear conclusion that no such representation had been made in any shape or form, but further that the defendant was never under any misapprehension on this point. That attack on the validity of the option agreement, in those circumstances, cannot possibly succeed.

The next attack on the validity of the option agreement was that it was an unconscionable bargain and consequently one that a court of equity would not support. I may say at once that there was no evidence or even any suggestion that the price of £10,000 was inadequate. Indeed, the defendant had successfully stuck out for £1,000 more than his neighbours. Nor, under this head, was any reliance placed on the £1 option money being inadequate consideration for the option. The suggestion mainly made really amounted I think to this, that Mr Sambruck ought to have told this house-painter with a wife and six children that he ought, before signing, to have considered whether if he sold the house he would have enough money to buy himself a suitable house elsewhere. Several cases—and of this I make no complaint—on unconscionable bargains were cited to us. But, in my view, none of them assists. It is perfectly true that the defendant cannot read; but there is nothing before us to suggest that he was not intelligent, let alone that he has any weakness of mind. He speaks (according to the learned judge) and understands English perfectly well. The option agreement was explained to him by his friend and lodger, Mr Reid, and I have little doubt that the whole matter of the options on this row of four houses was the subject of much discussion between the defendant and his neighbours well before he signed the final document at the price which he thought right. I can find nothing in this case remotely approaching the circumstances in which equity has been prepared to intervene under the general heading of unconscionable bargain.

The third ground of attack on the validity of the option agreement was that the consideration for the grant of the option, stated and paid, namely £1, was a sum which the law would not regard as valuable consideration; therefore there was no consideration in the eye of the law to support the obligation on the defendant not to withdraw his offer for six months. This I found a startling proposition. The industry of counsel for the defendant has not been able to find any support for it in English authority; and his reliance on a Canadian case of Gilchrist Vending Ltd v Sedley Hotel Ltd was based on a misreading, in my view, of the decision in that case, which appears to me to suggest only that possible future obligations which could be avoided by payment of $1 were illusory as consideration.

The situation in this case, therefore, is that the option agreement was valid and effective, it constituted an irrevocable offer to sell (so that the defendant’s purported rejection of any obligation in his letter in January 1972 was inoperative as a withdrawal of the offer) and, on the exercise of the option, the offer to sell was accepted and the contract for sale and purchase was constituted.

The final contention for the appellant was that that contract should not be specifically enforced, but that the purchaser should have only been awarded damages. I see no justification for that contention. If the owner of a house contracts with his eyes open, as the judge held that the defendant did, it cannot in my view be right to deny specific performance to the purchaser because the vendor then finds it difficult to find a house to buy that suits him and his family on the basis of the amount of money in the proceeds of sale. It is to be observed, as to this particular case, that to the knowledge

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of the defendant, the purchasers were and are planning development on one site embracing his house together with the three other houses. It is right to say that, after this final point had been the subject-matter of a certain amount of debate in this court, counsel for the defendant found himself unable to pursue the point—unable, let me say, not because he was unable to get a word in edgeways, but because he thought in the end, after debate, that the point was not a good one. Accordingly, I reject the contention that the judge could not or should not have ordered specific performance.

But I wish to add a comment on the learned judge’s approach to that last point. As I have said, a valid option to purchase constitutes an irrevocable offer to sell during the period stated, and a purported withdrawal of the offer is ineffective. When, therefore, the offer is accepted by the exercise of the option, a contract for sale and purchase is thereupon constituted, just as if there were then constituted a perfectly ordinary contract for sale and purchase without a prior option agreement. The court is asked to order specific performance of that contract of sale and purchase, not to order specific performance of a contract not to withdraw the offer; provided that the option be valid and for valuable consideration and duly exercised, it appears to me to be irrelevant to the question of remedy under the contract for sale and purchase that the valuable consideration can be described as a token payment; and so also if the option agreement be under seal with no payment, which is what I take the learned judge to be referring to when he refers to a gratuitous option in his judgment. While I therefore agree that a valid option to purchase constitutes an interest in the land, I do not consider, as the learned judge appears to have thought, that that fact is necessary to his conclusion and my conclusion on what is the appropriate remedy.

I would, for those reasons, dismiss the appeal.

CAIRNS LJ. Counsel for the defendant summarised his argument under three headings: first, that the learned judge’s finding that the defendant was not induced to enter into the transaction by misrepresentation by Mr Sambruck on behalf of the plaintiffs was against the weight of evidence; secondly, that the whole transaction was an unconscionable bargain which the court will not enforce; thirdly, that the option agreement was not valid or, alternatively, if it was valid, then the only remedy to which the plaintiffs were entitled was damages and not specific performance.

As to the first of these points, the only representation relied on in this court was a representation that the effect of the option agreement was to give either party the right to withdraw from it within six weeks. So far as appears from the judgment, which is the only guide we have to the evidence which was given, it is not even clear that the defendant stated that Mr Sambruck had said anything of the kind. The defendant may have been resting his case wholly on his allegation, not now persisted in, that pages of the document had been changed after he signed it. But if he did say that such a representation had been made orally, the judge disbelieved him; and it is impossible for this court to say that the judge was not entitled to do so. Counsel for the defendant invited us to infer that Mr Reid, a friend of the defendant who was present when the agreement was signed, in explaining the matter to the defendant, misinterpreted cl 4 of the agreement and that Mr Sambruck failed to correct it. This is pure speculation, and it is quite impossible to say that it is supported by evidence of weight or by any evidence at all.

As to the second point, there is in my opinion no good ground for describing this as an unconscionable bargain. All the 19th century cases to which counsel for the defendant referred had features which distinguished them from this one. They were cases where a person at some disadvantage was induced to enter into a very bad bargain, usually with no time for thought and no opportunity of getting legal advice. Here, there was no reason to suppose that £10,000 was less than the market value of the house. The defendant had had many weeks to consider a transaction on the lines of what was ultimately agreed, and more than a week to consider a price of £10,000.

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It had been suggested in a letter from Mr Sambruck that he might get the advice of a lawyer, and at the time of the signing of the agreement he had two friends with him, one of whom explained it to him, and the whole transaction lasted over a period of about half an hour. Stress is laid by counsel for the defendant on the fact that between 12 December 1971 and 3 January 1972 the defendant was unable to find suitable accommodation for himself and his family at a price which, with the £10,000 he was to receive, he would be able to pay. There was no duty on the part of the plaintiffs or their agent to discover what the defendant’s requirements were in the way of a new home, or what the cost of it was likely to be. Even assuming a degree of ignorance and lack of intelligence on the part of the defendant, which by no means follows from the fact of his illiteracy, it cannot possibly be said that the bargain was unconscionable because the defendant was not advised as to the difficulties that he might be faced with if he could not quickly find a new home within his means. It is contended that the option agreement was unconscionable, in that the defendant was paid only £1 and might have to wait six months before knowing whether the plaintiffs were going to buy his house or not. But it is very difficult to put a value on an option, and I believe it to be a common practice for options to be granted for a merely nominal consideration. There was nothing unreasonable in the plaintiffs wishing to have a reasonable time to ensure that they could buy all four houses and get planning permission. No doubt the price that the defendant could have got for the house without planning permission would have been much lower. At the risk of some uncertainty, there was the chance of his receiving a substantial price for the house; and I cannot regard the option agreement as being in any way unconscionable.

Then, thirdly, there was a separate contention, based on the Canadian decisiona to which Russell LJ has referred, that the £1 consideration was no consideration in law. That was not the actual decision in the Canadian casea and, if it had been, it would have been contrary to a mass of English authority to the effect that anything of value, however small the value, is sufficient consideration to support a contract at law. When it comes to the equitable remedy of specific performance, it is to be remembered that this only arises if the option agreement is valid. If it was valid, then it was conceded that it was irrevocable. Therefore, on 29 March 1972, when the plaintiffs exercised the option, a valid contract for sale was made. For that contract there is no basis for saying that the consideration was inadequate or that for any other reason specific performance should not be ordered. Insofar as there is a difference in approach to this matter between that of the learned trial judge and that of Russell LJ, I agree with Russell LJ.

For the reasons that I have given, I too would dismiss this appeal.

SIR JOHN PENNYCUICK. I agree with the judgment which have been delivered, and do not wish to add anything.

Appeal dismissed.

Solicitors: Suriya & Co (for the defendant); Hancock & Willis (for the plaintiffs).

F K Anklesaria Esq   Barrister.

Esso Petroleum Co Ltd v Mardon

[1975] 1 All ER 203

Categories:        TORTS; Negligence        

Court:        QUEEN’S BENCH DIVISION        

Lord(s):        LAWSON J        

Hearing Date(s):        15, 16, 17, 18, 19, 22, 23, 24, 31 JULY 1974        

Negligence – Duty to take care – Statement – Information or advice – Special relationship giving rise to duty of care – Financial interest of adviser in advice given – Reliance on adviser’s knowledge and expertise – Company engaged in distribution of petrol – Negotiation by company to let new petrol station – Forecast by company of prospective petrol sales from station – Forecast inducing tenant to enter tenancy agreement – Forecast inaccurate – Whether company under duty of care to tenant.

Negligence – Duty to take care – Statement – Pre-contract negotiations – Statement made by one party to other in course of negotiations – Statement inducing other party to enter agreement – Whether fact that statement made in course of pre-contract negotiations precluding duty to take care in making statement.

A company engaged in the production and distribution to the public of petroleum, owned petrol stations throughout the United Kingdom. The company had a dealer sales representative, L, who had 40 years’ experience of that side of the business. L was anxious for the company to acquire a site within his area for development as a petrol station. The site lay in a busy part of a town. L attached great weight to the custom which could be obtained at that site from ‘passing trade’, ie traffic coming into and out of the town. In 1961 the representative submitted to the company a proposal for the acquisition of the site. He estimated that the annual consumption of the developed petrol station would amount to 200,000 gallons a year in the second year after development. The proposal was enthusiastically received by the company which proceeded to acquire and develop the site. When the development had been completed it was obvious that, because of certain physical characteristics, the petrol station suffered from a number of deficiencies for the purpose of attracting custom from passing traffic. Early in 1963 the company began negotiations with a prospective tenant who was interested in acquiring a tenancy of the petrol station. The tenant inspected the site and its deficiencies with regard to potential passing trade were readily apparent to him. L and other representatives of the company told the tenant that they estimated that the ‘throughput’ of the site in the third year of development would be 200,000 gallons a year. The tenant indicated that in his view 100,000 to 150,000 gallons would be a more realistic estimate but his doubts were quelled by L whose estimate, as L appreciated, the tenant was prepared to accept in view of L’s expertise and long experience. Because of what he had been told about the estimated throughput in the third year the tenant agreed to take a three year tenancy of the site. Under the agreement the tenant undertook to pay the rent and to take all his supplies of petrol from the company at a discount on the retail price. Despite the efforts of the tenant to make a success of the venture, the business did not prosper, largely because it failed to attract the passing trade. Although in 1964 the company agreed to substitute a new tenancy at a lower rent and revised terms as to the supply of petrol, the tenant continued to make heavy losses. In the third year the annual throughput of petrol had risen to only 86,502 gallons. In 1966 the tenant gave up the tenancy. In proceedings by the company for arrears of rent, the tenant counterclaimed for damages for negligence, relying on the statements made to him on behalf of the company in 1963 when he was negotiating the tenancy agreement.

Held – (i) In making statements, during the course of negotiations for the tenancy agreement, concerning the petrol station’s prospects, the company owned the tenant a duty of care for the following reasons—

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(a) There was a special relationship between the company and the tenant which gave rise to the duty of care since the company had a financial interest in the advice which they had given in that they knew that the tenant, in reliance on their knowledge and expertise, was seeking information which would affect his decision whether or not to enter into a tenancy agreement of which the company would have the benefit (see p 220 d and e, post); Hedley Byrne & Co Ltd v Heller and Partners Ltd [1963] 2 All ER 575 and dictum of Lord Diplock in Mutual Life and Citizens Assurance Co Ltd v Evatt [1971] 1 All ER at 160, 161, applied.

(b) The fact that the statements had been made in the course of pre-contractual negotiations between the company and the tenant did not relieve the company from a duty of care in making those statements (see p 220 g and p 221 h, post); Dillingham Construction Pty v Downs [1972] 2 NSWLR 49 applied.

(ii) In forecasting that in the third year of operation the throughput of petrol would be 200,000 gallons the company had failed to take reasonable care for they had failed to reappraise the 1961 throughput forecast of 200,000 gallons in the light of the physical characteristics of the site as they had become plain when the development had been completed in 1963 and before the tenant had begun negotiations for the tenancy. Accordingly the company was liable to the tenant for the loss and damage which he had suffered in consequence of the company’s negligent statement (see p 216 f, p 217 a and p 222 h, post).

Notes

For the circumstances giving rise to a duty to take reasonable care, see 28 Halsbury’s Laws (3rd Edn) 7, 19–21, paras 4, 17, and for cases on the subject, see 36 Digest (Repl) 12–18, 34–79.

Cases referred to in judgment

Anderson (W B) & Sons Ltd v Rhodes (Liverpool) Ltd [1967] 2 All ER 850, Digest (Cont Vol C) 406, 199a.

Andrews v Hopkinson [1956] 3 All ER 422, [1957] 1 QB 229, [1956] 3 WLR 732, Digest (Cont Vol A) 1161, 443b.

Bentley (Dick) Productions Ltd v Harold Smith (Motors) Ltd [1965] 2 All ER 65, [1965] 1 WLR 623, CA, Digest (Cont Vol B) 629, 559a.

Bissett v Wilkinson [1927] AC 177, [1926] All ER Rep 343, 136 LT 97, 42 TLR 727, PC, 35 Digest (Repl) 8, 22.

Brown v Sheen & Richmond Car Sales Ltd [1950] 1 All ER 1102, 26 Digest (Repl) 666, 34.

Candler v Crane, Christmas & Co [1951] 1 All ER 426, [1951] 2 KB 164, [1951] 1 TLR 371, CA, 36 Digest (Repl) 17, 75.

Coats Patons (Retail) v Birmingham Corpn (1971) 69 LGR 356.

Chess (Oscar) Ltd v Williams [1957] 1 All ER 325, [1957] 1 WLR 370, CA, 39 Digest (Repl) 514, 559.

De Lassalle v Guildford [1901] 2 KB 215, [1900–3] All ER Rep 495, 70 LJKB 533, 84 LT 549, CA, 12 Digest (Reissue) 161, 935.

Dillingham Constructions Pty v Downs [1972] 2 NSWLR 49.

Erskine v Adeane, Bennett’s Claim (1873) LR 8 Ch App 756, 42 LJCh 825, 29 LT 234, 38 JP 20, 2 Digest (Repl) 50, 256.

Hedley Byrne & Co Ltd v Heller & Partners Ltd [1963] 2 All ER 575, [1964] AC 465, [1963] 3 WLR 101, [1963] 1 Lloyd’s Rep 485, Digest (Cont Vol A) 51, 1117a.

Hill v Harris [1965] 2 All ER 358, [1965] 2 QB 601, [1965] 2 WLR 1331, CA, Digest (Cont Vol B) 477, 3302a.

Heilbut, Symonds & Co v Buckleton [1913] AC 30, [1911–13] All ER Rep 83, 82 LJKB 245, 107 LT 769, 20 Mans 54, HL, 39 Digest (Repl) 514, 355.

Le Lievre v Gould [1893] 1 QB 491, 62 LJQB 353, 68 LT 626, 57 JP 484, 4 R 274, CA, 36 Digest (Repl) 9, 27.

Morgan v Griffith (1871) LR 6 Ex 70, 40 LJEx 46, 23 LT 783, 12 Digest (Reissue) 160, 930.

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Mutual Life & Citizens Assurance Co Ltd v Evatt [1971] 1 All ER 150, [1971] AC 793, [1971] 2 WLR 23, [1970] 2 Lloyd’s Rep 44, [1971] ALR 235, PC.

Nocton v Lord Ashburton [1914] AC 932, [1914–15] All ER Rep 45, 83 LJCh 784, 111 LT 641, 35 Digest (Repl) 57, 502.

Oleificio Zucchi ASP v Northern Sales Ltd [1965] 2 Lloyd’s Rep 496, Digest (Cont Vol C) 855, 848c.

Robinson v National Bank of Scotland 1916 SC (HL), 154, HL, 26 Digest (Repl) 33, *63.

Shanklin Pier Ltd v Detel Products Ltd [1951] 2 All ER 471, [1951] 2 QB 854, [1951] 2 Lloyd’s Rep 187, 39 Digest (Repl) 579, 1030.

Action

By a writ issued on 1 December 1966 the plaintiffs, Esso Petroleum Co Ltd, brought an action against the defendant, Philip Lionel Mardon, claiming (1) possession of premises known as Eastbank Service Station, Eastbank Street, Southport, in the county of Lancaster, (2) £1,133 13s 9d being the arrears of rent due under an agreement in writing dated 1 September 1964 whereby the plaintiffs let those premises to the defendant, and (3) mesne profits from 28 December 1966 at the rate of £101 15s 11d per month until possession was delivered up. By his defence and counterclaim, as subsequently amended, the defendant claimed damages. By para 6 of the amended counterclaim the defendant alleged that, in order to induce him to enter into a tenancy agreement and in consideration of him so doing the plaintiffs by their servants or agents had represented and warranted to the defendant that the petrol-filling station, the subject-matter of the agreement, had a potential selling capacity of 200,000 to 250,000 gallons of petrol per annum which amount would be realised before the expiration of a tenancy agreement for a period of three years made between the plaintiffs and the defendant on 10 April 1963, that the plaintiffs were experts in that sphere of business and that the defendant could rely on those representations and warranties. By paras 7 and 8 the defendant alleged that he had been induced to enter into the tenancy agreements of April 1963 and September 1964 and that the representations were untrue and the warranties broken in that the filling-station only ever had a potential throughput of 60,000 to 70,000 gallons per annum. Further or alternatively, by para 8A the defendant alleged that the plaintiffs’ servants or agents—

‘knew, or ought to have known that the Defendant was relying upon them to exercise due care, skill and judgment in giving him information and advice relating to the said petrol station and its throughput potential. Accordingly the plaintiffs owed the Defendant a duty to exercise reasonable care in tendering such information and advice to him.’

By para 8B the defendant alleged that in breach of their duty of care the plaintiffs had been negligent in tendering such advice and information to the defendant. By para 9 the defendant alleged that in consequence of the plaintiffs’ breaches of warranty and misrepresentation and/or by reason of their breach of their duty of care, the defendant had sustained damage; the moneys he had expended in equipping the premises had been lost; he had traded at a loss and had lost the profits he would have made had the petrol station been as represented and warranted; the plaintiffs had exercised their right of forfeiture of the agreement of September 1964 and, to minimise further loss, the defendant had been compelled to give up the premises. The facts are set out in the judgment.

Colin Ross-Munro QC and John Peppitt for the plaintiffs.

John Hall QC and Alan Rawley for the defendant.

Cur adv vult

31 July 1974. The following judgment was delivered.

LAWSON J read the following judgment. In this case the plaintiffs, by their writ issued on 1 December 1966, claim against the defendant, formerly the plaintiffs’ tenant of a petrol service station, showroom, offices and other premises

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situated on the south side of Eastbank Street, Southport, firstly possession on the ground of non-payment in breach of covenant of money due under the relevant tenancy agreement in respect of which breach the plaintiffs duly served a notice under s 146 of the Law of Property Act 1925; secondly, payment of moneys due; thirdly, the mesne profits from 28 December 1966 until possession is given. The defendant in fact gave up possession on 7 March 1967. The moneys due have been agreed in the sum of £483·69 and the mesne profits at £620. There is no issue outstanding therefore on the claim and, subject to the counterclaim, £1,103·69 is due to the plaintiffs.

By way of counterclaim against the plaintiffs, the defendant claims damages, relying on certain statements alleged to have been made to him by the plaintiffs’ employees in 1963 and 1964. His counterclaim is based on three grounds. First of all, on misrepresentation, but it is conceded that since the transaction in this case was dealt with long before the Misrepresentation Act 1967, and since the relief provided for in that Act in respect to innocent misrepresentation is specifically excluded in pre-1967 cases, the defendant is not entitled to any relief in respect of this head of counterclaim. Secondly, he counterclaims for breach of warranty by the plaintiffs in relation to the subject-matter of the defendant’s tenancy agreements. Since these agreements were completely reduced into writing, however, the defendant’s claim is put as being for breach of a collateral agreement or collateral agreements, that is to say, an agreement or agreements entered into between the parties in relation to the subject matter of the tenancy agreements. Thirdly, he counterclaims for damages in negligence, in that he alleges that the plaintiffs by their employees made statements to him in relation to the subject-matter of the tenancy agreements without taking proper care as to the accuracy of those statements. It is the second and third heads of the counterclaim with which I am thus concerned. As I have said, the defendant’s counterclaim is based on statements allegedly made to him by various of the plaintiffs’ representatives. This happened as long ago as 1963 and 1964. Not only therefore is there great difficulty in determining what in fact was and was not said ten or 11 years ago before the trial, but this difficulty is accentuated here by the relative absence of contemporary records. Nevertheless some important witnesses, though not all of them, to these oral transactions are available and have given evidence to the best of their recollection, which necessarily cannot be more than uncertain after so long an interval. The problem is aggravated for the plaintiffs by the fact that the defence initially failed to particularise the occasions on which the statements in question were made or the persons by whom they were alleged to have been made on behalf of the plaintiffs. When these particulars were sought in April 1967, they were not furnished until January 1971. In some contrast to the position of the plaintiffs is that of the defendant, who told me that he had lived with this case for years, and that indicates to me that I have to scrutinise his evidence with very great care, because with the best will in the world it is well known that people who have brooded on a grievance or a claim do in fact persuade themselves that things have been said, or not said, contrary to the facts.

The plaintiffs are a well-known company engaged in the production and distribution to the public of petroleum and allied products. They also own petrol stations throughout the country, some of which, as in the present case, are occupied by the plaintiffs’ tenants. Through these petrol stations, and other independently owned stations, petrol is supplied to the general public. The defendant, who is now aged 49, has since 1947 been concerned with the motor trade. From 1947 to 1949, and again for a time in 1953, he was general manager with a company known as Ormskirk Motors where he was mainly concerned with commercial vehicle sales. From 1949 to 1952, and again from 1953 to 1959, he was employed as a motor tour organiser and manager by two different companies. In 1952–53 the defendant was manager of an Esso service station in Toronto, Canada, but he returned from Canada and resumed the employment which I have earlier indicated. Finally, in 1959 he commenced his own business,

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for the purpose of which he formed a limited company, as a garage owner, omnibus proprietor and petrol station operator at Skelmersdale in Lancashire. Ultimately his company operated four pumps at Skelmersdale and he estimated the eventual throughput of petrol at the rate of about 50,000 gallons a year. In 1962, for health reasons, he decided to put the Skelmersdale business on the market, and he eventually sold it satisfactorily early in 1963. He then returned to live in Southport. Except for his year in Canada, he lived in Southport from 1947 to 1959, and he was thus no stranger to its characteristics as a town, to its population spread and character and its traffic volumes and patterns.

The plaintiffs had a dealer sales representative, a Mr Leitch, a gentleman with nearly 40 years’ experience of that side of the petroleum business, within whose area at all material times until autumn 1963 fell the town of Southport. For some time from as early as 1959, largely at Mr Leitch’s instigation, the plaintiffs were interested in the possible acquisition of a site at Eastbank Street, a busy part of the town, and its development as a filling station and as an additional outlet in Southport for their petrol. Ultimately they in fact acquired this site in 1962, with the appropriate planning permission, and developed it as a petrol station, saleroom and other premises. This development was completed in early 1963.

It is unnecessary to go into the early history of the acquisition of the site by the plaintiffs in any detail. Two matters must, however, be mentioned. The first is that there was a planning application which was rejected in 1959, which led to an appeal by the plaintiffs which failed. Mr Leitch gave evidence in these proceedings in support of the need for a petrol station at Eastbank Street, at this site, his proof having been handed in to the inspector. In the course of this trial, he was cross-examined at great length on the proof. It indicated that Mr Leitch was at the time concerned to establish a substantial demand for a modern petrol station in the relevant area and to dispute the local authority’s contention that the area was adequately served by other petrol stations to the extent that an additional output was redundant. It is clear that at this time Mr Leitch attached great weight to the custom to be obtained from passing trade, that is to say, traffic coming from the east and moving towards the west into Southport, mainly coming along the road which leads from Manchester and Ormskirk into Southport.

The second matter is of much greater importance. In 1961 Mr Leitch submitted to the plaintiffs a proposal for the acquisition of the Eastbank site for which conditional planning permission had then been granted. In this proposal Mr Leitch estimated that the annual consumption of the developed petrol station would amount to 200,000 gallons a year in the second year after development. Accompanying this proposal was a sketch plan showing the location, the brand allocation and the estimated annual throughput of all other petrol stations in a wide area of Southport. The importance of this sketch plan and its data is that it contained information as to throughput known to Mr Leitch and his employers in 1961 and, if updated, generally speaking in 1963, but not known to or within the means of knowledge of the defendant; that is, the defendant knew the number and locations of the other petrol stations in Southport but had not, and could not have had, any detailed knowledge of their respective consumptions. Mr Leitch’s recommendation seems to have been enthusiastically process to the top level of the plaintiffs who acted on it, no doubt applying their own judgment in this matter, and accepted the estimate as to throughput and in due course proceeded to acquire and develop the Eastbank Street site.

On the completion of this development early in 1963, the plaintiffs had an area of approximately 920 square yards. This was laid out as shown in the plan and illustrated by photographs, although the photographs are of much more recent origin. The plan of the area shows Eastbank Street and the route by which traffic from the east can approach Lord Street and the sea front in Southport, without such obstructions as level crossings and other diversions because of the position as shown on the plan of the railway lines and the relative absence of road bridges in the area coming from east to

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west. Eastbank Street is and was at all material times a very busy street carrying a great deal of traffic, both local and passing traffic. When I use the expression ‘passing traffic’ I mean that which is coming in and moving out of Southport into other areas in both east and west directions, and Eastbank Street also has bus routes.

The fundamental criticisms of the site as such are, firstly, entry and exit is provided only through side streets, Yellow House Lane and Part Street respectively, and not directly from or into Eastbank Street. Secondly, the improbability of eastbound traffic in Eastbank Street utilising the site for refuelling, because firstly of the lack of visibility of the pumps from the north side of the street until vehicles have virtually passed out of sight. Thirdly, the problem of turning across the westbound traffic moving in the street. Fourthly, the position of the Esso sign as shown in the photographs which made it unlikely that drivers coming east would see it before too late to make a turn into Yellow House Lane.

The positioning of the building comprising the showroom and offices above the south pavement of Eastbank Street, which was dictated by planning conditions and which meant that the forecourt which constituted the petrol station was behind that building, also obscured to a large extent the existence of the pumps from traffic, particularly the eastbound, in Eastbank Street. That is another basic deficiency of the site. These deficiencies are in the forefront of the defendant’s case, but they are all matters of physical layout and structure and must have been obvious and apparent to anyone paying attention, as the defendant did, to the characteristics of the site as it had been developed, before its operations began. From the viewpoint of a prospective tenant these things must have been quite obvious.

I accept the evidence given for the plaintiffs that initially a concern known as ‘Hollands’, who operated a large garage and petrol station at the junction of Virginia Street and Scarisbrick New Road was contemplated as a potential tenant for Eastbank Street. Hollands were in fact distributors of Esso, but their site had the disadvantage of being situated so that, owing to the interposition of a roundabout, traffic moving from east to west along Scarisbrick New Road and Eastbank Street would be unlikely to use it to refuel. I find that the defendant knew at all material times that Hollands had the business of the kind I have indicated and he was in a position to make an assessment of their position as possible competitors with the Eastbank Street site. The proposal to let the site to Hollands, however, fell through.

The defendant asserts that Mr Leitch introduced him as a potential tenant for the Eastbank Street site in the course of conversation between them at Skelmersdale. I do not accept this and prefer Mr Leitch’s evidence that the first time he met the defendant was at Manchester at the plaintiffs’ district offices. However that may be, the defendant certainly got to know of the availability of the site, and he visited it on a number of occasions and formed a favourable assessment of its potentiality sufficient to move him to seek the tenancy. I am satisfied that the defendant visited Manchester early in 1963, having first seen the site, and on that occasion, or possibly a later date in March 1963, Mr Leitch drove him there. The purpose of the visit on which he was the driver was that the defendant should negotiate for a tenancy of the plaintiffs’ site. In the course of the drive Mr Leitch, in general conversation, told the defendant of his very long experience in the petrol trade, and I am sure that the defendant was impressed, as I was, by Mr Leitch as a very straightforward and careful man, as well as by his experience. But it is clear, and I am satisfied, that at the interview which followed—at which certainly Mr Allen of the plaintiffs, who had become late in 1962, or early in 1963, the area dealer sales manager, and Mr Leitch were present—the defendant was told that the plaintiffs estimated that the throughput of the Eastbank Street site, in its third year of operation, would amount to 200,000 gallons a year. I also find that the defendant then indicated that he thought 100,000 to 150,000 gallons would be a more realistic estimate, but he was convinced by the far greater expertise of, particularly, Mr Leitch. Mr Allen is a far younger man and, although on his appointment as manager for the area I am satisfied he made his own observations as to

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the potentiality of the Eastbank Street site, in the result he accepted Mr Leitch’s estimate. The defendant, having indicated that he thought that a lower figure would be a more realistic estimate, had his doubts quelled by the experience of, and the estimate furnished by, Mr Leitch; and it was for that reason, I am satisfied, because of what he was told about the estimated throughput in the third year, that he then proceeded to negotiate for and obtain the grant of a three year tenancy at a rent of £2,500 a year for the first two years, rising to £3,000 yearly in the last year. The tenancy agreement is dated 10 April 1963. The defendant personally became the tenant under the agreement and liable to make the payments for rent and the payments for fuel supplied under the provisions of the agreement.

The defendant makes certain other allegations in his pleadings or in his evidence, or both, as to statements made to him in 1963, before 10 April 1963, the date when he entered into the agreement. I deal briefly with these. I am satisfied he was told that he should have a capital of £8,000 to £10,000 available and that he satisfied the plaintiffs that he met this requirement. I am sure, and I find, that he was told nothing of the plaintiffs’ capital outlay on the petrol station, and I find that he was not told that the rent was fixed in relation to that outlay. I find that the only estimate or forecast given to him was of a 200,000 gallons per year throughput in the third year of operation, and I note that this is the figure which is mentioned in the defendant’s first letter of ‘complaint’—I will call it that—which is dated 17 July 1964. I find that Mr Allen did not tell him that the plaintiffs were experts and that he was only a layman. Nevertheless it is clear that from what he was told, rightly, of Mr Leitch’s experience, he certainly took the view—and the plaintiffs’ representatives must have appreciated, and I find they did appreciate it—that he would accept their better informed and expert estimate.

I should have mentioned that after the Manchester meeting Mr Leitch entertained the defendant to lunch. At this lunch I find that Mr Leitch was enthusiastic as to the prospects of the site and that he expressed his confidence in the previously given forecast. I think it probable, and I find that Mr Leitch told the defendant, that it was possible that Hollands might cease distributing Esso and if that happened some trade might result from this; but I am sure that Leitch did not give any estimate as to what percentage of Hollands’ customers for Esso would come to Eastbank Street in that event. I am satisfied that this had no influence on the defendant’s decision to take his tenancy. I note again that in his letters of complaint to the plaintiffs, of which there are two, he does not complain about that matter.

This brings me shortly to state some findings of fact in the defendant’s favour as at 10 April; that is to say, he was induced to, and did, enter into the tenancy agreement of 10 April in reliance on an estimate or forecast of potential turnover of 200,000 gallons, in the third year of that tenancy, which was one given by experts, and I find also that the plaintiffs through their representatives appreciated that the defendant did in fact so act in reliance on this estimate or forecast. This is to my mind confirmed by the defendant’s first letter of complaint, dated 17 July 1964, and by what happened thereafter, to which I will come in due course. It is however essential to emphasise that there is no question but that the representatives of the plaintiffs concerned in this matter acted with complete honesty and genuinely believed in the validity of what was the potential throughput as stated to the defendant.

As I have said, the defendant personally signed the tenancy agreement dated 10 April 1963, and on 12 April 1963 the Eastbank Street site was opened for trading. It is clear that the business of the site, which included a not unsubstantial trade in good class secondhand motor cars—the defendant estimated a gross profit in this line of trade of some £1,100 in the first year of trading—was in fact carried on by the defendant’s old Skelmersdale company of which he and his wife were the sole shareholders and directors. The plaintiffs contemplated that this would be the position and, although the appropriate change in name of the company was duly registered, the tenancy agreement and the succeeding agreement of 1 September 1964, to which I will come, remained in the name of the defendant alone.

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The Eastbank Street site got away to a poor start as far as petrol sales and sales of ancillary goods were concerned, and it is clear that the defendant and Mr Leitch, who was in close touch with the defendant until about September 1963, when he retired, were both worried about this. A combination of laudable and grim determination not to be beaten—of which the defendant perhaps possesses more than most people—and optimism as to the future moved the defendant to carry on doing his best, as I am sure he did, to build up his trade.

When Mr Leitch retired his place was taken by Mr Kinrade, whom I have heard in evidence, and I have no doubt that the poor trading results of the defendant’s business were the main subject of fairly regular meetings when Mr Kinrade, from the autumn of 1963, commenced calling at the site in the course of his normal duties as a dealer sales representative. I have no doubt that both the defendant and Mr Kinrade firmly believed that the forecast potential would ultimately be achieved and mutually expressed these opinions. Perhaps it is unfortunate, but I see no blame attaching to the defendant in this respect, that, being the man he is, he decided to wait for the results of the first year’s trading before reaching a decision as to what he should do in relation to the site. He knew that it was running at a loss, but he had not, I am sure, anticipated trading at a profit during his first year. The defendant’s company’s first trading year closed at 30 April and in due course, at the end of June 1964, the company’s accountants produced the accounts, which on the face of them showed a gross profit of some £3,000 but a startling loss of some £5,800 net. I have no doubt that the company’s outgoings, which had been planned and incurred to handle a far larger volume of trade than had materialised, were the main cause of this relatively high loss. There were, I should mention, other factors which operated adversely to the defendant during this period. In particular, after the site opened, two serious competitors in selling cheaply ancillaries such as oil, parts and other goods opened up business in the immediate neighbourhood of the site.

When the defendant had digested the ominous message of these accounts, he wrote what has been described in his own terms as a letter of resignation to the plaintiffs. This is the letter dated 17 July 1964. I will not read it all. After reluctantly tendering notice to quit—a course which was not in fact available to him under the tenancy agreement of 10 April 1963—in order, as he quite reasonably asserts, to avoid bankruptcy and salvage what he can, he sets out at some length all the efforts he has made to establish a thriving business. I think it is right to say that I find that the poor trading results were not in any way attributable to the defendant’s business methods or conduct of the site or its trade. I am satisfied that the defendant did all that he reasonably could, and indeed more, to establish the business and to build it up to attain its potential throughput by the time that throughput had been forecast. In the letter the defendant then gives brief details of the throughput of petrol and the trading results over the period 12 April 1963 to June-July 1964. He appeals to the plaintiffs to find a solution to the problem and he concludes with an important passage which I will read; he says this:

‘This letter sir, I assure you is most confidential, and no one is even vaguely aware at this stage of my plight, therefore I trust we can arrange an amicable departure of this site without publicity to our mutual detriment. I must add finally, that I certainly would have been delighted to have been able to inform you that the site was doing the gallonage you assessed on my taking over, 200,000 gallons a year at least, but alas, to compare the figures actually done against the estimated figure is certainly one for very much concern jointly.’

This assertion relates only to a forecast throughput of 200,000 gallons per annum which was furnished, as I find, by the plaintiffs before the defendant took over the tenancy; and it is right that the defendant, in this letter, makes no other complaint of the plaintiffs’ conduct or statements made by them in relation to his entering into the tenancy.

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Although the plaintiffs made no written reply to this letter, it is clear, as I find, that the defendant’s appeal did not fall on deaf ears. The ensuing events are somewhat confused, and I regret that in the face of the contemporary documents I am unable to accept the evidence of the defendant to the effect that in August 1964 he had a short and stormy interview, principally with Mr Allen in Manchester, in which he complained that he had been ‘sold a pup’; that Mr Allen inferred that he, the defendant, had not been running the site properly and told him that if he didn’t like it he could get out. Mr Allen has no recollection of this interview, and I am sure that he is an honest and reliable witness so far as his recollection of events so long ago extends, and that if an interview of this character had taken place Mr Allen would have recalled it and told me frankly about it. Moreover, this evidence of the defendant is wholly inconsistent and irreconcilable with the memorandum dated 4 August 1964, signed by Mr Allen, but probably written and signed for him by Mr Wooldridge, who was his assistant, who had been dealing with the Eastbank Street site and had been present at a number of meetings between Mr Allen and the defendant.

I should say that owing to the lapse of time and the delay in furnishing the particulars to which I have earlier referred, it has been impossible to trace Mr Wooldridge and therefore I have not had the advantage of hearing his evidence about any of these matters. The memorandum contains a number of important statements. Mr Allen, or the person who signed for Mr Allen, writes an internal memorandum in which he says, among other things:

‘You will observe that the actual sales of the site to date are considerably less than what was anticipated in relation to the second year e.a.c. [estimated annual consumption] of 200,000 gallons p.a. [That is a reference back to the proposals of 1961 which contain that figure as e a c in the second year of development.] The main reasons for this low throughput are the many restrictions placed on the site by Southport Corporation, who insisted that the service station forecourt should be developed at the back of the site and not with both access points on the main road. We feel it will take longer than normally expected to obtain a throughput in line with our e.a.c.’

I have already mentioned the deficiencies resulting from the layout and physical characteristics of the site. The memorandum proceeds:

‘Mr Mardon is an extremely good tenant who has tried every method to increase the sales and profitability of the service station and we are in no way dissatisfied with the way he has operated this site. The attached letter from Mr Mardon [of 17th July 1964] gives in detail the situation as it exists today and was in fact, his letter of resignation. Following discussions with him, he does not wish to leave the premises, but can only carry on if our Company is prepared to reduce the rental and place the service station on a surcharge basis with a fixed rental element. Mr Mardon has discussed this matter with his Bank Manager at the National Provincial Bank in Southport and they are adamant that the maximum fixed rental element he can afford to pay is £1,000 p.a. Even this figure in our opinion is high when one takes into account that the revaluation of the rates … means an additional outgoing of £544. The success of this site as a profit making concern depends largely on how Mr Mardon can cover the cost of the fixed rental element and rates, by making use of the car showroom and office accommodation …  It is our wish to retain Mr Mardon as tenant of this site, as it will be necessary, if he does resign, to obtain a rental reduction before we will be able to install any other person in this tenancy. In addition, we do not believe we can improve on his operation of this site which was first class in all respects.’

They then ask for the provision—

‘as soon as possible of a surcharge table with a fixed rental element not exceeding £1,000 p.a. On this basis, Mr Mardon considers he will be able to continue

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and possibly recoup his losses although this will obviously take some considerable time. It is felt that a business appraisal form is unnecessary in view of the detail given in Mr Mardon’s letter.’

I emphasise the views expressed there about Mr Mardon’s operation of the site, as to which I have already made a finding, and it is quite clear that no criticism can or could in fact have been levied against him on that respect.

The other point which is important in this internal memorandum is that, contrary to the evidence and recollection of the defendant, it is manifest that there must have been discussions before this internal memorandum was written, in which Mr Mardon expressed himself as willing to pay a rent of £1,000 per year and take a tenancy on a surcharge basis. This is important particularly in view of the allegation which has been made about certain other representations made, it is said, to induce Mr Mardon to enter into a tenancy agreement which is dated 1 September 1964. It is, of course, quite clear that there had been discussions between the defendant and the plaintiffs’ representatives before this memorandum was written. It is equally clear that the plaintiffs’ representatives’ suggested new rental basis for the tenancy related to the defendant’s ability to pay and the poor results thus far of the site. I am not satisfied that in the course of these discussions the potential throughput of 200,000 gallons per annum was mentioned except as a target which was attainable more remotely than originally forecast. I am however satisfied that whatever was said about the 1963 forecast at this time, it had no effect upon the defendant in relation to the agreement dated 1 September 1964 which he subsequently entered into.

These discussions were, I find, followed by a visit paid by Mr Kinrade to the Eastbank Street site at or about the latter part of August, on which occasion Mr Kinrade produced and handed to the defendant a document entitled ‘A Business Appraisal’, the purpose of which was to establish a realistic forecast of the Eastbank Street site’s trading for the period January-December 1965. I am satisfied that this document was not produced at the behest or for the purposes of the plaintiffs but originated from Mr Kinrade’s genuine desire to help the defendant to find a solution to the trading problems which clearly faced him should be continue as the plaintiffs’ tenant of the site. That the plaintiffs did not require such an appraisal is clear from the internal memorandum of 4 August 1964, part of which I have read. In fact, the matter of the appraisal, except insofar as providing a test as to the reliability of the recollections of Mr Kinrade and the defendant—in which respect I have no hesitation in preferring the former’s evidence to that of the latter—has little relevance to the issues of the case. Nothing in the appraisal is relied on as constituting any matter of representation or warranty. Specifically, it is not alleged that the defendant was induced to enter into the agreement dated 1 September 1964, which followed the appraisal, by means of any representation or warranty expressed or implied in the appraisal. In fact, I find, on the basis of that internal memorandum, that the defendant, as early as 4 August or just before 4 August, well before the appraisal came into existence, was ready and willing to take a tenancy at the rent of £1,000 per year plus surcharge rent on the gallons sold. The appraisal is only pleaded as constituting in one respect a particular of the plaintiffs’ alleged negligence in relation to information and advice given in 1963 and 1964. That particularised matter is that the appraisal wrongly stated the actual throughput of petrol and the amount of certain other income items which it is alleged related to 16 1/2 to 17 months’ trading as appropriate to a 12 months’ trading period and contrasted these figures, which were in fact figures for 16 1/2 to 17 months, with figures of outgoings for a period of 12 months. It is said that the calculations on the left hand side of the appraisal were inaccurate and misleading. But even if this were the case, I accept Mr Kinrade’s evidence, firstly that it was the defendant who provided the figures which appeared on the left hand side of the appraisal, and he obtained these from his own books; secondly, that the only purpose of inserting on that side the petrol sales was to reach an assessment of the proportions of the various types of all petrol sold, which proportions could be carried forward to the right hand

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side of the appraisal which contained the forecast throughput for the 12 months of 1965. It is also to be observed that if one compares the actual expenditure on the main items of wages and rent which appear from the defendant’s certified accounts for the period April 1963 to 1964, the discrepancies between those figures and those given in the appraisal are very substantial indeed. Further, the figure given for car sales and accessories on the left hand side of the appraisal is gross £460, which contrasts strikingly with the defendant’s own evidence of an approximate profit of £1,100 for the 12 months’ period under this head. The right hand side stating a profit objective which relates to the year 1965 results in an estimated net operating profit of £1,006. This is based on an estimated annual throughput of 100,000 gallons, as to the basis of which I accept Mr Kinrade’s evidence, and I am satisfied that the explained the appraisal to the defendant, who appreciated the basis of the calculation.

The defendant, in his evidence, said that he entered into the September 1964 agreement, to which I come, on the basis of this estimate of operating profit. This however is not pleaded and for that reason, and also because I am told by counsel who agree that some two years ago leave to amend the counterclaim to rely on this matter was refused in interlocutory proceedings, I do not propose to go further into the matter. The defendant also said in his evidence that, save as to the figure of £1,006 profit, he paid no regard to the appraisal and did not examine it. This being the case, it also reinforces my view that nothing on the left hand side of the document, which as I find contained only information which he himself had provided, misled him.

Shortly after the handing over of the appraisal, the defendant again personally entered into a new tenancy agreement. It is dated 1 September 1964 but was entered into rather later in that month. It is clear that this new agreement supersedes the three year tenancy at a rent of £2,500 for the first two years and £3,000 for the third year. The new agreement creates a term of one year and to continue thereafter being terminable by three months’ notice to expire at the end of the first year or on the last day of any month thereafter. The yearly rent is agreed at £1,000 plus a £120 reducing rent for the lubrication bay, plus a surcharge at the rates set out in the annexed schedule, which on a consumption of 100,000 gallons per year would amount to a penny per gallon. The rental so agreed was payable monthly in arrear on the last day of the month. The reasons which brought the defendant to enter into this agreement did not, I find, include his reliance on the 1963 throughput forecast.

The defendant, through his company, thereafter carried on business at the Eastbank Street site but there was little improvement in his trading. In accordance with his earlier determination not to be beaten, and to try to recoup his loss on the lower rental to which I have referred, the defendant persisted. It is clear that sometime in 1965 he formed the not unreasonable view that the solution to his problems would be for the plaintiffs to offer him the tenancy of another, more profitable site from which he could subsidise the unprofitable business at Eastbank Street. Some steps were taken in this connection but nothing concrete emerged. Eastbank Street continued a failure.

At last, following a meeting with his accountants, on 1 January 1966 the defendant wrote a further letter of complaint to the plaintiffs. Early in this letter he refers to the assurances as to potential which he had been given before April 1963, which he now states as a throughput of 250,000 gallons per annum in approximately two years. I am satisfied, for the reasons I have mentioned, and because I prefer Mr Leitch’s and Mr Allen’s evidence to that of the defendant, and looking at the defendant’s own letter of July 1964, that the plaintiffs’ statements related to a throughput of 200,000 gallons per annum in the third year. He again refers to the efforts he has made to succeed but attributes failure to the site’s position—a fact of which the defendant must have been aware from a date before the negotiations with the plaintiffs began and to which he makes no reference in his letter of July 1964. I am, however, quite sure that it was this fact which played a major part in the unsatisfactory progress of the business (see the plaintiffs’ internal memorandum of 4 August 1964 which confirms this). The

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defendant also, in this letter, confirms that he had been hopeful of and was waiting for an Esso ‘cream’ site to enable him to offset his losses at Eastbank Street, a matter to which I have already referred. Again, the plaintiffs did not reply to this letter, but on 8 February 1966 two of their representatives, a Mr Millyard and a Mr Jasper, called on him to discuss their mutual problems. In the result Mr Jasper wrote a memorandum to Mr Kinrade on 10 February 1966. It is clear that the possibility of the defendant becoming tenant of another site was discussed and that further rental relief to the tenant was being contemplated in respect of Eastbank Street. Unfortunately this came to nothing. The defendant consulted his solicitors, who wrote to the plaintiffs on 31 March 1966. There followed a meeting but no conclusion was reached and the defendant continued, with no better results, to carry on at the Eastbank Street site.

The tragic story of the wasted endeavour and financial disaster of the defendant really ends on 28 August 1966 when, finding himself unable to pay moneys due for petrol supplied by the plaintiffs and sold by him, and despite his genuine and reasonable belief that the plaintiffs would continue to supply him on the basis of a day-to-day payment, he had his tanks drained and his petrol supplies cut off, and as a petrol station he was put out of business. I am bound to say that this seems a harsh action on the part of the plaintiffs, although there is no issue in this action concerning it and it may well be that in law the plaintiffs were entitled to do what they did. The defendant remained at the site doing such business as he could. On 1 December 1966 the plaintiffs issued their writ. On 7 March 1967 the defendant yielded up possession of the site. Shortly thereafter, in May 1967, the plaintiffs obtained another tenant for the site, a Mr Sinclair, who remained thereafter and remains in occupation of and operating the site.

Three matters will, I think, round off my findings as to the facts of this case. On 7 November 1967 the defendant’s accountants certified the accounts of the defendant’s company for the three years ending 30 April 1967. Briefly stated these accounts disclose the following. The year ended 30 April 1965, gross profit £4,649, net operating loss approximately £2,000; year ended 30 April 1966, gross profit £4,082, net operating loss approximately £1,600; year ended 30 April 1967, gross profit £1,238, net operating loss approximately £3,500. From the figures of operating loss I have excluded depreciation and directors’ remuneration, and it must also be noted that as a petrol station Eastbank Street effectively closed down at the end of August 1966, so that the last year’s results are not comparable with the results of the two earlier years ending 30 April 1965 and 1966.

The next point is this, that the evidence indicates that the throughput of petrol at the Eastbank Street site was as follows: 11 April 1963 to 10 April 1964, the first year of operation by the defendant’s company, 58,375 gallons; 11 April 1964 to 10 April 1965, 83,306 gallons; 11 April 1965 to 10 April 1966, 86,502 gallons. The period 11 April 1966 to 27 August 1966, 4 1/2 months, 26,347 gallons. Under Mr Sinclair, according to his agreed statement of evidence, the figures are: year 1968, 82,117 gallons; 1969, 96,318 gallons; 1970, 110,418 gallons; 1971, 101,821 gallons; 1972, 94,240 gallons; 1973, 96,265 gallons. Mr Sinclair gives no figures for the period May-December 1967.

I have referred to the criticism of the Eastbank Street site, its layout, access, egress and limited visibility which are mentioned in the plaintiffs’ internal memorandum 4 August 1964 and much later in the defendant’s letter of complaint written on 1 January 1966. I am satisfied that as a result of the site’s physical characteristics the passing trade which Mr Leitch was optimistic of attracting largely failed to materialise. This is borne out not only by the defendant’s evidence that the best part of his trade was with regular and local customers, and this point is also made in his letter of 1 January 1966, but also by Mr Sinclair’s agreed statement which concludes with the following: ‘The majority of the sales was to regular customers and sales of petrol to casual callers was comparatively small.’

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As I am now moving to the questions of law affecting the issue of liability on the counterclaim, it will probably be helpful if I briefly recapitulate my basic findings of fact as to the defendant’s inducement to enter into, firstly the agreement of 10 April 1963, and secondly the agreement dated 1 September 1964. As to the former, I find that the defendant was induced and did enter into that agreement in reliance on the plaintiff’s forecast of a 200,000 gallons throughput of petrol in the third year of that tenancy as one provided by experts, and the plaintiffs appreciated that the defendant did in fact so act in reliance on the plaintiff’s statement. As to the latter, I find that the defendant was not induced to enter into that agreement in reliance on their earlier forecast or any repetition of that earlier forecast prior to his entering into the agreement dated 1 September 1964. I further find that the 1963 forecast referred to expressly or by implication contained a statement of fact, namely as to the then potential of the site, and was not a mere expression of opinion as to what throughput the site might in fact achieve in the future. I further find that this statement of fact was incorrect. Put another way, in 1963 I find that the Eastbank Street site had not a potential throughput of 200,000 gallons in the third year or foreseeably in any year after the third year of tenancy. The incorrectness of this statement was attributable to the physical conditions of the site, its layout and siting, which were such as to fail in substance to attract the attention of passing as opposed to local traffic, and it was plain that without a substantial contribution from passing traffic their forecast throughput was unattainable.

For the reasons I have mentioned at the outset of my judgment, the counterclaim, so far as it is based on innocent misrepresentation, cannot be pursued. I come first therefore to the counterclaim based on a breach of warranty set out in para 6 of the defendant’s counterclaim as amended. In my judgment the statement as to potential cannot properly be treated as a warranty. I think the authorities indicate conclusively that to constitute a warranty a statement firstly must be intended on the part of the maker to constitute a promise which can be described as a warranty or, putting it into common language, a statement by which the maker says ‘I guarantee that this will happen’. Secondly, to constitute a warranty a statement must be of such nature that it is susceptible in relation to its content of constituting a clear contractual obligation on the part of the maker of the statement.

I have been referred to the following principal authorities. The first group is constituted by three cases: Morgan v Griffith; Erskine v Adeane; De Lassalle v Guildford. In De Lassalle v Guildford there is a dictum as to what is said to be the decisive test whether a statement of the kind that we have under review in this case constitutes a warranty, a statement which I find was rejected by the House of Lords unanimously in a later case to which I will refer, Heilbut, Symons & Co v Buckleton. In each of these three cases the court held that a promise that the promisor would fulfil specific obligations in the future on the basis of faith of which the promisee entered into a lease was enforceable at the suit of the promisee who had entered into the lease in the event of the promisor failing to carry out his promise. Hill v Harris is another case which deals with the matter on the same basis, although in that case the existence of a promise was negatived.

The second set of cases is constituted by a group of which the following are representative and have been cited to me: Brown v Sheen & Richmond Car Sales Ltd; Shanklin Pier Ltd v Detel Products Ltd; Oscar Chess v Williams; Andrews v Hopkinson and

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Dick Bentley Productions Ltd v Harold Smith (Motors) Ltd. In all these cases the statements which were held to or alleged to constitute warranties were statements as to the existing qualities or attributes of the property which became the subject of the post-statement contract. The statement made in this case does not fall in my judgment into this category. The statement relied on here possesses none of the characteristics of the cases in the group to which I have last referred. In my judgment it cannot be said that this was intended, and I find that it was not intended, to constitute a promise on the part of the plaintiffs; nor do I find that it was not intended, to constitute a promise on the part of the plaintiffs; nor do I find that this statement was of such a nature that it was susceptible of constituting a clear contractual obligation. In other words I am satisfied that there was no intention by the plaintiffs to promise that the forecast throughput should be achieved. I cannot see how the plaintiffs could possibly implement such a promise.

The vital point, I believe, is that whether or not the potential throughput of the site was achieved at the time indicated depended largely if not exclusively on factors entirely outside the control of the plaintiffs. I have been greatly helped in this part of the case by the references and citations which have been made to the case to which I referred a moment ago, Heilbut, Symons & Co v Buckleton and particularly passages from the speeches of Lord Haldane ([1913] AC at 37, 38, [1911–13] All ER Rep at 85, 86), Lord Atkinson ([1913] AC at 43, [1911–13] All ER Rep at 88) and Lord Moulton ([1913] AC at 49–51, [1911–13] All ER Rep at 91, 92). I am therefore against the defendant on the issue of warranty.

On the other hand, the relevant statement was not a mere expression of opinion. In that respect it is to be distinguished from a statement which was the subject of Privy Council scrutiny in the case of Bisset v Wilkinson.

I finally come to what has been the most difficult part of the case, that is, the counterclaim based on the allegations of negligence contained in para 8A of the defence and counterclaim. This involves considering two questions: firstly, in the circumstances of this case did the plaintiffs owe a duty of care to the defendant in relation to the information contained in the statement which I have found was made to him in or about March 1963? Secondly, if such duty were owed, was it broken? I can deal at once with the second question. I am satisfied that the plaintiffs failed to take reasonable care in relation to the relevant statement. Their fatal error lay in the failure to reappraise the 1961 throughput forecast of 200,000 gallons in the light of the physical characteristics of the site as they became plain when its development was competed in 1963 and before the defendant began negotiations for the April 1963 tenancy. Mr Leitch said, and I accept, that he was disappointed when he saw the results of the building of the showroom. He thought it was, as was the fact, blocking the visibility from Eastbank Street of part of the forecourt. He agreed that the obstruction of the view of the pumps from that street would adversely affect throughput. He also conceded that the site layout was back-to-front and this adversely affected the site’s potential. The same view is of course expressed in the plaintiffs’ internal memorandum of 4 August 1964.

Paragraph 8B of the defence and counterclaim was amended by an addition made in the course of the trial, which refers to the alleged ignoring of the information contained in Mr Leitch’s sketch plan of May 1961 to which I have referred, and the further and better particulars of the plaintiffs’ failure to exercise due care contain numerous and, I am sorry to say, repetitive allegations all of which apart from the allegation relating to the design and siting of the station, I find to be wholly unfounded. It is not necessary for me to deal with them in detail.

Page 217 of [1975] 1 All ER 203

My finding that the plaintiffs were in breach of duty, if one was owed to the defendant, rests and rests solely on a state of facts as to the site which were apparent to the defendant when he began his negotiations. The plaintiffs’ difficulty in relying on this as an answer to the counterclaim based on negligence lies in the fact, which I found, that the defendant’s realistic assessment of throughput communicated to the plaintiffs’ representatives was 100,000 to 150,000 gallons per annum and that he resiled from his estimate in reliance on the plaintiffs’ superior expertise, which so to speak ‘sugared’ their statement so that he relied on what they told him and not what he himself thought.

I come back to the vital question: did the plaintiffs, in all the circumstances, owe the defendant the duty in relation to the statement made? My answer is, Yes. The reasons why I reach this conclusion can be summarised as follows. In Nocton v Lord Ashburton I understand their Lordships to be saying that a duty of care may arise in relation to a statement made when there are special circumstances which give rise to an implied contract in law or to a relationship which equity would regard as fiduciary. Lord Dunedin ([1914] AC at 963, 964, [1914–15] All ER Rep at 57, 58) treats this liability as an aspect of the law of negligence. That I think is an important point because one finds very strong echoes of the same position being taken up in the judgment of Lord Devlin in Hedley Byrne & Co Ltd v Heller & Partners Ltd to which I will now come. In the Hedley Byrne case ([1963] 2 All ER at 582, [1964] AC at 485, 486), Lord Reid was clearly of opinion that such a duty might arise from a special relationship; and the nature of this he indicated in two passages in his speech. In the first passage ([1963] 2 All ER at 583, [1964] AC at 486) he referred to Lord Haldane’s speech in Robinson v National Bank of Scotland, a case in which Lord Haldane was virtually repeating points he had made, if that is the right expression to use, in Nocton v Lord Ashburton. Lord Reid said:

‘This passage makes clear that LORD HALDANE did not think that a duty to take care must be limited to cases of fiduciary relationship in the narrow sense of relationships which had been recognised by the Court of Chancery as being of a fiduciary character. He speaks of other special relationships, and I can see no logical stopping place short of all those relationships where it is plain that the party seeking information or advice was trusting the other to exercise such a degree of care as the circumstances required, where it was reasonable for him to do that, and where the other gave the information or advice when he knew or ought to have known that the inquirer was relying on him.’

Then in the second passage ([1963] 2 All ER at 586, [1964] AC at 492) Lord Reid said this; he was again referring to Lord Haldane who in Robinson v National Bank (1916 SC (HL) at 157) had used the expression ‘a contract to be careful’:

‘… LORD HALDANE must have meant an agreement or undertaking to be careful. This was a Scots case and by Scots law there can be a contract without consideration: LORD HALDANE cannot have meant that similar cases in Scotland and England would be decided differently on the matter of special relationship for that reason. I am, I think, entitled to note that this was an extempore judgment. So LORD HALDANE was contrasting a “mere inquiry” with a case where there are special circumstances from which an undertaking to be careful can be inferred.’

Page 218 of [1975] 1 All ER 203

He then went on to deal with the specific facts in that case. Lord Morris of Borth-y-Gest in the Hedley Byrne case ([1963] 2 All ER at 588, 594, [1964] AC at 494, 502) related the duty to take care in relation to a statement to what he describes as an assumption of responsibility by the maker of the statement; to which he added that the maker should be possessed of some special skill or expertise. Lord Hodson ([1963] 2 All ER at 598, [1964] AC at 509, 510) contemplated that the duty of care in the making of statements might arise where there was no fiduciary relationship, as where the maker of the statement held out his skills to reinforce the acceptability of the statement; and Lord Hodson agreed ([1963] 2 All ER at 601, [1964] AC at 514) with the assumption of responsibility test with which Lord Morris in his judgment dealt—there is one particularly cogent passage ([1963] 2 All ER at 594, [1964] AC at 502, 503). Then Lord Devlin ([1963] 2 All ER 610 et seq, [1964] AC at 528 et seq) indicated that the duty of care is not limited by reference to certain types of person or sorts of situations but arose from the situations which he described ([1963] 2 All ER at 611, [1964] AC at 529) in his speech. He said:

‘It is a responsibility that is voluntarily accepted or undertaken either generally where a general relationship, such as that of solicitor and client or banker and customer, is created, or specifically in relation to a particular transaction.’

Finally Lord Pearce ([1963] 2 All ER at 617, [1964] AC at 539) stressed the importance of the existence of a special relationship and said:

‘Was there such a special relationship in the present case as to impose on the respondents a duty of care to the appellants as the undisclosed principals for whom National Provincial Bank, Ltd. was making the inquiry? The answer to that question depends on the circumstances of the transaction. If, for instance, they disclosed a casual social approach to the inquiry no such special relationship or duty of care would be assumed …  To import such a duty, the representation must normally, I think, concern a business or professional transaction whose nature makes clear the gravity of the inquiry, and the importance and influence attached to the answer.’

It seems to me that all their Lordships were all agreed that, apart from a general relationship involving fiduciary aspects such as solicitor and client, bank and customer, the special relationship from which the duty of care in the making of the statements arises, is not limited to particular categories of persons or types of situations. In the Privy Council case, Mutual Life & Citizens Assurance Co Ltd v Evatt their Lordships were divided. The majority, Lords Hodson, Guest and Diplock, appeared to limit the duty of care in the making of statements to persons who carried on or held themselves out as carrying on the business of giving advice (see the passage ([1971] 1 All ER at 160, 161, [1971] AC at 809) of the majority judgment):

‘In their Lordships’ view these additional allegations are insufficient to fill the fatal gap in the declaration that it contains no averment that the company to the knowledge of the respondent carried on the business of giving advice on investments or in some other way had let it be known to him that they claimed to possess the necessary skill and competence to do so and were prepared to exercise the necessary diligence to give reliable advice to him on the subject-matter of his enquiry. In the absence of any allegation to this effect the respondent was not entitled to assume that the company had accepted any other duty towards him

Page 219 of [1975] 1 All ER 203

than to give an honest answer to his enquiry nor, in the opinion of their Lordships, did the law impose any higher duty on them. This is in agreement with the reasoning of Taylor J in the High Court of Australia with which the judgment of Owen J is consistent.’

The Mutual Life case was an appeal from the High Court of Australia in which the High Court by a majority had decided that the claim of the person who had suffered damage as a result of relying on a mis-statement as to the financial situation of a company disclosed a cause of action. The majority in the Mutual Life case ([1971] 1 All ER at 161, [1971] AC at 809) went on with a substantial note of caution:

‘As with any other important case in the development of the common law, Hedley Byrne should not be regarded as intended to lay down the metes and bounds of the new field of negligence to which the gate is now opened. Those will fall to be ascertained step by step as the facts of particular cases which come before the courts make it necessary to determine them. The instant appeal is an example: but their Lordships would emphasize that the missing characteristic of the relationship which they consider to be essential to give rise to a duty of care in a situation of the kind in which the respondent and the company found themselves when he sought their advice, is not necessarily essential in other situations, such as, perhaps, where the advisor has a financial interest in the transaction on which he gives his advice.’

Then there is a reference made to the decision of Scott Cairns J in W B Anderson & Sons Ltd v Rhodes (Liverpool) Ltd which has been cited to me. A reference is made to the American Restatement of the Law of Torts, and the passage concludes:

‘On this, as on any other metes and bounds of the doctrine of Hedley Byrne their Lordships are expressing no opinion. The categories of negligence are never closed and their Lordships’ opinion in the instant appeal, like all judicial reasoning, must be understood secundum subjectam materiam.’

It should be said, I think, that the majority in the Privy Council approached this matter as a decision to be made on a point of pleading, although the observations which the court made are clearly of general application.

The minority, Lords Reid and Morris, differed from the majority view, the effect of which—implicit in the last passage which I have read—can fairly be said to be that the duty of care relating to statements is limited to people who are carrying on, or holding themselves out as carrying on, the business of giving advice in relation to the subject-matter of the statements which they make. But, with respect, I think that this is unduly restrictive of the duty under consideration. I much prefer the minority reasoning of Lord Reid and Lord Morris, and I cite the following passage ([1971] 1 All ER at 163, [1971] AC at 812):

‘Then it was argued that an adviser ought not to be under any liability to exercise care unless he had, before the advice was sought, in some way held himself out as able and willing to give advice. We can see no virtue in a previous holding out. If the enquirer, knowing that the adviser is in a position to give informed advice, seeks that advice and the adviser agrees to give it, we are unable to see why his duty should be more onerous by reason of the fact that he had previously done the same for others. And again, if the previous conduct of the adviser is relevant, would it be sufficient that, in order to attract new customers

Page 220 of [1975] 1 All ER 203

or increase the goodwill of existing customers, he had indicated a general willingness to do what he could to help enquirers, or must he have indicated a willingness and ability to deal with the precise kind of matter on which the enquirer seeks his assistance?’

Then comes the vital test, in the minority’s opinion:

‘In our judgment when an enquirer consults a businessman in the course of his business and makes it plain to him that he is seeking considered advice and intends to act on it in a particular way, any reasonable businessman would realise that, if he chooses to give advice without any warning or qualification, he is putting himself under a moral obligation to take some care. It appears to us to be well within the principles established by the Hedley Byrne case to regard his action in giving such advice as creating a special relationship between him and the enquirer and to translate his moral obligation into a legal obligation to take such care as is reasonable in the whole circumstances.’

Subject to one last point which I have to consider, I am satisfied that there was, in the circumstances of this case, a special relationship; and this special relationship I find to have existed, even if one applies the tests indicated by the majority in the Mutual Life case ([1971] 1 All ER 150 at 160, 161, [1971] AC 793 at 809). The present was a situation in which in fact the plaintiffs did have a financial interest in the advice they gave. This was advice which was given to the defendant who, as they knew, was asking or seeking information and was in fact given information which would lead him into the decision to enter into the tenancy agreement, the benefit of which the plaintiffs as landlords would have. If one applies the Mutual Life minority test, which is expressed in the passage ([1971] 1 All ER at 163, [1971] AC at 812) which I have just read, it is clear in my judgment, subject to the final point I am now coming to, that this was a situation in which the plaintiffs owed the defendant a duty of care.

The last point on which the counterclaim could founder is whether the fact that the statement was made in the context of pre-contractual negotiations between the plaintiffs and the defendant, and from which a contract resulted, excludes the duty of care. McNair J (obiter) in Oleificio Zucchi v Northern Sales Ltd did take this view; but it was quite unnecessary for him to do so, because he was dealing with a case stated on an arbitration award in which the arbitrator found that there had been no failure to take care in the making of a statement in a pre-contractual relationship situation. It is also possible to contend that the observations of the House of Lords in the Hedley Byrne case assumed that statements made in pre-contractual negotiations between parties who ultimately came to contract are excluded from the duty of care principle: see, for example, what Lord Reid said in a passage in his speech in Hedley Byrne ([1963] 2 All ER at 581, [1964] AC at 483): ‘Where there is a contract there is no difficulty as regards the contracting parties: the question is whether there is a warranty.' But there are other relevant passages in Hedley Byrne and, taking the speeches as a whole, in my judgment it is not right to regard Hedley Byrne as containing anything which excludes the duty of care relationship in a pre-contractual negotiation situation. It seems to me that Lord Devlin’s observations ([1963] 2 All ER at 602, 603, 609, [1964] AC at 516, 517, 526, 527) are a clear indication to the contrary, because he was dealing in those passages with the situation where one has running alongside a contractual relationship and a relationship which gives rise to a duty of care.

Page 221 of [1975] 1 All ER 203

It is right to say there is no direct authority on this point which is binding on me. There was in fact a decision of Bean J in Coats Patons (Retail) v Birmingham Corpn. But this is a decision which I find not helpful, because in that case it was conceded that there was a duty of care situation in relation to the making of statements.

I have however been referred to Dillingham Construction Pty v Downs, an Australian case, a decision of Hardie J sitting in the Supreme Court of New South Wales. This question is discussed by the judge at some length. I think it is sufficient if I read passages from the headnote, having first said that this is a decision which was handed down after the Privy Council had decided the Mutual Life case in the way which has been indicated. The facts, putting them very briefly, were that the plaintiffs had entered into a contract to undertake certain works in a New South Wales harbour; these works became much more difficult to carry through at the contract price, because all sorts of snags and difficulties emerged, since there were disused coal workings under the harbour; the defendant knew of the existence of these workings but nothing had been said of them to the plaintiffs. So the plaintiffs alleged, amongst other things, that there was a duty of care on the defendant to give them this information, in the course of making statements in the pre-contractual situation, and that this duty of care had been broken. The relevant passage in the headnote is as follows ([1972] 2 NSWLR at 49, 50):

‘Held: (1) The policy of the common law is to uphold contracts freely made between parties who are at arm’s length and on equal terms. The pre-contract relationship between such parties would not normally qualify as a special relationship of the type which, according to the doctrine of Hedley Byrne & Co. Ltd. v. Heller & Partners Ltd, would subject one or other of the parties to a duty of care in the assembly or presentation of facts, figures or other information as to the subject matter of the contract.’

Then there is a reference to McNair J’s casea and to two other Australian casesb where the point had arisen but in which no determination was reached about it. Then the headnote goes on:

‘(2) In the present case, in view of the very special nature of the contract and the nature and extent of the specialised knowledge in the possession of the defendant which would have been of the utmost importance to the plaintiffs if it had been imparted to them, the mere fact that the parties were in a pre-contract relationship at the time when the duty was said to have been created and to have been breached, would not in itself necessarily preclude the application of the principle under consideration. (3) Upon a consideration of all relevant factors … there was no assumption or acceptance by the defendant, in fact or law, of the task of providing the plaintiffs with accurate or full information … ’

I am not going to read passages from Hardie J’s judgment; they are, in my view, accurately summarised in those passages in the headnote. I find the reasoning and the decision in his case to be very helpful, because it does indicate a view, which I personally hold, that the fact that statements are made in a pre-contractual relationship does not preclude the person to whom the statements are made from relying on the duty of care in the making of the statements by the person who is making them.

The special features of the present case are, of course, that here was the defendant who had himself formed what he thought a realistic estimate of the turnover of this

Page 222 of [1975] 1 All ER 203

garage; he puts his realistic figure to the plaintiffs, who are the landlords seeking a tenant for their premises, and he is given by them a different estimate which I find to be affected by a failure to take care in relation to its being made. I have given the reasons why I hold that there was a failure to take care. Furthermore, the plaintiffs must have appreciated, and I am sure they appreciated—and in fact they quite frankly said this—that had the statement not been made the defendant would certainly have not entered into the tenancy agreement of 10 April at the rental and on the terms which he did.

As a matter of principle, I cannot think there is anything wrong in holding that the duty of care in relation to the making of statements may arise in a pre-contractual situation. For example, it is well established that a seller of goods which are dangerous, and which are dangerous to the knowledge of the seller, can be liable to the buyer in damages for negligence as well as in damages for breach of the contractual term in relation to the merchantability or fitness of the goods; and the passages to which I have referred in Lord Devlin’s speech in Hedley Byrne are really on the same lines. The theory that in some way or other the law is different in relation to negligent mis-statements from the law concerning the circulation of dangerous things—the theory that there is a distinction between a negligent statement and some negligence or omission in relation to goods or chattels or land—seems to me to be harking back to the pre-Hedley Byrne days when the view was taken, on the basis of cases since overruled—Le Lievre v Gould and the majority decision in Candler v Crane, Christmas & Co—that there was no duty of care in relation to the making of statements. What Hedley Byrne has done, I am quite satisfied, is to indicate that there is really no difference between the duty of care in relation to the making of a statement and the duty of care in relation to other situations which, if broken, might give rise to a cause of action for damages for negligence. Of course, it may well be said, if my view is right, that I am opening the door very wide indeed and eroding the principle of caveat emptor and the general principle that contracting parties are at arm’s length. But I fall back on what Lord Reid said in Hedley Byrne ([1963] 2 All ER at 583, [1964] AC at 486) on this point:

‘A reasonable man, knowing that he was being trusted or that his skill and judgment were being relied on, would, I think, have three courses open to him. He could keep silent or decline to give the information or advice sought: or he could give an answer with a clear qualification that he accepted no responsibility for it or that it was given without that reflection or inquiry which a careful answer would require: or he could simply answer without any such qualification. If he chooses to adopt the last course he must, I think, be held to have accepted some responsibility for his answer being given carefully, or to have accepted a relationship with the inquirer which requires him to exercise such care as the circumstances require.’

Therefore, for those reasons I find for the defendant on his counterclaim for damages for negligence. I am against him on the other basis of his counterclaim, but I have indicated sufficiently, I trust, the four walls within which this liability falls. It follows that the plaintiffs are entitled to £1,103·69, subject to setting off such damages as the defendant may be entitled to having regard to my findings on the plaintiffs’ liability on the counterclaim.

Judgment for the plaintiffs and judgment for the defendant on the counterclaim. Defendant’s damages to be assessed.

Solicitors: Durrant, Piesse & Co (for the plaintiffs); Batchelor, Fry, Coulson & Burder agents for Bellis, Son & Ashton, Southport (for the defendant).

E H Hunter Esq   Barrister.

Practice Direction

Infant Divorce: Guardian ad litem

[1975] 1 All ER 223

PRACTICE DIRECTIONS

FAMILY DIVISION

20 December 1974

Paternity – Blood test – Divorce – Guardian ad litem – Official Solicitor – Appointment of Official Solicitor as guardian ad litem where blood test likely to be directed – Appointment usually unnecessary in first instance – Circumstances in which appointment should be made.

Where the court directs the trial of a separate issue as to the paternity of a child it has been general practice at the same time to direct under r 115 of the Matrimonial Causes Rules 1973a that the child be separately represented, and the Official Solicitor has almost invariably been appointed as guardian ad litem.

It is now usual, whenever a question of paternity needs to be resolved, to direct the use of blood tests under RSC Ord 112 or CCR Ord 46, r 23, as the case may be. It is found in practice that the report on the blood tests often in effect disposes of the issue or dispute.

While the court should, when such a question of paternity arises, always consider the position of the child, it is not necessary, especially when blood tests are likely to be directed, for the court in the first instance to make an order appointing the Official Solicitor as guardian ad litem of the minor unless either: (a) the minor is ten years old or more; or (b) there are special circumstances making such appointment immediately desirable.

Where no order appointing the Official Solicitor is made at the time blood tests are directed, the direction for blood tests should include a provision that the proceedings be restored for further directions by the registrar when the report by the tester has been filed.

The registrar should then decide, in the light of the position following the report, whether to order that the Official Solicitor be appointed guardian ad litem of the minor. Such an order should be made, for example, where in the opinion of the court the issue as to paternity is still a live one or other aspects of the case make it desirable that the minor should be represented by the Official Solicitor.

The Registrar’s Practice Direction dated 8 March 1965 ([1965] 1 All ER 905, [1965] 1 WLR 600) is cancelled.

Issued by the President with the concurrence of the Lord Chancellor.

D Newton,   Senior Registrar

20 December 1974

Graddage v London Borough of Haringey

[1975] 1 All ER 224

Categories:        HOUSING        

Court:        CHANCERY DIVISION        

Lord(s):        WALTON J        

Hearing Date(s):        15 OCTOBER 1974        

Housing – Notice from local authority – Validity – Challenge to validity – Appeal – Prescribed time limit – Notice invalid on its face – Unauthorised signature – Failure to appeal against notice within time limit – Effect – Whether recipient of notice precluded from challenging validity – Whether recipient entitled to disregard notice – Housing Act 1957, ss 11(1), 37(1), 166(2).

A local authority served notices under s 9(1)a of the Housing Act 1957 on the owner of two properties requiring certain works to be carried out in order to make them fit for human habitation. The owner failed to do the necessary works. Accordingly the local authority, in exercise of its powers under s 10 of the 1957 Act, entered the properties and executed the works. It also carried out on each of the properties other works which had not been specified in the s 9 notices. In order to recover the expenses incurred in executing those works the local authority served on the owner notices under s 10(3)b of the 1957 Act demanding payment. The notices were in similar terms and stated: ‘To: Work Under: Housing Act 1957, Sections 9 and 10.' They gave details of how the total figure had been made up and were signed by the borough treasurer. Subsequent letters from the borough treasurer indicated that the total figures given in the demands included sums for the additional works which had not been specified in the s 9 notices. The owner failed to pay the sums demanded. Some years later the plaintiff, who was the successor in title to the properties, brought proceedings to challenge the demands on the grounds that they had not been signed by the town clerk or his lawful deputy, as required by s 166(2)c of the 1957 Act, and that they included sums in respect of works not specified in the s 9 notice. The local authority contended that, since the owner of the properties had not appealed to the county court under s 11(1)d of the 1957 Act against the demands within 21 days of service, they had become operative by virtue of s 37(1)e of the 1957 Act.

Held – The requirement of s 166(2) that a notice or demand should be signed by the town clerk or his deputy was mandatory and accordingly a notice or demand which failed to comply with that requirement was invalid. Since the demands served on the owner were invalid on their face the owner was entitled to disregard them; he was not compelled to appeal against them in order to be in a position to assert their invalidity (see p 227 j to p 228 a and p 231 b c and j to p 232 a post).

West Ham Corpn v Charles Benabo & Sons [1934] 2 KB 253 and dictum of Salmon LJ in Plymouth City Corpn v Hurrell [1967] 3 All ER at 358 applied.

Dicta of Davies and Russell LJJ in London Borough of Hillingdon v Cutler [1967] 2 All ER at 366 not followed.

Per Walton J. Although the local authority was not entitled to demand payment in respect of costs incurred on work which had not been specified in the s 9 notice, since there was nothing on the face of the demands served on the owner to indicate that the local authority was asking for payment of such costs, the owner would only have been entitled to challenge the validity of the demands on that ground by way of an appeal under s 11 of the 1957 Act (see p 231 e and g to p 232 a, post).

Page 225 of [1975] 1 All ER 224

Notes

For authentication of notices under the Housing Act 1957, see 19 Halsbury’s Laws (3rd Edn) 586, Para 947.

For the Housing Act 1957, ss 9, 10, 11, 37, 166, see 16 Halsbury’s Statutes (3rd Edn) 121, 122, 125, 147, 232.

Cases referred to in judgment

Becker v Crosby Corpn [1952] 1 All ER 1350, 116 JP 363, 50 LGR 444, 26 Digest (Repl) 706, 150.

Cohen v West Ham Corpn [1933] Ch 814, [1933] All ER Rep 24, 102 LJCh 305, 149 LT 271, 97 JP 155, 31 LGR 205, CA, 26 Digest (Repl) 683, 13.

London Borough of Hillingdon v Cutler [1967] 2 All ER 361, [1968] 1 QB 124, [1967] 3 WLR 246, 131 JP 361, 65 LGR 535, CA, Digest (Cont Vol C) 955, 268a.

Plymouth City Corpn v Hurrell [1967] 3 All ER 354, [1968] 1 QB 455, [1967] 3 WLR 1289, 131 JP 479, 65 LGR 557, CA, Digest (Cont Vol C) 420, 15a.

R v Berkshire (Forest) Justices, ex parte Dallaire [1961] 3 All ER 1138, [1962] 2 QB 629, [1962] 2 WLR 642, 126 JP 48, 60 LGR 172, DC, Digest (Cont Vol A) 657, 150a.

West Ham Corpn v Charles Benabo & Sons [1934] 2 KB 253, [1934] All ER Rep 47, 103 LJKB 452, 151 LT 119, 98 JP 287, 32 LGR 202, 26 Digest (Repl) 685, 33.

Case also cited

Benabo v Wood Green Corpn [1945] 2 All ER 162, [1946] KB 38, DC.

Preliminary issue

By a writ issued on 13 April 1973 the plaintiff, Edward Stanley Graddage (as trustee of the S A Graddage Will Trust), brought an action against the defendants, the Council of the London Borough of Haringey (‘the local authority’) claiming, inter alia, a declaration that the local authority were entitled to further payment of £556·85 only in respect of works executed by it on premises known as 106 and 108, North Hill, Highgate, owned by the plaintiff, under the Housing Act 1957 and pursuant to notices served on the plaintiff’s predecessor in title on 4 November 1965 and 19 January 1966 respectively. By their defence and counterclaim the local authority claimed declarations that it was entitled to the further payment of £2,339·86 in respect of the works. On 19 June 1974, on the summons for directions, the master ordered the trial of a preliminary issue whether certain documents served on the plaintiff’s predecessor in title by the local authority, or any of them, amounted to a valid demand for payment under ss 9 and 10 of the 1957 Act. The facts are set out in the judgment.

David Hands for the plaintiff.

Robert Wakefield for the local authority.

15 October 1974. The following judgment was delivered.

WALTON J. The plaintiff in this action is the present owner of two properties, 106 and 108 North Hill, Highgate. On 4 November 1965 and 19 January 1966 respectively the local authority served notices on the then owner of these premises under s 9 of the Housing Act 1957 requiring the execution of certain works. The validity of these notices is not in dispute. The owner did not do the works and the local authority, as they were entitled to do, entered the respective properties and executed the works. They also carried out other works not included in the s 9 notices on each of the properties. Having done so, they sought to recover the costs from the owner under their statutory powers, and it is with the documents seeking to effect that result that I am concerned in the present case. They are, first of all, notices in virtually similar terms in regard to each of the properties, addressed to a former owner of the property. The name of the property is given and it then says:

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‘To: Work Under: Housing Act, 1957, Sections 9 and 10.' It gives the date of completion and makes up an amount for wages and materials and so forth, and comes out at the final figure. I am not particularly concerned with the exact amount of those figures. It is headed: ‘Borough of Haringey J. Owen [and then his qualifications are given] Borough Treasurer.' Then there are a number of directions as to payment. Those two notices are dated 23 May 1968 and are on what I judge to be printed forms. There is then a letter of 2 July 1968 which has been sent by the borough treasurer, and is signed by him, to the solicitors for the then owner of the property, and that letter, besides asking in substance for payment, says this: ‘During the course of the works additional items’ that is to say items additional to those in the original s 9 notice ‘became necessary as follows’ and then they are set out, there being three matters in connection with no 106 and a number of matters in connection with no 108. There is then another document of 7 August 1968 which is another letter from the borough treasurer demanding payment. There are two final applications of 22 August 1968, one in respect of each of the properties bearing a printed signature of the borough treasurer. Finally there is a letter of 6 November 1968 signed by the borough treasurer. All of those quite clearly requested payment of the sums alleged to be due. It will be observed that, first of all, none of these documents is signed by the town clerk or his deputy, and, second, the sums sought to be recovered in each case include the costs of the additional works, that is to say those in addition to those originally specified in the s 9 notices.

On 13 April 1973 the present proceedings were launched, the plaintiff claiming a declaration that the local authority is only entitled to be paid a very much less sum than that which it claims. In effect, he wishes to exclude the costs of the additional works. The local authority says that by failing to appeal against the demands which it alleges it has made in time, the plaintiff is now too late to take the points he wishes to take, and so battle has been joined.

In these proceedings a preliminary issue has been directed by the master in the following terms:

It is ordered that the following question be tried as a preliminary issue before the trial of this action and counterclaim, namely, whether the documents dated 23rd May, 1968, 2nd July, 1968, 7th August, 1968, 22nd August, 1968 and 6th November, 1968 in paragraph 2 of the Defence referred to, or any of them, amounted to a valid demand under sections 10 and 11 of the Housing Act, 1957.’

In order to make the debate intelligible, it is necessary to bear in mind the relevant sections of the 1957 Act which are, fortunately, few. There is first of all s 9(1) which provides:

‘Where a local authority … are satisfied that any house is unfit for human habitation [which was the case here], they shall, unless they are satisfied that it is not capable at a reasonable expense of being rendered so fit, serve upon the person having control of the house a notice—(a) requiring him, within such reasonable time, not being less than twenty-one days, as may be specified in the notice, to execute the works specified in the notice … ’

Section 10(1) provides:

‘If a notice under the last foregoing section requiring the person having control of a house to execute works is not complied with, then, after the expiration of the time specified in the notice or, if an appeal has been made against the notice and upon that appeal the notice has been confirmed with or without variation, after the expiration of twenty-one days from the final determination of the appeal, or of such longer period as the court in determining the appeal may fix, the local authority may themselves do the work required to be done by the notice, or by the notice as varied by the court, as the case may be.’

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That, of course, is what happened here. Then s 10(3) provides:

‘Any expenses incurred by the local authority under this section, together with interest from the date when a demand for the expenses is served until payment, may, subject as hereafter provided, be recovered by them, by action or summarily as a civil debt, from the person having control of the house … ’

Then s 11, under the rubric right of appeal:

‘(1) Any person aggrieved by … (b) a demand for the recovery of expenses incurred by a local authority in executing works specified in any such notice … may, within twenty-one days of the service of the notice, demand or order, appeal to the county court within the jurisdiction of which the premises to which the notice, demand or order relates are situate, and no proceedings shall be taken by the local authority to enforce any notice, demand or order in relation to which an appeal is brought before the appeal has been finally determined …

‘(3) On an appeal to the county court under this section the judge may make such order either confirming or quashing or varying the notice, demand or order as he thinks fit … ’

Section 37(1) provides:

‘Any notice, demand or order against which an appeal might be brought to a county court under this Part of this Act shall, if no such appeal is brought, become operative on the expiration of twenty-one days from the date of the service of the notice, demand or order, and shall be final and conclusive as to any matters which could have been raised on such an appeal … ’

Finally, s 166(2) provides:

‘A notice, demand or other written document proceeding from a local authority under this Act shall be signed by their clerk or his lawful deputy.’

On these facts in law, counsel for the plaintiff submits that the demands in each of them are nullities and that for two reasons: first, none of such notices is signed by the town clerk or his deputy as required by s 166(2) of the Act; second, the sum sought thereby to be recovered in respect of each house contains costs in respect of works which were not set out in the original s 9 notices. He then proceeds to say that the demands being nullities, he is not obliged to appeal against them, and that there is nothing in s 37 of the Act which turns an invalid notice or demand when un-appealed within the 21 days’ time limit into a valid notice or demand.

Counsel for the local authority on the other hand, contends that the requirements of s 166(2) are purely procedural; that, accordingly, the only remedy open to the plaintiff was to appeal under s 11 and that, not having done so, by virtue of s 37 he cannot now take the point in these proceedings. He further says that whatever might be said of later demands, after the letter of 2 July 1968 had been written by the local authority explaining that the earlier demands of 23 May contained costs in relation to work additional to that included in the s 9 notice, nevertheless those two earlier demands themselves were not, on their faces, in any way invalid. Accordingly, the plaintiff not having appealed against either of those within the 21 days is not now able to question their validity on counsel for the plaintiff’s second ground.

It appears to me that on both principle and authority counsel for the plaintiff is correct in his first submission. In view, however, of the extremely careful arguments which have been addressed to me on this matter, I must take some little time with the authorities. On principle, however, it is difficult to see that the requirements of s 166(2) are not mandatory, so that the subject who is affected thereby may not be able to see at a glance whether the notice which he has received is one which does or does not properly proceed from the local authority. He is, surely, obviously entitled to ignore any notice ostensibly served on him in exercise of the relevant statutory

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powers unless it bears on its face the imprimatur of the town clerk or his deputy. There would seem to be no conceivable reason why he should have to go to the length of appealing against any other notice if he does not like it. His legal obligations in this regard are limited to those franked by the authority of the town clerk.

So far as authority is concerned, I begin with Cohen v West Ham Corpn. There were two points there in issue. The first was whether the plaintiff was entitled to maintain that a notice served on him under what is now s 9 of the 1957 Act which, on its face, complied with all the necessary formalities was invalid because the council had not, in fact, properly considered the matters which, under that section, it was bound to consider; two, whether, if he could show that he had, in fact, complied with the notice, the council was nevertheless entitled to enter and carry out the work it wished to carry out. The second point is of no relevance here. It was held by Maugham J and the Court of Appeal that the plaintiff’s only remedy would have been to have appealed against the notice when originally served. It is to be observed that there was no evidence before the court one way or the other whether the council had, in fact, properly discharged the duties laid on it by the section before issuing the notice. None of the judges in the Court of Appeal was prepared to assume, in the absence of evidence, that the council was in default, and they were unanimous as to that point being decisive. As I read their judgments, however, they were far from unanimous as to what the position would have been had there been such evidence before them. Lord Hanworth MR said ([1933] Ch at 832, [1933] All ER Rep at 26):

‘The simple point that is before this Court is whether those notices were valid or invalid. We have come to the conclusion that they were valid. Consideration must be given to ss. 17, 18 and 19 of the Housing Act [1930], also to s. 22, which enables an appeal to be made to the county court, but makes it impossible to appeal after the lapse of twenty-one days from the date of the service of the notice. In the present case there was no appeal to the county court within the twenty-one days of the service of the notices, and the result is that they stand good in their terms if they are valid notices under s 17.’

He then proceeds to enquire whether they were valid notices under s 17 and came to the conclusion that they were. But his enunciation of the simple point before the court as being whether those notices were valid or invalid, and particularly his use of the word ‘if’ towards the concluding part of that paragraph, makes it appear to me clearly that if he had not found that they were valid, he would have decided the case in favour of the plaintiff. Lawrence LJ took, I think, a different view. He said ([1933] Ch at 835, [1933] All ER Rep at 27):

‘Be that as it may, however, even if the Council has in some way neglected its duty in the present case, I am clearly of opinion that the notices were given by the Council under s. 17, and, therefore, if the owner desired to dispute the notices on the ground that they were improperly given, his proper course was to appeal against them under s. 22.’

It is to be observed, however, that he was of the opinion that the notices had, in fact, been given by the council under s 17. He expressed no opinion, because the matter was not before him, as to what the consequences would have been if the notices had not borne the signature of the town clerk, and therefore the notices had been bad on their face. I do not think it is possible to assume that automatically he would have said that the notices were given by the council in those circumstances under s 17. Romer LJ expressly declined to deal with the point ([1933] Ch at 836, [1933] All ER Rep at 28). So there one has, as it were, one to the right, one to the left, and one dead centre on the point with which

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we are now concerned. Certainly, there is no ratio decidendi in that case which is of any assistance, and it was in that state of the law that West Ham Corpn v Charles Benabo & Sons was decided. The headnote ([1934] 2 KB at 253) in that case reads:

‘On the default of the defendants to render fit for human habitation two blocks of houses, numbering twenty-three houses altogether, which were under their control, after proper notices served on them, the plaintiff corporation, under s. 18, sub-s. 1, of the Housing Act, 1930, did the work themselves, and served a demand for payment on the defendants under s. 18, sub-s. 3, of the Housing Act, 1930. The claim was signed by one of the plaintiffs’ officials, not the town clerk. It claimed two sums, one in respect of each block of houses, giving the totals of the different items of expenditure, labour and materials, but there was no demand for the expenditure on each or any house separately. On these demands being made the defendants did not appeal to the county court under s. 22, sub-s. 1(b), of the Act of 1930:—Held, that the demands were bad, firstly, in that they were not signed by the town clerk as directed by s. 120, sub-s. 2, of the Housing Act, 1925, which by s. 65, sub-s. 1, of the Act of 1930 is to be construed as one with the latter Act; and secondly, because they did not specify the sums spent on each separate house. Held, further, that the fact that the defendants did not appeal to the county court did not make demands good demands, and that “demand” in s. 22, sub-s. 1(b), of the Act of 1930 meant a valid demand. The defendants therefore, were not bound to appeal to the county court.’

I may pick up the nub of the decision in the judgement of Atkinson J ([1934] 2 KB at 264, 265, [1934] All ER Rep at 53):

‘… but in my view if the document called the demand is one which does not create a legal liability to pay, it cannot subsequently create such legal liability because of a failure to appeal. It is quite true that s. 18, sub-s. 4, providing for the time from which the time limit of six months is to run, says that it is to be reckoned from the date of the service of the demand or, if an appeal is made against that demand, from the date on which the demand becomes operative. But I do not think that quite touches the point that there has to be a good demand to create a legal liability. If the demand is not one which satisfies the statutory requirements, I cannot for my part see how a neglect to appeal can turn it into a good demand. a neglect to appeal certainly debars a defendant from making any objection to such matters as the amount, whether the work has been done, the reasonableness of the charges, and so on. It is quite clear that a county court judge must be able to deal with some such objections as are raised in this case, because if the defendants had appealed it would have jumped to the eye of everybody that this was a bad notice, and I think the county court judge could have said: I quash it; it is a bad notice. But s. 22, sub-s. 1(b), says: “Any person aggrieved by,” not any demand, good, bad or indifferent, but “a demand for the recovery of expenses incurred by a local authority in executing works specified in any such notice.” Why is it all set out at such length? Supposing some of these houses had been mortgaged. What is the mortgagee to do when he gets served with a demand of this kind? I cannot myself see that there is any obligation on a person receiving a demand of this sort to appeal if the demand does not come within s. 22, sub-s. 1(b). I think all statutes of this kind, which confer upon local authorities rights which some people think are harsh, are to be dealt with strictly, and I do not think I have any right practically to eliminate from that subsection words which I am satisfied were put in to indicate the nature of the demand against which a person can, and indeed must, appeal.’

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It has been suggested, as will be seen, that Cohen’s case should have been cited to the learned judge, but it was not, and I cannot myself see that it would have been of the slightest assistance to him dealing as he was with a notice which was, on its face, a bad notice. The strict view of what is now s 166(2) of the Housing Act 1957 taken in Benabo’s case has also been taken expressly or impliedly in several cases relating to the service of notices to quit by local authorities, for example in Becker v Crosby Corpn and R v Berkshire (Forest) Justices. But I do not think these cases afford any real assistance on matters of principle. It is, however, to be noticed that the provision of the Housing Acts of 1925 and 1930 which were under discussion in Benabo’s case have been re-enacted by Parliament in virtually the same terms in the Housing Act 1957. That having been done in the light of the fact that Benabo’s case had been decided the way it had been, affords at any rate some argument to the effect that Benabo’s case carried out the intention of Parliament.

Counsel for the local authority relied heavily, however, on dicta of Davies and Russell LJJ in London Borough of Hillingdon v Cutler to which case I must now accordingly turn. The points on which that case was decided were completely different. Harman LJ dealt only with that, but Davies LJ said ([1967] 2 All ER at 366, [1968] 1 QB at 138):

‘We have had cited to us two authorities with regard to this point, one a decision at first instance, ATKINSON, J., in West Ham Corpn v. Charles Benabo & Sons and the other a decision of this court, Cohen v. West Ham Corpn. If it were necessary to decide this point (which, in view of the opinion which I have formed on the first point, it is not), I am bound to say that I should have thought that ATKINSON, J.’s decision in the later case could not stand in the light of the decision of this court in the earlier case, which for some extraordinary reason was not, apparently, cited to ATKINSON, J., although one of the counsel who appeared in the former case also appeared in the later one.’

Russell LJ said ([1967] 2 All ER at 366, [1968] 1 QB at 139):

‘I am, alternatively, inclined to think that the validity of the demolition orders could not be challenged on the ground on which they are challenged, having regard to the provisions of s. 20 and s. 37, the Housing Act 1957, to which DAVIES, LJ., has referred.’

With the greatest possible respect to their authors, I think these dicta bear all the signs of not being well considered. As I have already pointed out, it just is not true to say, as Davies LJ appears to assume, that there is anything inconsistent in the actual decisions in the two cases of Benabo and Cohen. There is not, and it will also be borne in mind that Cutler’s case, which is the case in which they were uttered, is another case like Cohen in which the orders were, on their face, good and valid and there was nothing on their face to suggest that they were anything other than good and valid. Whilst, therefore, I naturally am somewhat shaken in my views by being referred to the dicta, I do not feel constrained to follow them. I think there is a very good reason why Cohen’s case was not cited in Benabo’s case, namely that it really had absolutely nothing whatsoever to do with it, and I am strengthened in the resolve not to follow them by a dictum of another very formidable jurist indeed, Salmon LJ, in a case again under the Housing Act 1957, although that was not the principle point of the case, Plymouth City Corpn v Hurrell. That was a curious case where the signature of the town clerk was a mere facsimile. At the end of the day, by virtue of the

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Local Government Act 1933 as amended by the London Government Act 1963, it was held that the facsimile signature was good. In the course of the case Davies LJ not unnaturally referred to what was then the recent decision in Cutler’s case and received the rather chilling, but in my view completely justified, reply from counsel that that case was of no assistance, which I think was the right answer precisely because of the differences between notices which are and those which are not bad on their face; but the dictum to which I wish to refer is in the following words ([1967] 3 All ER at 358, [1968] 1 QB at 465):

‘Under s. 166(2) of the Housing Act, 1957, a notice from a local authority under the Act of 1957 must be signed by “their clerk or his lawful deputy“. That is a mandatory requirement. Clearly the local authority cannot “duly give” a notice under s. 9 unless that notice is signed by their clerk or his lawful deputy.’

This conclusion appears to me to be fully in line with both principle and authority and I am content to follow it. Accordingly, I come to the conclusion that none of the alleged demands relied on by the local authority in this case are valid demands within the meaning of the Housing Act 1957 and that the plaintiff need not pay to any of them the slightest attention whatsoever.

I should be happy to leave the matter there, but in deference to the forceful and attractive argument of both counsel, I think I ought to deal with counsel for the plaintiff’s second basic ground of submission of invalidity, namely that the notices were all bad because the amount thereby claimed was excessive in that it included works not originally covered by the s 9 notices. I agree with counsel for the plaintiff that as regards the letter of 2 July and all subsequent notices or demands, this point is a good and valid one. I do not think that a local authority is entitled to add to the £X which it might conceivably properly recover under the Act £Y to which it has no title under the Act whatsoever and claim that an un-appealed notice in respect of £X plus Y becomes binding on the recipient. My difficulty is, however, that pointed out by counsel for the local authority, namely, that there is nothing on the face of either of the notices of 23 May to indicate any invalidity. It is not as if, for example, the sums claimed were so utterly extravagant that anyone comparing the s 9 notice and the demand for payment would say, “There is a mistake here somewhere’. I have considered whether there could be any case for dissecting the amount claimed so as to show that, in fact, part of it was excessive, being outside the sum which can be recovered under the statutory provision; but I cannot think of any proper way in which what is sometimes possible (for example, when one is dealing with the statute of limitation it is possible to dissect acknowledgments in balance sheets and things of that nature) can be properly effected in a case such as the present. I cannot really think that those sort of sophisticated procedures were meant to be applied to what is intended basically to be a very simple notice, a demand for money under the 1957 Act. I therefore think that consistently with what appears to me to be the right line of demarcation, that is to say between notices which are bad on their face (either for lack of compliance with the requirement of the Act or because they are so utterly extravagant in their terms that anyone acquainted with the property or any other relevant fact would say unhesitatingly that there must be a mistake somewhere) in which case the recipient may either appeal if so minded, or, if of sufficiently strong nerve simply disregard them, and those which disclose no invalidity on their face and in relation to which, in general, the only relief to be obtained is, in my view, by way of appeal.

I therefore think at the end of the day that the two notices of 23 May fall into the category of those notices which, for aught that appears in them or from any of the surrounding circumstances immediately apparent, are good and valid and therefore can only be challenged by an appeal. Therefore, at the end of the day, I come to the conclusion that counsel for the plaintiff succeeds on his first point, but, had it been

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material, would have lost on the second. I will accordingly answer the issue raised in this action by declaring that none of the specified documents amounted to a valid demand under ss 10 and 11 of the 1957 Act.

Declaration accordingly.

Solicitors: Crossman, Block & Keith (for the plaintiff); Dennis E Wood (for the local authority).

Jacqueline Metcalfe   Barrister.

Practice Direction

Chambers: Chancery Division: Adjournment to Judge

[1975] 1 All ER 232

PRACTICE DIRECTIONS

CHANCERY DIVISION

18 December 1974

Practice – Chambers – Chancery Division – Adjournment to judge – Application to master for adjournment – Time limit – Applications after order pronounced but before order perfected.

1. Many minor orders made by chancery masters are not drawn up but remain recorded in their notes, available to be perfected at some future time should occasion arise. This practice is authorised by RSC Ord 42, r 4, and is convenient but its value is diminished if a party requires an adjournment to the judge in accordance with para 3 of the Practice Direction of 24 September 1965 ([1965] 3 All ER 306, [1965] 1 WLR 1259) some considerable time after the order has been pronounced. Difficulty also arises when a request to adjourn is made at a late stage in the drawing up of an order. The said para 3 is accordingly cancelled.

2. A party dissatisfied with a master’s order should, immediately on the pronouncement of the order, apply to the master to adjourn to the judge or allow him time to consider whether to require such an adjournment. If, however, a party omits to make such application or has a change of mind he may, before the order is perfected but not later than seven days after it has been pronounced, apply to the master to restore the matter to his list, at the party’s own expense, so that an adjournment may be required or the matter may be considered further. The perfection of orders will not be delayed in anticipation of any such application.

3. If no requirement to adjourn to the judge is made within the period fixed by the master or, where no such period has been fixed, if no application to restore is made within seven days after the order has been pronounced, the order may be perfected at the instance of any party regardless of any requirement or application made out of time.

4. The above is without prejudice to the power of the judge or master under the inherent jurisdiction to withdraw an order of his own motion for sufficient cause at any time before it is perfected.

By the direction of the Vice-Chancellor.

R E Ball,   Chief Master

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18 December 1974

R v Davis (Alan Douglas)

[1975] 1 All ER 233

Categories:        CRIMINAL; Criminal Evidence, Criminal Law        

Court:        COURT OF APPEAL, CRIMINAL DIVISION        

Lord(s):        LAWTON, SCARMAN LJJ AND DUNN J        

Hearing Date(s):        18 OCTOBER, 1 NOVEMBER 1974        

Criminal law – Evidence – Character of accused – Evidence against other person charged with same offence – Evidence establishing that either accused or co-accused or both guilty of offence charged – Accused denying guilt – Denial necessarily implicating co-accused – Whether denial constituting ‘evidence against’ co-accused – Criminal Evidence Act 1898, s 1(f)(iii).

The appellant and the co-accused visited a private house for the ostensible purpose of inspecting antiques belonging to the occupier. Following the visit it was discovered that certain articles, including a gold cross on a chain and a soup tureen, were missing. The appellant and the co-accused were jointly charged on indictment with the theft of those articles. In his evidence-in-chief at the trial the co-accused denied stealing the cross and chain, and in cross-examination he stated that, shortly after the time of the alleged theft, the appellant had showed him the cross and chain, producing it from his pocket. In his examination-in-chief the appellant denied the allegation and, when cross-examined on behalf of the co-accused, said: ‘I am not suggesting [the co-accused] took the cross and chain. As I never, and it is missing, he must have done but I am not saying he did.' The trial judge allowed an application by counsel for the co-accused to cross-examine the appellant about his previous convictions under s 1(f)(iii)a of the Criminal Evidence Act 1898 on the ground that he had ‘given evidence against [another] person charged with the same offence’. The appellant and the co-accused were both convicted of stealing the soup tureen and the co-accused alone was convicted of stealing the cross and chain. The appellant appealed against his conviction on the ground that the judge should not have admitted evidence of his previous convictions since a mere denial was not evidence of the kind contemplated by s 1(f)(iii) of the 1898 Act.

Held – As only the appellant or the co-accused or both of them could have stolen the cross and chain, the appellant’s denial that he had done so necessarily undermined the defence of the co-accused, for if the jury accepted the denial the co-accused stood little chance of acquittal. It followed that the denial constituted ‘evidence against’ the co-accused within s 1(f)(iii) and the appeal would therefore be dismissed (see p 235 j to p 236 a and d, post).

Murdoch v Taylor [1965] 1 All ER 406 applied.

Dictum of Winn J in R v Stannard [1964] 1 All ER at 38 explained.

Notes

For admissibility of evidence of bad character, see 10 Halsbury’s Laws (3rd Edn) 447, 449, paras 823, 828, and for cases on the subject, see 14 Digest (Repl) 410–412, 4008–4025.

For the Criminal Evidence Act 1898, s 1, see 12 Halsbury’s Statutes (3rd Edn) 865.

Cases referred to in judgment

Director of Public Prosecutions v Merriman [1972] 3 All ER 42, [1973] AC 584, [1972] 3 WLR 545, 136 JP 659, HL.

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Murdoch v Taylor [1965] 1 All ER 406, [1965] AC 574, [1965] 2 WLR 425, 129 JP 208, 49 Cr App Rep 119, HL, Digest (Cont Vol B) 175, 4957b.

R v Stannard [1964] 1 All ER 34, [1965] 2 QB 1, [1964] 2 WLR 461, 128 JP 224, 48 Cr App Rep 81, CCA, Digest (Cont Vol B) 177, 5018c.

Appeal

On 15 May 1974 in the Crown Court at Chichester before his Honour Judge Cunliffe the appellant, Alan Douglas Davis, was convicted of theft and sentenced to six months’ imprisonment. He appealed against conviction with leave of the single judge (Forbes J). The facts are set out in the judgment of the court.

Rodger Bell for the appellant.

R A Anelay for the Crown.

1 November 1974. The following judgment was delivered.

LAWTON LJ. In May 1974 at Chichester Crown Court before his Honour Judge Cunliffe, the appellant and his co-accused, Owen, were tried on an indictment charging them with theft. They were alleged to have stolen a gold cross on a chain, a soup tureen, a pair of prints and a cakestand. The judge directed the jury that there was no case against either accused as regards the prints and no case against Owen as regards the cakestand. On 15 May both Owen and the appellant were found guilty of stealing the soup tureen. Owen alone was found guilty of stealing the gold cross on a chain. Owen was sentenced to 15 months’ imprisonment, the appellant to six months.

Now, by leave of the single judge, the appellant appeals against his conviction. He does so on two grounds: first, that as the two accused had been charged jointly with theft, the jury could not properly find them both guilty of stealing one article and only Owen guilty of stealing the cross on a chain; secondly, that the judge had misdirected himself by adjudging, as he did, that the appellant had given evidence against Owen so as to make him liable to be cross-examined about previous convictions by Owen’s counsel. He was so cross-examined.

The first ground of appeal can be disposed of shortly. In our judgment the verdict returned by the jury was a proper one. A charge of theft made against two persons is several as well as joint: see Director of Public Prosecutions v Merriman. After a short discussion, the appellant’s counsel agreed that the decision in Merriman covered this case.

The second ground raises a much more difficult point. In broad terms it is this: when the evidence establishes that either A or B or both of them acting together must have committed the crime charged and A in evidence says that B alone was guilty and B in his evidence denies that he committed the crime, has B given evidence against A within the meaning of the Criminal Evidence Act 1898, s 1(f)(iii) as construed in Murdoch v Taylor?

The appellant and Owen were a couple of ‘knockers’, that is to say they went around knocking at doors, claiming to be interested in buying antiques and taking advantage of householders who were ignorant of the value of their possessions to buy articles at prices well below the market prices. In this case the Crown alleged that these two men, having gained entry to the house of an elderly lady on the pretence of looking at some of her possessions, took advantage of her by stealing the articles mentioned in the indictment. The circumstances were such that one or other or both of them acting together must have stolen the gold cross on a chain. It was never recovered. Both denied stealing it. During the course of his interrogation by the police the appellant was asked whether he was suggesting that Owen had taken the cross on a chain and was alleged to have answered: ‘I am not suggesting he took the

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cross and chain. As I never, and it is missing, he must have done, but I am not saying he did.’

When Owen gave evidence-in-chief he denied stealing the cross on a chain. He did not then implicate the appellant in the stealing. When he was cross-examined on behalf of the Crown he did so. He alleged that when they were going away in a van, the appellant showed him the cross on a chain, producing it from his pocket. In saying this he was clearly giving evidence against the appellant whose counsel was adjudged to be entitled to cross-examine him about his previous convictions.

At the end of Owen’s case, the appellant gave evidence. He too had had previous convictions, one being on facts much the same as in this case. We infer from the way he gave his evidence that he was aware of the dangers which he was likely to face if he gave evidence against Owen. He had to say something about Owen’s accusation against him; the jury would have thought it significant if he had not denied it. In examination-in-chief he was asked whether he had shown the cross on a chain to Owen. He said: ‘No, that is a pack of lies.' At the end of his examination he repeated his denial. He was cross-examined by both counsel for Owen and the Crown. Owen’s counsel cross-examined him about the oral statement about Owen which he was alleged to have made to the police. In the course of answering he said:

‘I am not suggesting he took the cross and chain. As I never, and it is missing, he must have done but I am not saying he did. If it is not in the house, who did steal it I do not know. I am not going to implicate [sic] that he stole it because I never saw him steal it. I have got no idea.’

A piece of evidence given by a police officer which when first given was only admissible against the appellant has now become evidence which the jury could consider when considering the case against Owen. The extended admissibility had come about not because the appellant wanted to say anything about Owen but because the latter’s counsel had made him do so.

Counsel for the Crown also cross-examined the appellant about Owen’s accusation against him to which he replied: ‘That is a pack of lies. As I stand here that is a pack of lies.' There then followed a submission by counsel for the Crown that he should be allowed to cross-examine the appellant because in one of the answers he had given to Owen’s counsel he had sought to establish his own good character. The judge refused this application. Some discussion between the judge and Owen’s counsel then followed in the course of which the judge said to him: ‘I thought you were going to make some application about cross-examining this witness [ie the appellant].' Counsel said that he was and referred to the appellant’s statement that Owen’s evidence against him was a ‘pack of lies’. After more discussion the judge ruled that the appellant had given evidence against Owen so as to entitle Owen’s counsel to cross-examine the appellant about his previous convictions. The reason given for the ruling was that the appellant’s evidence had undermined Owen’s defence. The problem for us has been whether this ruling was correct. Owen’s counsel took advantage of it.

The meaning of the words ‘he has given evidence against any other person charged with the same offence’ in s 1(f)(iii) of the Criminal Evidence Act 1898 was considered by the House of Lords in Murdoch v Taylor. The following propositions were clearly established by that case: first, that what an accused person says in cross-examination is just as much a part of his evidence as what he says in examination; secondly, that ‘evidence against’ means evidence which supports the prosecution’s case or undermines the defence of the co-accused; and thirdly, that it is not necessary to show the witness to have had a hostile intent against his co-accused.

When what happened in this case is examined against these propositions it seems clear to us that the appellant did give evidence against Owen. As only he or Owen or both of them could have stolen the cross on a chain, his denial that he had done so

Page 236 of [1975] 1 All ER 233

necessarily meant that Owen had. In cross-examination, whilst trying to avoid saying Owen had stolen these articles, he said he must have done so. In our judgment these answers would have undermined Owen’s defence. We should add that we have attached no importance to the use by the appellant of such phrases as ‘pack of lies’ and ‘that was dreamed up yesterday’ as forms of denial. A denial in restrained language is often more likely to undermine the evidence of a co-accused than a denial in the language of the gutter.

It was submitted on behalf of the appellant that there was a fallacy in our reasoning because mere denials are not the kind of evidence contemplated by s 1(f)(iii) of the 1898 Act. This was based on an opinion expressed by Winn J in R v Stannard ([1964] 1 All ER 34 at 38, [1965] 2 QB 1 at 12), approved and adopted by Lord Donovan in Murdoch v Taylor ([1965] 1 All ER at 415, [1965] AC at 591). It may well be that, as Winn J put it in Stannard ([1965] 2 QB at 12, cf [1964] 1 All ER at 38)—

‘mere conflict between a version of fact given by one is quite insufficient to amount to evidence given by one against the other.’

Much will depend, however, on the relevance of the conflict to the issues in the case. Here the conflict went to the very root of the case. If the jury accepted the appellant’s denial, Owen had little chance of acquittal. For his part the appellant had to make the denial if he was to have any chance of being acquitted and in making it, by undermining Owen’s defence, he exposed himself to cross-examination about his previous convictions, thereby severely damaging, probably destroying, such chances as he had. Some may not find this result attractive: Lord Reid did not (see Murdoch v Taylor ([1965] 1 All ER at 408, [1965] AC at 583)). We have to apply the law as it is. No injustice has been done in this case. Once the appellant through his counsel had suggested that Owen was a rogue, the jury would have wanted to know whether the pot was calling the kettle black. If they had not been told, they might have drawn inferences which were not justified by the facts.

The appeal will be dismissed.

Appeal dismissed.

Solicitors: Registrar of Criminal Appeals; T Lavelle, Lewes (for the Crown).

Sepala Munasinghe Esq   Barrister.

Clifford Davis Management Ltd v WEA Records Ltd and another

[1975] 1 All ER 237

Categories:        EQUITY        

Court:        COURT OF APPEAL, CIVIL DIVISION        

Lord(s):        LORD DENNING MR AND BROWNE LJ        

Hearing Date(s):        18, 21 OCTOBER 1974        

Equity – Undue influence – Inequality of bargaining power – Assignment of copyright – Validity – Circumstances in which assignment invalid – Agreement to assign unenforceable because of inequality of bargaining power – Relationship between parties – Composer of music and business manager – Manager procuring composer to enter into agreement – Composer not receiving independent advice – Terms of agreement manifestly unfair – Agreement requiring composer to assign to manager for nominal sum copyright in all compositions for period of ten years – Whether assignment valid.

The plaintiff was the manager of a ‘pop group’. Two members of the group, M and W, were talented composers who wanted to get their songs published. The plaintiff persuaded them to sign publishing agreements with him. Although M and W were experienced performers and were of full age, they were not experienced in business. The agreements were in a standard form. They were long documents which had been professionally drafted. Neither M nor W received independent legal advice before signing. The agreements bound M and W for a period of five years, which could be extended for a further five years at the plaintiff’s option, to assign to the plaintiff the English and world copyright in any work composed by them. The consideration for the assignment was to be 1s per work, though royalties were payable by the plaintiff if he chose to exploit the works. M promised to deliver at least one composition a month. Under the agreements the plaintiff had the right to reject any work without payment, but even when he chose to retain a work he was under no obligation to exploit or to do anything with it. Further, the agreements gave him the right to assign the copyright of the work to any third party. Subsequently the plaintiff and the group split up. The group acquired a new manager. M and W wrote new songs for the group which were recorded in an album of records. Arrangements were made for the defendants to distribute the album in England. The plaintiff brought an action in which he sought an interim injunction restraining the defendants from infringing his copyright in the songs composed by M and W by selling, distributing or otherwise dealing with the album.

Held – The defendants had succeeded in establishing a prima facie case that the agreements between the plaintiff and M and W were unenforceable in that they had been made in circumstances in which there was inequality of bargaining power since (i) at the time when the agreements were made M and W were members of a pop group of which the plaintiff was the manager, (ii) M and W had received no independent legal advice before signing the agreements and (iii) the terms of the agreements were manifestly unfair. It followed that there was a prima facie case that the assignments of copyright under the agreements were invalid. The plaintiff was not therefore entitled to an interim injunction (see p 240 e to p 241 e, post).

A Schroeder Music Publishing Co Ltd v Macaulay [1974] 3 All ER 616 and dictum of Lord Denning MR in Lloyds Bank Ltd v Bundy [1974] 3 All ER at 765 applied.

Notes

For undue influence in relationship to transactions inter vivos, see 9 Halsbury’s Laws (4th Edn) 174, para 298, 17 Halsbury’s Laws (3rd Edn) 672–681, paras 1297–1312, and for cases on the subject, see 12 Digest (Reissue) 125–142, 687–820.

Page 238 of [1975] 1 All ER 237

For agreements in restraint of trade, see 38 Halsbury’s Laws (3rd Edn) 20, 21, paras 13, 15, and for cases on the subject, see 45 Digest (Repl) 443–449, 271–297.

Cases referred to in judgments

Esso Petroleum Co Ltd v Harper’s Garage (Stourport) Ltd [1967] 1 All ER 699, [1968] AC 269, [1967] 2 WLR 871, HL, Digest (Cont Vol C) 985, 132a.

Lloyds Bank Ltd v Bundy [1974] 3 All ER 757, [1974] 3 WLR 501, CA.

Schroeder (A) Music Publishing Co Ltd v Macaulay [1974] 3 All ER 616, [1974] 1 WLR 1308, HL; affg sub nom Instone v A Schroeder Music Publishing Co Ltd [1974] 1 All ER 171.

Interlocutory appeal

By a writ issued on 27 September 1974, the plaintiffs, Clifford Davis Management Ltd, brought an action against the defendants, WEA Records Ltd and CBS Records Ltd, claiming (i) an injunction restraining the defendants by their servants, agents or otherwise from infringing the plaintiffs’ musical and literary copyright in the compositions and writings of Anne Christine McVie and Robert Lawrence Welch by manufacturing, publishing, releasing for sale, selling, distributing or in any other manner dealing with a record album bearing the title ‘Heroes are Hard to Find’; (ii) delivery up of all infringing records and all plates or other originals thereof; and (iii) damages. On 8 October 1974 Forbes J in chambers granted the plaintiffs an interim injunction in the terms of the injunction claimed in the writ. The defendants sought to have the interim injunction discharged but the judge refused to discharge it. The defendants appealed against that refusal. The facts are set out in the judgment of Lord Denning MR.

F M Drake QC and Harold Burnett for the defendants.

David Hunter QC and R Neville Thomas for the plaintiffs.

21 October 1974. The following judgments were delivered.

LORD DENNING MR. There is a pop group of four or five musicians called ‘Fleetwood Mac’. The group take their name from two of their members, Michael Fleetwood and John McVie. The group have formed themselves into a limited company called Fleetwood Mac Promotions Ltd. The members are the directors and shareholders of it. I will call them ‘the group’. The manager of the group was Clifford Adams, known as Clifford Davis. He has now turned himself into a limited company: Clifford Davis Management Ltd. He and his wife are the sole shareholders. I will call it ‘the manager’.

The manager, by a written agreement, had agreed to act as agent and manager for the group. The group was successful. They made several tours to the United States of America and were well known there. In January 1974 the manager fell out with the group or they fell out with him. He went his own way; they went theirs. On his side he formed a new group of five musicians. He called them ‘Fleetwood Mac’, and sent them on a tour of the United States. The original group brought an action against the manager for passing-off. On 12 July 1974 Goff J granted an interim injunction until trial.

The original group, having broken off from their old manager, worked under new management. Two of them were talented composers. They wrote and composed new songs and put them to music. They made arrangements with well-known firms in the United States to record them and distribute the records. These firms have made a record album called ‘Heroes are Hard to Find’. It contained 11 songs. It has been released in the United States and has sold 150,000 copies. Now the firms in the United States, through their English subsidiaries, wish to release this record album for sale in England. It is very important, they say, that this should be done quickly, within two weeks—else it will lose its impact.

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The old manager, Clifford Davis, now seeks to prevent this record album being sold in England. He claims that his company is entitled to the copyright in this album ‘Heroes are Hard to Find’, even though it was produced by the group after he ceased to have anything to do with them. He has brought this action against the makers and distributors, through their English subsidiaries. He seeks to stop the sale and distribution in England. The judge in chambers granted an interim injunction. The defendants sought to have it discharged. The judge refused to discharge it. The defendants appeal to this court.

The words and music of the 11 songs were composed by two talented members of the group. One of them is Christine McVie. She joined the group in July 1970. The other was Mr Robert Welch. He joined the group in January 1971. They are both of full age and are experienced performers and composers. But several months after they had joined the group, the old manager got each of them to sign a publishing agreement with him. Mrs McVie signed hers on 1 January 1971. Mr Welch signed his on 21 December 1972. Under each publishing agreement the manager (that is the old manager through his self-same company) described himself as ‘the publisher’. Under each agreement, the composer was to write and compose songs. The publisher was to be at liberty to publish them. If he did so, the composer was to get 10 per cent of the retail price of the sheet music and 50 per cent of the royalties on the records. So far so good. It was fair enough. But when each of the publishing agreements is examined, it is found to contain some amazing provisions. It gives the publisher, alias the manager, a stranglehold over each of the composers. It does it by means of the copyright. In every work which the composer produces over a period of ten years, the copyright is vested in the publisher. I will not read the agreements in full. I will summarise the provisions. (1) Each composer bound himself to the publisher for five years, but the publisher could extend the term at his option for another five years, making it ten years in all. (2) The composer for the whole of those ten years was tied hand and foot to the publisher. Whenever he composed a work he was bound to submit it to the publisher, who at once became entitled to the copyright in it. The composer assigned to the publisher the copyright in every one of his works. Not only the English copyright but the copyright throughout the world. Each was expected to be very productive. In the case of Mrs McVie, she promised to deliver to the publisher at least one complete musical composition a month. (3) The publisher was not bound to publish any of the works. At any rate, he did not give any positive undertaking to do so. All he did was to promise Mrs McVie that he would use his best endeavours to launch her works to the fullest extent. There was no such promise to Mr Welch; but it may perhaps be implied. (4) The publisher had the right for six months to reject any work without payment. If he did not reject it, he was held to have retained it. But even when he retained it, he was not under any positive obligation to exploit it or to do anything with it. If he thought it was not good enough for him to publish, he could put it in a drawer and forget about it; or he could burn it. He did not have to pay anything for it, except that he had to pay Mrs McVie the sum of 1s and to pay Mr Welch a sum left blank in the form. No doubt it was also intended to be 1s. (5) The manager had the right to assign the copyright of the works to any third party. He could assign it to anyone he chose no matter that the assignee knew nothing about the trade or about publishing and had not the means to publish it. The composer had no say in it at all.

Now the question arises: is the court bound to enforce this assignment of copyright at the suit of the publisher alias manager? The agreement is of the same class as the agreement considered by the Court of Appeal in Instone v A Schroeder Musical Publishing Co Ltd, and by the House of Lordsa only last week.

Page 240 of [1975] 1 All ER 237

An agreement such as this is not an agreement which is ‘in restraint of trade’ strictly so called. It does not preclude a man from exercising his trade at all. But it is an agreement which is ‘restrictive of trade’ in this sense, that it requires a man to give his services and wares to one person only for a long term of years to the exclusion of all others. Lord Reid said ([1974] 3 All ER at 622, [1974] 1 WLR at 1314) that such restrictive agreements do not normally require to be justified; but he did add the important qualification. Wherever such agreements contain—

‘contractual restrictions [which] appear to be unnecessary or to be reasonably capable of enforcement in an oppressive manner, then they must be justified before they can be enforced.’

Lord Diplock ([1974] 3 All ER at 624, [1974] 1 WLR at 1316) urged the courts to be vigilant. They should look into the provenance of such agreements. He made it clear ([1974] 3 All ER at 623, 624, [1974] 1 WLR at 1315, 1316) that if one party uses his superior bargaining power so as to ‘exact … promises that were unfairly onerous’, or ‘to drive an unconscionable bargain’, then the courts will relieve the other party of his legal duty to fulfil it. He gave this pertinent example. A strong concern prepares a new standard form containing terms which are most unfair—and dictates to the customer: ‘Take it or leave it.' The customer is in a weak position. He has no real option but to accept. The courts may decline to enforce it or, at any rate, may decline to enforce any term which is unfair to the customer, such as an exemption clause.

Reading those speeches in the House of Lords, they afford support for the principles we endeavoured to state at the end of last term about inequality of bargaining power. It was in Lloyds Bank Ltd v Bundy ([1974] 3 All ER 757 at 765, [1974] 3 WLR 501 at 508, 509). Instone’s case provides a good instance of those principles. The parties there had not met on equal terms. The one was so strong in bargaining power and the other so weak that, as a matter of common fairness it was not right that the strong should be allowed to push the weak to the wall.

In the present case I would not presume to come to any final opinion. It is only interlocutory. But there are ingredients which may be said to go to make up a case of inequality of bargaining power. The composers can urge these points. (1) That the terms of the contract were manifestly unfair. Each composer was tied for ten years without any retaining fee and with no promise to do anything in return save for a promise by the publisher to use his best endeavours. Such a promise was so general as probably to be of little use to the composer. See what Lord Reid said in Instone’s case ([1974] 3 All ER at 621, 622, [1974] 1 WLR at 1313, 1314). And the tie of ten years for a composer seems to me just as unfair as a tie of 21 years in a solus agreement for a garage: see Esso Petroleum Co Ltd v Harper’s Garage (Stourport) Ltd. (2) That the property (the copyright in every one of the works over ten years) was transferred for a consideration that was grossly inadequate. It was 1s for each work. It is true that if the publisher chose to exploit a work, he was to pay royalties; but if he did not do so, he got the copyright for 1s. (3) That the bargaining power of each of the composers was gravely impaired by the position in which he or she was placed vis-à-vis the manager. Each composer was in a group which was managed by him. They wanted to get their songs published. It was their ladder to success. In order to get the songs performed—and to get them published—they were dependent on the manager. Their needs and desires were dependent on his will. He could say Aye or No. He was skilled in business and finance. They were composers talented in music and song but not in business. In negotiation they could not hold their own. That is why they needed

Page 241 of [1975] 1 All ER 237

a manager. (4) That undue influences or pressures were brought to bear on the composers by or for the benefit of the manager. The manager did not condescend to say how the agreements came to be signed. But from the internal evidence much can be inferred. They were cyclostyled and hence came from a stock of forms. They were very long and full of legal terms and phrases. Hence they were drawn up by lawyers. Some spaces had been filled in by typewriters, others left blank. Hence done by clerks in the office. Both the composer and the publisher signed in the presence of the same witness. It may be inferred that the manager took a stock form, got the blanks filled in and asked the composer to sign it without reading it through or explaining it. One thing is clear from the evidence. The composer had no lawyer and no legal advisers. It seems to me that, if the publisher wished to exact such onerous terms or to drive so unconscionable a bargain, he ought to have seen that the composer had independent advice.

For these reasons it may well be said that there was such inequality of bargaining power that the agreement should not be enforced and that the assignment of copyright was invalid and should be set aside. In any case, the balance of convenience is all in favour of discharging the injunction. The defendants are responsible concerns. They are ready to keep an account of their sales. If the publisher is right, he will be adequately compensated in damages.

On those grounds, I would allow the appeal and discharge the injunction.

BROWNE LJ. I agree. As Lord Denning MR has said, we are dealing in this case with an interlocutory matter. We therefore only have to be satisfied that there is a prima facie case, that these agreements may be unenforceable. The final decision will, of course, be made at the trial. For the reasons given by Lord Denning MR I am satisfied, as he is, that there is such a prima facie case.

Counsel for the defendants also raised a point about repudiation, but he was not asked to address us on this point, which, however, remains open for the future if he wishes to rely on it.

So far as balance of convenience is concerned, again I entirely agree with Lord Denning MR. I assume that the offer made in the letter from the solicitors to the first defendants dated 1 October 1974 that all royalties arising from the sales of this album will be paid to a suspense account and held there until the dispute has been settled still stands.

Accordingly I agree that this appeal should be allowed and the injunction discharged.

Appeal allowed; injunction discharged; undertaking given in letter of 1 October 1974 that royalties arising out of sale of album ‘Heroes are Hard to Find’ would be placed on a suspense account until dispute settled, reaffirmed by counsel for the defendants.

Solicitors: Harbottle & Lewis (for the defendants); Clintons (for the plaintiffs).

Wendy Shockett   Barrister.

International Tank and Pipe SAK v Kuwait Aviation Fuelling Co KSC

[1975] 1 All ER 242

Categories:        CONFLICT OF LAWS        

Court:        COURT OF APPEAL, CIVIL DIVISION        

Lord(s):        LORD DENNING MR, ORR AND BROWNE LJJ        

Hearing Date(s):        8, 9 OCTOBER 1974        

Conflict of laws – Contract – Arbitration – Time-bar – Extension of time – Jurisdiction of English court – Contract made outside jurisdiction – Proper law of contract English law – Clause conferring right to refer disputes to arbitration within specified time limit – Arbitration procedure to be governed by foreign law – Dispute arising – Expiry of time limit under arbitration clause – Application by party to English court to extend time limit – Whether English court having jurisdiction to grant extension – Arbitration Act 1950, s 27.

By a written contract the contractors agreed to construct a new fuelling depot for the employers at the Kuwait International Airport. Both parties were companies registered in Kuwait. The contract was expressed to be subject to general conditions prepared by the International Federation of Engineers together with certain supplementary conditions of particular application. Clause 75 of the conditions provided that the contract was to be construed and operated in conformity with the laws of England and that the respective rights and liabilities of the parties were to be in accordance with the laws for the time being in force. Clause 67 made provision for the settlement of disputes by requiring them to be referred in the first place to the engineer who should give the parties written notice of his decision within 90 days. A party which was dissatisfied with the engineer’s decision could submit the matter to arbitration, however, by communicating a claim to arbitration to the engineer within 90 days of receiving notice of his decision. If no such claim were made the engineer’s decision was to be final and binding. Any dispute submitted to arbitration was to be settled finally under the Rules of Conciliation and Arbitration of the International Chamber of Commerce. By art 16 of those rules the arbitration procedure was to be governed by the law of procedure chosen by the parties or, failing such choice, by that of the country in which the arbitrator held the proceedings. In 1972 a dispute arose concerning certain extra asphalting carried out by the contractors. They maintained that the work represented a variation from the contract specification for which they were entitled to additional payment. The question was referred to the engineer by the contractors on 9 December 1972. On 25 January 1973 the engineer rejected the contractors’ claim. There followed a period during which the parties attempted to negotiate a settlement of the dispute but on 19 April the contractors, realising that the 90 day period in which a claim to arbitration could be made would expire on 25 April, wrote to the engineer explaining the position. Their letter stated: ‘Should no settlement be reached, we reserve our right to have the matters in dispute settled by arbitration in accordance with clause 67.' The employers did not accept that that letter constituted a sufficient communication of a claim to arbitration within 90 days of the engineer’s decision. The contractors therefore applied to the High Court in London for an extension of time for commencing arbitration proceedings under s 27a of

Page 243 of [1975] 1 All ER 242

the Arbitration Act 1950 on the grounds that they would otherwise suffer undue hardship. The employers contended that the court had no jurisdiction to entertain an application under s 27 since it was possible that the arbitration would be conducted according to the rules of procedure of the law of some country other than England.

Held – As English law was the proper law of the contract, it governed the interpretation and effect of the contract between the parties, and in particular, it governed the arbitration clause, even though the law governing the procedure in an arbitration arising from the contract might be some other law. The question whether s 27 of the 1950 Act could be invoked to extend time for initiating a claim to arbitration was therefore a matter to be decided according to English law since any right to go to arbitration was a right arising under the contract and not a matter of procedure in an arbitration which did not yet exist. Section 27 was to be looked on as being, in effect, an additional statutory term written into the arbitration clause and, as such, its interpretation, application and effect were to be governed by English law. Accordingly, the English court had jurisdiction to grant an extension of time (see p 246 c to j and p 247 b to g, post).

James Miller and Partners Ltd v Whitworth Street Estates (Manchester) Ltd [1970] 1 All ER 796 applied.

Notes

For conflict of laws in relation to arbitration clauses in a contract, see 2 Halsbury’s Laws (4th Edn) 280, para 546, and for cases on the subject, see 2 Digest (Repl) 448, 173–175.).

For the Arbitration Act 1950, s 27, see 2 Halsbury’s Statutes (3rd Edn) 457.

Cases referred to in judgments

Liberian Shipping Corporation v A King & Sons Ltd [1967] 1 All ER 934, [1967] 2 QB 86, [1967] 2 WLR 856, [1967] 1 Lloyd’s Rep 302, CA, Digest (Cont Vol C) 24, 7c.

Miller (James) and Partners Ltd v Whitworth Street Estates (Manchester) Ltd [1970] 1 All ER 796, [1970] AC 583, [1970] 2 WLR 728, [1970] 1 Lloyd’s Rep 269, HL, Digest (Cont Vol C) 29, 1949a.

Rolimpex (Ch E) Ltd v Avra Shipping Co Ltd (The Angeliki) [1973] 2 Lloyd’s Rep 226.

Cases also cited

Rendal (A/S) v Arcos Ltd [1937] 3 All ER 577, 58 Lloyd LR 287.

Richmond Shipping Ltd v Agro Co of Canada Ltd (The Simonburn (No 2)) [1973] 2 Lloyd’s Rep 145.

Tradax Export S A v Volkwagenwerk AG [1970] 1 All ER 420, [1970] 1 QB 537, CA.

Interlocutory appeal

This was an appeal by the defendants, the Kuwait Aviation Fuelling Co KSC, against an order of Ackner J made on 14 May 1974 by which the plaintiffs, International Tank and Pipe SAK, were allowed an extension of 14 days from the date of the order in which to initiate arbitration proceedings in respect of a dispute which had arisen under a contract made between the plaintiffs and the defendants. The facts are set out in the judgment of Lord Denning MR.

A R Barrowclough QC for the defendants.

Johan Steyn for the plaintiffs.

9 October 1974. The following judgments were delivered.

LORD DENNING MR. This case arises out of some construction work at the Kuwait International Airport. The defendants, Kuwait Aviation Fuelling Co (‘the employers’) wanted to construct a new fuelling depot. They employed the plaintiffs,

Page 244 of [1975] 1 All ER 242

International Tank and Pipe Co SAK of Kuwait (‘the contractors’). Both companies were registered in Kuwait. Whilst the work was being done, there was a dispute about some asphalting. The contractors claimed to be paid for it. The employers refused. The engineer decided against the contractors. They wished to refer it to arbitration. But the employers said that the contractors did not make the claim for arbitration within the permitted time. The contractors seek an extension of time under s 27 of the English Arbitration Act 1950. The question is whether the court has any jurisdiction to grant an extension.

The contract was made on 24 March 1971. It was subject to the general conditions prepared by the International Federation of Engineers, as amended and supplemented by particular clauses, including this clause, cl 75:

‘Construction of Contract: The contract shall in all respects be construed and operated in conformity with the laws of England and the respective rights and liabilities of the parties shall be in accordance with the Laws for the time being in force.’

The general conditions themselves contained a cl 67 about the settlement of disputes. I will not read it in full. It is similar to provisions in our English contracts for engineering works. They are based on the fact that many questions arise which require immediate solution. The engineer makes the decision then and there so that the works can go ahead without delay. But his decisions can afterwards be reviewed—and referred to arbitration—after the works are completed. In order to have such a review, a party who is dissatisfied with the engineer’s decision must give notice within 90 days. The material parts of the clause are these:

‘If the engineer has given written notice of his decision to the employer and the contractor and no claim to arbitration has been communicated to him by either the employer or the contractor within a period of 90 days from receipt of such notice, the said decision shall remain final and binding upon the employer and the contractor.’

So the aggrieved party is barred unless he claims arbitration within 90 days. The clause goes on:

‘If the engineer shall fail to give notice of his decision as aforesaid within a period of 90 days after being requested as aforesaid or if either the employer or the contractor be dissatisfied with any such decision, then and in any such case either the employer or the contractor may within 90 days after receiving notice of such decision or within 90 days after the expiration of the first named period of 90 days (as the case may be) require that the matter or matters in dispute be referred to arbitration as hereinafter provided.’

That means that within 90 days the party who is dissatisfied can require the matter to be submitted to arbitration. The clause contains this final provision:

‘All disputes or differences in respect of which the decision (if any) of the engineer has not become final and binding as aforesaid shall be finally settled under the Rules of Conciliation and Arbitration of the International Chamber of Commerce by one or more arbitrators appointed in accordance with the said Rules.’

Such being the relevant clauses, I turn to the facts of this particular case. A dispute arose about some asphalting which had been done, on the ground that it was an extra or variation. The contractors claimed additional payment. The employers refused it. On 9 December 1972 the contractors wrote to the engineer asking for a decision on the point whether it was a variation for which they were entitled to be paid. The contractors asked for a decision within 90 days in accordance with cl 67. The engineer gave it. On 25 January 1973 his firm wrote saying:

Page 245 of [1975] 1 All ER 242

‘We do not consider that the remedial work required on the asphalt paving as originally laid represents a variation to the contract.’

So there it was. The contractors’ claim was made on 9 December 1973. It was rejected by the engineer on 25 January 1973. According to cl 67 the contractors had 90 days in which to communicate to the engineer their claim to arbitration. If they did not communicate it to the engineer, his decision would become final and binding. During the 90 days the contractors submitted details of their claim to the employers, and there were negotiations for a settlement. The 90 days were due to expire on 25 April 1973. In order to protect themselves the contractors wrote this letter on 19 April 1973:

‘We take this opportunity of advising you that at present the dispute between ourselves and the employer is being discussed with a view to possible settlement, before proceeding to arbitration in accordance with clause 67 of the Contract “Settlement of Disputes“. Should no settlement be reached, we reserve our right to have the matters in dispute settled by arbitration in accordance with clause 67.’

There is a difference between the parties about that letter. The contractors say that that letter of 19 April was a sufficient communication of a claim to arbitration within the 90 days, and therefore they are within time under cl 67. The employers say, No, not at all. It was not a sufficient communication of a claim to arbitration. It did not require the matter in dispute to be referred to arbitration. That is a controversy on the true interpretation of cl 67. We need not rule on it today. Suffice it to say that the contractors were nervous about the point. They realised that the letter might not be a sufficient communication within cl 67, and that they might be barred by time. So they applied for an extension of time under s 27 of the Arbitration Act 1950. They said that undue hardship would be caused to them if the time was not extended.

This submission raises this important point of jurisdiction. Can s 27 of the 1950 Act be invoked here? This depends on what is the law to be applied. Is it English law or some other law? The contract itself is to be construed by English law. (That appears from cl 75 which I have read.) But the arbitration is to be governed by the law of Kuwait or some other country. I say this because the arbitration is governed by the rules of the International Chamber of Commerce. (That appears from cl 67 which I have read.) And the Rules of the International Chamber of Commerce say in art 16 that the arbitration is governed by the rules—

‘of the law of procedure chosen by the parties or, failing such choice, those of the law of the country in which the arbitrator holds the proceedings.’

Thus the parties may choose that the arbitration procedure is to be governed by the law of some country other than England. If they do not so choose, the procedure will be governed by the law where the arbitrator sits. That may be in Kuwait.

We reach, therefore, this point. English law governs the interpretation and effect of the contract. But the Kuwait law, or some other law, governs the arbitration procedure. This sort of difference is well known. It is recognised by the decision of the House of Lords in James Miller and Partners Ltd v Whitworth Street Estates (Manchester) Ltd. Lord Dilhorne ([1970] 1 All ER at 806, [1970] AC at 612) and Lord Wilberforce ([1970] 1 All ER at 809, 810, [1970] AC at 616) expressed the opinion that the law is correctly stated in Dicey and Morrisb:

Page 246 of [1975] 1 All ER 242

‘It cannot however be doubted that the courts would give effect to the choice of a [procedural] law other than the proper law of the contract. Thus, if parties agreed on an arbitration clause expressed to be governed by English law but providing for arbitration in Switzerland, it may be held that, whereas English law governs the validity, interpretation and effect of the arbitration clause as such (including the scope of the arbitrators’ jurisdiction), the proceedings are governed by Swiss law.’

In these circumstances the question is whether English law applies so as to enable the contractors to invoke s 27 of the Arbitration Act 1950? The learned judge held that it did. He said that the rules of the International Chamber of Commerce had not come into operation. Article 16 had not come into force because the parties had not chosen what country was to govern the procedure; and no decision had been taken as to where the arbitration should take place. So the judge thought that the only law which could govern the matter was the proper law of the contract itself, which was English law. The judge may be right about this; but I should prefer to put it differently. It seems to me that English law governs a great deal of the arbitration clause. Take the interpretation of it. Suppose the arbitration clause had said the claim had to be made within three months, and then there was an argument as to whether ‘months’ meant lunar months or calendar months. That dispute would have to be solved according to English law. Take next the very question here, that is, whether a sufficient ‘communication’ had been made to the engineer within 90 days. That, too, would have to be decided by English law. Similarly it seems to me that it is for English law to say whether or not s 27 of the 1950 Act can be invoked. That section says that when the terms of the agreement contain a time-bar—

‘the High Court, if it is of opinion that in the circumstances of the case undue hardship would otherwise be caused … may, on such terms, if any as the justice of the case may require … extend the time for such period as it thinks proper.’

I look on s 27 as being, in effect, an additional statutory term written into the arbitration clause. As such, its interpretation, its application and effect are to be governed by English law. It may be that some other law will govern the procedure in the arbitration itself. It may be Kuwait law, or some other law. But that procedural law does not take effect until the arbitration has actually started, that is to say, not until the arbitrator has been properly appointed and is able to rule on the procedure to be adopted in the arbitration.

Counsel for the employers drew our attention to Ch E Rolimpex Ltd v Avra Shipping Co Ltd (The Angeliki). In that case Kerr J said that, when there was a time limit under the Hague Rules, it would be very rare for our courts to exercise their power under s 27 of the 1950 Act to extend the time. Counsel submitted that, when parties contracted on the form of an international agreement, the time ought not to be capable of extension by the fortuitous circumstance that the determination of the matter might arise in England. I cannot accept this submission. It may be that other countries have provisions similar to s 27. In any case the parties have agreed that the contract shall be interpreted and operated in conformity with the laws of England. This means reading into it s 27 of the 1950 Act. In my opinion, therefore, the High Court has jurisdiction under s 27 to extend the time.

The next question is whether the judge was right in the circumstances to extend the time. I think he was. The contractors thought that their letter of 19 April 1973 was sufficient claim to arbitration within the 90 days. Thereafter discussions for a settlement continued. It was only on 8 September 1973 that the employers

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took the point that the 90 days requisite had not been fulfilled. The employers knew perfectly well that the contractors were reserving their rights in regard to arbitration. The employers suffered no prejudice whatever. On 3 December 1973 the contractors applied for an extension of time under s 27. The judge, applying Liberian Shipping Corporation v A King and Sons Ltd, thought that in all the circumstances undue hardship would be caused to the contractors unless the time was extended. I agree with him. He extended the time for six weeks. It may be it will have to be extended further in view of the appeal. I would dismiss the appeal.

ORR LJ. I entirely agree and do not wish to add anything.

BROWNE LJ. I also agree that the appeal should be dismissed for the reasons given by Lord Denning MR. I only add a few words on the question of jurisdiction. It is common ground that the proper law of a contract and the law governing the procedure in an arbitration arising from that contract may be different. In this case the law to be applied to the problem we have to decide is in my view the proper law of the contract, that is, English law, in accordance with cl 75 of the contract. The question is whether the plaintiffs are entitled to require the defendants to go to arbitration. If they have a right to go to arbitration, this is (and can only be) a right arising from the contract. The first question, as Lord Denning MR has said, is whether the plaintiffs’ letter of 19 April 1973 was an effective claim or demand for arbitration under cl 67 of the contract. In my view that is clearly a question of the construction or operation of the contract within cl 75 and will have to be decided according to English law. For the purposes of this appeal, we are assuming that that letter was not an effective claim or demand. The effect of granting an extension under s 27 of the Arbitration Act 1950 is that the plaintiffs will be entitled to exercise their right under cl 67 to claim arbitration although they are out of time and their right to claim arbitration would otherwise be barred. The effect of granting an extension under s 27 is that the engineer’s decision is no longer final and binding within cl 67. In my view this is not a matter of procedure in the arbitration, which in fact does not yet exist, but a matter of the operation of the contract. In my view, it is a question of the effect of the arbitration clause, which is stated in the passage from Dicey and Morrisc which Lord Denning MR has already quoted and which was approved by Lord Wilberforce in the House of Lords, in James Miller and Partners Ltd v Whitworth Street Estates (Manchester) Ltd ([1970] 1 All ER 796 at 809, 810, [1970] AC 593 at 616), to be a question to be decided in accordance with English law, in the circumstances of this case. In my view therefore English law applies to this problem in accordance with cl 75 and the English courts have jurisdiction to grant an extension of time under s 27 of the Arbitration Act 1950. For this reason, in addition to those given by Lord Denning MR, I agree that this appeal should be dismissed.

Appeal dismissed. Liberty to apply for further extension of time. Leave to appeal to the House of Lords refused.

Solicitors: Herbert Smith & Co (for the defendants); Frere, Cholmeley & Co (for the plaintiffs).

James Collins Esq   Barrister.

Sun Alliance and London Assurance Co Ltd v Hayman

[1975] 1 All ER 248

Categories:        LANDLORD AND TENANT; Tenancies        

Court:        COURT OF APPEAL, CIVIL DIVISION        

Lord(s):        LORD SALMON, STEPHENSON LJ AND MACKENNA J        

Hearing Date(s):        11, 31 OCTOBER 1974        

Landlord and tenant – New tenancy – Business premises – Notice by landlord to terminate tenancy – Validity – Form of notice – Prescribed form – Notice substantially to like effect – Notice informing tenant of right to apply for new tenancy within specified time limit – Notice stating that time running from receipt of notice by tenant – Prescribed form stating that time running from giving of notice by landlord – Whether notice given by landlord ‘substantially to the like effect’ as prescribed form – Landlord and Tenant (Notices) Regulations 1957 (SI 1957 No 1157), reg 4 – Landlord and Tenant (Notices) Regulations 1969 (SI 1969 No 1771), reg 3, Appendix I, Form 7.

The landlord of premises occupied by a tenant for business purposes purported to give the tenant a notice under s 25 of the Landlord and Tenant Act 1954 terminating her tenancy. The notice complied with all the relevant statutory provisions save that it required the tenant to notify the landlords ‘within two months after receiving this notice’ whether she would be willing to give up possession. In accordance with s 66(2)a of the 1954 Act the notice also contained an explanatory note stating that an application by the tenant to the court for a new tenancy ‘must be made not less than 2 or more than 4 months after receipt of the Notice’. The tenant contended that the notice was invalid since it was not in the form prescribed by reg 4b of and the Appendix, Form 7, to the Landlord and Tenant (Notices) Regulations 1957, as amended and replaced by reg 3c of, and Form 7d in Appendix I to, the Landlord and Tenant (Notices) Regulations 1969, in that it referred to the relevant time limits running from the receipt of the landlord’s notice rather than from the giving of the notice, and furthermore was not a form ‘substantially to the like effect’ as the prescribed form, within reg 4 of the 1957 regulations, since there might be a significant lapse of time between the giving of the notice by the landlords and its receipt by the tenant.

Held – (MacKenna J dissenting)— The effect of s 66(4)e of the 1954 Act was that a notice under the provisions of the Act was both given and received when it was served in accordance with s 23(1)f of the Landlord and Tenant Act 1927 and therefore, in law,

Page 249 of [1975] 1 All ER 248

the time when the notice was given and the time when it was received were one and the same, ie the time of service. There was therefore no substantial difference between the form of the landlord’s notice and the prescribed form. Accordingly the notice was valid (see p 251 j to p 252 a and d, p 253 h and p 254 c, post).

Notes

For the forms of notice to be served under the Landlord and Tenant Act 1954, see 23 Halsbury’s Laws (3rd Edn) 840, 841, para 1629.

For the Landlord and Tenant Act 1927, s 23, see 18 Halsbury’s Statutes (3rd Edn) 468.

For the Landlord and Tenant Act 1954, ss 25, 66, see ibid 559, 604.

For the Landlord and Tenant (Notices) Regulations 1957, reg 4, see 12 Halsbury’s Statutory Instruments (3rd Reissue) 115.

Cases referred to in judgments

Compagnie Continentale D’Importations v Handelsverstretung der Union der SSR in Deutschland (1927) 29 Ll LR 52; affd (1928) 138 LT 663, 17 Asp MLC 428, 33 Com Cas 213, 30 Ll LR 140, CA, 39 Digest (Repl) 517, 587.

Newborough (Lord) v Jones [1974] 3 All ER 17, [1974] 3 WLR 52, CA.

Price v West London Investment Building Society [1964] 2 All ER 318, [1964] 1 WLR 616, CA, 31(2) Digest (Reissue) 948, 7737.

Appeal

The defendant, Freda Hayman (‘the tenant’) appealed against the decision of his Honour Judge Lind-Smith given at the Warwick County Court on 10 December 1973 whereby it was adjudged that the plaintiffs, Sun Alliance and London Assurance Co Ltd (‘the landlords’), were entitled to possession of the shop and premises situate at 32 The Parade, Leamington Spa, Warwick, which had been let to the tenant by a lease dated 2 June 1966 for a term of two years at a yearly rent of £1,200, and it was ordered that the tenant give to the landlords possession of the property on 25 January 1974. On 25 January 1974 the tenant was granted a stay of execution of the order pending the hearing of an appeal. The tenancy was one to which Part II of the Landlord and Tenant Act 1954 applied. The facts are set out in the judgment of Stephenson LJ.

Anthony Dinkin for the tenant.

I A B McLaren for the landlords.

Cur adv vult

31 October 1974. The following judgments were delivered.

STEPHENSON LJ. On 7 August 1972 the landlords purported to give the tenant notice under the provisions of s 25 of the Landlord and Tenant Act 1954 terminating her tenancy.

There is no dispute that the notice complied with all the provisions of the section save one. It stated that the landlords would oppose an application for the grant of a new tenancy as required by s 25(6) of the 1954 Act. It was properly served on the tenant in compliance with s 23 of the Landlord and Tenant Act 1927 as required by s 66(4) of the 1954 Act. But it required the tenant ‘within two months after receiving this Notice to notify me in writing whether or not you will be willing to give up possession of the premises’ on 25 March 1973 and it referred to Note 2 which was in these terms:

‘Part II of the Act enables the tenant, on being served with a notice in this form, to apply to the court for an order for the grant of a new tenancy. Such

Page 250 of [1975] 1 All ER 248

an application, however, will not be entertained unless the tenant has within 2 months after receiving the Notice terminating the tenancy notified the landlord in writing that he will not be willing to give up possession of the premises on the date specified in the Notice. The application must be made not less than 2 or more than 4 months after receipt of the notice.’

By s 25(1) and s 66(1) of the 1954 Act the landlords’ notice had to be given in the form prescribed by regulations made by the Lord Chancellor by statutory instrument, and that form was required by s 66(2) to—

‘include such an explanation of the relevant provisions of this Act as appears to the Lord Chancellor requisite for informing persons [to be served] of their rights and obligations under those provisions.’

The most relevant provision of the Act was s 29(3) which reads:

‘No application under subsection (1) of section twenty-four of this Act shall be entertained unless it is made not less than two nor more than four months after the giving of the landlord’s notice under section twenty-five of this Act or, as the case may be, after the making of the tenant’s request for a new tenancy.’

The landlords’ notice was a print, filled in and corrected in some particulars immaterial to this appeal, of Form 7 in the Appendix to the Landlord and Tenant (Notices) Regulations 1954g made by the Lord Chancellor under s 66. Regulation 4 provided:

‘The forms in the Appendix to these Regulations, or forms substantially to the like effect, shall be used for the following purposes, that is to say:—… (vii) A notice under the provisions of section 25 of the Act … shall … be in Form 7 … ’

Unfortunately, the 1954 regulations were no longer in force at the date of the landlords’ notice. They had been repealed and repeated by the Landlord and Tenant (Notices) Regulations 1957h; but Form 7 and Note 2 of the 1957 regulations had been amended by reg 6 of the Landlord and Tenant (Notices) Regulations 1967i, which by reg 8 preserved from invalidity any notice served before 1 January 1968 which complied with the requirements of the 1957 regulations. The amended Form 7 and Note 2 were prescribed by reg 3 of the Landlord and Tenant (Notices) Regulations 1969j and at the date of the landlords’ notice the prescribed form and note (see Form 7 in Appendix I to the 1969 regulations) were in these terms:

‘2. You are required within two months after the giving of this Notice to notify me in writing whether or not you will be willing to give up possession of the premises at that date.’

Note 2 is in these terms:

‘Part II of the Act enables the tenant, on being served with a notice in this form, to apply to the court for an order for the grant of a new tenancy. Such an application, however, will not be entertained unless the tenant has within 2 months after the giving of the notice terminating the tenancy notified the landlord in writing that he will not be willing to give up possession of the premises on the date specified in the notice. The application must be made not less than 2 or more than 4 months after the giving of the notice.’

Page 251 of [1975] 1 All ER 248

The only question for the county court judge and for this court was concisely stated by him to be whether the notice in fact served on the tenant was ‘substantially to the like effect’ as the form of notice prescribed by the 1968 regulations which were in force at the date of the service of the notice.

The tenant’s contention is that it was not. The form of notice prescribed by the 1954 regulations was, her counsel submits, not substantially to the like effect because it required her to give her counter-notice under s 24(1)(a) of the Act within two months after receiving the landlords’ notice, and warned her that her application for a new tenancy would not be entertained unless she notified the landlords of her objection to giving up possession within two months after receiving their notice, and that she must apply for a new tenancy not less than two nor more than four months after receipt of the notice; whereas the notice should have stated that those times ran from the giving of the landlords’ notice.

The 1967–69 wording of the form of notice brings it into line with the wording of s 29(2) and (3), whereas the 1954–57 wording departs from it, as was pointed out by this court in Price v West London Investment Building Society and recognised by the Lord Chancellor in his amendments made by the Landlord and Tenant (Notices) Regulations 1967. But neither those amendments not the decision in Price’s case determine the question posed by the tenant in this case. The importance of the answer which it receives is great. If the change back to the obsolete wording has produced a form of notice which is substantially to the like effect as the new wording, the landlords’ notice is good and the tenant cannot apply for a new tenancy because she is out of time; if the effect of the old wording is substantially different from the new, the notice is bad, the landlords must serve a fresh notice and she can apply for a new tenancy.

Counsel for the tenant has rightly conceded that on the facts of this case there is no difference in time between the date when she was given notice and the date when she received it; and I think that counsel for the landlords conceded, rightly also, in my judgment, that if the judge held that he could take that fact into account in answering the question raised by the tenant, he was wrong. For, as it seems to me, what we have to do is to construe the few relevant words in the regulations and in the two forms of notice, and to decide whether in their ordinary significance the old words which were in fact used to mean substantially the same as the new words which should have been used. If they do not, then a notice in the old form is bad and cannot be validated because the particular tenant on whom it is served is not prejudiced by any difference in their meaning.

Counsel for the tenant submitted that there was a real difference between the giving of a notice and its receipt. If a tenant went away on holiday and found the notice on his return home, he would not receive it until he found it, but the landlord would have given it when it reached the tenant’s home. If the notice was in the old form, the tenant on reading it with the aid of Note 2 would reasonably think that he had two months from the day he found it to go into action, whereas the true time limit was shorter by the length of his holiday and the time the notice had been at his home. That is at first sight a powerful argument without considering the complications introduced by supposing that he failed to find the notice on his return because it had gone under the linoleum near his door: see Lord Newborough v Jones, to which we were referred. But I have come to the conclusion that it must be rejected.

It is an argument which is provided for the tenant by the reluctance of the legislature to refer simply and directly and consistently to the service of notices in the particular provisions of statutes and statutory instruments which prescribe notices. In my judgment, the effect of s 66(4) of the 1954 Act is that a notice under the provisions of the Act is both given and received when it is served in accordance with s 23(1) of the

Page 252 of [1975] 1 All ER 248

1927 Act, and to anyone who knows the law, the time when it is given and the time when it is received are one and the same, namely, the time of service when the giving of the notice is in law complete. There is therefore on a true construction of the old form no material departure from the statute and no material difference from the new form. It is a distinction without a difference. It describes the same act from the landlord’s and tenant’s points of view. The giving and receiving of the notice are two aspects of the same action and are simultaneous, like ‘the giving and receiving of a ring’ in the Form of Solemnization of Matrimony in the Book of Common Prayer. The one gives, the other receives. The tenant takes what the landlord gives when he gives it, and he need not be there to take it from the landlord. The time when this two-sided act is done is the time when it is deemed to be done by the statutory provisions as to service. The tenant cannot say that he has not received it when the Act says that it has been served on him. The effect which a court of law must give to the different words in order to see whether their effect is substantially like is their true effect in the context of landlord and tenant.

These doubts, which the 1967 amendments sought to remove with ‘an explanation of the relevant provisions of the Act’ which I regard as inadequate, would never have existed if Parliament had spoken plainly of ‘service’ and ‘served’ in relation to notices instead of ‘giving’ and ‘given’ in s 25 and the regulations. Why not a plain statement that all notices referred to in this Act are given and received when served in accordance with s 23(1) of the Landlord and Tenant Act 1927 if it is too much trouble to repeat the words of that section, instead of resorting to the cryptic cross-reference in s 66(4)? But the effect is, I think, the same, and the effect of using the words ‘giving’ and ‘receiving’ in reference to notices is substantially the same.

It is said that it is hard on the tenant, who is not necessarily conversant with s 23 of the 1927 Act to read different words in the same sense in the light of that section: the different words would, or might reasonably, have a different effect on him or her. But if it is legitimate to look at the effect of the difference in wording on the mind of a hypothetical tenant who is ignorant of the relevant law, the answer to that contention is that such a tenant would not, I think, see any difference between the time of giving the notice and the time of receiving it. To him or her a notice would not appear to be given unless and until it was received, for instance, when found after returning from a holiday. That, it is true, would not be when it was served according to law. But, as counsel for the landlords pointed out, this notice would not be bad simply because it was misleading, but only if it misled in different directions; if it misled the tenant into thinking that she could take action when in law she was out of time, it would be good provided that it would have misled in the same way if it had been in the proper form. That is not an attractive argument, but I see no answer to it. It does, however, provide strong support for so amending the Act and regulations, the forms and notes, as to leave landlords and tenants in no doubt when time begins to run for and against them.

I therefore agree with the answer given by the learned judge to the question raised by this appeal, though for rather different reasons, and I would dismiss it.

MACKENNA J. The question we have to decide is whether a notice in the old form, which speaks of ‘receiving’, is ‘substantially to the like effect’ as one which speaks of ‘giving’, which is the word used in the amended form. If it is, the landlords’ notice was a valid one and they succeed. If it is not, they fail and the appeal must be allowed.

A notice is a notification, a making known, a communication, of some matter by one person to another, and in the ordinary way a notice is not received until the person to whom it is to be communicated becomes aware of that matter; in other words, he receives the notice when the matter is brought to his attention. Where the notice is given personally, the giving and the receiving will as a rule be simultaneous; the notice will be received at the same time as it is given. But where, as here, the law

Page 253 of [1975] 1 All ER 248

provides that notice may be given in other ways, by leaving a document at the tenant’s place of abode, or by sending it to him through the post, the view might reasonably be taken that the giving and the receiving may not be simultaneous, that the notice will be given when the document is left at the tenant’s house or delivered by the postman, but that it will not be received until the tenant actually becomes aware of its existence. To tell a person taking that view that he must act within two months from the giving of the notice is not the same as telling him that he must act within two months from its receipt. For this reason, it seems to me that the old form which uses the word ‘receiving’ is not substantially to the like effect as the new form which uses the word ‘giving’.

In Price v West London Investment Building Society the landlord had used the old form which was current at the time and had sent the notice to the right address by registered post where it was signed for on 23 March by one of the tenant’s employees. By some mischance it did not come to the tenant’s notice until 29 March. He argued unsuccessfully that his time ran from that date, pointing to the word ‘received’ in para 2 and Note 2 of the form. The argument was rejected by Danckwerts LJ in the following passage ([1964] 2 All ER at 322, [1964] 1 WLR at 622, 623) from his judgment:

‘Another argument was based on the form and the notesk issued under the provisions of s. 66 of the Landlord and Tenant Act, 1954 …  The word “received” is used. A reference is plainly intended to s. 29 of the Landlord and Tenant Act, 1954, in which the word is not “received”, but “giving“. It seems to me to be quite plain that neither the form nor the notes can alter the provisions of the Act. In so far as there is an attempt to provide for a different situation from that contained in the sections of the Act to which I have referred, which use the word “give”, “giving” or “given”, the forms and these notes [are] ultra vires, because the regulations [in which they are contained] can not enlarge the jurisdiction of the court as conferred by the Landlord and Tenant Act, 1954.’

If it had seemed to Danckwerts LJ that giving and receiving must necessarily be simultaneous, and therefore that it made no difference which word was used in the regulations, he would perhaps have said so. As it is, his language suggests that the word ‘receiving’ refers to ‘a different situation’ from the word ‘giving’, and it was no doubt with these observations in mind that the Lord Chancellor amended the regulations in 1967.

The judge decided this case against the tenant because on its particular facts the giving and the receiving of the notice were truly simultaneous. I think that this was wrong. If the form used was not substantially to the like effect as the prescribed form, the notice was invalid. It is, I think, irrelevant that on the facts of the particular case, the giving and the receiving were simultaneous, so that it did not matter to the tenant which words were used. The case is to be decided on a comparison of the two forms without regard to those facts.

I would allow the appeal.

LORD SALMON (read by Stephenson LJ). I entirely agree with the judgment of Stephenson LJ and add only a few observations of my own.

According to the ordinary and natural use of English words, giving a notice means causing a notice to be received. Therefore, any requirement in a statute or a contract for the giving of a notice can be complied with only by causing the notice to be actually received—unless the context or some statutory or contractual provision otherwise provides: see the judgment of Wright J in the Compagnie Continentale D’Importations cases.

Page 254 of [1975] 1 All ER 248

Statutes and contracts often contain a provision that notice may be served on a person by leaving it at his last known place of abode or by sending it to him there through the post. The effect of such a provision is that if notice is served by any of the prescribed methods of service, it is, in law, treated as having been given and received.

I recognise that the out-of-date form of notice served in the present case may well be misleading—but no more nor less than the amended form of notice introduced by reg 6 of the Landlord and Tenant (Notices) Regulations 1967. (The fact that in the present case the tenant was not misled is, of course, irrelevant.) The only difference between the two forms is that the 1967 form has the advantage of following the exact words of the statute. The two forms are, however, ‘substantially to the like effect’. Neither, in my view, takes on a different meaning from the other because one speaks of an act to be done ‘within two months after receiving this notice’ and the other, ‘within two months after giving this notice’, because the ordinary and natural meaning of words make it plain that a notice cannot ordinarily be given until it is received just as it cannot be received until it is given.

The notice is misleading in both its forms, because neither makes any reference on its face, or states in the explanatory note accompanying it, that it has been served in accordance with the law; and that therefore the tenant cannot be heard to say that the notice has not been validly served on him, nor deny that it has been given to, and therefore received by him.

This is particularly alarming as s 66(2) makes it evident that the legislature recognised that the notice is likely to be served on persons who may have difficulty in obtaining legal help and still more difficulty in understanding it by themselves. This they could only do by ploughing through the Act until they reached the, to them, obscure cross-reference in s 66(4) and then obtaining access to the Landlord and Tenant Act 1927 s 23. Both very unlikely contingencies. If this had not been recognised by the legislature, there would have been no point in s 66(2) enacting that the form of notice shall include an explanation of the relevant provisions of the Act for the purpose of informing tenants of their rights and obligations under those provisions. I strongly support Stephenson LJ’s recommendation that the Act and regulations, the forms and explanatory notes should be revised as soon as possible in the way he suggests. There may well be difficulty in finding parliamentary time to amend the Act and to make the consequential amendments in the forms now. The explanatory notes, however, particularly Note 2, could, and should, be quite easily amended in the immediate future so that tenants shall be clearly informed of their statutory rights and obligations when a landlord’s notice under the Act is served on them.

I would dismiss the appeal.

Appeal dismissed.

Solicitors: Field & Sons, Leamington Spa (for the tenant); Russell, Livingstone, Wood & Co, Worcester (for the landlords).

A S Virdi Esq   Barrister.

Practice Direction

Chambers: Chancery Division: Masters' Powers

[1975] 1 All ER 255

PRACTICE DIRECTIONS

CHANCERY DIVISION

18 December 1974.

Practice – Chambers – Chancery Division – Masters’ powers – RSC Ord 32, r 14.

1. The judges of the Chancery Division have decided that it would be proper for the chancery masters to adjudicate in Chambers on wider lines than those set out in the memorandum ([1970] 1 All ER 1183, [1970] 1 WLR 762) on this subject dated 30 January 1970.

2. As has been the case hitherto, the judges have refrained from giving any direction under RSC Ord 32, r 14, that certain classes of business shall be transacted by a judge in person but give the following guidance to the masters as to how they should exercise their powers under that rule. This memorandum supersedes all previous memoranda on the subject and amendments (See [1971] 2 All ER 215, [1971] 1 WLR 706) thereof.

3. The masters will continue to transact business and exercise jurisdiction to the same extent as they did under the practice prevailing before 1955 but may make the following additional orders:

(a) For service out of the jurisdiction, in clear cases, and for substituted service of orders made by judges on motion.

(b) For the appointment of trustees except in cases where a trustee (not being a trustee under disability or a judicial trustee) of a fund or property significantly in excess of £5,000 in value is to be superseded without his consent.

(c) Vesting property or directing or authorising some person to assign or convey unless there is a pending application for a new trustee which should be determined by a judge.

(d) Under s 59 of the Trustee Act 1925, where a trustee cannot be found.

(e) For enquiries relating to the next-of-kin of deceased persons or beneficiaries under wills or settlements, including special inquiries for particular persons and their issue, but only in clear cases.

(f) Approving purchases of trust property of any description by executors, administrators or trustees, but only in clear cases.

(g) Authorising executors, administrators and trustees to acquire (by purchase or otherwise) property of any description the holding of which is not authorised by the trust instrument, under s 57 of the Trustee Act 1925, s 64 of the Settled Land Act 1925 or otherwise.

(h) Authorising solicitor trustees and trust corporations to charge remuneration for acting as trustees (in the case of corporate trustees such remuneration not to exceed the limits prescribed by their published terms).

(i) Under s 1(1) of the Variation of Trusts Act 1958, to the extent only of removing protective trusts where the interest of the principal beneficiary has not failed or determined.

(j) For the administration of an estate or execution of trusts, whether the estate is solvent or not.

(k) Giving leave to executors, administrators and trustees to bring or defend proceedings, or to continue the prosecution or defence of proceedings, with indemnity for costs out of the trust estate, in plain cases.

(l) Approving a compromise on behalf of a person under disability where: (i) there is a claim not involving the payment of money, or (ii) the value of that person’s interest in a fund or, if there is no fund, the maximum amount of

Page 256 of [1975] 1 All ER 255

the claim (as certified by counsel) does not significantly exceed £5,000 (but not so as to effect any variation of trusts for the purposes of the Variation of Trusts Act 1958 in cases falling outside item (i) above).

(m) For payment or transfer of funds out of court where a petition would have been necessary under the practice prevailing before 1955 (that is, in effect, where a devolution of trust funds has to be proved and it was not merely a question of establishing the identity or title of some particular person), but only where the value of the fund, the subject of the application, does not significantly exceed £5,000 at the date of the issue of the summons.

(n) Appointing guardians of minors’ estates, in straightforward cases, without limit of amount. The masters may in suitable cases authorise guardians to retain property out of court in the capacity of trustees, subject to appropriate safeguards.

(o) Summary orders for specific performance under RSC Ord 86 except where it is necessary for the plaintiff to rely on acts of part performance.

(p) Under s 50(2) and (3) of the Law of Property Act 1925, declaring land to be freed from incumbrances, and the consequential orders for which sub-s (2) provides.

(q) Determining a rent which it would be reasonable for a tenant to pay while a tenancy continues, by virtue of s 24 of the Landlord and Tenant Act 1954, and (in clear cases where no suggestion of oppression or coercion could be made) orders under s 38(4) of that Act.

(r) Giving leave to take proceedings under s 1 of the Leasehold Property (Repairs) Act 1938.

(s) Giving general liberty to wards to go out of the jurisdiction, subject to appropriate safeguards.

(t) For the appointment of a receiver.

(u) For an injunction in the following cases: (i) in a consent order, but only if the parties are unwilling to consent to an undertaking in lieu of an injunction, and (ii) if, and only so far as, the injunction is ancillary to an order for the appointment of a receiver by way of equitable execution.

4. A master should not, without the special authority of a judge, make the following orders:

(a) An order sanctioning any compromise, arrangement or transaction except in any of the cases specified in para 3.

(b) An order binding persons on whom service of a notice of judgment or order for accounts and inquiries has been dispensed with.

5. Cases involving exceptional difficulties or complications should be referred to the judge as heretofore and before exercising his extended powers the master should consider in every case whether it is one in which it would be more appropriate that the judge should make the order.

6. Nothing in this memorandum is intended to derogate from the established practice under which a judge may (a) in a special case authorise a master to make any order which the judge has power to make in chambers or (b) reserve any particular matter for his own decision.

R E Ball,   Chief Master, Chancery Division

18 December 1974.

Hay and another v Hughes

[1975] 1 All ER 257

Categories:        CIVIL PROCEDURE        

Court:        COURT OF APPEAL, CIVIL DIVISION        

Lord(s):        LORD EDMUND DAVIES, BUCKLEY AND ORMROD LJJ        

Hearing Date(s):        2, 3, 4, 7, 8, 17 OCTOBER 1974        

Fatal accident – Damages – Assessment – Deduction from damages – Benefit resulting from death – Children – Parents killed in accident – Children deprived of mother’s services in caring for them – Grandmother voluntarily taking children into her care – Whether grandmother’s services in caring for children benefit resulting from death – Whether value of grandmother’s services to be deducted from damages otherwise recoverable in respect of mother’s death.

A husband and wife, then aged 28 and 24 respectively, were killed in a motor accident for which the defendant admitted liability. They left two sons aged 4 1/2 and 2 1/2. The wife had not at any material time been engaged in gainful employment. Her energies had been devoted exclusively to caring for the family as a wife and mother. After the death of their parents the two orphan boys were taken in by their maternal grandmother who cared for them thereafter. When she took the boys into her care the grandmother neither expected nor received any payment; she intended to continue to care for the boys irrespective of whether she was paid for doing so. When the accident occurred the grandmother was aged 49 and already had substantial domestic responsibilities of her own, having three teenage children. She did not give up any paid employment in order to look after her two grandsons. In an action by the administrators on behalf of the estates of the deceased, and also on behalf of the two boys under the Fatal Accidents Acts 1846 to 1959 and the Law Reform (Miscellaneous Provisions) Act 1934 the defendant contended that, in assessing the damages to which the boys were entitled under s 2a of the Fatal Accidents Act 1846, the grandmother’s services in caring for them should be taken into account in abatement of the financial loss suffered by the boys as a result of their mother’s death, on the ground that the grandmother’s services were benefits resulting from the mother’s death in that they were a predictable consequence of the fatality resulting from the accident.

Held – In view of her circumstances at the time of the accident it could not have been predicted with any certainty that the grandmother would take the boys into her care. Accordingly the services which the grandmother had provided and would continue to provide for the boys were benefits resulting not from the death of their mother but from the decision made by the grandmother after the accident to take them into her care. Accordingly those services were not to be taken into account in diminution of the damages recoverable on behalf of the sons in respect of their mother’s death (see p 267 d to f, p 272 f to h, 273 c and p 275 c, post).

Notes

For deductions from damages awarded under the Fatal Accidents Acts, see 28 Halsbury’s Laws (3rd Edn) 103, 104, para 113, and for cases on the subject, see 36 Digest (Repl) 211–214, 1111–1132.

For the Fatal Accidents Act 1846, s 2, see 23 Halsbury’s Statutes (3rd Edn) 781.

Cases referred to in judgments

Baker v Dalgleish Steam Shipping Co Ltd [1922] 1 KB 361, 91 LJKB 392, CA, 36 Digest (Repl) 223, 1191.

Page 258 of [1975] 1 All ER 257

Berry v Humm & Co [1915] 1 KB 627, 84 LJKB 918, 36 Digest (Repl) 221, 1175.

Buckley v John Allen & Ford (Oxford) Ltd [1967] 1 All ER 539, [1967] 2 QB 637, [1967] 2 WLR 759, Digest (Cont Vol C) 754, 1194h.

Burgess v Florence Nightingale Hospital for Gentlewomen Management Committee [1955] 1 All ER 511, [1955] 1 QB 349, [1955] 2 WLR 533, Digest (Cont Vol A) 1202, 1117a.

Carroll v Purcell (1961) 35 ALJ 384.

Cunningham v Harrison [1973] 3 All ER 463, [1973] QB 942, [1973] 3 WLR 97, CA, 17 Digest (Reissue) 116, 191.

Daniels v Jones [1961] 3 All ER 24, [1961] 1 WLR 1103, CA, Digest (Cont Vol A) 1205, 1163c.

Davies v Powell Duffryn Associated Collieries Ltd (No 2) [1942] 1 All ER 657, [1942] AC 601, 111 LJKB 418, 167 LT 74, HL, 36 Digest (Repl) 231, 1229.

Donnelly v Joyce [1973] 3 All ER 475, [1974] 1 QB 454, [1973] 3 WLR 514, [1973] 2 Lloyd’s Rep 130, CA, 17 Digest (Reissue) 117, 193.

Franklin v South Eastern Railway Co (1858) 3 H & N 211, [1843–60] All ER Rep 849, 31 LTOS 154, 4 Jur NS 565, 157 ER 448, 36 Digest (Repl) 213, 1128.

Goodburn v Thomas Cotton Ltd [1968] 1 All ER 518, [1968] 1 QB 845, [1968] 2 WLR 229, CA, Digest (Cont Vol C) 754, 1194ca.

Hicks v Newport, Abergavenny & Hereford Railway Co (1857) 4 B & S 403 n, 122 ER 510, 36 Digest (Repl) 221, 1178.

Howitt (Widow and Administratrix of Richard Arthur Howitt) v Heads [1972] 1 All ER 491, [1973] QB 64, [1972] 2 WLR 183.

Jeffrey v Smith [1970] RTR 279, CA.

Jenner v Allen West & Co Ltd [1959] 2 All ER 115, [1959] 1 WLR 554, CA, Digest (Cont Vol A) 599, 340c.

Malyon v Plummer [1963] 2 All ER 344, [1964] 1 QB 330, [1963] 2 WLR 1213, CA, Digest (Cont Vol A) 1203, 1132b.

Mallett v McMonagle [1969] 2 All ER 178, [1970] AC 166, [1969] 2 WLR 767, HL, [1969] 1 Lloyd’s Rep 127, Digest (Cont Vol C) 292, 838a.

Mead v Clarke Chapman & Co Ltd [1956] 1 All ER 44, [1956] 1 WLR 76, CA, Digest (Cont Vol A) 1208, 1194c.

Monarch Steamship Co Ltd v A B Karlshamns Oljefabriker [1949] 1 All ER 1, [1949] AC 196, [1949] LJR 772, 82 Lloyd LR 137, 1949 SC (HL) 1, 1949 SLT 51, HL, 41 Digest (Repl) 362, 1549.

Moore v Babcock & Wilcox Ltd, Rawlinson v Same [1966] 3 All ER 882, [1967] 1 WLR 481, Digest (Cont Vol B) 570, 1194g.

Parry v Cleaver [1969] 1 All ER 555, [1970] AC 1, [1969] 2 WLR 821, [1969] 1 Lloyd’s Rep 183, HL, Digest (Cont Vol C) 750, 1061e.

Peacock v Amusement Equipment Co Ltd [1954] 2 All ER 689, [1954] 2 QB 347, [1954] 3 WLR 288, CA, Digest (Cont Vol A) 1208, 1194b.

Pevec v Brown (1964) 108 Sol Jo 219, Digest (Cont Vol B) 570, 1194f.

Pym v Great Northern Railway Co (1863) 4 B & S 396, [1861–73] All ER Rep 180, 2 New Rep 455, 32 LJQB 377, 8 LT 734, 10 Jur NS 199, 122 ER 508, 36 Digest (Repl) 208, 1097.

Redpath v Belfast & County Down Railway Co [1947] NI 167, 18 Digest (Repl) 177, *902.

Reincke v Gray [1964] 2 All ER 687, [1964] 1 WLR 832, CA, Digest (Cont Vol B) 570, 1194e.

Shaw v Mills (7 March 1961) unreported, CA, [1961] Bar Library transcript 86, CA.

Taff Vale Railway Co v Jenkins [1913] AC 1, [1911–13] All ER Rep 160, 82 LJKB 49, 107 LT 564, HL, 36 Digest (Repl) 213, 1124.

Thompson v Price [1973] 2 All ER 846, [1973] QB 838, [1973] 2 WLR 1037, [1973] 1 Lloyd’s Rep 591.

Voller v Dairy Produce Packers Ltd [1962] 3 All ER 938, [1962] 1 WLR 960, Digest (Cont Vol A) 1205, 1163ac.

Page 259 of [1975] 1 All ER 257

Cases also cited

Blake v Midland Railway Co (1852) 18 QB 93.

Bradburn v Great Western Railway Co (1874) LR 10 Exch 1, [1874–80] All ER Rep 195.

Daish (an infant by his next friend, Albert Edward Daish) v Wauton [1972] 1 All ER 25 [1972] 2 QB 262, [1972] 2 WLR 29, CA.

Davies v Tenby Corporation [1974] The Times, 10 April.

Gage v King [1960] 3 All ER 62, [1961] 1 QB 188.

Grand Trunk Railway Co of Canada v Jennings (1888) 13 App Cas 800, PC.

Haggar v de Placido [1972] 2 All ER 1029, [1972] 1 WLR 716.

Hurt v Murphy [1971] RTR 186.

Liffen v Watson [1940] 2 All ER 213, [1940] 1 KB 556, CA.

Povey v Governors of Rydal School [1970] 1 All ER 841.

Roach v Yates [1937] 3 All ER 442, [1938] 1 KB 256, CA.

Schneider v Eisovitch [1960] 1 All ER 169, [1960] 2 QB 430.

Seward v The Vera Cruz, The Vera Cruz (1884) 10 App Cas 59, HL.

Wattson v Port of London Authority [1969] 1 Lloyd’s Rep 95.

Appeal

This was an appeal by the defendant, Leslie Hughes, against the judgment of Reeve J given on 24 October 1973 awarding the plaintiffs, Alfred Stanley Hay and John Toone, the administrators of the estates of Francis James Edward Hay deceased, and of his wife, Patricia Hay deceased, £16,400 damages under the Fatal Accidents Acts 1846 to 1959 (_£7,900 being in respect of the death of the husband and £8,500 in respect of the death of the wife) and £2,460 interest thereon at 7 1/2 per cent per annum from 17 June 1971 for two years, and £1,110·30 under the Law Reform (Miscellaneous Provisions) Act 1934 and £150 interest on £1,000 (part thereof) at 7 1/2 per cent per annum from 17 June 1971 for two years. The defendant admitted liability for the accident and the only issue was the quantum of damages. The appeal related solely to the awards under the Fatal Accidents Acts. By a respondent’s notice the plaintiffs sought to have both awards increased. The facts are set out in the judgment of Lord Edmund Davies.

Michael Turner QC and Alan Taylor for the defendant.

Charles McCullough QC and Nigel Baker for the plaintiffs.

Cur adv vult

17 October 1974. The following judgments were delivered.

LORD EDMUND DAVIES. The defendant appeals from the judgment of Reeve J, dated 24 October 1973, in an action brought against him under the Fatal Accidents Acts 1846 to 1959 and the Law Reform (Miscellaneous Provisions) Act 1934. The appeal is said to raise problems in the law of damages hitherto unconsidered by the courts or, if considered, not always satisfactorily solved, and we have been referred to a very large number of authorities on the subject during its hearing.

The plaintiffs are the administrators of the estates of Francis Hay, deceased, and of his wife Patricia, both of whom were killed in a motor accident on 10 January 1970, for which the defendant admitted liability. The action was brought on behalf of their estates and also on behalf of their two sons, born on 29 July 1965 and 24 May 1967, and accordingly 4 1/2 and 2 1/2 years old when their parents were killed. The total award was for £20,120·30, £16,400 being in respect of the Fatal Accidents Acts claims (£7,900 relating to the death of the father and £8,500 to the death of the mother) and £1,110·30 under the 1934 Act, the balance consisting of interest. The appeal relates only to the awards under the 1846 Act, as amended, which the defendant challenges as being wrongly arrived at and excessive, while by a respondent’s notice the plaintiffs seek to have both awards increased.

Page 260 of [1975] 1 All ER 257

The relevant facts, which were set out in detail by Reeve J, may for present purposes be summarised in this way: when the fatal accident occurred, Mr Hay was nearly 29, his wife nearly 25. They lived with their children in a three bedroom house which he had bought on mortgage. After working for some years with the National Coal Board, he became a trainee welder in August 1969, and soon showed considerable aptitude. His average weekly take-home pay at the time of his death was nearly £24. His chances of promotion were good and, had they been realised he would have been earning net weekly wages of £40 by April 1973, when the case was first heard. The learned judge accepted that this net wage would have been apportioned within the family circle in the manner indicated by plaintiff’s counsel. On this basis he concluded that the total annual dependancy of the two boys on their father at the date of trial was £1,100. But, recognising that, while exceeding the figure prevailing at the date of the accident this was also less than the figure appropriate for the future, he said that he would bear those competing considerations in mind when considering the multiplier. He eventually applied a multiplier of nine to both claims under the Fatal Accidents Acts.

Section 2 of the 1846 Act provides that—

‘the jury may give such damages as they may think proportioned to the injury resulting from such death to the parties respectively for whom and for whose benefit such action shall be brought … ’

The relevant facts in connection with the orphaned children’s dependancy on their father were not disputed, but the position was markedly different in respect of the claim brought in relation to the mother’s death. I quote from the words of the learned trial judge:

‘After the death of their parents the two boys were taken in by their maternal grandmother (Mrs Toone) who has cared for them ever since, except for one and a half days at weekends and for some holiday periods when they are cared for by their paternal grandparents. Mrs Toone has received no payment for keeping the children, and she candidly admitted to me that the question of payment never entered her head when she decided to act as mother-substitute for these two orphans. It is true that on the 18th March 1972 she signed a letter, addressed to the plaintiffs in their capacity as administrators of the estates of Mr and Mrs Hay, in which she stated: “I am writing to advise you that as from this date I am charging the estate of the above-named deceased the sum of £5 per week in respect of each of the two children …  This total sum of _£10 is for my time and trouble in looking after the said children.” No secret has been made of the fact that such a letter was written on legal advice in the hope that the plaintiffs’ case on the quantum of damages to be recovered in these proceedings would thereby be strengthened; and Mrs Toone freely admitted that she intends to continue to care for the children irrespective of whether she is or is not paid for so doing. It is now conceded by counsel that the letter is irrelevant to the assessment of damages. Mrs Hay was not at any material time engaged in gainful employment. Her energies were exclusively devoted to caring for the family as a wife and as a mother. The children have, by her death, been deprived of the full-time services of a mother.’

As the cases repeatedly remind us, the starting point must always be the wording of the Fatal Accidents Act 1846. That these two infants were ‘injured’ by the death of their mother is not, in my judgment, open to doubt. Thereby they were deprived of her services which had that pecuniary value which, ever since Franklin v South Eastern Railway Co, has been held to be the basis of an award under the Act. What is

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contested is how the damages proportionate to that injury are to be arrived at, and the difficulty is due to the two-fold nature of the exercise involved. This was explained in Malyon v Plummer ([1963] 2 All ER 344 at 353, [1964] 1 QB 330 at 349) by Diplock LJ who said:

‘The pecuniary loss which the court has to assess is a loss which will be sustained in the future. This involves making two estimates, videlicet, (i) what benefit in money or money’s-worth arising out of the relationship would have accrued to the person for whom the action is brought from the deceased if the deceased had survived but has been lost by reason of his death and (ii) what benefit in money or money’s-worth (subject to certain statutory exceptions) the person for whom the action is brought will derive from the death of the deceased which would not have been enjoyed had the deceased lived. The difference between these two estimates is the measure of damages recoverable under the Fatal Accidents Acts, 1846 to 1959.’

As to the first estimate, we begin with the undoubted fact that, by reason of her premature death, these two very young children lost the care which their 25 year old mother could reasonably have been expected to continue to bestow on them for several years to come. In Pevec v Brown a widower claimed on behalf of himself and his infant son damages in respect of his wife’s death, and contended that compensation should be awarded for loss, not of a mother’s love, but for the disadvantage of the care which the child would receive from the nanny whom the father had engaged as compared with that which he would have received from his mother had she survived. The report is a very short one, but it appears that, in rejecting this submission, Megaw J adverted to the ‘irrecoverability of compensation for the father’s loss of the companionship of his wife’ and, saying that there was no distinction in principle in relation to the child, held that no damages should be awarded in respect of any element of the child receiving less care than he would have done had his mother survived. Were it now necessary to decide the point, I am not at present convinced that I should take the same view, and it is to be noted that in Burgess v Florence Nightingale Hospital for Gentlewomen Management Committee ([1955] 1 All ER 511 at 513) Devlin J expressed the view that damages should be awarded ‘for what the child lost by the wife’s death, both in respect of the school fees and of what she might have done for the child’. While it is undoubtedly established that damages can be awarded under the Fatal Accidents Acts only in respect of pecuniary loss and not as a solatium for injured feelings (see Taff Vale Railway Co v Jenkins ([1913] AC 1 at 4, [1911–13] All ER Rep 160 at 161), per Lord Haldane V-C, and Davies v Powell Duffryn Associated Collieries Ltd (No 2) ([1942] 1 All ER 657 at 665, [1942] AC 601 at 617)), so that these two children could recover nothing for the deprivation of their mother’s love, yet it may sometime have to be considered whether Mr McGregorb is not right in saying that—

‘it may be argued that the benefit of a mother’s personal attention to a child’s upbringing, morals, education and psychology, which the services of a housekeeper, nurse or governess could never provide, has in the long run a financial value for the child, difficult as it is to assess.’

Be that as it may, in the present case it was accepted by the defence that in different circumstances these children would have been entitled to damages for the quantified loss of their mother’s services. Counsel for the defendant conceded that if a nanny or housekeeper had been engaged by the plaintiffs to look after these children, the

Page 262 of [1975] 1 All ER 257

cost of employing her would be recoverable from the defendant (as in Berry v Humm & Co and Jeffrey v Smith) and, furthermore, that the salary of £15 a week claimed by the plaintiffs and adopted by the learned trial judge as the estimated cost of obtaining her services could not then have been challenged. Similarly, it is accepted that, had Mrs Toone (their grandmother) given up a paid job in order to look after her grandchildren, the administrators could have recovered in the action a sum equivalent to her losses to date and in respect of her future salary losses.

But the engagement of a nanny or housekeeper has not taken place nor is it contemplated, and the grandmother gave up no paid job, though it has already been noted that she has evinced a desire to be paid £5 a week in respect of her services to each child. She has taken them in and looked after them ‘without any thought of payment’ just as she would have done had their parents died of natural causes, and she told the trial judge that she intended to care for them indefinitely in exactly the same way. As a result, they have unquestionably benefited from her care, and it is this fact which has given rise to difficulty in considering the second of the estimates referred to by Diplock LJc. Counsel for the defendant has submitted that all the trial judge could properly do would be to award the plaintiffs something to cover the risk of Mrs Toone’s services ceasing and hired service having to be obtained. Then can it be truly said that Mrs Toone’s services ‘derive from the death of the deceased’? They would undoubtedly not have been rendered had the children not become orphans, but are those services relevant to the balancing operation involved in assessing, in the words of s 2 ‘the injury resulting from such death’?

This question has not infrequently arisen in earlier cases. It is not easy to extract from them any test which may be universally applied nor to reconcile all the decisions. Clearly, not all events that happen after a death can be said to have resulted from it. Thus, it has been held that no deduction should be made for rent received from lodgers whom a widow started taking in after her husband’s death (Buckley v John Allen & Ford (Oxford) Ltd); the High Court of Australia has decided that none should be made from a widow’s award because she had gone out to work (Carroll v Purcell); and in this country a similar conclusion was arrived at by Cumming-Bruce J in Howitt v Heads. But in this case, the mother having also been killed, it is said by the defendant that the position is entirely different where the grandmother works gratuitously for the two orphaned children.

Several of the earlier reported cases would now have to be decided differently. This arises from the Fatal Accidents (Damages) Act 1908 and the Fatal Accidents Act 1959, the latter providing that no deduction shall be made for a wide range of money payments following on death which would otherwise have had to be taken into account. Nevertheless the earlier cases have still to be borne in mind when considering whether a benefit received by the dependants after the death, but not consisting of the payment of money to them, is to be regarded as ‘resulting from such death’.

Broadly speaking, it was considered that payments received as a result of arrangements already set up to meet the eventuality of death did so result. Thus in Baker v Dalgleish Steam Shipping Co Ltd the Court of Appeal held that the fact that a widow was in receipt of a Crown pension ought, as a general rule, to be taken into consideration, notwithstanding that payments depended on the voluntary bounty of the Crown, Younger LJ saying ([1922] 1 KB at 380) that ‘their voluntary character cannot affect the value

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the plaintiffs of those payments already received’, though Bankes LJ stressed ([1922] 1 KB at 369) that ‘The reasonable expectation of their continuance must, I think, be taken into account’, while Scrutton LJ said ([1922] 1 KB at 372, 373) that regard must be had to ‘the extreme probability of the Admiralty not continuing a pension if compensation could be obtained from the wrongdoer’.

But the position was and is less clear where payments are made or services having pecuniary value are rendered in circumstances never foreseen before the death. In Baker v Dalgleish Steam Shipping Co Ltd all members of the Court of Appeal approved of the view expressed by Greer J in the lower court that sums subscribed by fellow workmen of the deceased would not be deductible, Younger LJ saying ([1922] 1 KB at 380):

‘I conceive that normally in such cases the amount of the subscription is largely personal to the beneficiaries, and is materially affected by their merit in the eyes of the subscribers or the reverse.’

Similarly, in Redpath v Belfast & County Down Railway Co it was held in a claim for personal injuries (which in that respect is not distinguishable from a fatal accident claim) that money received by the plaintiff from a fund subscribed to by the public in respect of a railway disaster was not deductible from what would otherwise have been his proper entitlement to damages. And in Peacock v Amusement Equipment Co Ltd, where the plaintiff did not benefit under the will of his deceased wife but his stepchildren (to whom his wife had bequeathed everything) voluntarily paid him a sum equivalent to one-third of the value of the estate, the Court of Appeal held that no deduction should be made from his Fatal Accident Act damages on that account. Somervell LJ said ([1954] 2 All ER at 692, [1954] 2 QB at 354):

‘… I think it would be only in very unusual circumstances that a voluntary payment would be taken into account when there was no expectation of it at the time of the death. It seems to me that that indicates for itself that there is a nova causa interviens and, therefore, the payment was not made in consequence or as a result of the death …  Of course, it would not have been made unless the wife had died, but I would say that it was made as the result of the stepchildren’s consideration, and, perhaps, affection for their stepfather.’

In line with this was the decision of Nield J in Voller v Dairy Produce Packers Ltd that the claims of infant daughters in respect of their father’s death were not to be reduced by the fact that they had been taken into the home of their aunt after the subsequent death of their mother and were being well looked after. A similar case is Moore v Babcock & Wilcox Ltd, where proceedings under the Fatal Accidents Acts instituted by the widow of a man employed by the defendants were brought to trial in the names of her administrators, she herself having died 16 months after her husband. Their orphaned daughter was then taken into the home of an uncle, and another uncle gave her money presents from time to time. On these facts, it was submitted on behalf of the defendants that she was no worse off than she would have been had her father still been alive. Rejecting this submission, which he considered was based on a misunderstanding of certain observations of Jenkins LJ in Mead v Clarke Chapman & Co Ltd, which must shortly be considered, Chapman J held that the

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support extended to the girl by her two uncles arose fundamentally from motives of charity and benevolence and must be ignored, as their operative cause was not the fact of death but the voluntary decision of the donors activated by motives of compassion towards a person in distress. I disagree with the submissions of counsel for the defendant that these last two cases were wrongly decided.

In performing the balancing operation involved in assessing fatal accident claims, it is established that, just as it is not necessary that the claimant should have a legal right to pecuniary benefits from the deceased and that it is enough that there was a reasonable expectation of their continuance, voluntary though they may be—

‘so the probability of voluntary contribution bestowed in consequence of the death may be used to reduce the claim by showing what loss the claimant has in fact sustained by the death. Less weight will be given to voluntary contributions than to those made under legal obligation, just because they are voluntary’:

per Scrutton LJ in Baker v Dalgleish Steam Shipping Co Ltd ([1922] 1 KB at 372). Cases arising from the remarriage of the widow illustrate both types of expectation. Until the passing of the Law Reform (Miscellaneous Provisions) Act 1971, in assessing the damages payable to a widow there had to be taken into account her prospects of remarriage and so acquiring the legal right to be maintained by her new husband, thereby reducing her dependancy and, it may be, terminating it altogether (Davies v Powell Duffryn Associated Collieries Ltd (No 2), Goodburn v Thomas Cotton Ltd. Accordingly, in Mead v Clarke Chapman & Co Ltd the second husband earning as much money as the first, Donovan J awarded the widow damages only in respect of the period between the death of her first husband and her remarriage. But a similar limitation in respect of her infant daughter was disapproved by the Court of Appeal, Singleton LJ saying ([1956] 1 All ER at 47, 48, [1956] 1 WLR at 81–83):

‘I do not think that it is right to say that no regard should be paid to the fact that the child has a stepfather who is kind and good to her … but it should not be assumed that of necessity the position will remain the same … there is a difference between a father and a stepfather, in that the father can be forced to support his child if he fails to do so, while the stepfather cannot. Over and above that, when the child is getting a little older, the father may well be willing to do something for his own child to help it forward in education or in some other way, a burden which a stepfather might not be willing to undertake …  I do not consider it was right to say that no damages after the date of the second marriage should be given in respect of the child’s claim.’

As to the submission that the acquisition of an affectionate stepfather should be ignored in that the mother’s remarriage gave her daughter no rights of maintenance against the stepfather and that, in accordance with Peacock v Amusement Equipment Co Ltd, the defendants could not take advantage of the stepfather’s voluntary actions in undertaking the care of his stepdaughter, Jenkins LJ said ([1956] 1 All ER at 48, [1956] 1 WLR at 83):

‘Clearly, if the father had not died, the mother could not have re-married and the child could never have acquired a stepfather. She could not have the advantage of being protected by her two fathers at one and the same time; so that the financial advantage to her of the protection of the stepfather was

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something that she could not have enjoyed but for the death of her father. In my view, there is a sufficient causal connection here to make it proper to take into account the financial consequences to the child of the re-marriage of her mother.’

For myself, I have some difficulty in following this approach and there seems force in the view expressed by Professor Streetd that ‘Only if the Court of Appeal had found that at the death it was probable that the child would be maintained by a kind stepfather would the decision be correct.' The Matrimonial Proceedings (Children) Act 1958, s 1(1), provides that if a widow remarries and her children are accepted as members of the family by their stepfather, he incurs a legal obligation to maintain and educate them. But even this does not, in my judgment, mean that if a widow with a child has prospects of remarriage or has even actually remarried (as in Reincke v Gray) the dependancy of the child thereupon terminates, for it may never ‘be accepted as one of the family’ by the new husband, and, even if it is, the chance that it may not be as well-treated financially by the stepfather as it would have been by the natural father had he lived must be allowed for, just as it was before the 1958 Act (see Mead v Clarke Chapman & Co Ltd).

It is for the defendant to a Fatal Accidents Acts claim to establish that there must be offset against the loss caused by the death benefits received after that death (Baker v Dalgleish Steam Shipping Co Ltd ([1922] 1 KB at 377), per Younger LJ; Peacock v Amusement Equipment Ltd ([1954] 2 All ER at 692, [1954] 2 QB at 354) per Somervell LJ; and Mead v Clarke Chapman & Co Ltd ([1956] 1 All ER at 49, [1956] 1 WLR at 84) per Parker LJ). And there is a presumption against deducting the value of unpaid services rendered to a bereaved person. This is in conformity with the general policy against deductions evinced by the 1959 Act. The observations of Somervell LJ in Peacock ([1954] 2 All ER at 692, [1954] 2 QB at 354) on this matter have already been referred to. In Shaw v Millse the court took into account in its assessment of damages the value of services rendered to her father by a daughter after her mother’s death, Sellers LJ saying that they ‘were not actually compensated for but will be out of the proceeds of these damages’. And a whole series of cases dealing with non-fatal accident claims establish that the injured plaintiff can recover the value of nursing and other services gratuitously rendered to him by a stranger to the proceedings: Parry v Cleaver ([1969] 1 All ER 555 at 558, [1970] AC 1 at 14) per Lord Reid, Cunningham v Harrison ([1973] 3 All ER 463 at 469, [1973] QB 942 at 952) per Lord Denning MR, and Donnelly v Joyce ([1973] 3 All ER 475 at 480, [1974] 1 QB 454 at 462) per Megaw LJ.

I have difficulty in reconciling the rationale of Jenner v Alan West & Co Ltd with the increasing tendency of the courts to make no deductions for purely voluntary benefits in claims in respect of personal injuries, fatal or otherwise. A man was killed in the course of his employment at his employer’s premises, and his personal representatives successfully sued them under the Fatal Accidents Acts for negligence and statutory breaches. Before the matter came to trial the employers had made voluntary payments to the widow but there was no evidence that they had done anything of the sort before. Lord Evershed MR and Pearce LJ held that these payments had to be deducted from the widow’s damages. There is nothing remarkable in that finding; such an approach is adopted frequently by the courts in respect of ex gratia payments, which are often regarded as being impliedly made simply without prejudice to any claim which may be advanced but nevertheless on the basis that they are

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to be taken into account in the event of liability being established. But that is not how the court arrived at its decision. Pearce LJ said ([1959] 2 All ER at 125, [1959] 1 WLR at 565, 566):

‘Had the pension come from the generosity of some third party who was in no way concerned with the accident, one might well say that it did not result from the death but from that generous impulse. Here, however, the employers paid the pension to the widow of a man whose whole working life had been spent in their service and who had met his death while working on the roof of their premises. It is true that there is no evidence as to their motives or their usual practice or the machinery by which they instituted the pension …  But the chain of causation is so direct and so strong on the few facts which are known to us, and any inferences that would break or weaken that chain are so unlikely and remote that, in my view, the pension should be taken into account as “resulting” from the death.’

Lord Evershed MR expressed himself similarly ([1959] 2 All ER at 126, 127, [1959] 1 WLR at 568, 569). But, in the light of the exiguous facts, how can it be said that at the moment of death there was a reasonable expectation that the employers would act as they did? For my part, I find it impossible to hold that there was and, applying that test alone, I should have held that the payments must be ignored.

The fact is that it is impossible to extract from the large number of decided cases one universal test or principle and, indeed, in Jenner’s case ([1959] 2 All ER at 124, [1959] 1 WLR at 565) Pearce LJ warned against making the attempt. In Monarch Steamship Co Ltd v A B Karlshamns Oljefabriker ([1949] 1 All ER 1 at 19, [1949] AC 196 at 232) Lord du Parcq stressed that ‘in the end what has to be decided is a question of fact, and therefore a question proper for a jury’, and continued:

‘Circumstances are so infinitely various that, however carefully general rules are framed, they must be construed with some liberality and not too rigidly applied. It was necessary to lay down principles lest juries should be persuaded to do injustice by imposing an undue, or, perhaps, an inadequate, liability on a defendant. The court must be careful, however, to see that the principles laid down are never so narrowly interpreted as to prevent a jury, or judge of fact, from doing justice between the parties. So to use them would be to misuse them.’

There was canvassed before us the question of what the position would be had these two orphaned children been taken into care of the local authority, pursuant to s 1 of the Children Act 1948. But this not having occurred, the question is not before us and does not call for consideration. Nor, in my respectful view, does allusion to it assist in determining the problem now being considered, for, as Buckley LJ said in the course of counsel’s submissions, the fact that faute de mieux these children might have been taken into care does not affect the situation where, as here, they are not.

How would a jury have regarded this case? Would they have accepted the defendant’s invitation to say that, in the events which have occurred, either (a) no loss measurable in money terms had been suffered by the dependant children by reason of the death of their mother, or, (b) alternatively, that the services already rendered by the grandmother are ‘benefits resulting from the death’ and should therefore be taken into account, with the result that all the children were entitled to recover was something to safeguard them against the contingency that, for one reason or another, her services might cease to be available? Or, as the plaintiff’s counsel at the trial and before us contended, would they say that, by reason of their mother’s death, the

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children had lost her services which, had their father not also died, would have been replaced by a paid housekeeper, and that compensation should therefore be assessed by reference to the probable cost of so doing; that damages should be calculated on this notional basis even though the children were in fact housed and cared for by the gratuitous services of their grandmother; and that these services were not benefits ‘resulting from the death’ and therefore do not require to be brought into account?

As to (a) counsel for the defendant has urged that, there is no reported case where the replacement of a deceased wife’s services not having taken place or been contemplated (unlike Berry v Humm & Co), the court has awarded damages for the pecuniary loss of those services and that this lack of precedents is due to the obvious absence of any right to recover such damages. I disagree. In my judgment, the fact that a widower decided to manage for himself after the death of his wife would not disentitle him to sue for and recover damages for the pecuniary loss he had nevertheless sustained. And, in the same way, the fact that the orphaned children here have incurred no expense in engaging a housekeeper to look after them does not destroy or diminish that right to be compensated which the defendant concedes would be theirs had such expense actually been incurred or had the grandmother given up a paid job in order to look after them. As to (b), in my judgment, while the need for the grandmother’s care undoubtedly arose from the mother’s death, the view which a reasonable jury would be likely to adopt would be that the children benefited not as a result of their mother’s death but simply because the grandmother had taken it on herself to render them services. At the time of their mother’s death it was anyone’s guess what would happen to them and the defendant had not discharged the onus of establishing that at that time there was a reasonable expectation that the grandmother would act as she subsequently did. Then aged 49, she already had substantial domestic responsibilities of her own (she had three teenage children and she too lived in a three-bedroom house) and it would not have been surprising had she decided against adding to them. In my judgment, it would be an unreasonable conclusion were a jury or judge of fact to hold that, because she was moved by their plight to act as she did, her generous action fell within s 2 of the 1846 Act.

For these reasons I hold that the learned judge rightly came to the conclusion that the grandmother’s services should be ignored in calculating the financial loss sustained by the children as a result of the death of their mother.

In relation to the children’s dependancy on their father, the defendant makes no criticism of the learned judge’s award of £7,900, save in relation to a figure of £604 per annum adopted by him in respect of the provision of a house and such additional items as fuel, power and repairs. It is said that, having regard to the family budget at the time of death and the fact that the children did not occupy the whole house £604 is an excessive figure. I restrict myself to saying that I do not regard this criticism as well founded.

As to their dependancy on the mother, the defendant accepts that if the approach of the learned judge was right and if the appropriate test is what it would cost to engage a nanny-housekeeper the £8,500 he awarded cannot be effectively attacked.

On the other hand, the plaintiffs attack both awards on the ground that a multiplier of 12 should have been applied, instead of the figure of nine adopted, but I see no reason to differ from the finding of the learned judge on this point. The plaintiffs also attack as inadequate the multiplicand of £1,000 adopted in relation to the mother’s death. They say that this figure ignored the cost of a housekeeper’s maintenance and that £234 per annum should have been added therefor; that the judge omitted the cost of engaging a substitute housekeeper for a fortnight in each year (_£42); and that, having done this sum, he unwarrantably reduced the annual total of £1,099 arrived at to a round figure of £1,000. In the result, so it is submitted, there was a shortfall of £375 per annum, to which the multiplier of 12 contended for

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should be applied. Such criticisms are in my judgment ill founded. The editors of Clerk and Lindsellf are right in saying that, although some arithmetical calculations are necessarily involved in the assessment of the loss in such cases as the present, much of the calculation must be in the realm of hypothesis. As Holroyd Pearce LJ said in Daniels v Jones ([1961] 3 All ER 24 at 28, [1961] 1 WLR 1103 at 1110), arithmetic is a good servant but a bad master. The loss suffered by the dependants must be assessed as best they can in the light of their particular facts. But, having done his arithmetic, there comes a stage when the judge has to stand back and look at the result. When he does, he should bear in mind the wise words of Willmer LJ who said in the last mentioned case ([1961] 3 All ER at 30, [1961] 1 WLR at 1113): ‘In what is essentially a jury question the over-all picture is what matters. It is the wood that has to be looked at, and not the individual trees.' I think the trial judge sought to do that in the present case. I also think that, after prolonged reflection, he did it well, and I would not disturb his awards either separately or in their totality.

In the result I would dismiss both the appeal and the cross-notice.

BUCKLEY LJ. The Fatal Accidents Act 1846, s 2, invests a jury with the duty of awarding such damages as they may think proportioned to the injury to the claimant resulting from the death which occasions the claim. Although this function is now performed by a judge in place of a jury, the question remains what is commonly called a jury question, that is to say, a question which is to be answered not in a narrowly legalistic or analytical way but in a commonsense way after giving due weight to careful consideration of all the relevant facts.

It has long been established that only injuries capable of evaluation in monetary terms can found claims for damages under the section (see, for example, Franklin v South Eastern Railway Co), but the loss need not be a monetary loss: a loss of services capable of being valued in pecuniary terms will suffice (Berry v Humm & Co), as also will the loss of reasonable exception at the time of death of future financial benefits from the deceased (Taff Vale Railway Co v Jenkins) or, as must follow, the reasonable expectation of services in the future capable of evaluation in monetary terms. But an injury which cannot be so evaluated, such as grief or humiliation, cannot found a claim (Franklin v South Eastern Railway Co).

In the present case Mr and Mrs Hay’s children doubtless suffered grievously in a variety of ways in consequence of their parents’ death in the accident which has occasioned this action. They have lost the benefits and happiness it was to be expected they would derive as they grew up from the companionship of their father and mother. They have lost parental love. They have lost the joys of a happy home. These losses cannot be assessed in monetary terms and so cannot support a claim for damages. They have lost the financial support of their father, the breadwinner of the family, and with it they have lost the family home which he provided and maintained for them, including its furnishings and ancillaries, such as the family motor car and the provision of all those things which he provided for them to maintain them in the style in which that home was conducted. These losses can be evaluated in financial terms and accordingly can support a claim for damages. Although damages cannot be recovered for the loss of their mother’s love, they can be recovered for the loss of those services capable of being valued in terms of money which she would have rendered to them as their mother had she survived. About

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these matters there is no dispute in this action, but there is dispute about how the losses capable of evaluation should be valued.

I shall call the monetary value which it is proper to be put on these losses capable of valuation the children’s gross loss. Its ascertainment is not the end of the matter, for it is common ground that, where a dependant of a deceased person has suffered a gross loss of this nature as a result of the deceased’s death by a fatal accident, any benefit which the dependant has secured in consequence of the same death may, if it can be valued in money terms, have to be taken in abatement of the gross loss. It was contended in the present case that, had there been no member of their family willing to give the children a home and had they been taken into the care of a local authority and placed with foster parents at the public expense, no damages would have been recoverable because the children would have been provided without expense to them with a substitute home and substitute parental care. As I understand counsel for the defendant’s argument, he says that either the children could not in these circumstances be shown to have suffered any loss (that is to say, they would not have suffered any injury within the meaning of the section) or their gross loss would be shown to have been wholly abated by gains accruing to them as the result of the accident in consequence of their being taken into the care of a local authority as homeless orphans. The children were not taken into public care. The occasion for that never arose because their maternal grandmother, Mrs Toone, took them into her home and has ever since cared for them as if they were her own children. Counsel for the defendant contends that in these circumstances again the children cannot be shown to have suffered any loss or alternatively that the benefits which have accrued to them in this way must be set off against their gross loss in assessing the damages, if any, recoverable in this action. Counsel for the plaintiffs on the other hand contends that these benefits are not such as should be taken in abatement of the gross loss—he says that they are irrelevant to the assessment of the recoverable damages.

The question to be asked can be simply stated. How much worse off financially were the children as the result of their parents’ deaths than they would have been if their father and mother had not been killed? It is less easily answered. Four problems have been discussed in the course of the argument. First, did the judge value the children’s gross loss in relation to their father rightly? Secondly, did the judge value the children’s gross loss in relation to their mother rightly? Thirdly, ought the grandmother’s services to be brought into account? And fourthly, was the judge justified in adopting a multiplier of nine years?

In relation to the first of these questions figures were placed before the judge analysing the probable expenditure of the Hay family, had Mr and Mrs Hay survived, on the basis that Mr Hay’s expendable income would have been of the order of £40 per week, which as was common ground, was the amount of take-home pay which he would have been earning at the date of the trial if his career had not been interrupted by the accident. These figures were broken down into amounts representing how much of this income would have been expended exclusively for the benefit of Mr Hay, how much of it would have been expended exclusively for the benefit of Mrs Hay, how much would have been expended exclusively for the benefit of the children and what balance would have been expended for the general benefit of the family collectively. In this way of a total expendable income of £2,080 per annum £520 was attributed to the father, £420 to the mother, and £496 to the two children, leaving a balance of £644 (which the judge and everyone else, misled by an arithmetical error in the table of figures before the court, assumed to be £673) attributable to expenditure for the family generally. No question now arises with regard to the £496. The learned judge discounted the figure of £673 by £69 and proceeded on the basis that the children were worse off in respect of expenditure that would have been made for the benefit of the family generally to the extent of £604, making with the £496 a total sum of £1,100 a year by which the children were worse off in consequence of the loss of their father. Counsel for the defendant disputes the propriety of

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dealing with the general family expenditure in this way. He contends that the figure of £674 should have been apportioned to the father, the mother and each of the children in the fractions one-third, one-third, one-sixth and one-sixth respectively. The learned judge, rightly, in my opinion, regarded this as a wholly unrealistic approach. Each boy, he said, lived in a whole house, not in one-sixth of a house. The children have lost the enjoyment of a home, not a fraction of a home. The cost of providing a substitute home for the children of a similar quality to the house provided by their parents and capable of accommodating them and a substitute mother would not be greatly less than the cost of their family home would have been had their parents survived. In my judgment the learned judge’s approach to this part of the problem was realistic and reasonable.

As regards the value to be placed on the mother’s services, the only evidence put before the court was that of a Mrs Baxter, a proprietress of an employment agency. Her evidence was that at the time of the trial it would have been difficult to find any woman who would go and live in such a house as the family home to look after two children aged five and seven and to perform the duties of a mother at less than £15 per week. Founding himself on this figure, and making an addition in respect of the cost of providing substitute care when the substitute mother would take time off, and making allowance for the cost of National Insurance contributions, the learned judge arrived at a figure of £1,000 per annum as representing the value of the services which the mother would have provided had she survived. The learned judge added the figures of £1,100 and £1,000 together and multiplied the result by nine arriving at a sum of £18,900 from which he deducted £2,500 representing the net values of the estates of the deceased parents including damages recovered under the Law Reform (Miscellanuous Provisions) Act 1934, thus arriving at a sum of £16,400 which with interest thereon he awarded as damages under the Fatal Accidents Act 1846.

In my judgment counsel for the defendant’s argument that in consequence of the fact that the grandmother is voluntarily affording maternal care to the two children they are not shown to have suffered any injury as a result of the loss of their mother cannot be sound. If it were sound, it seems to me that it might equally well be argued that, since their grandmother is also providing them with a home and their keep they have suffered no loss as a result of the death of their father. But it would surely be necessary at least to compare and take into account the comparative qualities of the services and benefits afforded in these respects by the parents in their lifetime and by the grandmother since the parents’ death. In my judgment, the proper approach is first to place a valuation on those losses which the children have suffered in consequence of the death of their parents and then to set against those losses any benefits which it is proper to take into account as benefits that have come to them as the result of the accident. If that is the right approach, counsel for the defendant does not dispute the validity of the figures adopted by the learned judge for the purposes of his calculations.

Counsel for the plaintiffs on the other hand says that the judge in arriving at the figure of £1,000 a year for the mother’s services has adopted too low a figure in that he omitted to bring into the calculation anything for the cost of the substitute mother’s board and for the provision of other care during an annual holiday for the substitute mother, and on account of his having rounded the total calculated figure down by £99 a year. In these respects counsel for the plaintiffs says the judge’s figure of £1,000 fell short by £375, which, when multiplied by an appropriate multiplier, would make a substantial difference to the amount of damages. It is true that the learned judge did not take these two matters (board and holidays) explicitly into account, but there were other things going the other way which he also did not take explicitly into account, such for example as the amount of assistance and relief which a substitute mother might expect to receive from the children’s grandparents, both maternal and paternal, and other relations. Moreover, it must be borne in mind that in making such an assessment as this arithmetic cannot provide a means of arriving at an exact

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amount but merely a method of checking the reasonableness of the proposed award. I see no reason to interfere with the figure of £1,000, and the less so since the judge by excusably overlooking the arithmetical error to which I have referred may have adopted a slightly larger figure in respect of the loss of the father’s support than he would otherwise have done.

I now come to the question whether what Mrs Toone has done should be taken into account in abatement of the children’s gross loss. Counsel for the defendant has contended that the principle can be stated thus: if immediately before the death which occasions a claim there was a reasonable expectation that any benefit which in fact thereafter enures would arise in the event of the death occurring, then this benefit should be taken into account in abatement of any gross loss. Counsel for the defendant relies in this connection on the evidence of Mrs Toone to the effect that if her daughter and son-in-law had died at any time from any cause she would have taken their children into her home as their grandmother who loved them and would have wished to care for them. Counsel for the defendant consequently says that it was wholly predictable that if both Mr and Mrs Hay were killed Mrs Toone would look after the children as if they were her own. What has happened in this respect was accordingly a predictable consequence of the fatality which resulted in the deaths of Mr and Mrs Hay, so that the benefits resulting to the children ought to be taken into account in considering the extent of the injury they suffered as a result of the deaths.

Counsel for the plaintiffs on the other hand says that the cases establish no clear principle on which it should be decided whether a benefit according to a dependant of a deceased person after the death should be treated as abating any injury suffered by the dependant as a result of the death. He says that one must look at the words of the section, which are in wide terms, and decide on the facts of the particular case whether the benefit ought fairly to be regarded as abating the injury. He relies strongly on the remarks of Pearcel LJ and of Lord Evershed MR in Jenner v Allen West & Co Ltd ([1959] 2 All ER 115 at 124, 126, [1959] 1 WLR 554 at 565, 568) and on Daniels v Jones.

Counsel for the plaintiffs also points out that a strange anomaly would flow from the defendant’s argument. If only one parent had been killed in the accident, there could be no doubt that damages would be recoverable under the Fatal Accidents Act 1846, on behalf of both the surviving parent and the children, whereas, according to the defendant’s argument, in the event which happened of both parents being killed no or only very small damages are recoverable. Nobody doubts that, if the dependants inherit property from the deceased, this is a benefit so directly resulting from the death of the deceased that it should be taken into account under the section. On the other hand the gift by a deceased mother’s children of one third of her estate to their stepfather in Peacock v Amusement Equipment Co Ltd was, I think, a benefit of a kind which any juryman would say should not be treated as reducing the injury he had suffered by reason of his wife’s death. It was a windfall which, it is true, would not have occurred but for her death. It resulted from an act of generosity on the part of her children subsequent to her death. But there may obviously be many cases in which it is difficult to draw the line—for example, a voluntary pension granted to a dependant after the death, the proceeds of contributions from fellow employees of the deceased, a fund similarly provided by friends or relations, a grant from a disaster fund, a compassionate gift. Similar difficulty may arise where the benefit is not monetary but in the form of services, such as voluntary nursing care. Questions have also arisen in respect of moneys received by the dependant as the result of accident or life insurances and as to the effect on the recoverable damages of the fact or possibility of a widow remarrying, as well when the claimant is the widow herself as where the claimant is a child of hers.

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It is not surprising that in cases of such variety of kinds judges have used different language in different cases. In some judgments attention has been directed to whether the benefit was to be accurately regarded as resulting from the death. In such cases consideration has been given to causation. In others the court has approached the problem from the point of view of what should be regarded as reasonably to have been expected to follow the event of the death.

For it to be proper to take a post-obit benefit into account in limitation or reduction of an injury suffered by reason of a death, there can be no doubt, I think, that there must be some association between the death and the receipt of the benefit, but the cases clearly establish that this need not be a direct causal link, a causa causans. See for example Mead v Clarke Chapman & Co Ltd, where the remarriage of the widow of the deceased was not the direct consequence of his death, although she could not have remarried had her first husband still been alive. Jenkins LJ there considered ([1956] 1 All ER at 48, [1956] 1 WLR at 83) that there was ‘a sufficient causal connection’. And this was held to affect the damages recovered by the deceased’s children notwithstanding that at that time a stepfather was under no legal obligation to maintain stepchildren, even if he accepted them into his family.

We have been referred to a considerable number of reported cases decided either under the Fatal Accidents Acts or in personal injuries cases in which questions of this kind or analogous questions have arisen, but I do not think that I need to refer to them. Lord Edmund Davies has already mentioned a number of them. In my opinion counsel for the plaintiffs is justified in saying that it is not possible to discover from them any established principle by which we should decide whether the benefits which Mrs Toone has conferred and is conferring on her grandchildren should be taken into account in the present case. The question remains, in my opinion, a jury question in the sense indicated at the beginning of this judgment, and must be answered accordingly in the way which seems fair in the light of all the circumstances of the case. The learned judge asked himself this question: ‘Do the services which Mrs Toone has already provided and will continue to provide for the two children constitute benefits resulting from the death of their mother?’ He answered it in the negative.

To my mind Mrs Toone’s evidence, to which I have already referred, which was given with hindsight, really amounts to no more than this, that in the event of Mr and Mrs Hay becoming for any reason unable to provide and care for their children she as the children’s grandmother would have wished to do her best to fill their parents’ place. Whether in any given circumstances she would have been able to do so, or, even if able, would in fact have done so, must be dependent on what the circumstances might be when the event occurred. Mrs Toone’s health, or her commitments to other dependant members of her family, or her financial or domestic situation might have rendered her incapable of doing as she would have liked to do; or some other member of the children’s family, either on their mother’s side or their father’s, might have been in a better position to care for them. In my judgment, it is more realistic to say that Mrs Toone’s services to her grandchildren resulted from a decision made by her on her own initiative after the accident than that they resulted from Mr and Mrs Hay’s deaths in the accident. Counsel for the plaintiffs put the point neatly and epigrammatically when he said that generosity does not result from death.

I doubt if it is very useful to try to find analogies in cases where the facts are very different, but it seems to me that Mrs Toone’s services are more similar in quality to the subscriptions of fellow employees (see Baker v Dalgleish Steam Shipping Co Ltd ([1922] 1 KB 361 at 369, 380)) than to the voluntary pension from the Crown with which that case was concerned or the voluntary pension in Jenner v Allen West & Co Ltd. Contributions to a workshop

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whip-round would, I think, normally be properly attributed to a desire by the contributors, conceived after the death, to relieve the needs of the widow or orphaned children of the dead man, whereas a widow’s pension, albeit voluntary, is by its nature fairly obviously related to her dead husband’s past services to the payer and is thus connected with matters dating from before the death and is likely to have been associated with the circumstances in which the deceased died.

In Jenner’s case ([1959] 2 All ER at 125, [1959] 1 WLR at 565, 566), in a passage already cited by Lord Edmund Davies, Pearce LJ contrasted a pension provided by the generosity of a third party who was in no way connected with the accident and a pension paid by employers to the widow of an employee who has died in consequence of an accident in the course of his employment.

In my judgment, the learned judge was fully entitled on the evidence in the present case to answer the question which he asked himself as he did, from which it follows that, in my judgment, he rightly treated Mrs Toone’s care of the children as conferring no benefit on them which ought to be taken into account in diminution of the damages recoverable in this action.

I would only add to the discussion of this part of the case that the decision in Mead’s case strikes me as somewhat anomalous. That a claim to damages on behalf of children in respect of their father’s death should be liable to abatement on account of the possibility or the event of their mother’s contracting a second marriage of which no prospect existed at the date of the death seems to me a strange proposition. It must, I think, have flowed from the fact that it had become established that the widow’s own claim was until 1971 liable to abatement in respect of such prospect of remarriage as she might have. This proceeded on the basis that on her remarriage any claim in respect of her earlier dependancy on her former husband must have ceased, since she could not claim to be entitled to be treated as dependant on two husbands at one time. From this it was perhaps not a long step to hold that the children of a dead father could no longer claim for loss of dependancy on him when they had become de facto dependant on a stepfather. The position in respect of the widow’s claim has now been altered by statute (Law Reform (Miscellaneous Provisions) Act 1971, s 4) but no similar change has been made in the law in respect of a claim by a widower or a child. See in this connection Jeffrey v Smith and Thompson v Price. This may be thought to call for consideration by the legislature.

There only remains the question of the multiplier. The learned judge assumed that each child would remain dependant until the age of 18 1/2, which resulted in an average period of 15 years’ dependancy for each. On this footing he adopted a multiplier of nine. Counsel for the defendant has suggested that this is too high because, he says, it does not take account of the fact that the boys’ need for a substitute mother’s care will decrease as they grow older. We cannot tell to what extent, if at all, the judge took this factor into account. Counsel for the plaintiffs says that the boys would be likely to remain dependant until the age of 20 and that consequently the average period of dependancy should be taken at more than 15 years, so that a multiplier of nine is too low. There seems to me to be little, if any, evidence to support this. I should be most unwilling to upset the learned judge’s decision in this respect, unless he could be shown to have proceeded on some clearly mistaken basis of fact or erroneous principle. Neither party has persuaded me of this and accordingly I do not think that the learned judge’s decision in this respect should be disturbed.

For these reasons I am of opinion that both this appeal and the cross-appeal fail and I agree that each should be dismissed.

Page 274 of [1975] 1 All ER 257

ORMROD LJ. The main issue in this appeal is whether or not the fact that Mrs Toone, the children’s maternal grandmother, has voluntarily assumed the responsibility of bringing them up, should be taken into account in assessing the extent of the injury which they have sustained as a result of the death of their mother.

Leaving aside for the moment the large volume of authority which has been cited to us by counsel on both sides, and looking only at the wording of the statutory provision which created this cause of action, namely, s 2 of the Fatal Accidents Acts 1846, which permitted the jury to ‘give such damages as they may think proportioned to the injury, resulting from such death … ’, it would appear that Parliament intended the jury to make a comparison between the position of the dependants before and after the relevant death, and award damages ‘proportioned’ to the difference, excluding of course, benefits acquired after, but independently of the death. This in fact was the interpretation adopted by the courts from the beginning. (See Hicks v Newport, Abergavenny & Hereford Railway Co, Pym v Great Northern Railway Co and many other cases.) This principle was reaffirmed by the House of Lords in Davies v Powell Duffryn Associated Collieries Ltd (No 2) ([1942] AC 601 at 609), in which Lord Macmillan said:

‘… the damages to be awarded to a dependant of a deceased person under the Fatal Accidents Acts must take into account any pecuniary benefit accruing to that dependant in consequence of the death of the deceased. It is the net loss on balance which constitutes the measure of damages.’

Lord Wright said ([1942] 1 All ER at 662, [1942] AC at 612):

‘The actual pecuniary loss of each individual entitled to sue can only be ascertained by balancing on the one hand the loss to him of the future pecuniary benefit, and on the other any pecuniary advantage which from whatever source comes to him by reason of the death.

This principle, however, has been so seriously eroded by subsequent legislation that, today, little remains of it. Already by the 1908 Act Parliament had excepted sums payable on the death of the deceased under insurance policies. The 1959 Act went much further, excepting a very wide class or classes of benefits, including pensions; and the 1971 Act directed the court, in the case of widows, to ignore all benefits arising from remarriage or the prospect of remarriage. All that is left of the balancing process appears to be benefits arising from the estate of the deceased and, in the case of children, from their stepfather’s liability to maintain them: Mead v Clarke Chapman & Co Ltd, Reincke v Gray, and Thompson v Price. Daniels v James suggests that even in cases where the benefit arises from the estate, the court will not be unduly influenced by arithmetical calculations. The courts themselves have further restricted the classes of benefit which are to be taken into account by construing such phrases as ‘resulting from’ or ‘in consequence of’ the death, restrictively. (See, for example, Peacock v Amusement Equipment Co Ltd and Redpath v Belfast & County Down Railway Co, Voller v Dairy Produce Packers Ltd, and Moore v Babcock & Wilcox Ltd.)

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In the light of this history, the court ought, in my judgment, to hesitate to extend the balancing principle to classes of benefit which are not directly covered by authority which is binding on it. Accordingly, I think there is a great deal of weight in counsel for the plaintiff’s primary submission that this court should not, as a matter of policy, bring into account the benefits provided to these children by Mrs Toone. I accept also his submission that it is impossible to formulate in general terms any test which will satisfactorily discriminate between benefits to be taken into account and those to be ignored. Attempts to do so using phrases such as ‘resulting from’ or ‘in consequence of’ lead to sterile debates on causation, and have produced results in the reported cases which are difficult, if not impossible, to reconcile one with another. Counsel for the defendants’ suggestion that benefits, of which there can be said to have been a reasonable expectation at the time of death, should be included in the balancing process, in practice, also fails. It is difficult to see why a benefit from a stepfather should reasonably be expected, and a benefit from a fund raised by subscriptions from fellow employees, which is quite a common practice, should not be expected.

I, therefore, conclude that in the present state of the law it would be wrong to bring into account the benefit which these children are deriving from their grandmother, and that the learned judge was right to exclude it from his calculations. It seems to me, however, to follow from this, that it is necessary to avoid putting an inflated value on the pecuniary loss sustained by the children. Loss of the services of a wife and mother is a grievous loss on any view, but I am not convinced that the current cost of a notional housekeeper is necessarily a reliable guide in this most difficult exercise. No question on this point arises in this appeal but it would have been helpful to have had evidence, if it were available, of the cost of providing a foster home for these children. So far as the cross-appeal is concerned the learned judge was right, in my judgment, to ignore such items as the notional cost of feeding the notional housekeeper and of providing notional substitutes for her holidays. To include such items would be to make the valuation still more artificial and unreal.

Looking at the learned judge’s final figure, and bearing in mind Lord Diplock’s observations about annuity values in his speech in Mallett v McMonagle ([1969] 2 All ER 178 at 191, [1970] AC 166 at 177), I would not interfere with the multiplier of nine which the learned judge decided to apply. I would therefore dismiss the appeal and the cross-appeal.

Appeal and cross-appeal dismissed. Leave to appeal to House of Lords refused.

Solicitors: Robert Walters & Co, Birmingham (for the defendant); Field, Fisher & Martineau agents for Moss, Toone & Dean, Loughborough (for the plaintiffs).

Mary Rose Plummer   Barrister.

Dyson v Ellison

[1975] 1 All ER 276

Categories:        CRIMINAL; Criminal Procedure, Road Traffic        

Court:        QUEEN’S BENCH DIVISION        

Lord(s):        LORD WIDGERY CJ, MAIS AND CROOM-JOHNSON JJ        

Hearing Date(s):        14 NOVEMBER 1974        

Road traffic – Disqualification for holding licence – Two previous convictions endorsed on licence within previous three years – Evidence of previous convictions – Appeal to Crown Court – Appeal against sentence only – Offence involving obligatory endorsement – Driving licence endorsed by justices – Duty of Crown Court to order production of driving licence for endorsement – Duty of court to examine licence for purpose of determining whether disqualification should be ordered – Road Traffic Act 1972, ss 93(3), 101(4).

Where a defendant is convicted by justices of a road traffic offence involving obligatory endorsement and, following conviction, the defendant’s driving licence is produced to the court for endorsement in accordance with s 101(4)a of the Road Traffic Act 1972, it is the duty of the court to have regard to any endorsements already on the licence for the purpose of determining whether, in view of previous convictions disclosed by the endorsements, the defendant should be disqualified from holding a driving licence under the provisions of s 93(3)b of the 1972 Act. Where, on conviction of an offence involving obligatory endorsement, the defendant appeals to the Crown Court against sentence only, the appeal is by way of a rehearing and it is the duty of the Crown Court also to require production of the defendant’s licence for endorsement and for the purpose of determining whether he should be disqualified (see p 278 h and j, and p 279 b to g, post).

Notes

For disqualification and endorsement of driving licences, see 33 Halsbury’s Laws (3rd Edn) 638–644, paras 1080–1089, and for cases on the subject, see 45 Digest (Repl) 117–120, 398–430.

For the Road Traffic Act 1972, ss 93, 101, see 42 Halsbury’s Statutes (3rd Edn) 1744, 1753.

Case stated

This was an appeal by way of a case stated by the Crown Court (Mr Recorder Muscroft and justices) at Bradford in respect of its adjudication sitting on appeal from justices for the city of Bradford.

On 20 March 1973, on an information preferred by the prosecutor, James Arthur Ellison, the defendant, John Thomas Dyson pleaded guilty before the justices to a charge of unlawfully driving a motor vehicle on a restricted road at a speed exceeding 30 mph contrary to ss 71 and 78A of the Road Traffic Regulation Act 1967.

On 6 April 1973 the justices ordered: (a) that the defendant should pay a fine of £12; (b) that particulars of the offence should be endorsed on his driving licence; and (c) that, pursuant to s 93(3) of the Road Traffic Act 1972, he be disqualified from

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holding or obtaining a driving licence for a period of six months. Pursuant to s 94(2) of the Road Traffic Act 1972 the period of disqualification was suspended pending the hearing of an appeal by the defendant.

On 6 April 1973 the defendant by his solicitors gave notice of appeal against so much of the sentence as ordered that he be fined £12 and disqualified from driving for six months. The notice specified that the general grounds of the appeal were that the sentence was too severe. No other ground was specified. On 8 June 1973 the defendant’s appeal was heard in the Crown Court at Bradford. The defendant’s counsel explained that the disqualification had been imposed under the ‘totting-up’ procedure. The recorder pointed out that there was no evidence before him as to the defendant’s previous convictions. Counsel for the prosecutor informed the recorder that the police had no record of minor motoring offences. He did not indicate that the defendant’s driving licence was available or invite him to look at it but simply called Pc Cranswick to give evidence. The constable, who was present to give evidence of the defendant’s antecedents, had no knowledge and gave no evidence of the defendant’s previous convictions. He did however indicate that there would be convictions endorsed on the defendant’s driving licence. The recorder was of the opinion that the prosecutor had not supplied evidence of those convictions and that accordingly there was no evidence on which the court could or ought to have ordered the defendant to be disqualified from holding or obtaining a driving licence pursuant to s 93(3) of the 1972 Act. The recorder concluded, therefore, that he had no alternative but to allow the appeal.

Accordingly the Crown Court allowed the appeal to the extent that the period of disqualification was removed. No legal arguments on either side were heard and no authorities were cited. The question for the opinion of the High Court was whether the recorder should have asked if the defendant’s driving licence was available and if so called for its production.

Andrew Pugh for the prosecutor.

The defendant did not appear and was not represented.

14 November 1974. The following judgments were delivered.

LORD WIDGERY CJ. This is an appeal by case stated from the Crown Court at Bradford in respect of an adjudication on an appeal from the justices for the city of Bradford.

What had happened by way of history was this. On 20 March 1973 the defendant pleaded guilty before the justices to a charge of unlawfully driving a motor vehicle on a restricted road at a speed exceeding 30 mph contrary to ss 71 and 78A of the Road Traffic Regulations Act 1967. The case came before the justices on 6 April 1973. They ordered that the defendant be fined £12 and that his licence be endorsed; and pursuant to s 93(3) of the Road Traffic Act 1972 they applied the totting-up procedure and disqualified him from holding or obtaining a driving licence for a period of six months. He appealed to the Crown Court against his sentence only, and the only ground which he specified was that his sentence was too severe. The matter came before the learned recorder sitting in the Crown Court on 8 June 1973 and nothing was put before him by way of proof of the earlier and qualifying offences which would be the basis of the justices’ order for disqualification on totting-up. It is exceedingly difficult to know exactly what happened in the Crown Court, and I cannot go further with confidence than to say that the recorder took the objection that he had no evidence on which to conclude that this was a case for totting-up at all.

Of course what is intended to happen on occasions of this kind is that the earlier offences which form the foundation of the totting-up will normally be proved (at all events prima facie) by reference to the endorsements on the defendant’s licence. One need not go further for that proposition than s 101(1) of the Road Traffic Act 1972,

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which prescribes that where a person is convicted of an offence of the kind which the section describes as an ‘offence involving obligatory endorsement’, the court shall order that particulars of the conviction and, if the court orders him to be disqualified, particulars of the disqualification, shall be endorsed on any licence held by him; and particulars of any conviction or disqualification so endorsed may be produced as prima facie evidence of the conviction or disqualification.

So evidently Parliament intended that the elementary and normal method of proving the qualifying offences would be by looking at the driver’s licence to see what endorsements the licence carried. But for some reason, which we cannot discover on the material before us, the licence does not seem to have been before the recorder. Accordingly he decided that he had no evidence on which to support the totting-up disqualification. He allowed the appeal to the extent of disallowing the disqualification, but otherwise allowed the justices’ order to stand. The case is brought to us, and the question for the opinion of the court is whether the recorder should have asked if the defendant’s driving licence was available and, if so, called for its production.

If we still had to consider whether this particular man was going to be disqualified, we should have a very considerable task on our hands owing to the form in which the case has been stated, but counsel for the prosecutor has assured us that there is no intention of asking us in this court to restore the disqualification after all this lapse of time. So we are really being asked by the prosecutor to give an answer to the legal problem to which I have referred because apparently it is one where an authoritative ruling would be appreciated, and would be of assistance to the police hereafter. I think in all the circumstances we ought to endeavour to do just that.

What is the problem? As I say, if the licence is produced before the court, reference to its endorsements, if any, will prima facie satisfy the requirements to be proved in totting-up, but the problem seems to be how you get the licence before the court in certain circumstances. Section 101(4) of the 1972 Act is designed to deal with this very problem. It provides:

‘A person who is prosecuted for an offence involving obligatory endorsement and who is the holder of a licence, shall either—(a) cause it to be delivered to the clerk of the court not later than the day before the date appointed for the hearing, or (b) post it, at such a time that in the ordinary course of post it would be delivered not later than that day, in a letter duly addressed to the clerk and either registered or sent by the recorded delivery service, or (c) have it with him at the hearing; and if he is convicted of an offence and the court makes an order under subsection (1) above the court shall require the licence to be produced to it for endorsement.’

That provision, operating in the court of first instance, namely, the magistrates’ court, should in my judgment work in this way. The charge being one which involves an obligatory endorsement on conviction, the justices first of all proceed to the question of conviction or no. If they decide to convict, then it being an obligatory endorsement case, they order an endorsement under sub-s (1), and the moment they have taken those two steps they can call for the licence and look at it. Having called for the licence and looked at it, they can then take whatever action is appropriate in regard to any endorsements which an inspection of the licence reveals.

In saying that they can do that, I am not in the least put off by the terms of the section which say that the requiring of the licence to be produced shall be for endorsement. Maybe it is. That may be the initial excuse for requiring it to be produced, but once it is before the court, then its evidential value to support the earlier convictions seems to be clear enough. That is the situation in the magistrates’ court.

Next we are in the Crown Court. Appeal to the Crown Court against sentence is a rehearing just like any other appeal from the justices to the Crown Court, and it is

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a rehearing from conviction onwards. In other words, the court should take the matter up, as it were, at the moment when the conviction is announced and then proceed to fix the sentence on a rehearing basis. The conviction having been entered in the magistrates’ court and not being appealed against, the conviction is effective in the Crown Court from the moment when the hearing begins. The Crown Court should, in compulsory endorsement cases, order an endorsement under s 101(1). In saying that, I am not oblivious to the fact that there may be a standing endorsement in existence ordered by the magistrates’ court. That is another matter. The Crown Court in my judgment should go through the sentencing procedure on a rehearing basis without regard to the existing order in the magistrates’ court. Having, therefore, decided, as it must, in the Crown Court to order an endorsement, then the Crown Court should ask for the licence—demand it, if you like—and then, that licence being inspected and showing the previous convictions, the totting-up procedure can be followed.

I think that is the only way to make sense of this section, and it is strictly in parallel with the Criminal Appeal Act 1968 which enjoins the Court of Appeal Criminal Division, when dealing with an appeal against sentence to ask itself, ‘Should this man be sentenced differently?’ I think the Crown Court on an appeal against sentence again is asking itself ‘Should this man be sentenced differently?’ The only way in which one can decide that is to decide how he ought to be sentenced and then see to what extent, if at all, it differs from the order made in the court below. If it differs to a significant degree, then the appeal should be allowed to that extent.

Accordingly in the present instance my view of the problem of law put before us is that it should be answered in this way, that on the opening of the appeal, the conviction standing, the court should have ordered the obligatory endorsement, which was on any view inescapable in this case, and should then have called for the licence. Having called for the licence, the problems which in fact arose before the Crown Court would, I hope, not arise at all.

It is not necessary for us to allow the appeal. Indeed I think the right thing is that it should be dismissed, but that will not affect, I hope, any assistance which this judgment may give to recorders sitting in the Crown Court hereafter.

MAIS J. I agree.

CROOM-JOHNSON J. I agree.

Appeal dismissed.

Solicitors: Tuck & Mann & Geffen and T D Jones & Co agent for David Morgan, Bradford (for the prosecutor).

Jacqueline Charles   Barrister.

Reiterbund v Reiterbund

[1975] 1 All ER 280

Categories:        FAMILY; Divorce        

Court:        COURT OF APPEAL, CIVIL DIVISION        

Lord(s):        MEGAW, ORMROD LJJ AND CUMMING-BRUCE J        

Hearing Date(s):        28, 29 OCTOBER 1974        

Divorce – Separation – Five year separation – Decree nisi – Refusal – Grave financial hardship – Social security benefits – Relevance – Loss of chance of widow’s pension – Right to supplementary benefit of similar amount to pension – Duty of husband to maintain wife irrelevant in situation where husband assumed to be dead – Entitlement to social security benefits to be taken into account – Matrimonial Causes Act 1973, s 5.

The parties were married in 1942. In 1956 they separated and lived apart thereafter. In February 1971 the husband petitioned for dissolution of the marriage relying on the fact prescribed by s 1(2)(e)a of the Matrimonial Causes Act 1973, ie that the parties had lived apart for a continuous period of five years immediately preceding the presentation of the petition. The wife, relying on s 5b of the 1973 Act, opposed the petition on the ground that a decree would cause grave financial hardship to her in that she would lose her pension rights as a married woman. The wife lived on supplementary benefits of £7·75 a week out of which she paid £4·55 for her keep to a charitable institution that was looking after her. For some time she had required psychiatric help as an in-patient at a mental hospital and, although she was employed at a day-centre earning £1 a week, she was unable to seek other than a sheltered form of employment from which she could not earn enough for her keep if not assisted by private charity. It was likely that she would in the future remain incapable of earning her own living and would have to continue to rely on external sources of support. The husband was himself a poor man dependent for the most part on state benefits and that situation was unlikely to change in the future. He had chronic bronchitis and was a registered disabled person. He made a few pounds from time to time in casual activities but he had no substantial income or disposable capital. At the date of the hearing the husband was aged 54 and the wife 52. The judge found that if he granted a decree and the husband predeceased the wife before she reached the age of 60, she would lose a widow’s pension but that she would in any event be entitled to a retirement pension on attaining the age of 60. He held that, although the loss of the chance of acquiring a widow’s pension would constitute financial hardship within s 5, the wife had failed to prove that the hardship would be grave. He further held that the wife would not in any event suffer grave financial hardship since the supplementary benefits to which she would be entitled would not be less than the widow’s pension. The wife appealed contending, inter alia, that in determining whether she would suffer grave financial hardship the court was not entitled to take into account her right to social security benefits.

Held – Since the loss of the wife’s right to a widow’s pension would only occur in the event of the husband’s death, there was no reason to ignore the wife’s right to social security benefits in determining whether the loss would constitute grave financial hardship for, the husband being dead, there could be no question of public funds being used to relieve him of his duty to maintain her. It followed that, in the particular circumstances where there was no prospect of the wife entering gainful employment which would reduce her right to supplementary benefits, the grant of a decree would not cause the wife any financial hardship since in the event of the husband predeceasing the wife before she reached the age of 60, the sums that she would receive from

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public funds in the form of supplementary benefits would be not less than those which she would otherwise receive in the form of a widow’s pension. The appeal would therefore be dismissed (see p 286 a to g and p 288 j to p 289 b and g, post).

Dictum of Sir George Baker P in Dorrell v Dorrell [1972] 3 All ER at 348 disapproved.

Per Curiam. Each case must depend on its own facts and the right of a respondent to receive supplementary benefits would not necessarily be a determinant, or even a relevant, factor in deciding whether the respondent would suffer grave financial hardship in the event of a decree being granted (see p 286 g and h, and p 289 b and g, post).

Decision of Finer J [1974] 2 All ER 455 affirmed.

Notes

For the refusal of a decree on the ground of hardship, see Supplement to 12 Halsbury’s Laws (3rd Edn) para 437A, 6, and for cases on the subject, see 27(1) Digest (Reissue) 361, 362, 2638–2644.

For the Matrimonial Causes Act 1973, ss 1, 5, see 43 Halsbury’s Statutes (3rd Edn) 541, 548.

Case referred to in judgments

Dorrell v Dorrell [1972] 3 All ER 343, [1972] 1 WLR 1087.

Cases also cited

Ashley v Ashley [1965] 3 All ER 554, [1968] P 582, DC.

Brickell v Brickell [1973] 3 All ER 508, [1973] 3 WLR 602, CA.

Grigson v Grigson [1974] 1 All ER 478, [1974] 1 WLR 228, CA.

Mathias v Mathias [1972] 3 All ER 1, [1972] Fam 287, CA.

Parker v Parker [1972] 1 All ER 410, [1972] Fam 116.

Talbot v Talbot [1971] The Times, 19 October.

Wilson v Wilson [1973] 2 All ER 17, [1973] 1 WLR 555, CA.

Appeal

This was an appeal by the wife, Bessie Reiterbund, against the order of Finer J ([1974] 2 All ER at 455, [1974] 1 WLR 788) made on 18 February 1974 whereby he granted the husband, Solomon Reiterbund, a decree nisi of divorce having been satisfied that the parties had lived apart for a continuous period of at least five years immediately preceding the presentation of the petition. The facts are set out in the judgment of Megaw LJ.

John Samuels for the wife.

Norman Primost and Mordecai Levene for the husband.

29 October 1974. The following judgments were delivered.

MEGAW LJ. This is an appeal from the judgment and order of Finer J ([1974] 2 All ER 455, [1974] 1 WLR 788) made on 18 February 1974 whereby it was decreed that the marriage of the petitioner, Mr Solomon Reiterbund, and the respondent, Mrs Bessie Reiterbund, should be dissolved. For simplicity, I shall refer to the petitioner as ‘the husband’ and to the respondent as ‘the wife’. The wife appeals to this court, asking that the decree nisi should be set aside and that the petition should be dismissed, or that a new trial should be ordered. The appeal is concerned with the question of the defence of ‘grave financial hardship’ under s 5 of the Matrimonial Causes Act 1973. The relevant provisions are well known, but I should perhaps read the more immediately relevant provisions. Section 1 of that Act provides:

‘(1) Subject to section 3 below, a petition for divorce may be presented to the court by either party to a marriage on the ground that the marriage has broken down irretrievably.

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‘(2) The court hearing a petition for divorce shall not hold the marriage to have broken down irretrievably unless the petitioner satisfies the court of one or more of the following facts, that is to say—… (e) that the parties to the marriage have lived apart for a continuous period of at least five years immediately preceding the presentation of the petition … ’

Section 5 provides for refusal of decree in what are called ‘five year separation cases’ on grounds of grave hardship to the respondent. Section 5 reads:

‘(1) The respondent to a petition for divorce in which the petitioner alleges five years’ separation may oppose the grant of a decree on the ground that the dissolution of the marriage will result in grave financial or other hardship to him and that it would in all the circumstances be wrong to dissolve the marriage.

‘(2) Where the grant of a decree is opposed by virtue of this section, then—(a) if the court finds that the petitioner is entitled to rely in support of his petition on the fact of five years’ separation and makes no such finding as to any other fact mentioned in section 1(2) above, and (b) if apart from this section the court would grant a decree on the petition, the court shall consider all the circumstances, including the conduct of the parties to the marriage and the interests of those parties and of any children or other persons concerned, and if of opinion that the dissolution of the marriage will result in grave financial or other hardship to the respondent and that it would in all the circumstances be wrong to dissolve the marriage it shall dismiss the petition.

‘(3) For the purposes of this section hardship shall include the loss of the chance of acquiring any benefit which the respondent might acquire if the marriage were not dissolved.’

The husband and wife were married on 18 January 1942. The husband was then 22 years of age, and the wife was 20. So, when the petition was heard and decided by Finer J in the beginning of 1974, the husband was 54 and the wife was 52. There were two children of the marriage, but they are both now adults, the younger of them being some 24 years of age. The parties separated in 1956. In August 1956, on the wife’s complaint of desertion by the husband, a stipendiary magistrate made an order for the husband to pay £5 a week for the wife’s maintenance and 15s a week for each child. I doubt whether very much was paid under that order, even before 1959; and in 1959 payments ended. In 1958 the husband brought divorce proceedings, alleging cruelty on the part of the wife. After a contested hearing, those proceedings were dismissed.

The husband’s petition in the proceedings out of which this appeal arises was filed on 18 February 1971. The husband asserted irretrievable breakdown of the marriage, relying, and relying only, on para (e) of s 2(1) of the Divorce Reform Act 1969 (which is now s 1(2)(e) of the Matrimonial Causes Act 1973): that is, that the parties had lived apart for a continuous period of five years immediately preceding the service of the petition. The wife’s answer relied on s 5 of the 1973 Act (as it now is). Initially, she relied, not only on ‘grave financial’, but also on ‘other’, hardship. The ‘other’ hardship was that divorce was anathema to the wife, on religious and moral grounds. That plea was expressly abandoned at the outset of the hearing before the learned judge, and we are not concerned with it.

The issue which the judge had to decide was the issue of grave financial hardship. That issue was raised in the wife’s answer to the petition dated 17 June 1971. The relevant part of that document is para 8 which reads:

‘If a decree of dissolution is granted to the Petitioner the Respondent will lose her pension rights as a married woman, and, in the future, as a widow under the prevailing regulations of the Department of Health and Social Security.’

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The evidence before the learned judge was indeed, as he has said in his judgment, ‘distinctly exiguous’. So far as concerns the wife, the judge said ([1974] 2 All ER at 458, [1974] 1 WLR at 791):

‘The wife lives on supplementary benefits at the rate, as at 2nd November 1973, of £7·75 weekly. A letter from her solicitors dated 23rd August 1972 states that out of the then payment of £6 a week for supplementary benefit she paid £4·55 a week for her keep to a charitable institution that was looking after her, and was earning up to £1 a week for working during the day for a day-centre. She had no savings or capital, and her clothing was largely provided by the charity. The answer filed in June 1971 alleges that the wife has for some time required psychiatric treatment as an in-patient in a mental hospital and, although now employed at a day-centre, is unable to seek other than a sheltered form of employment from which she could not earn enough for her keep if not assisted by private charity. All this leaves her precise current circumstances rather obscure, but I am satisfied (and it has never been contested by the husband, who, indeed, himself asserts that his wife was mentally disturbed when he left her) that the wife is, and will in the further, remain incapable of earning her own living, and will have to continue to rely on external sources of support.’

As regards the husband, the learned judge went in some detail into such evidence as was indeed before him. The conclusion which the learned judge expressed as to the husband’s circumstances was ([1974] 2 All ER at 459, [1974] 1 WLR at 792):

‘On the whole of the evidence, including the agreed documents, I find that the husband is himself a poor man, dependent for the most part on support from state benefits, and not very likely to be able to break out of that situation in the future.’

I should perhaps add that there was material on which the court could conclude that the husband had suffered from indifferent health and that the he had had chronic bronchitis. He had been issued with a certificate of registration under the Disabled Persons (Employment) Acts 1944 and 1958. According to the judge, he made a few pounds from time to time in casual activities, but he certainly had no substantial income, and he had no disposable capital at all. The judge referred to the fact that there had been no attempt by the Supplementary Benefits Commission to seek to enforce maintenance order against the husband after payments had stopped, and the judge inferred that the commission had taken the view that the husband was too poor to be worth pursuing.

The learned judge was concerned, and as I think rightly concerned, at the lack of proper evidence as to matters relating to the husband, and as to matters relating to the wife, which would have been relevant to the assessment of the wife’s entitlement to benefits which she would, in certain contingencies, lose if the divorce were to take place. It was such contingent losses on which she was relying before the learned judge to establish grave financial hardship. In saying that, it is right that one should appreciate the difficulties that face the advisers of a party in a case such as this in obtaining the evidence, or information which can be converted into evidence, on various matters which may well be relevant for the purpose of establishing the case.

Before the learned judge, the somewhat obscure assertions which I have read in para 8 of the wife’s answer were interpreted as referring to the contingent loss by the wife, if she were divorced, of two different types of benefit. The first of those was retirement pension when the wife would be over the age of 60. I need not consider, I think, any of the matters which were argued before the learned judge and dealt with in his judgment in respect of retirement pension, because in this court counsel for the wife did not contend that any contingent loss which the wife might suffer as a result of a divorce would continue after she attained the age of 60. So, we are concerned in this appeal with the risk of the loss of a widow’s pension, a loss which, if it

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came into existence, would cease when the wife became 60. What is involved? If there were no divorce, and if (i) the husband died at any time between the date of the divorce decree and the date of the wife’s 60th birthday (a total period of some eight years), and if (ii) the wife was surviving when the husband died, then the wife would be entitled to receive a widow’s benefit for the period between the husband’s death and her 60th birthday, or her earlier death. If, on the other hand, the divorce decree stood, the wife would not receive a widow’s benefit for any such period, even if the circumstances arose of the husband predeceasing the wife during those eight years. She would receive something else, namely, a greater sum in the form of supplementary benefit; but for the moment I propose to leave that out of account altogether, as Finer J did in reaching what he described as his ‘first conclusion’.

The learned judge’s first conclusion, so far as is relevant for the purposes of this appeal, was ([1974] 2 All ER at 461, 462, [1974] 1 WLR at 795):

‘My first conclusion may, on the basis of the preceding discussion, be thus stated. If I grant the husband a decree and he dies within the next eight years or so, before the wife is 60 years of age, she will have lost a widow’s pension before becoming eligible for a retirement pension …  A divorce will therefore cause a hardship to the wife within the meaning of s 5(3) of the 1973 Act, but I do not consider that she has sufficiently proved that the hardship is a grave one.’

As I understand it, the learned judge was finding that ‘a divorce will therefore cause hardship’ on the assumption, which he is making at the moment, of disregarding the question of supplement benefit. There was the contingency of the loss of a widow’s pension, and that the learned judge accepted as being a hardship which would be caused by the divorce even though it was only a contingency. Quite clearly, having regard to s 5(3) of the 1973 Act, which I have read, the judge was right to take into account the contingencies—risks of loss.

Counsel for the wife contends that the learned judge’s conclusion, that the hardship relating to the potential loss of the contingent pre-60 widow’s pension was not shown to be ‘grave’, was caused by a failure on the part of the learned judge to take into account a relevant fact which was in evidence. It appears that the judge thought that there was no evidence before him as to the amount of the widow’s benefit, if any, to which the wife would have been entitled if the husband had died, say, immediately before the pronouncement of the decree. In particular, I think, as I read his judgment, the learned judge felt that he was being asked to walk in the dark, because the amount of the widow’s benefit would depend on the husband’s contribution record, and there was no evidence as to that fact except the inference which the learned judge was able to draw from the facts that were before him that the husband had paid at least 156 national insurance contributions. In his judgment the learned judge said ([1974] 2 All ER at 460, 461, [1974] 1 WLR at 794), ‘On the other hand, I have no material from which to determine the amount of the widow’s pension she risks losing.’

However, counsel for the wife has referred us to letters in the agreed bundle of correspondence, and we are told, and of course accept, that the facts stated in those letters were, by express or tacit agreement between the parties, accepted as being correct. By letter dated 25 September 1972 the wife’s solicitors asked the Department of Health and Social Security, amongst other questions, the question what would be the amount of pension which the wife should receive as a widow, in the event that her husband were to die forthwith. The answer to that letter from the Department of Health and Social Security dated 2 February 1973 said: ‘… I would like to inform you that, as a widow, Mrs Bessie Reiterbund would receive benefit as follows (assuming her husband were to die forthwith) … ’ Then there is set out the widow’s allowance for 26 weeks, and the possibility of a widow’s supplementary allowance for 26 weeks:

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I need not read that because nothing turns on it in this appeal. Then the letter goes on: ‘After that [that is, after 26 weeks] she would receive Widow’s Pension at £6·75 and any increase for dependent children (rates as above).’ (Of course, no question of dependent children arises.)

So, it does seem to me that there was material on which the learned judge could find that the potential widow’s benefit (apart from the 26 weeks’ allowance, which I think it is agreed has to be ignored) would have been at the rate of £6·75 a week up to the age of 60. Of course, that amount might increase, and so no doubt would other benefits at the same time.

Let it be assumed, in favour of the wife, that the learned judge did, indeed, for some reason, omit to take into account that piece of evidence. I have considerable doubt whether the taking of it into account would, or ought to, have made any difference to the judge’s first conclusion—the absence of sufficient proof of grave financial hardship (still ignoring for the moment the question of the receipt of supplementary benefit).

Let me say at this point that I reject completely a submission made by counsel for the wife that the word ‘grave’ in this context means no more than ‘greater than de minimis’. (‘De minimis’ is, of course, the Latin tag used to express the meaning ‘wholly trivial’, or ‘of no practical significance’.) ‘Grave’, in this context, has its ordinary meaning. If it were necessary (which I doubt) to use other words to provide guidance as to its meaning, I would offer the words ‘important’ or ‘very serious’. I would reject also counsel for the wife’s submission, made later in his argument, that somehow or other the meaning of the word ‘grave’ in the phrase ‘grave financial hardship’ is affected by the fact that one who relies as a defence on the provisions of s 5 of the 1973 Act has to persuade the court, not merely of the existence of grave financial or other hardship, but also that it would in all the circumstances be wrong to dissolve the marriage.

What is the nature and extent of the chance that a financial loss will be suffered (still forgetting for the moment supplementary benefit) if the wife is divorced? She was 52. The period within which the various factors must coincide, in order that she would have obtained the benefit if not divorced and therefore would lose the benefit if divorced, is limited to eight years. If the husband does not die within the eight years, there is no loss. True, the husband has been in ill-health (I have referred to chronic bronchitis); but I do not think that the learned judge can be faulted for holding ([1974] 2 All ER at 461, [1974] 1 WLR at 794), on the evidence before him (as he did expressly hold) that it is ‘a circumstance which can be regarded as very likely’ that the wife will be over 60 when the husband dies. Again, of course, it is more likely than not, in the absence of evidence of physical ill-health of the wife, that she will survive to the age of 60 and beyond. But there is a chance that she will not. If she predeceased her husband, then, again, there would be no loss of widow’s benefit.

However, let me assume for this purpose, though I am not to be taken as so deciding, that, apart from the relevance of supplementary benefit, there would be ground here for holding that the potential loss of widow’s benefit was such as to warrant the description ‘grave financial hardship’. Making that assumption, I should nevertheless hold that this appeal fails, on the second ground set out in Finer J’s judgment.

We were referred to a passage in the judgment of Sir George Baker P, in Dorrell v Dorrell ([1972] 3 All ER 343 at 348, [1972] 1 WLR 1087 at 1093). There, Sir George Baker P appears to have taken the view that supplementary benefit or other social security benefit ought, as a matter of principle, to be ignored in deciding the question of ‘grave financial hardship’ under s 5 of the 1973 Act. I am far from sure that Sir George Baker P was indeed intending to state that as being a principle. The facts in Dorrell v Dorrell were different from the facts with which we

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are here concerned, and, it may be, materially different. But, if and insofar as anything which was said in that case ought to be construed to mean that, on facts such as exist in the present case, the fact and the amount of supplementary benefit must be ignored in assessing financial hardship under s 5, I would respectfully disagree. I agree with Finer J’s conclusion that, on the facts of the present case, there cannot be grave, or indeed any, financial hardship to the wife, by reason of the divorce decree, because, in the event of her husband’s death during the next eight years following the divorce (the only period now alleged to be relevant), while the wife would lose the contribution from public funds consisting of the widow’s benefit, she would be entitled to a larger contribution from public funds consisting of supplementary benefit. That, as I understand it, is the undoubted and admitted fact in this case. If there were no divorce, and the husband died before the wife reached 60, she would have been entitled to a widow’s pension of £6·75, plus, no doubt (on the present scale) a further £1 of supplementary benefit, and, no doubt, payment of rent. That would not come from the husband, for he is, on this hypothesis, dead, but it would come from public funds. Why should it be said that there is hardship to the wife—grave financial hardship—when, the divorce having taken place, and the husband having died, the wife gets precisely the same amount from the public funds, though from a different account in the public funds?

I do not see that there is grave, or any, hardship to the wife in this contingency—which is the only contingency relied on as potentially creating hardship. Nor do I see how the fact that the payment comes from one public fund rather than another could be a relevant factor or could lead to the conclusion that the fact that the wife would receive such payment should be ignored in considering the question of financial hardship. It must be borne in mind that, on the facts of this case, on the letter from the department which I have read and on which the wife so strongly relies in this appeal, it is apparent that the necessary contributions of the husband for the purpose of providing the widow’s benefit had already been paid before a divorce decree was pronounced.

With all respect, I think the position here is quite different from that which prevails, rightly, in my view, as decided in a number of cases, in respect of the assessment of the proper amount of a periodic order for maintenance to be paid by a husband. The husband’s means are relevant. It would be wrong that social security benefits to the wife should reduce his liability at the expense of the state. But in a case such as the present one is looking at potential hardship on the hypothesis that the husband is dead, and that the benefit in question to the wife will in any event come from public funds, and that in fact she will not be one penny the worse off because of the decree.

I wish to make it clear that what I have said has been said in relation to the facts of this particular case. We were invited to consider various hypothetical cases. I do not find it useful so to do. I do not intend to suggest, and I hope that nothing which I have said would be taken to suggest, that the existence, or the amount, of supplementary benefit, in lieu of widow’s pension, would always, and necessarily, be a determinant, or even a relevant, factor in deciding the question of grave financial hardship for the purposes of s 5 of the 1973 Act. For example, as Finer J pointed out in his judgment, there might well be a case—though on the facts it is not this case—in which the receipt of the widow’s benefit would have carried with it the right of substantially greater outside earnings, without diminishing the entitlement to benefit, than would be the case in respect of supplementary benefit. Again, it may be, though it would be wrong to express a concluded view on a question which does not arise, that if the potential widow’s pension were greater in amount than the potential supplementary benefit, the latter might not fall to be taken into account at all in the consideration of financial hardship under s 5. Those are all questions which may arise and may have to be considered when the facts of the case require the decision of those questions. All that I say now is that, in my view, on the facts of this case it would be impossible to say that there had been shown grave financial hardship to the wife

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having regard to the only contingency which is relied on as showing the potential existence of that loss, and by reason of the fact that she would not in fact suffer any financial loss whatever if that contingency were to arise.

We were addressed by counsel for the wife on questions of public policy and on questions of the relevance of the Fatal Accidents Acts. With great respect to counsel’s submissions, I am unable to find that there is anything in any of those submissions which is of help in this case.

With regard to public policy, I should perhaps say that on the question of the source of the benefits counsel for the wife contended that it should be regarded as contrary to public policy to enlarge the number of persons who are required to have recourse to supplementary benefit rather than to contributory funds. Let us see in this context what that argument on public policy is. It is, apparently, that, where Parliament has provided a defence on the ground of grave financial hardship, that defence should be extended to a case where in fact the defending spouse would suffer no financial hardship, and that that extension should be made to what Parliament has provided because of a view of public policy relating to the question whether it is desirable that a person should be required or encouraged to have recourse to one fund or another. That argument does not appeal to me.

I would dismiss the appeal.

ORMROD LJ. I agree. In my judgment the learned judge below was right on both the grounds on which he based his judgment; and I would like at the outset of this judgment to express my gratitude to him for his extremely lucid summary of the relevant provisions relating to widow’s pension, retirement pension, and social security or supplementary benefit. He is, of course, himself an expert in this field; and his summary has enabled me to see the issues very much more clearly than I am sure I would have been able to do without it.

The case as it was presented to the learned judge below seems to have been put on the general proposition which is often put forward—that, as a result of the divorce, the wife would lose her widow’s pension. The first thing to be noticed about the learned judge’s judgment, I think, in this context, is the distinction which he draws, and which is now accepted as entirely valid, between the widow’s pension, properly so called, and the retirement pension; because, as he fully demonstrates and counsel for the wife now accepts, after the wife has reached the age of 60 the dissolution of her marriage will not have any adverse effect on her retirement pension situation, on the facts of this case. On the other hand, the learned judge pointed out the different considerations which concern the widow’s pension, the widow’s pension being a pension which is payable on widowhood and, on facts like these at any rate, which becomes absorbed in the retirement pension at the age of 60. In practice in this case the only way in which the wife can establish grave financial hardship is by relying on the loss to her of the chance of obtaining a widow’s pension; that is, a potential loss of income between the date when her marriage is dissolved and her 60th birthday, which in practice in this case is a period of eight years.

I accept for the purpose of the argument, as I am bound to by the terms of s 5(3), that the loss of the chance of acquiring a benefit is included in the word ‘hardship’. I would for my part hesitate to conclude that Parliament was saying that all losses of chances of acquiring benefit must necessarily be ‘hardship’; but the word ‘hardship’ in sub-s (2), as sub-s (3) says, ‘includes the loss of the chance’. In other words, loss of chances of acquiring pension or other benefits is a matter which the courts must take into account in calculating and assessing whether or not there is grave financial hardship.

So the question here is, what will this wife lose in the event of her marriage being dissolved? Leaving aside supplementary benefit altogether, it is said that her potential loss if her husband dies within the next eight years and she survives him will be a sum of £6·75 a week widow’s pension. The learned judge I think overlooked the

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fact that that one figure was definitely stated in the evidence before him—and it seems to have been about the only one that was clear and definite. But I do not think that the fact that he was uncertain as to the quantum of the widow’s pension in this case affects the principle or the substance of the judgment in any way; because what the learned judge had to do (still leaving supplementary benefit out of account) was to assess what were the chances of this wife suffering this loss of a widow’s pension. He had virtually no material before him on which he could make anything but a guess as to that. All he knew was the ages of these two people, both in their early 50s, and the fact that the husband suffered from chronic bronchitis. So he had no means of making a prognosis as to the likelihood of the husband surviving or as to the likelihood of the wife surviving, about whom there was no evidence whatever. He took the view, and in my judgment reasonably, that on that material, and dealing with people of that age, and in the absence of any strong evidence to the contrary, it was very unlikely that the husband would die during the eight years following the divorce. Consequently, the chance that the wife would suffer any financial loss or hardship during those eight years was remote; and that to me is equivalent to finding that she failed to prove grave financial hardship. It would, in my judgment, be quite ridiculous, in such a speculative situation as this, to refuse this man a divorce. Logically, I suppose, over the next eight years or as she approaches her 60th birthday, the potential hardship on her becomes progressively less. But the court must make its finding as to what the real risks are. If there were evidence that the husband’s life expectancy was very short, I could well understand the learned judge coming to a different view—again leaving the supplementary benefit out of consideration. But in the present state of the evidence in this case, any finding of grave financial hardship on the basis of the evidence put before the court by the respondent would be absurd, in my judgment.

I now turn to the second point. That is, as the learned judge put it, that if he were wrong in his assessment on the ‘grave financial hardship’ question on the bare facts of the case, then it would be necessary and proper for him to take into account the wife’s position in relation to supplementary benefit. I think he was right about that also.

Counsel for the wife had the advantage of having a decision of Sir George Baker P in Dorrell v Dorrell in his favour. In a short passage Sir George Baker P simply said this, in relation to a submission which had been made to him about taking into account certain social security benefits ([1972] 3 All ER at 348, [1972] 1 WLR at 1093):

‘This is a novel argument but I am not disposed to accept it for I do not think it can be right. I think you have to look at the position of this lady, quite apart from social security. That is my understanding of the law which has been applied in these courts for many years in relation to magistrates’ orders.’

I think it is clear from the report itself that the relevant cases dealing with magistrates’ orders were not in fact cited to Sir George Baker P, and it is my impression that the matter was not at all fully argued before him. If one takes the facts of the present case, they turn out to be these. In the event that the husband dies during the next eight years and the marriage is still subsisting, the widow (as she would be then) would receive £6·75, plus any increments subsequently ordered by the government, by way of widow’s pension, and, by way of supplementary benefit, such sum as brought her up to whatever is the going rate for supplementary benefit at the time. If, on the other hand, her marriage had been dissolved, she would continue to receive precisely the same sum (at the time when it was before the learned judge the sum of £8·25) from social security. So that she would be in precisely the same financial position as to income whether her marriage was dissolved or whether it was not.

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Counsel on her behalf submits that as a matter of law the court should ignore her social security benefits. Why, I am unable to understand; but he submits that this is the law. A law which produces the paradox that a woman who is in precisely the same financial position before and after the dissolution of her marriage has yet suffered, in law, grave financial hardship as a result of the divorce, requires no elaboration on my part to demonstrate its absurdity. What possible sense could there be in supporting such a paradox? There is in fact nothing in the report of Dorrell v Dorrell to suggest that such a situation as this was put before Sir George Baker P before he made the observations which I have cited; and had he had this in mind I venture to think that his judgment would have gone the other way. Equally it would be quite wrong, in my judgment, to lay it down as a proposition of law that in all cases under s 5 the court must take into account the wife’s potential social security benefits. Each case must, it seems to me, depend on its own facts. Megaw LJ has already referred to the position of a wife who is in fact not earning very much but working. It is clear from the summary that Finer J gave that such a wife could be worse off if she were dependent on the supplementary benefit than if she were drawing the widow’s pension or a retirement pension, because each of these different kinds of benefit has a different ‘disregard’ figure. That is just one example of balancing the situation. Another may be facts like those in Dorrell v Dorrell itself, because at the end of the judgment in that case Sir George Baker P adjourned the case to give the husband an opportunity of putting forward some financial proposal to compensate for the loss of the £2 a week local government pension which the wife ran the risk of losing. It may well be that where a husband can make financial provision for the loss of a chance of the widow’s pension the court will require him to do so, without taking into account the fact that the social security is the longstop at the end to protect the wife from destitution. I merely mention these matters to show that it is essential to keep an open mind in these cases. This court and the Family Division deal with human people with human problems, and it is vitally important, in my judgment, that their lives should not be complicated unnecessarily by what I might call highly theoretical lawyers’ points.

In conclusion, I would just say this. I doubt whether it does anybody any kindness to try to dress up very understandable, strongly-felt, feelings about the undesirability of a divorce into a supposed grave financial hardship. I do not think it is kind to anybody to do that; and so, speaking for myself, ‘grave financial hardship’ means what it says. The purpose of s 5 is to protect husbands and wives against grave financial hardship as a result of marriages being dissolved without their consent after five years’ separation. While it is most important that that provision should not be whittled away, it is equally important that it should not be used as a method of whittling away the rights of other people to get a divorce after five years’ separation.

I agree that this appeal should be dismissed.

CUMMING-BRUCE LJ. I agree.

Appeal dismissed.

Solicitors: Stanley Sovin (for the wife); Herbert Oppenheimer, Nathan & Vandyk (for the husband).

Mary Rose Plummer   Barrister.

Colin Smith Music Ltd v Ridge

[1975] 1 All ER 290

Categories:        LANDLORD AND TENANT; Tenancies        

Court:        COURT OF APPEAL, CIVIL DIVISION        

Lord(s):        CAIRNS, LAWTON LJJ AND BRIGHTMAN J        

Hearing Date(s):        30 OCTOBER 1974        

Rent restriction – Statutory tenant – Occupation of dwelling-house as his residence – Occupation on behalf of tenant by wife or mistress – Mistress having borne children to statutory tenant – Tenant leaving premises permanently – Mistress remaining in occupation – Tenant executing surrender – Whether mistress continuing to occupy premises on behalf of tenant – Whether mistress entitled to rely on statutory tenancy – Rent Act 1968, s 3(1).

V and the defendant, a divorced woman, lived together as husband and wife in premises of which V was the statutory tenant. The defendant had two children by V and two children from her previous marriage. In July 1973 V left the defendant with no intention of returning. On 9 August he signed a deed of surrender of his tenancy and the landlords claimed possession against the defendant on the ground that she was a trespasser from 9 August onwards. The judge held that V had a protected tenancy in the premises which could be ended only by a judgment against him or by actual surrender and delivery up of possession by him; accordingly he held that as V had left the defendant in possession to provide accommodation for herself and the children, he had not given up possession when he left but remained a statutory tenant by virtue of s 3(1)a of the Rent Act 1968. On appeal,

Held – V had ceased to be a statutory tenant of the premises since he no longer occupied the premises ‘as his residence’, within s 3(1)(a) of the 1968 Act. The position of the mistress of a statutory tenant was not analogous to that of a wife and it could not be said that a mistress who had borne the tenant children occupied premises on his behalf, after he had left the premises permanently and surrendered them to his landlord. It followed that the defendant was a mere licensee and as such could not claim the protection of the Rent Acts. The landlords were therefore entitled to possession and the appeal would be allowed (see p 293 b to p 294 b, post).

Brown v Brash [1948] 1 All ER 922 and Thompson v Ward [1953] 1 All ER 1169 applied.

Hawes v Evenden [1953] 2 All ER 737 distinguished.

Notes

For the nature of a statutory tenancy, see 23 Halsbury’s Laws (3rd Edn) 805–808, para 1586, and for cases on the subject, see 31(2) Digest (Reissue) 976–997, 7841–7964.

For the Rent Act 1968, s 3, see 18 Halsbury’s Statutes (3rd Edn) 788.

Cases referred to in judgments

Brown v Brash [1948] 1 All ER 922, [1948] 2 KB 247, [1948] LJR 1544, CA, 31(2) Digest (Reissue) 984,7905.

Brown v Draper [1944] 1 All ER 246, [1944] KB 309, 113 LJKB 196, 170 LT 144, CA, 31(2) Digest (Reissue) 986, 7915.

Hawes v Evenden [1953] 2 All ER 737, [1953] 1 WLR 1169, CA, 31(2) Digest (Reissue) 992, 7946.

Middleton v Baldock [1950] 1 All ER 708, [1950] 1 KB 657, CA, 31(2) Digest (Reissue) 1079, 8445.

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Thompson v Ward [1953] 1 All ER 1169, [1953] 2 QB 153, [1953] 2 WLR 1042, CA, 31(2) Digest (Reissue) 1029, 8170.

Wabe v Taylor [1952] 2 All ER 420, [1952] 2 QB 735, CA, 31(2) Digest (Reissue) 1122, 8700.

Case also cited

Richards v Dove [1974] 1 All ER 888.

Appeal

The plaintiffs, Colin Smith Music Ltd, appealed against a decision of his Honour Judge Forrest at the Weston-super-Mare County Court on 20 February 1974 whereby he dismissed the plaintiffs’ claim against the defendant, Frances Paula Ridge, for possession of premises known as First and Second Floor Flat, The Bank House, High Street, Worle, Weston-super-Mare. The facts are set out in the judgment of Cairns LJ.

Patrick Talbot for the plaintiffs.

C Gosland for the defendant.

30 October 1974. The following judgments were delivered.

CAIRNS LJ. This appeal raises interesting points under the Rent Act and the court has had the benefit of a very helpful argument from counsel on both sides.

The appeal comes from a decision of Judge Forrest, sitting at the Weston-super-Mare County Court, by which he refused an order for possession. The premises concerned are the upper part of a building called The Bank House, High Street, Worle, Weston-super-Mare.

The plaintiffs, by their particulars of claim, claimed possession against the defendant on the ground that she was a trespasser from 9 August 1973 onwards. By her defence the defendant asserted that she was a joint weekly tenant with one Venn and was protected by the Rent Act. In further and better particulars she said the joint weekly tenancy had been created by an oral agreement made in 1969 between one Fry, who was a former owner of the premises, on the one hand, and herself and Venn on the other.

The evidence given for the plaintiffs was given by a Mr Joyner, who said that he and his wife had bought the premises in March 1973 at a time when Venn was the tenant; there was a rent book which showed Venn as sole tenant. Mr Joyner was a director of the plaintiff company, and the purpose of buying the premises was to use the shop which was on the ground floor as a music shop and to use the upper part of the premises as a residence for the manager. They got Mr Venn to sign a deed of surrender on 9 August 1973 and immediately after that the Joyners conveyed the premises to the plaintiffs.

The defendant gave evidence that she was a divorced woman who had lived with Venn from 1968 onwards; she already had two children of her own and they lived with her and Venn. Then, from September 1969 the couple lived, not being married to one another, as husband and wife at the flat with which we are concerned here and they continued to live together until nearly the end of July 1973; during that time two further children were born to the defendant, who were fathered by Venn. On 28 July 1973 Venn left her with no intention of returning.

The learned judge held that Venn had a protected tenancy which could be terminated only by a judgment against him or by surrender and actual delivery up of possession by him. The judge said that Venn had left, leaving the defendant in possession, to provide accommodation for herself and the children. Accordingly, the judge held that he had not given up possession.

Really, the whole matter boils down to the question of whether or not, in the circumstances that I have outlined, Venn had given up possession; or, to put it in the

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statutory language under s 3(1)(a) of the Rent Act 1968, whether he had ceased to occupy the premises as his residence, because it is only so long as he occupies the premises as his residence that he is a statutory tenant and it would only have been if he had continued to be a statutory tenant that the defendant could be there otherwise than as a trespasser.

It is clear from a number of cases decided in this court that the mere physical absence of the tenant from the premises in which he is a protected tenant does not remove protection from him. A number of the cases which have been decided, particularly Brown v Draper, are cases where a wife was left in possession; the position of a mistress left in possession was first considered, so far as appears from the reports, in Brown v Brash. That was a decision of this court in which the judgment of the court was delivered by Asquith LJ. It was a case where a mistress had been left in occupation of the premises, but had in fact left at the time when the landlord was seeking possession. These passages in the judgment of the court are I think material to the present case. Asquith LJ said ([1948] 1 All ER at 925, 926, [1948] 2 KB at 254, 255):

‘We are of opinion that a “non-occupying” tenant prima facie forfeits his status as a statutory tenant. But what is meant by “non-occupying”? The term clearly cannot cover every tenant who, for however short a time, or however necessary a purpose, or with whatever intention as regards returning, absents himself from the demised premises. To retain possession or occupation for the purpose of retaining protection the tenant cannot be compelled to spend 24 hours in all weathers under his own roof for 365 days in the year. Clearly, for instance, the tenant of a London house who spends his weekends in the country, or his long vacation in Scotland, does not necessarily cease to be in occupation. Nevertheless, absence may be sufficiently prolonged or unintermittent to compel the inference, prima facie, of a cesser of possession or occupation. The question is one of fact and of degree. Assume an absence sufficiently prolonged to have this effect: The legal result seems to us to be as follows [and then five propositions follow, of which the material ones are the first two:] (1) The onus is then on the tenant to repel the presumption that his possession has ceased. (2) To repel it he must, at all events, establish a de facto intention on his part to return after his absence …  Apart from authority, in principle possession in fact (for it is with possession in fact and not with possession in law that we are here concerned) requires not merely an ”animus possidendi” but a ”corpus possessionis”, viz., some visible state of affairs in which the animus possidendi finds expression.’

And a reference was made to the person left in possession being there as a ‘caretaker’ pending the return of the tenant.

That case was applied by this court in the later decision of Thompson v Ward. There a tenant had installed his mistress in a house of which he was tenant. After he had lived with her there for some time his contractual tenancy was determined by the landlord. Later he left, leaving his mistress behind. Some time later he brought an action for possession against her, claiming to be a statutory tenant. He obtained an order for possession in the county court but this was set aside on appeal. Evershed MR, giving the leading judgment, cited a passage from the judgment in Brown v Brash ([1948] 1 All ER at 925, [1948] 2 KB at 254) and said ([1953] 1 All ER at 1174, [1953] 2 QB at 164):

‘Counsel for the plaintiff further contended that, since the defendant’s presence on the premises must be attributed to a licence given by the plaintiff, it followed

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that the plaintiff was still in possession, so to speak, in the person of his licensee. Again, I think that for the purposes of these Acts such a conclusion would be in conflict with the reasoning of ASQUITH, L.J., in Brown v Brash. In the passage which I have already cited he makes it, in my judgment, clear that, in order that a statutory tenant may be said to retain possession through the medium of an occupying licensee, the latter must be his licensee “with the function of preserving the premises for his own ultimate home-coming“.’

On the basis of those decisions it appears to me that a licensee left in possession by a protected tenant when he himself leaves, and leaves with the intention of remaining permanently away from the premises, no longer has the protection of the Rent Acts.

Counsel for the defendant cites Middleton v Baldock. That appears again to have been a decision which depended wholly on the relationship of husband and wife. The same is true of another case which counsel for the defendant cited, Wabe v Taylor. Counsel seeks to say that in these days possession by a mistress who has borne children to the protected tenant is analagous to possession by a wife; but in my view that is not so.

Counsel for the defendant drew an interesting comparison with the position of a mistress who, with her children, was residing in the house with the protected tenant up to the time of his death. It was held in Hawes v Evenden that she was a member of the family of the protected tenant for the purpose of succeeding to the protection of the Act after his death; but that of course depends on the construction to be placed on the word ‘family’ in the Act and I do not find it of real assistance in this case.

It appears to me that the defendant could only succeed here if it were laid down as a general principle that any person who has a licence from the protected tenant to reside would continue to have the protection notwithstanding the surrender by the protected tenant to his landlord, notwithstanding his permanently leaving the premises without any intention at all to come back.

In my view it cannot be the intention of the legislature in using the expression ‘so long as he’—that is, the tenant—‘occupies the dwelling-house as his residence’ that protection should be extended in that way.

With all respect to the learned county court judge here, I think he came to the wrong conclusion and I would allow the appeal and make an order for possession in favour of the plaintiffs.

LAWTON LJ. In my judgment the starting point for deciding what is the right order in this case is to look at the status of the defendant when she and Mr Venn were cohabiting together. She was not his wife, so she did not enjoy the special position recognised by the common law for wives; she was his lodger; she was in the house by his leave and licence. He was under no legal obligation to her. In respect of the children he had had by her, she was entitled to look to him for money payments, but she was not entitled to call on him to provide them with a home.

When the cohabitation stopped in the summer of 1973, Mr Venn left the premises never intending to return; of that there is no doubt. He left before the protected tenancy had come to an end. It follows, on the face of it, that he never had a statutory tenancy within the meaning of s 3 of the Rent Act 1968.

It has been submitted that he did get the benefit of a statutory tenancy through the defendant, his mistress and lodger. He could only get that statutory tenancy if he had, through her, notionally been residing in the premises himself. On the authorities a wife occupies the house on behalf of her husband, so as to confer a statutory tenancy

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on him. There is nothing in the authorities which justifies this court, or any other court, adjudging that a mistress in her capacity as a lodger, or indeed in any other capacity, is in any position analogous to that of a wife. I find it unnecessary to review the authorities because it seems to me clear on principle that the Act does not protect those who are mere licensees of the tenant.

For those reasons I would allow this appeal.

BRIGHTMAN J. I agree with the judgments that have been delivered.

Appeal allowed; order for possession.

Solicitors: Reed & Reed agents for Hall, Ward & Fox, Weston-super-Mare (for the plaintiffs); Stiddard & Chew, Weston-super-Mare (for the defendant).

A S Virdi Esq   Barrister.

Evans v Sant

[1975] 1 All ER 294

Categories:        CONSTRUCTION        

Court:        QUEEN’S BENCH DIVISION        

Lord(s):        LORD WIDGERY CJ, BRIDGE AND SHAW JJ        

Hearing Date(s):        1 NOVEMBER 1974        

Building – Working places regulations – Safety of working places – Duty of employer – Working places so far as practicable to be made and kept safe – Made safe – Working place safe having regard to permanent equipment and normal activities carried on there – Equipment brought on to premises temporarily for particular purpose – Equipment creating a source of danger – Whether rendering place of work unsafe for purpose of regulations – Construction (Working Places) Regulations 1966 (SI 1966 No 94), reg 6(2).

The appellant, a civil engineering contractor, was engaged by a water board to lay a water main alongside a road. The work was carried out by three of the appellant’s employees. Once the main had been laid it was necessary to test it to see whether it could contain the pressure of water which it was designed to carry. For that purpose a length of pipe (‘the test head’) was inserted into the end of the pipeline which was to be tested. The test head was laid in the trench. On to the other end of the test head was screwed a cap (‘the test cap’). The test cap had a hole in the middle into which was fixed a length of steel pipe which passed through 90 degrees and ran to ground level where it was connected to a pressure gauge and stop valve which was in turn connected by means of a rubber hose to a pump. The water pressure required for the test and the consequent thrust on the test cap were considerable. The normal means of preventing the thrust from blowing off the test cap, and the test head from rising, was to wedge it against a solid object. About 14 inches from the test cap was a concrete block. The employees filled the gap with hardcore which they rammed down hard. They also partly filled the trench on top of the test head with loose earth. The loose earth was inadequate for its purpose, however, and as the pressure built up in the test head the employees saw the earth moving. They realised that the thrust was causing the test head to rise. Before they could take effective steps to stop it, the test head was blown out of the end of the pipeline and thrown a distance of 15 feet. In order to avoid being struck by it one of the employees ran on to the adjacent road where he was knocked down and killed by a passing car. The appellant was convicted on an information which alleged that he was an employer of workmen undertaking

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operations or works to which s 127 of the Factories Act 1961 and the Construction (Working Places) Regulations 1966 applied and that the place of work at which the deceased employee worked ‘was not so far as reasonably practicable made safe’ as required by reg 6(2)a of the 1966 regulations, contrary to reg 3(1)(a) of *those regulations and s 155(2) of the 1961 Act.

Held – Where a place of work, having regard to the equipment permanently there and the activities normally carried out there, was safe, the mere fact that a piece of equipment brought on to it temporarily for a particular purpose produced an element of danger did not render the place unsafe for the purposes of reg 6(2) of the 1966 regulations. Accordingly the appeal would be allowed and the conviction quashed, for the source of danger arising from the pressure on the test head did not cause the place where the deceased had been working to be one which had not been ‘made safe’ within reg 6(2) (see p 301 e to j and p 302 a to e, post).

Notes

For safety regulations for building and construction, see 17 Halsbury’s Laws (3rd Edn) 125–128, para 206, and for cases on the subject, see 24 Digest (Repl) 1075–1080, 326–373.

For the Factories Act 1961, ss 127, 155, see 13 Halsbury’s Statutes (3rd Edn) 526, 550.

For the Construction (Working Places) Regulations 1966, regs 3, 6, see 8 Halsbury’s Statutory Instruments (2nd Reissue) 301, 304.

Cases referred to in judgment

Higgins v Lyons & Co Ltd (1941) 85 Sol Jo 93, 24 Digest (Repl) 1066, 276.

Latimer v AEC Ltd [1953] 2 All ER 449, [1953] AC 643, [1953] 3 WLR 259, 117 JP 387, 51 LGR 457, HL, 24 Digest (Repl) 1065, 267.

Levesley v Thomas Firth & John Brown Ltd [1953] 2 All ER 866, [1953] 1 WLR 1206, 51 LGR 571, CA, 24 Digest (Repl) 1065, 268.

Woods v Power Gas Corpn Ltd (1969) 8 KIR 834, CA.

Case also cited

Stanley v Concentric (Pressed Products) Ltd (1971) 11 KIR 260, CA.

Case stated

This was an appeal by way of a case stated by the justices for the petty sessional division of Ross-on-Wye in the county of Hereford in respect of their adjudication as a magistrates’ court sitting at the Court House, Cantilupe Road, Ross-on-Wye, on 18 October 1973.

On 2 July 1973 an information was preferred by the respondent, Frederick Alan Sant, one of Her Majesty’s inspectors of factories, against the appellant, Thomas Evans, that he on 14 March 1973 at St Leonards on the A466 Hereford to Monmouth Road in the county of Hereford was an employer of workmen undertaking operations or works to which s 127 of the Factories Act 1961 and the Construction (Working Places) Regulations 1966 applied and the place of work at which an employed person, namely Patrick Joseph Doherty, worked was not so far as reasonably practicable made safe as required by reg 6(2) of the 1966 regulations and contrary to reg 3(1)(a) of the 1966 regulations whereby he was guilty of an offence as provided by s 155(2) of the 1961 Act.

At the hearing of the information the justices found the following facts. The appellant was a civil engineering contractor. On 14 March 1973 the appellant, by his employees, was engaged, pursuant to a contract between himself and the Herefordshire Water Board, in laying a mains water pipe line. The line of the pipeline lay along

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the A466 road (Monmouth to Hereford). The work of laying the pipeline was being carried out by three employees of the appellant, Patrick Joseph Doherty, John Leslie Smith and Michael John Price. Mr Doherty was the foreman of the three employees and was an experienced foreman with several years’ experience of laying and testing water mains. As part of the work it was necessary to carry out a pressure test on a section of pipeline. A pressure test consisted of filling the section of pipeline with water under a specified pressure and leaving it under that pressure for a specified length of time. The pressure test was being carried out on 14 March 1973 by Mr Doherty and Mr Smith. In order to carry out the pressure test, a length of piping about six feet long (called a ‘test head’) was inserted into the end of the pipeline section in question. The test head was laid in a trench approximately 18 inches wide and three feet deep. The nearest edge of the trench to the main road was about five feet from the edge of the carriageway. On to the other end of the test head from that which was inserted into the pipeline, was a screwed cap (called the ‘test cap’). The test cap had a hole in the middle into which was fixed a length of one inch diameter steel pipe which passed through 90 degrees and ran to ground level where it was connected to a pressure gauge and stop valve. A one inch diameter rubber hose connected the stop valve to a pump which was used for pumping water into the pipeline. The pressure required for the pressure test was 220 lbs per square inch. That would result in a thrust of approximately 2 3/4 tons on the test cap. The normal means of preventing the thrust from blowing the test cap off or from blowing the test head out of the pipeline was by wedging it against a solid object, such as a timber sleeper dug well into the sides of the trench or concrete block so positioned as to distribute the thrust over an area of earth. The test head had also to be prevented from moving upwards during testing by reason of thrust. Mr Doherty and Mr Smith did not not use a timber sleeper to act as a thrust block, although they could have done so if they had wished. About 14 inches away from the test cap, there was a concrete block securing pipes running in the other direction. Mr Doherty and Mr Smith filled this 14 inch gap with hardcore which they rammed hard down. They partly filled the trench on top of the test head with loose backfilling. The process of building up the required pressure for the test lasted some hours. At about 1.10 pm the pressure had reached approximately 200 lbs per square inch. Mr Doherty and Mr Smith were both standing in the vicinity of the gauge between the trench and the road. They saw the earth above the test head moving and realised that (as was the fact) the thrust was causing the test head to rise. They threw some more earth and tarmac into the trench but this did not stop the movement of the test head. Almost immediately afterwards they realised that the test head was going to blow off. Mr Smith ran towards the pump in order to stop it but, before he reached it, the test head blew out of the end of the pipeline. The test head was thrown a distance of approximately 15 feet. If the test head had been securely fixed both laterally and vertically it would not have blown off. Mr Doherty and the other employees concerned could have securely fixed it against lateral movement by means of a sleeper. There was a conflict of evidence whether the use of hardcore rammed between the test head and the existing concrete block was satisfactory to prevent lateral movement, but it was unnecessary for the justices to decide the point because: (a) the movement which did occur was vertical, and (b) the backfilling on the top of the test head should have been, but was not, rammed down adequately. The appellant had not supervised Mr Doherty or his other employees concerned in any way in connection with the laying and testing of the pipeline. He visited them once a week only in order to pay wages. He considered that the responsibility for supervising lay with the Herefordshire Water Board. Neither Mr Doherty nor Mr Smith had, while employed by the appellant, carried out an identical pressure test. When, or immediately before, the test head blew off Mr Doherty ran into the road and was killed by impact with a passing vehicle on the far side of the road from the trench. There were warning signs in the road on each side of the site where the test was taking place and an arrow indicating that the traffic should keep to the other side of the road. There

Page 297 of [1975] 1 All ER 294

were no cones to prevent traffic from passing close to the trench. The appellant left to Mr Doherty as foreman the responsibility for using, erecting and placing any traffic signs or traffic lights which he considered necessary for the safety of the operation in hand. Traffic lights were available at the site on 14 March 1973 but were not in use on that day although they had been used on previous days.

It was contended by the appellant (a) that the place of work was safe as far as was reasonably practicable and that reg 6(2) of the Construction (Working Places) Regulations 1966 had not therefore been contravened; (b) that if, which was not admitted, the requirements of reg 6(2) of the 1966 regulations had been contravened, such contravention was brought about by reason only of a contravention of an employed person’s, in this case Mr Doherty’s, duties imposed by the 1966 regulations or by s 143 of the Factories Act 1961; (c) that if there had been a contravention of the 1966 regulations or a breach of the duties imposed by s 143 of the 1961 Act by an employed person, in this case Mr Doherty, the respondent had failed to show that such contravention arose because of the appellant’s failure to take all reasonable steps to prevent it; (d) that if, which was not admitted, the method of testing the pipeline was in any way unsafe, such unsafe system of work did not make the place where Mr Doherty was working unsafe.

It was contended by the respondent (a) that the method of preparing the site, the test head and the pipeline was unsatisfactory in that inadequate measures were taken to prevent the test head from moving when test pressures were applied; (b) that the unsatisfactory and unsafe method of testing the pipeline made the place of work unsafe and that all reasonably practicable steps to make it safe had not been taken; (c) that the place of work had been made unsafe by the lack of cones on the road in the vicinity of the trench when the testing of the pipeline was being carried out.

The justices were of the opinion that the case had been proved and accordingly, the appellant was fined £150 together with costs of £35·45.

Piers Ashworth QC and J Playford for the appellant.

Peter Scott for the respondent.

1 November 1974. The following judgments were delivered.

LORD WIDGERY CJ. This is an appeal by case stated by justices for the county of Hereford sitting as a magistrates’ court at Ross-on-Wye. The hearing took place on 18 October 1973 and the business before the court was an information preferred by the respondent against the appellant that the appellant on 14 March 1973 at an address in Herefordshire being an employer of workmen undertaking operations or works to which s 127 of the Factories Act 1961 and the Construction (Working Places) Regulations 1966 applied and the place of work at which an employed person, namely Patrick Joseph Doherty, worked was not so far as reasonably practicable made safe as required by reg 6(2) of the 1966 regulations.

The justices convicted the appellant of that offence, and the appellant accordingly appeals by case stated, which means that the appellant is seeking the opinion of the court on a point of law arising in the proceedings. I feel bound to say at once that the point of law could not conceivably be identified by anyone reading the text, and it would be of considerable assistance if more attention had been paid initially to the way in which the case was stated in that regard. But I am satisfied that, with the assistance of counsel, we have isolated the point of law the decision of the court on which can be conclusive of the issue.

The facts are found with great clarity and considerable detail so far as the general narrative and description of the scene is concerned, and I shall put them quite shortly. The appellant, as a civil engineering contractor, had undertaken to lay a water main for the Herefordshire Water Board. The actual laying of the main was carried out by three workmen: Doherty, Smith and Price, of whom Mr Doherty, an experienced man, was the foreman.

The time had come when the main was laid and when it had to be tested; that is to

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say it had to be tested to see if it could contain the pressure of water which it was designed to carry. For that purpose a system of testing apparently well known and understood was employed in this manner. First of all there was brought to the site of the main, which was alongside a highway in Hereford, a thing called a ‘test head’, which was a length of pipe about six feet long, which could be, and was, inserted into the end of the section of pipe to be tested. The test head was laid in a trench 18 inches wide and three feet deep and so laid, as I understand it, in order that it could physically be inserted into the end of the main itself. On the end of the test head, remote from the main, there was something which was called a ‘test cap’, which was a cap screwed on to the test head. Then there were devices which I need not endeavour to explain whereby the pressure in the main could be monitored so that as pumping took place and pressure was built up, it was possible to see what pressure was being contained in the main.

It is quite obvious that when the required pressure was produced in the main (a pressure of 220 lbs per square inch) a very heavy force would be exerted on the test cap, and it was well recognised that precautions would have to be taken in order to prevent the test cap from being blown out by the pressure built up in the main. Normal engineering practice, as the justices find, would have been to locate the test cap against something solid such as a block of concrete inserted in the trench or some other resistant material which would prevent the pressure from blowing the cap off. It was also recognised that some steps would have to be taken to prevent the test head from rising vertically from its bed under the pressure. In other words, it was necessary to guard against a lateral movement of the test head or a vertical movement, either of which with high pressure in the main might have produced disaster.

The method employed under Mr Doherty’s direction to guard against this danger was not to use a block of concrete or a sleeper or anything of that kind, but since there was already a concrete block about 14 inches away from the test cap, the method employed was to fill that space with hardcore, which was rammed down hard. What seems to have been omitted was adequate precaution to prevent the test head rising vertically. All that was done there was that certain hardcore was put on the top of the head but in insufficient quantity or insufficiently well impacted to prevent the head from rising.

The test began. Some hours passed whilst pressure was being built up in the pipe, and at about 1.10 pm on the day in question, when the pressure was up to about 200 lbs per square inch, it was observed by the three men standing at the side of the equipment that the earth was beginning to move around the test head. This, of course, meant that something had gone wrong, and indeed that imminent danger might arise. An attempt was made to turn off the pump in order to prevent the pressure from increasing, but before the pump could be turned off, the test head blew out of the main. It was carried some 15 feet as a result of pressure behind it, and Mr Doherty, seeking to escape from the consequences of the accident which was imminent, ran on to the adjacent highway and was knocked down and killed by a passing car.

Arising out of those facts and without our being given any views which the justices formed on the technical issues in this case, we are asked to say by the appellant that the conviction was wrong and that the events to which I have referred could not result in a situation in which the employer, the appellant, was criminally responsible under the statute for having failed so far as reasonably practicable to make safe the workplace of these men.

The actual provision under which the charge was laid is reg 6 of the Construction (Working Places) Regulations, 1966. It provides:

‘(1) Without prejudice to the other provisions of these Regulations, there shall, so far as is reasonably practicable, be suitable and sufficient safe access to and egress from every place at which any person at any time works, which access and egress shall be properly maintained.

‘(2) Without prejudice to the other provisions of these Regulations, every place

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at which any person at any time works shall, so far as is reasonably practicable, be made and kept safe for any person working there.

The issue between the parties on the principal point in this appeal can be put quite shortly. The prosecution maintain, as they maintained, I think, below, that the presence of this test head, insufficiently secured in its bed and containing, as it did, a very high pressure of water, caused the place where these men were working to be unsafe. Looking at the whole picture, the actual ground on which the work had been done, the equipment with which it was being done and the consequences of the manner in which it was being done, it is said by the prosecution that you have here a place which is unsafe. Of course if one simply asks oneself: was Mr Doherty safe standing by the side of this imminent disaster? the answer would quite readily be returned that he was unsafe.

The argument for the appellant is that one must distinguish in these matters between a danger which is a danger arising from the place qua place, and a danger arising from the particular operation which at the moment in question is being carried on in that place. Counsel for the appellant submits that if one looked at the place before the operation began, there was nothing about it which would indicate that it was in any way unsafe, and he says that the place does not fail to be made and kept safe within the meaning of the regulation merely because the operation carried on on it on that day is one which produces a potential danger to those who are working in that place.

There is the issue, clear cut for all to see, and strangely enough it seems to be an issue which has never been decided before. There is little authority on the point, but in looking at it one has to remember that the precise language of the Factories Acts and the regulations made under them has varied from time to time, and one must bear in mind and have regard to the actual statutory provisions on which the various judgments were based.

The first case to which we have been referred is Higgins v J Lyons & Co Ltd. That is a case in which it was alleged that the means of access to a place of work was unsafe within the meaning of the then current regulations, regulations which in this regard were not dissimilar from the present. The simple facts of the case were that a girl employed in a large premises occupied by J Lyons & Co Ltd was moving through those premises on her way back from lunch. She was making her way back to the office in which she worked and was doing so through her employers’ premises. She passed through a yard for the purpose of getting back to her office, and as she went through the yard a truck carrying some 15 cwt of flour was being pushed towards her by two employees. The negligence of the two employees resulted in the girl being injured by this truck, and the question arose as to whether in those circumstances she had been provided with a safe means of access back to her office. The Court of Appeal held that the fact that a truck was negligently operated in the means of access did not in itself prevent the means of access from being safe. Clauson LJ, giving the leading judgment, said:

‘It was admitted that the plaintiff and the persons pushing the lorry were in common employment. Accordingly mere negligence was not ad rem. But the plaintiff said that there had been a breach of s. 26(1) of the Factories Act, 1937. The deputy county court judge found that the defendants had committed a breach of the Act. There was no evidence that they did. It was a perfectly simple position. There was a yard with a footpath round it. There was no trap and nothing wrong with the yard. Someone was using the yard negligently, but that fact alone did not justify the deputy county court judge in finding that there had been a breach of the subsection. The appeal must be allowed.’

I find that a helpful authority, although the language is somewhat different, and

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certainly helpful to the appellant in this case because it is at all events an example of the proposition that if the place qua place was safe, it does not cease to be a safe place because somebody happens to be conducting himself negligently in it at the material time.

The next case to which I propose to refer is Levesley v Thomas Frith & John Brown Ltd. This was a case again dealing with means of access, and the obligation imposed by the relevant legislation was that the means of access should be maintained in a safe condition. The evidence showed that for a short period articles had been allowed to stand on the defined means of access in such a way as might give rise to danger to those who sought to use it; and although no one criticised the means of access itself (it was perfectly properly made and laid down initially) it was said, and held by the learned trial judge, that the means of access was not maintained in a safe condition because these articles for a short period were lying on it.

Denning LJ, dealing with the section which required that the means of access should be provided and maintained in a safe state, said ([1953] 2 All ER at 869, [1953] 1 WLR at 1210):

‘The proper interpretation is to read “safe” with “provided” so that the section reads in this way: There shall be provided a safe means of access (such as scaffolding, staging or so forth) and, such a means having been provided, it must thereafter be “maintained”, i.e., maintained in the way defined in s. 152(1), viz., maintained in an efficient state, in efficient working order, and in good repair. Latimer’s caseb shows that this obligation to “maintain” should not be used so as to put an excessive obligation on the employer …  The obligation is not an absolute obligation to maintain safety, but a relative obligation to maintain efficiently. Once a safe means of access is provided, such as a passage or gangway, the occupier is not responsible for every temporary obstruction (such as a patch of oil or slipperiness) which may, through some accident or mischance, occur in it. If he has an efficient system to keep it clean and free from obstruction, that is all that can be reasonably demanded of him.’

I remind myself that the language is somewhat different, and whereas in our regulation the obligation in regard to the place of work is that it be kept safe, in Levesley’s case the obligation was that it be maintained, a word which had a statutory meaning in the Act. But I find it very difficult to believe that ‘kept safe’ in our regulation has any significant difference from ‘maintained’ in the legislation under consideration in Levesley’s case, and that seems to me to go some way—perhaps not very far—in support of the proposition of the appellant in this case.

Finally I would refer to some obiter dicta of Winn LJ in Woods v Power Gas Corporation Ltd. This was a case on reg 7 of the Construction (General Provisions) Regulations 1961c, and the terms of the regulation were these:

‘(1) Sufficient safe means of access and egress shall so far as is reasonably practicable be provided and maintained to and from every place at which any person has at any time to work and every such place shall so far as is reasonably practicable be made and kept safe for any person working there.

‘(2) Where work cannot safely be done (a) on or from the ground or from part of a building, or other permanent structure there shall be provided (b) and maintained either scaffolds (c) or where appropriate ladders or other means of support, each of which shall be suitable and sufficient for the purpose.’

I draw particular attention to the fact that in para (1) which I have already read we

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have a reference to the working place being made and kept safe in the same language as in our present regulation.

Winn LJ, at the end of his judgment, delivered himself of some general observations about the meaning to be attached to the words in the regulation such as ‘access’, ‘egress’, ‘ground’ etc. He said ((1969) 8 KIR at 841):

‘But I think that, having regard to the juxtaposition of the provisions of sub-regulation (2) with those of sub-regulation (i), which relate to safe means of access and egress and safety of a place of work, the whole concept is that the means of access, and egress, the place of work, or the ground, part of a building or permanent structure, referred to respectively in sub-regulations (i) and (2) of regulation 7 shall be safe in themselves, qua access, qua egress, qua place, qua ground, qua building, qua permanent structure. Not all ground is safe to stand on. Ground may slip away. It may give in by caving in, collapsing. Parts of a building may not be stable. They may collapse in the course of, for example, demolition of an old decrepit building. Similarly, in the case of means of access or means of egress, such means may be safe or unsafe in themselves. They may be slippery. They may tend to collapse or slip away, as distinct from having a slippery surface. In each case, in my suggested approach to this regulation, it is the safety or lack of safety of the place which is relevant as the primary consideration.’

Although, as I have indicated, that is not an observation on the self-same regulation with which we are concerned, it was dealing with a regulation in virtually identical terms, and I am much attracted by Winn LJ’s approach in that he says that the quality of access, egress, place etc, shall be considered qua access, egress or place respectively.

I think that the guiding light in our approach to the problem before us today is to say that in deciding whether the place of work was made safe, it is the place qua place that we look at, and not the place qua operation carried on on the place. That does not mean of course that in deciding whether the place is made safe one has total disregard for the activities which go on in the place itself. The safety of the place depends not simply on the construction of the floor or the solidity of the walls, but it also depends in some degree on the nature of the operations carried on therein. Insofar as there is permanent equipment in the place, then its safety can in my judgment reflect on the safety of the place. Insofar as there are activities carried on in the place which are constant, regular and recurring, I can well see that they may have their impact on the question of whether the place has been made safe.

But where, as in the present instance, you start with a place safe in every degree, and the only thing which renders it unsafe is the fact that equipment brought on it for a particular operation, and being used for a particular operation on a particular day, produces an element of danger, it seems to me that that is not enough to justify the allegation, certainly in criminal proceedings, that the place itself had not been made safe.

It seems to me that if the justices had instructed themselves on those lines, they would have been bound to hold that the source of danger arising from the pressure in the test head was not an element which would cause the place to be other than a safe place; and, if they had come to that conclusion, then I think they would have been bound to dismiss this information quite apart from the number of other points which have been raised, though not fully argued, before us today.

On the face of the case stated it might be said to be possible that the justices had reached their conclusion not on the matters to which my judgment has been directed, but on the very much narrower point, namely, that insufficient steps had been taken to mark off the working place from the highway and thus to give adequate protection to the workmen from the dangers of the highway. I can well see that a failure to mark off the working place from the highway might be the production of an unsafe

Page 302 of [1975] 1 All ER 294

working place, but the prosecution (and I think quite rightly) have not asked us to consider the possibility that the justices may have been moved by those considerations to reach the conclusion which they did.

Approaching the matter on the footing that they tested this by asking themselves whether the dangerous process made the place a dangerous place, I think that they reached a conclusion untenable in law, and I would allow the appeal and quash the conviction.

BRIDGE J. I entirely agree and I would only add this. It seems to me clearly right that a line must be drawn, when considering whether or not a breach of reg 6(2) of the Construction (Working Places) Regulations 1966 has been established, between a danger on the one hand, arising from the condition of the place as such, and a danger on the other hand, arising essentially from some activity carried on at the place in question.

I should hesitate to make any attempt to lay down a comprehensive test to distinguish in practice between those two different situations. I can envisage great difficulties in relation to particular sets of facts in saying exactly where the line should be drawn and exactly on which side of the line a particular case might fall. It must be largely a question of fact and degree. But I have no hesitation in agreeing with Lord Widgery CJ in concluding that on the facts of this case the dangers which arose from the high pressure of water introduced into the test head, and the absence of suitable precautions to prevent the escape of that pressure, fall on the side of the line which is favourable to the appellant, and I agree that the appeal for those reasons should be allowed

SHAW J. I also agree.

Appeal allowed. The court refused leave to appeal to the House of Lords but the following point of law was certified as being of general public importance: ‘Whether (and to what extent) a place of work can for purposes of reg 6(2) of the Construction (Working Places) Regulations 1966 be made unsafe by an unsafe system of work therein.’

Solicitors: Stevensons agents for Rowberry, Morris & Co, Gloucester (for the appellant); Solicitor for the Department of Employment.

Lea Josse   Barrister.

National Transit Insurance Co Ltd v Customs and Excise Commissioners

[1975] 1 All ER 303

Categories:        TAXATION; VAT and Customs and Excise        

Court:        QUEEN’S BENCH DIVISION        

Lord(s):        LORD WIDGERY CJ, MELFORD STEVENSON AND WATKINS JJ        

Hearing Date(s):        5 DECEMBER 1974        

Value added tax – Supply of goods or services – Supply of services – Supply for a consideration – Meaning of ‘consideration’ – Expenses – Reimbursement – Principal and agent – Sum paid by principal to agent towards cost of agent’s expenses incurred on behalf of principal – Whether sum paid a consideration for services supplied by agent – Finance Act 1972, s 5(2).

Value added tax – Exemptions – Insurance – Provision of insurance of any description – Meaning of ‘provision of insurance’ – Whether limited to the provision of insurance cover – Whether including the settling of claims – Finance Act 1972, Sch 5, Group 2, Item 1.

The taxpayer company carried on business as an insurer. Under an agreement between a large number of insurance offices the taxpayer was a member of a committee which acted on behalf of members in effecting insurance policies for the Road Haulage Executive. The committee had the right to receive premiums, issue policies, and to settle and pay claims, the proceeds of the business being divided rateably among members in accordance with the agreement. The committee had authority to delegate its responsibility in a particular area to any one of its members. The committee arranged that when an insurer settled a claim on behalf of the committee the insurer was entitled to a credit of £4. The credit was not intended to be economic but to be as fair as possible between all those concerned and to be a contribution towards expenses incurred in handling the claim. The taxpayer was assessed to value added tax on the sum of £4 which it had received for settling a claim on behalf of the committee. The taxpayer appealed contending, inter alia, (i) that the sum of £4 did not constitute a ‘consideration’ for the supply of services within s 5(2)a of the Finance Act 1972 but was merely a reimbursement of expenses; (ii) that, alternatively, the settling of the claim by the taxpayer constituted the ‘provision of insurance’ within Item 1b of Group 2 of Sch 5 to the 1972 Act and was not therefore a taxable supply of services. The tribunal dismissed the appeal. On appeal,

Held – The appeal would be dismissed for the following reasons—

(i) The tribunal were entitled to find that in the circumstances the credit of £4 was not the equivalent of reimbursing an agent for costs incurred on behalf of his principal and could therefore properly be described as a consideration within s 5(2) of the 1972 Act (see p 306 j to p 307 a and p 308 e and f, post).

(ii) The words ‘provision of insurance’ in Item 1 of Group 2 meant the provision of insurance cover, ie the effecting of a contract of indemnity, and did not include the settling of a claim made under such a contract. The sum of £4 had not therefore been paid for the ‘provision of insurance’ and was not therefore consideration for an exempt supply (see p 308 d to f, post).

Notes

For value added tax on the supply of services for a consideration, see Supplement to 33 Halsbury’s Laws (3rd Edn) para 479B, 4.

Page 304 of [1975] 1 All ER 303

For the exemption from value added tax in relation to insurance, see ibid, para 479B 10.

For the Finance Act 1972, s 5, Sch 5, Group 2, Item 1, see 42 Halsbury’s Statutes (3rd Edn) 167, 222.

Appeal

This was an appeal by National Transit Insurance Co Ltd (‘the taxpayer’) against a decision of a value added tax tribunal (chairman Neil Elles Esq) sitting at London on 1 May 1974 affirming a decision of the Customs and Excise Commissioners communicated to the taxpayer in a letter dated 18 January 1974 whereby it was determined that the following supplies of services by the taxpayer were liable to value added tax: (i) handling a claim in respect of damage to 400 cartons of eggs reported to the Road Haulage Insurers’ Committee on 13 April 1973 by Pickfords International Ltd, the alleged consideration received by the taxpayer for that service being £4; (ii) handling a claim notified to the taxpayer on 12 April 1973 by Pickfords International Ltd from British Aluminium Ltd in respect of one case of aluminium in transit to Belfast, the alleged consideration received by the taxpayer for that service being £4. The facts are set out in the judgment of Lord Widgery CJ.

C Potter QC and P Lawton for the taxpayer.

Harry Woolf for the commissioners.

5 December 1974. The following judgments were delivered.

LORD WIDGERY CJ. This is an appeal by the National Transit Insurance Co Ltd against the decision of a value added tax tribunal sitting at London on 1 May 1974 whereby the tribunal determined a liability for payment of value added tax by the appellants in regard to the receipt by the appellants of the sum of £4, the circumstances of such receipt being apparent in a moment.

I would like to begin by complimenting the tribunal on the form of judgment in this case. It is extremely clear, in good sequence, descriptive and, as far as I can judge, accurate, and so much so that I find it possible, instead of trying to find my own words to describe the issues which arise in this case, to take liberal portions of the judgment below and adopt them as my own.

The background appears in the judgment in these words:

‘Road Transport was partially nationalised in 1949 and as a result of this the insurance market had to cope with the Road Haulage Executive and there arose a need to reorganise and rationalise insurance relating thereto. Accordingly on 1 January 1951 an agreement (“the 1951 Agreement”) was entered into between a large number of insurance offices and Lloyds Underwriters all of whom are collectively referred to in the Agreement as the “Insurers“. The Road Haulage Executive was referred to in the Agreement as “the Insured” and the individuals severally appointed by the Insurers as the “Road Haulage Insurers Committee” was referred to in the Agreement as “the Committee“. A detailed system of administration was brought into being by the 1951 Agreement. The insurers acting together vested in the Committee the consideration of proposals for insurance, the fixing of the rates of premium and the acceptance, renewal, modification and discontinuance thereof. Under Clause 1(a) thereof any acceptance by the Committee of a proposal was to be accepted on behalf of the Insurers severally and rateably according to the proportions of each class of business set against the name of each Insurer in the second column of the Schedule thereto or such other proportions as might be substituted. They also vested in the Committee the receipt of premiums and the settling, adjustment, compromising, allowance and payment of claims.’

All that means, in a sentence or two, is that consequent on the amalgamation of a large number of road haulage operations into the one nationalised entity, a similar rationalisation of the insurance cover was required. The device, as the tribunal say,

Page 305 of [1975] 1 All ER 303

was the setting up of this committee and the individual insurers appointing the committee as their agent to conduct and run the business for them. The committee had a right to receive premiums, issue policies, settle claims and pay claims, and indeed, apart from the fact that at the end of each period, I think of three months, there was a final reckoning and an apportionment amongst the parties of amounts due to them, the committee were responsible for organising and running the insurance work involved.

In addition to the provisions of the contract noted in the tribunal’s decision, I would also draw attention to two other matters. In the first place it was provided that the committee itself should not be entitled to any remuneration although it was entitled to be indemnified by the insurers rateably. One finds that in para 10 of the agreement.

Further, by para 1(p) of the agreement provision was made whereby the committee could delegate its responsibility under the agreement to chosen individuals as it thought fit. This was no doubt to prevent the business being handled centrally by one unmanageably large organisation, and the committee took advantage of the power in para 1(p) to appoint one of the insurers themselves, preferably the larger, to act in any given area and any specific field of insurance under the title of a ‘service point’.

Thus one has the taxpayers, National Transit Insurance Co Ltd, playing, as it were, a dual role in that not only is it one of the insurers on whose behalf the committee was appointed, but it is also a service point, and as such it is responsible for handling claims which arise in its area or field of business, even though the claims are not claims under its own policies.

The first question which arises, indeed all the questions which arise in this case are concerned with a test sum of £4, and the tribunal describe the way in which this comes into relevance in the following way. They say:

‘Pursuant to its powers under the Agreement the Committee after discussion with all those concerned has made the following arrangements for dealing with expenses incurred in handling claims.’

I pause to observe that as a service point the taxpayer is concerned with the handling of claims. The tribunal go on:

‘Each Service Point is entitled to a credit of £4·00 for every claim which it handles. Originally in 1951 this was £3, and we find as a fact that this credit (known generically as a “handling fee”) was never intended to be economic, but was intended to be as fair as possible as between all those concerned, and to be a contribution towards expenses incurred in dealing with these matters.’

The dispute, as I say, centres around that £4 credited in the way described in the tribunal’s conclusion, and the way it comes before us is simply this. The Commissioners of Customs and Excise took the view that when each service point, including the taxpayer, settled a claim on behalf of the insurers generally (I pause to observe of course it would be on behalf of the insurers generally, the committee merely being an agent or conduit pipe connecting the insurers to the insured person) and received a credit of £4 in respect of that settlement, then according to the contention of the Commissioners of Customs and Excise, there was there a supply of a taxable service within the meaning of the Finance Act 1972 for a consideration, namely, £4 which was credited.

The provisions of the 1972 Act which give rise to the payment of value added tax are becoming well known, and I do not propose to refer to them all, but it is important to bear in mind, having regard to the form of the argument in this case, that no tax is payable on the supply of a service unless the service is rendered for a consideration. One gets that from s 5(2) of the 1972 Act.

Accordingly, in order to sustain the commissioners’ argument in the present

Page 306 of [1975] 1 All ER 303

instance it is necessary, amongst other things, to demonstrate that the £4 is a consideration for present purposes. Furthermore, no value added tax is chargeable unless the supply in question, whether of goods or services, is by a taxable person in the course of a business carried on by him. Hence in order to sustain the commissioners’ argument in the present instance it is necessary as well to show that the supply of the service by the service point was a supply in the course of a business carried on by that insurer.

Those being the main issues involved, and I turn to the remaining ones later on, I can pass on to see in what language the tribunal disposed of this claim, although before I do so, in deference to counsel for the taxpayer’s own contentions, I ought to say that in opposition to the contention of the commissioners to which I have already referred he submits to us, first, that there was no consideration in respect of this alleged supply of a service; secondly, that it was not in the course of a business carried on by the service point; and also another matter to which I will come later, if he is wrong on those two points, that the supply was an exempt supply.

To take the first two points first and the language used by the tribunal to deal with them: I have already read the tribunal’s findings of fact in which they say that this payment of £4 was never intended to be economic but was intended to be as fair as possible and a contribution towards expenses incurred.

Having heard the argument on both sides, the tribunal deal with the matter in this way:

‘For each claim handled the [taxpayer] is allowed a handling fee of £4·00, which is credited to its account in the quarterly settlement as between all the relevant Insurers which is effected through the Committee. Despite the superficial attraction of treating the activities undertaken by the Insurers, the Committee and the [taxpayer] as though they were one insurance company, and of looking at the end result, instead of what was actually done step by step, we are driven to the conclusion on the facts before us that a separate service is supplied by the [taxpayer] for a consideration which, whether or not it is aptly termed a handling fee, is quantified in the sum of £4·00 per claim handled. It was contended by [counsel for the taxpayer] with some force that some part of this service in reality relates to self supply, and self supply of a service is not a taxable supply … ’

Then there is further reference to the contention put before the tribunal on behalf of the taxpayer.

Counsel for the taxpayer criticises the decision of the tribunal and takes, as I have indicated, as his first point that the £4 is not a consideration for present purposes. He says that it is only a book entry and does not involve the actual transfer of cash from one person to another. But in a much more formidable argument, as it seems to me, he contends that a consideration for present purposes means some kind of remuneration or reward, and that one would not regard a service as being supplied for a consideration if all that the supplier was doing was getting his out-of-pocket payments.

I confess this point has given me more than a little trouble in the course of the hearing, and I am glad in a sense that we do not have today to decide what the position would be in a simple case in which the only consideration of any kind passing was the reimbursement to an agent of expenses which he had incurred on behalf of his principal, but that is not this case.

It seems to me here that when one looks at the basis of the fixing of the £4 sum it is not intended to be, nor do the tribunal find it intended to be, a reimbursement of expenses as such. It seems to me to be a kind of compounded fee which is payable to the service point in respect of each and every claim which it handles and settles, regardless of whether the actual expense exceeds or falls short of the figure of £4, or indeed amounts to anything at all.

In my judgment the tribunal were entitled to find on what is really a mixed point

Page 307 of [1975] 1 All ER 303

of law and fact that in the circumstance of the present instance the credit allotted of £4 per claim settled was not the equivalent simply of reimbursing an agent for the costs incurred on behalf of his principal and could fairly and properly be described as a consideration for present purposes.

The second argument put forward by counsel for the taxpayer in regard to the chargeability of this sum is a contention that the payment, if payment it was, was not made by the taxpayer in the course of its business, and if that is right, of course it is enough to exclude the payment from the net of value added tax.

I confess that on this point I have never really had any inclination to accept the argument put forward because it seems to me to be too clear for argument that when the taxpayer provides the service of settling the claims it is doing so in the course of its business.

What is its business? It is an insurer. It has also taken on itself the responsibility under the agreement of 1951 to act as a service point for other insurers as well. Perhaps it is fair to describe that as an addition to its business activities; perhaps it is not. But when it comes to settle a claim on behalf of itself and the other insurers who have joined in the agreement, it seems to be beyond argument that that should be a service supplied in the course of its business.

I have listened with care to counsel for the taxpayer’s contentions on this point. He made much of the fact that if, as he submitted, two solicitors were in partnership with one another each would supply services for the other, yet any money received would not be regarded as received in the course of a business carried on by the recipient. I think that may be so, but it seems to me to be a wholly artificial example unrelated to the problems which face us.

In the simple arguments in our case on this point I can see no possible ground for saying that the service was supplied otherwise than in the course of a business carried on by the taxpayer.

So I come to the third and last point which has been raised in regard to this matter, and that is a contention taken by counsel for the taxpayer, only if he has failed on both of his first principal submissions, that the supply of this service was an exempt supply under Sch 5, Group 2, Item 1, to the 1972 Act. This schedule contains a number of exemptions, and in Group 2, Item 1, the exemption described is: ‘The provision of insurance of any description.' In other words, what it means is that if the service alleged to be taxable is the provision of insurance of any description, it ceases to be taxable because it is taken out of the scope of the tax by the exemption.

Counsel for the taxpayer contends that the provision of insurance is not confined to the issuing of the policy or to the continuance in force of the policy, but extends up to and includes the day when the policy matures for whatever reason it matures and the actual claim is examined, settled and paid. He says that the insurers are supplying the service of the provision of insurance right through that period and accordingly the service of checking and settling the claim is all under the umbrella, as it were, of the provision of insurance.

What the tribunal thought about that was as follows. They said:

‘It remains then to be considered whether the service supplied by the [taxpayer] in handling the claim is an exempt service within the meaning of Group 2 of Schedule 5 to the Finance Act 1972. The insurance is collectively provided by the Insurers of the Insured under the 1951 Agreement, but what are the limits of the description “the provision of insurance”? and does this term include the handling of claims? In the view of the majority of us … the term “insurance” has the meaning ascribed to it in Webster’s Dictionary under the definition numbered 2(b), “coverage by contract whereby for a stipulated consideration one party undertakes to indemnify or guarantee against loss by a specified contingency or peril … ” The handling of claims appears to us to be an integral part of providing the indemnity itself after the contingency has arisen against

Page 308 of [1975] 1 All ER 303

which the insurance is effected. It is true that this forms part of the normal business undertaken by an insurance company: it is also true that the consideration or premium paid by the Insured for the insurance appears to have been costed by the Committee to include the estimated average cost of meeting claims in the relevant class of business, including the estimated cost of handling claims, and also an element of profit for the Insurer. None the less we hold that what is provided by the Insurer for the premium is the coverage against specified perils and we do not consider that the manner in which the premium is costed is relevant to the point which we have to decide. Insurance is a contract to indemnify and, once this has been effected we consider that the term in Group 2 of Schedule 5 “the provision of insurance” has been exhausted. The actual indemnity may never be called on and, in our view, if and when the relevant contingency arises the handling of the claim for the indemnity by the [taxpayer] against the Insurers is separate and distinct from the provision of the insurance as such.’

I feel disposed to accept not only that conclusion but also its reasoning. I agree with the conception, supported by the majority of the tribunal, that the provision of insurance means the provision of cover, and does not include as part of the service the settlement of a claim by the insurers on their own behalf or on behalf of other insurance companies, and accordingly it seems to me that the tribunal were entirely right in rejecting the argument that the supply of this service was an exempt supply in Item 1 of Group 2 of Sch 5.

For all those reasons, and thinking, as I do, that the tribunal was entirely right in its conclusions, I would dismiss the appeal.

MELFORD STEVENSON J. So would I.

WATKINS J. I agree.

Appeal dismissed.

Solicitors: Theodore Goddard & Co (for the taxpayer); Solicitor, Customs and Excise.

N P Metcalfe Esq   Barrister.

Davies v Customs and Excise Commissioners

[1975] 1 All ER 309

Categories:        TAXATION; VAT and Customs and Excise        

Court:        QUEEN’S BENCH DIVISION        

Lord(s):        LORD WIDGERY CJ, MAIS AND CROOM-JOHNSON JJ        

Hearing Date(s):        13 NOVEMBER 1974        

Value added tax – Value of supply of goods or services – Determination of value – Supply for consideration in money – Payment for goods by means of cash vouchers – Vouchers issued by company – Taxpayer accepting vouchers from customers in exchange for goods – Taxpayer entitled to reimbursement from company of cash value of vouchers less an agreed commission due to company – Whether goods supplied in exchange for vouchers supplied for a consideration in money – Whether tax to be charged by reference to the value of the goods supplied less amount of commission due to company – Finance Act 1972, ss 9(1), 10(2).

The taxpayer carried on business as a retail draper. He had an arrangement with a company whereby he would accept ‘checks’, ie vouchers bearing a face value, issued by the company and presented by customers in exchange for goods supplied in his shop. The company reimbursed the taxpayer the amount of the checks received by him subject to a deduction of 13 3/4 per cent which represented a commission from the taxpayer to the company in respect of customers introduced by means of the company’s checks. The taxpayer was assessed to value added tax under the Finance Act 1972, ss 9(1) and 10a, on the total cash value of goods paid for by means of the company’s checks. The taxpayer claimed that for the purposes of the charge to VAT he was entitled to deduct from the cash value of such goods the amount of the commission paid to the company.

Held – Payment by one of the company’s checks was a cash payment and s 10(2) of the 1972 Act was therefore applicable. The transaction between the taxpayer and the customer was in every way similar to a contract for the sale of goods; only the method of payment was different. It followed that, for the purposes of VAT, the value of the goods supplied was the amount which, with the addition of the tax chargeable, equalled the face value of the check presented by the customer by way of payment. The taxpayer had, therefore, been properly assessed by the commissioners (see p 311 a c d f and j, post).

Notes

For the value of a supply of goods or services, see Supplement to 33 Halsbury’s Laws (3rd Edn) para 479B, 8.

For the Finance Act 1972, ss 9, 10, see 42 Halsbury’s Statutes (3rd Edn) 172, 173.

Appeal

This was an appeal by John Joseph Davies (‘the taxpayer’) trading as Peter Sogood, against a decision of a value added tax tribunal sitting at the Birmingham Tribunal Centre on 20 May 1974 affirming a decision of the Commissioners of Customs and Excise contained in a letter dated 10 October 1973. The facts are set out in the judgment of Lord Widgery CJ.

The taxpayer appeared in person.

Harry Woolf for the commissioners.

13 November 1974. The following judgments were delivered.

LORD WIDGERY CJ. This matter comes before the court by way of an appeal from a value added tax tribunal which, on 20 May 1974, dismissed an appeal to the tribunal by Mr Davies, who is now in turn the appellant in this court.

The fact that the appeal comes from a value added tax tribunal indicates the

Page 310 of [1975] 1 All ER 309

nature of the matters with which we are concerned. The facts are these. The contention put forward by the taxpayer is really a contention about a variety of principles which he says are either wrong or wrongly applied in relation to the administration of this tax, and much of the paperwork which has been generated in this case has been due to the fact that only at a late stage was the issue applied to a single transaction so that it was possible to look at it and test the arguments of the taxpayer in relation to that transaction.

In brief, the background is this. The taxpayer is a drapery retailer, and he has an arrangement with a number of check companies (which is the simplest way of putting it), which are organisations which issue checks of a certain face value, which checks can be used in the appropriate and suitable shops for payment of goods on sale in the shops; and more specifically in relation to this shop of the taxpayer there was at all material times an agreement between the shopkeeper under a business name, but it was the taxpayer in substance, on the one hand, and the Provident Clothing & Supply Co Ltd (‘Provident’) on the other. The terms of the agreement were that the taxpayer would act on authorities issued by the company in the form of checks and cash vouchers and supply to the holder of such checks and vouchers any of the goods or services offered for sale from his premises and charge the same to the account of Provident at normal retail prices.

The purpose of that is clear enough. Customers of Provident who acquired their checks can use them in the taxpayer’s shop as though they were cash, and the obligation on the taxpayer is to charge Provident customers who come armed with these checks at normal retail prices which he would charge anybody else. But in some respects the customers who come to the taxpayer via Provident are less attractive than those who by their own way go from the street, because having charged customers only at normal retail prices, Provident proceeded to take 13 3/4 per cent from the amount of reimbursement which they would normally pay to the taxpayer when he submitted the check for payment. Thus, as a consideration for the services which Provident gives him, he is receiving on the sales to Provident customers 13 3/4 per cent less than he would have received had the sale been to a cash customer who walked into the shop.

That agreement was made in 1970 before value added tax was ever thought of, and the taxpayer says, and I have no doubt that he is right, that it has worked very well and very successfully, and he had no trouble in regard to the carrying on of business with Provident in that way. But of course VAT has come on to the scene, and undoubtedly it has created considerable problems for this kind of trader. One can illustrate the problem by reference to the particular transaction which was eventually isolated and made the subject of the tribunal’s decision before the matter came to us.

The transaction was a very simple one. There were six gentlemen’s handkerchiefs, and they were sold over the counter for £1·02. On an ordinary sale to an ordinary member of the public the customer would pay £1·02, and of that, some 9p would be VAT and the taxpayer would have to account for it to the Customs and Excise in the ordinary way. In other words, the £1·02 was an inclusive price, inclusive of VAT and on an ordinary sale the taxpayer would get 93p and would have to surrender 9p as VAT to the Revenue.

In fact this was not an ordinary sale; it was a sale to a Provident customer, so he took Provident checks to the value of £1·02, exactly the same price as an ordinary customer would pay, and when he submitted those checks to Provident for payment he received from Provident not £1·02 but 88p. The reason for that way by virtue of the agreement to which I have referred Provident were entitled to deduct 13 3/4 per cent of the face value of the checks when making payment to the taxpayer. He contends that in those circumstances he received only 88p in cash and that he should not be required to account for VAT on a notional sale at a net figure of 93p when in fact all he received was 88p from Provident.

Page 311 of [1975] 1 All ER 309

This simple transaction has given rise to arguments at great length, many of which have gone up to what I venture with respect to think were blind alleys. Consideration has been given to the question of whether a Provident customer acquiring goods through the Provident check is giving cash or something other than cash as a consideration. The point may be of some importance. From my point of view I am quite confident that the customer who presents the Provident check is paying cash and not consideration other than cash.

Another question which has been raised by the taxpayer this time is that the sale of the goods from his shop is not a sale to the customer who comes in and selects them but is a sale to Provident. He argues that because he is paid by Provident, Provident is his customer, and that the whole matter should be viewed on the footing that he is supplying the goods to Provident.

Again from my point of view I can see no substance either in law or common sense for that proposition. It seems to me that the transaction between the taxpayer and his customer is in every way similar to a final contract of sale of goods, save that the method of payment is different. As I suggested to the taxpayer when he was putting forward his argument, I said that if the goods had been defective, it seems clear enough that the customer would have brought them back to the taxpayer and would not have taken them to Provident. That is only a pointer to the fact that this is in my judgment a normal commercial sale from the taxpayer to the customer who comes into his shop.

Those being the circumstances, we find in s 9 of the Finance Act 1972 the provisions which determine how a supply of goods or services is to be valued for the purposes of VAT. Reference is made in s 9(1) to the provisions of s 10 as being relevant for this purpose. Section 10 is in these terms:

‘(1) For the purposes of this Part of this Act the value of any supply of goods or services shall be determined as follows.

‘(2) If the supply is for a consideration in money its value shall be taken to be such amount as, with the addition of the tax chargeable, is equal to the consideration … ’

That means in this case there being a sale to the customer for cash as I have already in my opinion indicated, the supply for VAT purposes is to be treated as being of such amount as with the addition of the tax chargeable is equal to £1·02; in other words the value of the supply is 93p and the difference of 9p is the VAT which has to be accounted for by the retailer.

If one stops at that point, I can see no further problems in the case as far as this simple example is concerned, and I think, with deference to the taxpayer, that he is not endeavouring to say that the conclusion of the tribunal in this specific instance was wrong, but he is eloquently describing to us the difficulties which retail traders have when dealing with VAT, and particularly when they also deal with provident societies and the like who issue these check forms.

I say with sincerity that he has my sympathy because the problems are obviously acute, and it may be that Parliament will find a way out of some of them, but this court is not here to make new laws. This court is only here concerned to say whether the tribunal’s view was right that on this simple sale of six handkerchiefs the taxpayer was accountable to the Customs for 9p. I think he was and I would dismiss the appeal accordingly.

MAIS J. I agree.

CROOM-JOHNSON J. I agree.

Appeal dismissed.

Solicitor: Solicitor, Customs & Excise.

N P Metcalfe Esq   Barrister.

Revell Fuels Ltd v Customs and Excise Commissioners

[1975] 1 All ER 312

Categories:        TAXATION; VAT and Customs and Excise        

Court:        QUEEN’S BENCH DIVISION        

Lord(s):        LORD WIDGERY CJ, BRIDGE AND KILNER BROWN JJ        

Hearing Date(s):        6, 7 NOVEMBER 1974        

Value added tax – Relief – Goods held at commencement of April 1973 – Goods on which purchase tax or other duty paid – Deduction as input tax of purchase tax or duty paid – Goods deemed to be held on material date by taxpayer – Goods supplied to taxpayer before that date and not by then supplied by him – Goods supplied to taxpayer before material date – Goods subsequently destroyed before material date – Whether goods deemed to be held by taxpayer on material date – Finance Act 1973, s 4(1)(6).

The taxpayer company was registered for the purposes of value added tax under the Finance Act 1972. On 19 March 1973 the taxpayer company held a large quantity of unused goods for the purpose of sale in the course of its business, on which purchase tax had been paid. On that day the premises where the goods were held were destroyed by fire and the entire stock was lost. The taxpayer company claimed a rebate under s 4(1)a of the Finance Act 1973 for the purchase tax which it had paid. It contended that it had satisfied the requirements of s 4(1) since, under s 4(6)b, the goods were to be deemed to have been held by it at the beginning of April 1973 in that they had been supplied to the taxpayer company before the end of March 1973 and had not by then been supplied by it.

Held – The purpose of s 4(6) was to prescribe the conditions which had to be fulfilled if goods which were in existence at the beginning of April 1973 were to comply with the requirement of s 4(1) that they should then be held by the person claiming relief for sale in the course of his trade. The conditions prescribed by s 4(1) and (6) were framed on the basis that the goods in question did in fact exist at the beginning of April 1973. Goods which had perished before then were not, therefore, eligible for relief under s 4(1). Accordingly the taxpayer company’s claim failed (see p 315 a to c and e to h, post).

Notes

For the deduction of input tax, see Supplement to 33 Halsbury’s Laws (3rd Edn) para 479B, 3.

For the Finance Act 1973, s 4, see 43 Halsbury’s Statutes (3rd Edn) 389.

Appeal

This was an appeal by Revell Fuels Ltd (trading as British Fuel Co) (‘the taxpayer company’), against the decision of a value added tax tribunal sitting at Pudsey on 5 March 1974 dismissing an appeal by the taxpayer company against the refusal of the Commissioners of Customs and Excise to allow the taxpayer company to include the sum of £17,615 in its value added tax return as an amount to be deducted as input tax by virtue of s 4 of the Finance Act 1973. The facts are set out in the judgment of Bridge J.

P G Whiteman for the taxpayer company.

Harry Woolf for the commissioners.

Page 313 of [1975] 1 All ER 312

7 November 1974. The following judgments were delivered.

BRIDGE J delivered the first judgment at the invitation of Lord Widgery CJ. This is an appeal under the Tribunals and Inquiries Act 1958 from the decision of a value added tax tribunal sitting at Pudsey given on 5 March 1974, dismissing an appeal by the taxpayer company from the refusal of the Commissioners of Customs and Excise to allow the taxpayer company a rebate or reduction of tax in the sum of £17,615 claimed by the taxpayer company to be due under the provisions of s 4 of the Finance Act 1973.

The facts, which were undisputed, can be very shortly stated. The taxpayer company is a trader which, on 19 March 1973, held in stock at certain supermarket premises in Hull a large and valuable quantity of goods intended in due course to be sold by the taxpayer company in the course of its business, which goods had suffered purchase tax in the sum of £17,615, the amount in dispute in this appeal. On that date, 19 March 1973, the premises in question were destroyed by fire and the stock of goods was totally destroyed in that fire.

The system of taxation known as value added tax was introduced by the Finance Act 1972 and came into operation on 1 April 1973. Before going to the provisions of s 4 of the Finance Act 1973, on which in the last analysis this appeal turns, it is necessary to say a very few words about the general structure of the value added tax system under the 1972 Act.

Value added tax is a tax charged on the supply of goods or services. We are concerned in this case solely with goods, so nothing more need be said about services. Only certain categories of goods attract the tax, but a person who carries on business in supplying goods of those categories is a taxable person, and when he supplies goods that is a taxable supply. The supply of goods by a taxable person attracts the tax notwithstanding that the person to whom that supply is made is not the ultimate consumer, but is another trader somewhere along the chain, who resells the goods supplied to him or uses them in the course of his business. That being so, the 1972 Act introduces what are called ‘input tax’ and ‘output tax’ with the object of ensuring that tax which is paid by a trader on goods supplied to him may be deducted from tax which he is liable to pay when he supplies those goods on to a third party or supplies other goods on to a third party having used in the course of his business the goods supplied to him.

This is effected by s 3 of the 1972 Act, sub-s (1) of which provides:

‘The following tax (in this Part of this Act referred to as “input tax”), that is to say—(a) tax on the supply to a taxable person of any goods or services for the purpose of a business carried on or to be carried on by him; and (b) tax paid or payable by a taxable person on the importation of any goods used or to be used for the purpose of a business carried on or to be carried on by him; may, at the end of any prescribed accounting period, be deducted by him, so far as not previously deducted and to the extent and subject to the exceptions provided for by or under this section, from the tax chargeable on supplies by him (in this section referred to as “output tax”).’

It is also necessary, as will appear when I come to look at s 4 of the 1973 Act, to take careful note of the provisions of s 7 of the 1972 Act, which embodies certain technical and, in a sense, artificial rules for determining the moment at which a supply is deemed to have taken place, which is referred to as the ‘tax point’, the point of time at which tax becomes payable.

Section 7(2) of the 1972 Act provides:

‘Subject to the following provisions of this section, a supply of goods shall be treated as taking place—(a) if the goods are to be removed, at the time of the removal; (b) if the goods are not to be removed, at the time when they are made available to the person to whom they are supplied; (c) if the goods (being sent or taken on approval or sale or return or similar terms) are removed

Page 314 of [1975] 1 All ER 312

before it is known whether a supply will take place, at the time when it becomes certain that the supply has taken place, but not later than twelve months after the removal.’

Then sub-ss (4) and (5), which I need not read in extenso, have this effect, that if an invoice in relation to goods supplied is issued either before the time of supply determined as under sub-s (2), or within 14 days thereafter, then the date of the issue of the invoice becomes the notional date of supply and supersedes the date which would otherwise be appropriate under the rules provided by sub-s (2). I also refer in passing to the circumstances that a somewhat similar artificial rule is adopted by s 47 in relation to the time of importation of goods.

Bearing those provisions in mind, I turn to the provisions of s 4 of the 1973 Act. That provides by sub-s (1):

‘Where the Commissioners of Customs and Excise are satisfied that purchase tax or a duty to which this section applies was charged on or in respect of goods or on or in respect of parts or ingredients of goods which at the beginning of April 1973 were unused and held by a taxable person for sale in the course of his business, then—[subject to certain administrative conditions] an amount determined or arrived at in accordance with subsection (2) of this section to take account of the tax or duty charged may … be included in the return made by the taxable person under Part I of the Finance Act 1972 for the first prescribed accounting period or, with the sanction of the Commissioners, in such a return made for a later period and shall, if so included, be treated for the purposes of that Part as an amount to be deducted as input tax.’

The object of that provision is plain. The value added tax system when it came into operation on 1 April 1973 took the place of the old purchase tax system, and if under the old system a trader had paid purchase tax on goods which he held in stock at the beginning of April 1973, and which on being supplied after that date by him in the course of his business would attract value added tax, such a provision as one finds in s 4 was necessary in order to avoid double taxation, and that is what this provision is intended to achieve.

The argument for the taxpayer company in this court is, as it has been both in making its claim to the commissioners and before the value added tax tribunal, to the effect that, notwithstanding that the goods destroyed in the fire on 19 March 1973 no longer existed at the beginning of April of that year, nevertheless, by reference to certain later provisions of this section, they are in a position to claim that those goods were at the beginning of April 1973 ‘unused and held by a taxable person for sale in the course of his business’. Accordingly it claims to be entitled to deduct the £17,615 purchase tax paid on those goods as input tax from its first return for value added tax purposes of tax due from it.

At first blush the argument seems a somewhat far-fetched one, but before reaching a conclusion about it, one has to look at s 4(6) of the 1973 Act, which is in these terms:

‘For the purposes of this section goods shall be deemed to be held by a person at the beginning of April 1973 if, and only if, they were—(a) produced by or supplied to him in the United Kingdom; or (b) imported by him; before the end of March 1973 and had not then been supplied by him; and any question whether goods were supplied by or to or were imported by any person before the end of March 1973 shall be determined as, under sections 7 and 47 of the Finance Act 1972, it falls to be determined for the purposes of the charge to value added tax.’

The argument of counsel for the taxpayer company is a very short one. Indeed the point is very short. He says that if one looks at the language of this subsection, it applies quite literally to the taxpayer company’s situation in relation to the goods

Page 315 of [1975] 1 All ER 312

destroyed by fire because those goods had been supplied to the taxpayer company before the end of March 1973, and by the end of March 1973 the goods had not been supplied by the taxpayer company.

In my judgment the argument is quite untenable when one looks at the object of sub-s (6) and, having considered that object, returns to consider its effect in relation to sub-s (1). The object of sub-s (6) in my judgment is plain. If s 4 is to operate as intended as a protection against double taxation where necessary, and only where necessary, then the question whether goods are to be treated as held by the taxpayer at midnight on 31 March 1973 has to be determined not by reference to his physical possession at that moment, but by reference to the artificial and technical rules relating to the moment of supply or importation to which I drew attention under ss 7 and 47 of the 1972 Act. The question whether goods at the critical moment are held by the taxpayer depends on whether they have been notionally supplied to him before that date, and whether they were notionally supplied by him after that date, quite irrespective of the question whether he then had them physically in his possession.

Thus, for instance, goods would be treated as being held by the taxpayer at the beginning of April 1973 if they had been invoiced to him before that date notwithstanding that they had not been delivered by that date. Conversely, they would be treated as not being held by him on that date if he had invoiced them to a third person before that date, but not delivered them until after 1 April.

Bearing those considerations in mind, which arise from an examination of the purpose of sub-s (6), one may accordingly return to sub-s (1) to see what is its proper construction. It seems to me quite clear under sub-s (1) that before a deduction as input tax of an amount paid by way of purchase tax can be allowed, it must be shown that three conditions are satisfied as at the beginning of April in relation to the goods which have suffered purchase tax. They are, first, that those goods should be unused; secondly, that they should be held by the taxpayer in the sense provided by sub-s (6), that is to say notionally held on the basis that the date falls between the notional dates of supply to and supply by the taxpayer, not by reference to his physical possession; thirdly and finally, the goods must satisfy the condition that on that date they are so held by the taxpayer for sale in the course of his business.

Each of those conditions clearly presupposes that the goods are in existence. At the beginning of April the goods in relation to which the taxpayer company’s claim is made did not exist. The commissioners in my judgment were right to refuse to allow the deduction claimed and the value added tax tribunal to confirm that view. I would dismiss this appeal.

KILNER BROWN J. I agree.

LORD WIDGERY CJ. I agree also.

Appeal dismissed.

Solicitors: Herbert Oppenheimer, Nathan & Vandyk (for the taxpayer company); Solicitor, Customs and Excise.

N P Metcalfe Esq   Barrister.

Watkinson v Barley

[1975] 1 All ER 316

Categories:        CRIMINAL; Criminal Procedure, Road Traffic        

Court:        QUEEN’S BENCH DIVISION        

Lord(s):        LORD WIDGERY CJ, MAIS AND CROOM-JOHNSON JJ        

Hearing Date(s):        19 NOVEMBER 1974        

Road traffic – Driving with blood – alcohol proportion above prescribed limit – Evidence – Provision of specimen – Breath test – Device – Instructions for use – Strict compliance with instructions not essential to validity of test – Smoking – High concentration of tobacco smoke liable to affect result of test – Instructions stating that smoking should not be permitted immediately before test – Defendant having been smoking shortly before test – No evidence that smoking affected result of test – Validity of test.

The respondent, who was driving a car on the wrong side of a main road, was stopped by the police and asked to take a breath test. He agreed and walked from his car to the police car to take the test. When he left his car, he was, to the knowledge of the police, smoking a cigar, which he extinguished before reaching the police car. The Alcotest 80 device used by the police for the purpose of the test was accompanied by the manufacturers’ instructions which stated, inter alia: ‘A high concentration of tobacco smoke tends to colour the re-agent brown. Smoking during or immediately prior to the test should not therefore be permitted.' The breath test was positive and the respondent was arrested. A subsequent laboratory test showed that his blood contained 186 milligrammes of alcohol per 100 millilitres of blood. The respondent was charged with driving a motor vehicle having consumed alcohol in such a quantity that the proportion thereof in his blood exceeded the prescribed limit, contrary to s 6(1) of the Road Traffic Act 1972. The justices upheld a submission by the respondent that the breath test was invalid on the ground that, by allowing the respondent to take the test so soon after he had finished smoking, the police had failed to comply with the manufacturers’ instructions. Accordingly they dismissed the information and the prosecutor appealed.

Held – A breath test would be invalidated by a failure to comply with manufacturers’ instructions only if it could be shown that the failure had affected the result of the test adversely to the accused. Where it was quite evident that the volume of smoke left in a driver’s mouth and lungs was not sufficient to be capable of being described as a ‘high concentration’, the fact that he had smoked before the test, or at all, became completely irrelevant. In the circumstances it was impossible to contend that when the respondent took the test there had been such a residual concentration of tobacco smoke in his lungs and mouth as to affect the test in the manner envisaged in the manufacturers’ instructions. Accordingly the appeal would be allowed and the case remitted to the justices to continue the hearing (see p 319 c and j to p 320 a and d e, post).

Notes

For the relevance of the manufacturers’ instructions as to the use of a device approved for the purposes of a breath test, see Supplement to 33 Halsbury’s Laws (3rd Edn) para 1061A, 4, and for cases on the subject, see Digest (Cont Vol C) 936, 937, 322aa-322bb.

Cases referred to in judgment

Darnell v Portal [1972] RTR 483, (1972) 136 JP 717, DC.

Director of Public Prosecutions v Carey [1969] 3 All ER 1662, [1970] AC 1072, [1969] 3 WLR 1169, 134 JP 59, [1970] RTR 14, HL, Digest (Cont Vol C) 936, 322aa.

Case also cited

Gill v Forster [1970] RTR 372, DC.

Page 317 of [1975] 1 All ER 316

Case stated

This was an appeal by way of a case stated by justices for the county of Lincoln Parts of Kesteven acting in and for the petty sessional division of Spitalgate in respect of their adjudication as a magistrates’ court sitting at Grantham on 7 March 1974.

On 24 January 1974 an information was preferred by the appellant, Charles Watkinson, against the respondent, Henry John Barley, that he on 8 December 1973 in the parish of Barrowby drove a motor car on the Great North Road having consumed alcohol in such quantity that the proportion thereof in his blood as ascertained from a laboratory test for which he subsequently provided a specimen exceeded the prescribed limit of 80 milligrammes per 100 millilitres at the time he provided the specimen, namely his blood contained not less than 186 milligrammes of alcohol per 100 millilitres of blood, contrary to s 6(1) of, and Sch 4, Part 1 to, the Road Traffic Act 1972. The following facts were found: (a) At 11.05 pm on 8 December 1973 the respondent drove a motor car in a northerly direction in the fast lane of the southbound carriageway of the A1 road at Barrowby, Lincolnshire, when two police officers in uniform caused him to stop whereupon the respondent got out of his car. (b) The respondent was unsteady on his feet and his breath smelt of alcoholic drink. (c) One of the police officers required the respondent to give a sample of breath for a test and the respondent sat in the rear seat of a police patrol car whilst giving a sample using the Alcotest 80 device. The test was positive, and he was arrested. (d) When the respondent got out of his car he was smoking a cigar to the actual knowledge of both police officers. (e) The time which elapsed between the respondent getting out of his car and his arrest following the positive breath test was about three minutes. (f) The respondent extinguished his cigar at some point in time between getting out of his car and getting into the police patrol car for the breath test to be administered. (g) After his arrest the respondent was taken to Grantham police station where a second breath test was administered and found to be positive. (h) The respondent provided a specimen of his blood in response to a requirement made by a police officer which was taken by a medical practitioner and divided into three parts one of which was offered to the respondent and another of which was later analysed and found to contain not less than 186 milligrammes of alcohol in 100 millilitres of blood.

It was contended on behalf of the respondent in a submission that the respondent had no case to answer, that the initial breath test was not conducted properly in that to the actual knowledge of the police officer conducting the test the respondent had been smoking immediately before the test was administered and hence that the power of arrest did not arise and all that followed it was unlawful.

It was contended on behalf of the appellant that the second breath test was properly conducted and was positive whereupon the requirement to provide a specimen of blood, the taking of that specimen and its subsequent analysis to show a level in excess of the prescribed limit was lawful.

The justices were referred to Director of Public Prosecutions v Carey ([1969] 3 All ER 1662, [1970] AC 1072) and in particular to part of the opinion of Viscount Dilhorne ([1969] 3 All ER at 1670, [1970] AC at 1086) and to the manufacturers’ printed instructions for the use of the Alcotest 80 breath testing kit reproduced in Wilkinson’s Road Traffic Offencesa and in particular to the words: ‘Smoking during or immediately prior to the test should not therefore be permitted.’

The justices were of the opinion that the evidence adduced by the prosecution being uncontradicted entitled them to make their findings of fact without hearing such evidence as the respondent might wish to adduce and to uphold the submission made on his behalf that since the respondent had been smoking immediately prior to the initial breath test being administered to the actual knowledge of the police

Page 318 of [1975] 1 All ER 316

officer administering it, the test was invalid hence invalidating the subsequent steps.

The question for the opinion of the high court was whether smoking to the actual knowledge of the police officer administering the breath test immediately prior to the breath test being administered in contravention of the instructions of the manufacturers of the Alcotest 80 kit invalidated the test.

Igor Judge for the appellant.

F B Smedley for the respondent.

19 November 1974. The following judgments were delivered.

LORD WIDGERY CJ. This is an appeal by case stated by justices for the county of Lincoln sitting as a magistrates’ court at Grantham on 7 March 1974. There was before them an information laid by the appellant against the respondent that the respondent, on 8 December 1973, had driven a motor car on a road at a time when there was contained in his blood a higher proportion of alcohol than that permitted by the Road Traffic Act 1972. The justices, as will appear in a moment, accepted a submission of no case to answer and accordingly dismissed the information.

The facts found so far as are relevant are these. At 11.05 pm on 8 December 1973 the respondent was driving a motor car on the A1 road but unhappily driving on the wrong side of the road. He was therefore, proceeding in a northerly direction on that part of the road reserved for traffic travelling to the south. Not surprisingly, the police took an interest in him, stopped him and when he got out of his car his breath smelt of alcohol. One of the police officers quite properly required him to give a sample of breath for a breath test, and the respondent, having got out of his own car, walked over to the police car, which must have been fairly near, although one does not know exactly how near, and sitting in the rear of the police car he gave a sample of breath using the Alcotest 80 device. The test was positive and he was arrested.

So far the facts give rise to no comment. The point comes next. When the respondent got out of his car he was smoking a cigar and both police officers observed this. The time which elapsed between the respondent getting out of his car and his arrest following the positive breath test was about three minutes. The respondent had extinguished his cigar at some point in time between getting out of his car and getting into the police car for the breath test to be administered.

The point which arises out of this is, that amongst the instructions which are issued by the manufacturers of the Alcotest device are two in regard to smoking. The short instructions, which appear on the lid of the box in which the device is contained, say, amongst other things, ‘Smoking during or immediately prior to the test should not be permitted’. In a pamphlet which is in the box is this observation: ‘A high concentration of tobacco smoke tends to colour the re-agent brown. Smoking during or immediately prior to the test should not therefore be permitted.’

I am left in no doubt, having read those two brief instructions from the manufacturers, that what they are saying is this, that a high concentration of tobacco smoke passed through the crystals into the bag is apt to turn the crystals brown. If the crystals turn brown, then it may be difficult to discover whether they simultaneously turn green, which is after all the outward and visible sign of excessive alcohol in the blood. So the manufacturers are saying this, and really no more than this: ‘Since a high concentration of tobacco smoke tends to colour the re-agent brown, make sure that a high concentration of tobacco smoke is not allowed to go through the crystals into the bag.’

On the facts which I have stated it was submitted by the advocate for the respondent that he had no case to answer. Although the precise nature of his argument is not altogether clear from the case, what he must have been saying was, that by allowing the respondent to take a test so shortly after he had extinguished his cigar, there was a failure to comply with the instructions issued by the manufacturers. The argument must have been that on the facts of the present case the respondent

Page 319 of [1975] 1 All ER 316

was still smoking at a time which could be described as during or immediately prior to the test. The next step in the argument must have been that if the manufacturers’ instructions were not meticulously adhered to, the test was vitiated, and if there was no valid test, then of course there could be no further proceedings.

The justices were referred, albeit I think a little briefly, to the opinion of Viscount Dilhorne in Director of Public Prosecutions v Carey. That was another case about a driver who had been smoking when stopped by the police with a view to his being subjected to a breath test, and their Lordships’ speeches contain a great deal of extremely important and valuable material to assist in deciding the extent to which, and the manner in which, the manufacturers’ instructions must be taken into account when deciding whether a valid breath test has been administered or not. Suffice it to say for present purposes that Carey decides that mere proof of non-compliance with the manufacturers’ instructions does not of itself invalidate the test. It must be shown, in my judgment, that the failure to comply with the manufacturers’ instructions, if failure there be,is a failure which could adversely affect the driver. If it is apparent that departure from the instructions could not affect the result of the test adversely to the driver, then no further reference to a failure to comply with the instructions need be made.

In the present instance the point had arisen in another case apart from Carey, Darnell v Portal. There the driver of the motor car had been smoking prior to the imposition of the test. In the judgment given by myself ([1972] RTR at 487) I turned to consider why the manufacturers make this recommendation in regard to smoking at all, because it seemed to me then, and it seems to me now, that one cannot construe the reference to smoking immediately prior to the test or during the test unless you know why smoking can affect the test. I made the observation in Darnell v Partal that the only reason why smoking should be regarded as relevant at all in my judgment would be because of the possibility that cigarette smoke might contaminate the sample and thus render it unreliable. I said ([1972] RTR at 487):

‘If that is the right approach, then in this case there was ample opportunity to clear his lungs between the stubbing out of the cigarette on the defendant’s own evidence and the moment when the test was actually taken. It will be recalled that the parties moved to the police car, the breath test equipment was assembled, the test was taken, and that was all done on any view after the cigarette had been stubbed out in the defendant’s ashtray.”

On the footing that after an interval of that kind, short though it was, the possibility of smoke contaminating the sample had been eliminated, the case was sent back to the justices in order that they might continue the hearing.

What we were not told in Darnell’s case but have had pointed out to us today is the phrase which I have already read from the manufacturers’ instructions explaining why smoking is a relevant factor in these matters, and it will be remembered that what the manufacturers say is this: ‘A high concentration of tobacco smoke tends to colour the re-agent brown’. That which I have guessed at in Darnell’s case is now clearly the real reason why smoking becomes a relevant factor, and in my judgment in considering what the manufacturers mean by saying that ‘Smoking during or immediately prior to the test should not be permitted’, one has to remember that that is the mischief which they are seeking to avoid.

Accordingly, as it seems to me, if in the individual case it is quite evident that the volume of smoke left in the driver’s lungs was not sufficient to be capable of being described as a high concentration, to borrow the words of the manufacturers, the fact that he had smoked prior to the test or at all becomes completely irrelevant.

Page 320 of [1975] 1 All ER 316

In the present instance it seems to me to be beyond argument that, when he stubbed out his cigar whilst he was walking between the two cars, he then got into the back seat of the police car and he then took the test, it is quite impossible to contend that at that time there was the sort of residual concentration of tobacco smoke in his lungs and mouth to create the difficulty which the manufacturers have referred to in their instructions.

I very much hope that this case will set to rest any tendency to argue further on the precise meaning of the phrase ‘smoking during or immediately prior to the test’, and will discourage advocates appearing for defendants in circumstances of this kind from putting forward this kind of argument when it is quite clear that at the time when the test was taken there was insufficient tobacco smoke in the defendant’s lungs and mouth to permit of a high concentration of such smoke entering the test bag. Only in those cases does it seem to me that a non-compliance with the manufacturers’ regulations has occurred at all, and only in those circumstances would it be appropriate to consider the more detailed instructions on this subject contained in the speeches in Carey’s case.

In this case, within the meaning of the phrase ‘smoking during or immediately prior to the taking of the test’, I would say that the justices could not on the material before them reach the conclusion that the appropriate concentration of smoke was available. It seems to me that the whole reference to smoking is a false trail in this case. A submission of no case should never have been made. It should not have been acceded to. The appeal will have to be allowed and the case will go back to the justices for them to continue the hearing.

MAIS J. I agree.

CROOM-JOHNSON J. I agree.

Appeal allowed.

Solicitors: Norton & Hamilton, Grantham (for the appellant); Routh, Stacey & Co agents for Maples & Son, Spalding (for the respondent).

Jacqueline Charles   Barrister.

Robinson v Collins

[1975] 1 All ER 321

Categories:        SUCCESSION; Intestacy        

Court:        CHANCERY DIVISION        

Lord(s):        PENNYCUICK V-C        

Hearing Date(s):        16 JULY 1974        

Intestacy – Appropriation by personal representatives – Surviving spouse – Matrimonial home – Valuation – Date of valuation – Right of surviving spouse of intestate to require appropriation of matrimonial home in or towards satisfaction of spouse’s interest in intestate’s estate – Valuation of home for purpose of appropriation – Whether home to be valued at date of intestate’s death or date of appropriation – Administration of Estates Act 1925, s 41 – Intestates’ Estates Act 1952, Sch 2, para 1(1).

Where the surviving husband or wife of an intestate exercises the power conferred by para 1(1)a of Sch 2 to the Intestates’ Estates Act 1952 to require the personal representatives of the intestate, in the exercise of their powers under s 41b of the Administration of Estates Act 1925, to appropriate the intestate’s interest in a dwelling-house in which the surviving husband or wife was resident when the intestate died, in or towards satisfaction of any absolute interest of the husband or wife in the intestate’s estate, the value at which the dwelling-house is to be appropriated for that purpose is the value thereof at the date of appropriation and not at the date of the intestate’s death (see p 325 d to f, and p 326 a to c, post).

Talbot v Talbot [1967] 2 All ER 920 distinguished.

Notes

For the right of the surviving spouse of an intestate to acquire the matrimonial home, see 16 Halsbury’s Laws (3rd Edn) 397, 398, para 767.

For statutory power of appropriation, see 16 Halsbury’s Laws (3rd Edn) 372, para 721, and for cases on the subject, see 24 Digest (Repl) 645–648, 6373–6391.

For valuation for the purposes of appropriation, see 16 Halsbury’s Laws (3rd Edn) 374, para 724.

For the Administration of Estates Act 1925, s 41, see 13 Halsbury’s Statutes (3rd Edn) 66.

For the Intestates’ Estates Act 1952, Sch 2, para 1, see 13 Halsbury’s Statutes (3rd Edn) 130.

Cases referred to in judgment

Charteris, Re, Charteris v Biddulph [1917] 2 Ch 379, 86 LJCh 658, 117 LT 391, CA, 47 Digest (Repl) 369, 3309.

Gollin’s Declaration of Trust, Re, Turner v Williams [1969] 3 All ER 1591, [1969] 1 WLR 1858, Digest (Cont Vol C) 1048, 3192a.

Talbot v Talbot [1967] 2 All ER 920, [1968] Ch 1, [1967] 3 WLR 438, CA, Digest (Cont Vol C) 1060, 427a..

Case also cited

Health, Re, Heath v Widgeon [1907] 2 Ch 270.

Adjourned summons

By para 3 of an originating summons dated 27 November 1973, the plaintiff Carol Robinson (‘the daughter’), an administratrix of the estate of Alfred Henry Robinson (‘the intestate’), who died on 6 May 1972, and the intestate’s only daughter, sought

Page 322 of [1975] 1 All ER 321

the determination by the court of the following question: whether on an appropriation by the personal representatives of the intestate’s fee simple in 2 Shelton Gardens, Ruddington (the ‘matrimonial home’) in consequence of a requirement made by the defendant, Mavis Joy Collins (‘the widow’), the intestate’s lawful widow and the other administratrix of the intestate’s estate, in exercise of the powers conferred on her by para 1 of Sch 2 to the Intestates’ Estates Act 1952, the value at which the matrimonial home was to be appropriated in or towards satisfaction of the fixed sum of £8,750, payable to the widow out of the intestate’s residuary estate, was (a) the value at the date of the intestate’s death, or (b) the value at the date on which the widow exercised the right conferred on her under para 1 of Sch 2 to the 1952 Act, or (c) the value at the date of appropriation, or (d) the value at some other and if so what date. The facts are set out in the judgment.

J A Moncaster for the daughter.

Brian Parker for the widow.

16 July 1974. The following judgment was delivered.

PENNYCUICK V-C. This originating summons raises a single question as to the terms on which a surviving spouse is entitled to acquire a matrimonial home on an intestacy. The summons arises in the matter of the estate of Alfred Henry Collins, to whom I will refer as ‘the intestate’. He died on 6 May 1972. He had been married some two months earlier, that second marriage revoking a will it is said he had made in favour of his only daughter. The intestate left surviving his second wife and his daughter.

His estate was sworn at £11,493 net. The exact figure is not important. The widow had, under the law as it stood at the death of the intestate, a first charge of £8,750 on the estate, the balance being held as to half for her for life, with remainder to the daughter and the second in trust for the daughter. The estate included a freehold house, 2 Shelton Gardens, Ruddington, in the county of Nottingham, which was their matrimonial home. The house was sworn for probate at £4,200. It is now stated to be of the value of £8,000, or thereabouts.

The short question is: at what value is the widow entitled to have that property appropriated towards satisfaction of her charge of £8,750? The daughter maintains that the value will be the value of the property as at the date of appropriation. The widow contends that the value is the value as at the date of death.

There was considerable correspondence between the parties’ solicitors before this summons was issued, but a good deal of that correspondence was on matters which in the event are not now relevant. The summons raises a single effective question, which is in these terms:

‘THAT it may be determined whether upon any such appropriation as aforesaid [that is an appropriation of the house towards the £8,750] (whether already made or to be made) [I interpose to say that the appropriation has not in fact yet been made] the value at which the said dwellinghouse is to be appropriated in or towards satisfaction of the said fixed net sum is:—(a) the value thereof at the date of the Intestate’s death, or … (c) the value thereof at the date when the personal representatives appropriate the same … ’

There are two other alternatives mentioned, for which neither party contends. It is not necessary to refer further to the evidence filed in this summons. The question before me is entirely one of law.

It will be convenient at this stage to read the statutory provisions which are relevant to the present question. The Administration of Estates Act 1925, s 41 provides:

‘(1) The personal representative may appropriate any part of the real or personal estate, including things in action, of the deceased in the actual condition or state of investment thereof at the time of appropriation in or towards satisfaction of

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any legacy bequeathed by the deceased, or of any other interest or share in his property, whether settled or not, as to the personal representative may seem just and reasonable, according to the respective rights of the persons interested in the property of the deceased …

‘(3) For the purposes of such appropriation, the personal representative may ascertain and fix the value of the respective parts of the real and personal estate and the liabilities of the deceased as he may think fit, and shall for that purpose employ a duly qualified valuer in any case where such employment may be necessary; and may make any conveyance (including an assent) which may be requisite for giving effect to the appropriation … ’

Then s 46(1) of the 1925 Act, which has subsequently been replaced by a different provision, reads:

‘The residuary estate of an intestate shall be distributed in the manner or be held on the trusts mentioned in this section, namely:—(i) If the intestate leaves a husband or wife (with or without issue) the surviving husband or wife shall take the personal chattels absolutely, and in addition the residuary estate of the intestate (other than the personal chattels) shall stand charged with the payment of a net sum of one thousand pounds, free of death duties and costs [to provide the husband or wife with interest].’

The last-mentioned provision has been superseded twice: first by the Intestates’ Estates Act 1952, s 1:

‘(1) As respects a person dying intestate after the commencement of this Act sections forty-six, forty-seven and forty-eight of the Administration of Estates Act, 1925(hereafter in this Part of this Act referred to as the “principal Act”), shall have effect subject to the amendments set out in this section.

‘(2) For paragraph (i) of subsection (1) of the said section forty-six (which relates to the disposition of the residuary estate of an intestate leaving a surviving spouse) there shall be substituted the following paragraph—”(i) If the intestate leaves a husband or wife, then in accordance with the following Table: …  If the intestate … (2) leaves issue … the surviving husband or wife shall take the personal chattels absolutely and, in addition, the residuary estate of the intestate (other than the personal chattles) shall stand charged with the payment of a net sum of five thousand pounds, free of death duties and costs, to the surviving husband or wife with interest thereon … ”’

That section has again been superseded, but before leaving the 1952 Act I will refer to the section under which the surviving spouse has a right to acquire the matrimonial home. Section 5 of the 1952 Act provides:

‘The Second Schedule to this Act shall have effect for enabling the surviving husband or wife of a person dying intestate after the commencement of this Act to acquire the matrimonial home.’

Then para 1(1) of Sch 2 to the 1952 Act, which is headed ‘Rights of Surviving Spouse as respects the Matrimonial Home’, provides:

‘Subject to the provisions of this Schedule, where the residuary estate of the intestate comprises an interest in a dwelling-house in which the surviving husband or wife was resident at the time of the intestate’s death, the surviving husband or wife may require the personal representative, in exercise of the power conferred by section forty-one of the [Administration of Estates Act 1925] (and with due regard to the requirements of that section as to valuation) to appropriate the said interest in the dwelling-house in or towards satisfaction of any absolute

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interest of the surviving husband or wife in the real and personal estate of the intestate … ’

Then paragraph 3(2):

‘A notification in writing under paragraph (c) of the foregoing sub-paragaph shall not be revocable except with the consent of the personal representative; but the surviving husband or wife may require the personal representative to have the said interest in the dwelling-house valued in accordance with section forty-one of the principal Act and to inform him or her of the result of that valuation before he or she decides whether to exercise the right.’

Paragraph 5:

‘(1) Where the surviving husband or wife is one of two or more personal representatives, the rule that a trustee may not be a purchaser of trust property shall not prevent the surviving husband or wife from purchasing out of the estate of the intestate an interest in a dwelling-house in which the surviving husband or wife was resident at the time of the intestate’s death.

‘(2) The power of appropriation under section forty-one of the principal Act shall include power to appropriate an interest in a dwelling-house in which the surviving husband or wife was resident at the time of the intestate’s death partly in satisfaction of an interest of the surviving husband or wife in the real and personal estate of the intestate and partly in return for a payment of money by the surviving husband or wife to the personal representative.’

Finally, the Family Provision Act 1966, s 1:

‘(1) In the case of a person dying after the coming into force of this section, section 46(1) of the Administration of Estates Act 1925, as amended by section 1 of the Intestates’ Estates Act 1952 and set out in Schedule 1 to that Act, shall apply as if the net sums charged by paragraph (i) on the residuary estate in favour of a surviving husband or wife were as follows, that is to say,—(a) under paragraph (2) of the Table (which charges a net sum of £5,000 where the intestate leaves issue) a sum of £8,750 or of such larger amount as may from time to time be fixed by order of the Lord Chancellor … ’

_£8,750 was the sum in force at the date of the intestate’s death.

Leaving aside the statutory provisions as to the matrimonial home, there can be no doubt that where a personal representative exercises the statutory power of appropriation under s 41 of the 1925 Act he must do so at the value of the property appropriated as at the date of appropriation. See as to this the note in Wolstenholme and Cherryc: ‘The value of appropriated securities should be taken as at the of date appropriation.' The case there cited, Re Charteris, contained the statement by Swinfen Eady LJ ([1917] 2 Ch at 386).

‘Upon that proposition being communicated to the solicitors for the plaintiff they objected to the appropriation. They pointed out that their client, Colonel Richard Charteris, was entitled to have 230,000l in cash, or the value thereof, as at the date of appropriation; that almost all the securities comprised in the list had dropped in value since February 21, 1915, the date of the death, and some of them considerably, and that if their client liked to invest in any of these securities he should do so on the basis of present prices. In other words, they raised the point that the value of the securities appropriated should be the value as at the date of

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appropriation, and not as at the date of the testatrix’s death. In my opinion that contention was well founded; and upon that point being raised by the plaintiff’s advisers the executors took the opinion of counsel with regard to the appropriation, and, having taken it, they sent a copy of it to the plaintiff’s advisers.’

If further citation is needed on this point, see Re Gollin’s Declaration of Trust where Buckley J said ([1969] 3 All ER at 1592, [1969] 1 WLR at 1861):

‘…  I must treat the transfer which was made to the first defendant in 1947 as a transfer to her of property of a certain cash value, that is to say, the then existing value of the stocks transferred on account of her true interest in the fund.’

The point is sometimes put by treating the appropriation as a notional sale of the appropriated assets to the beneficiary, the legacy to the beneficiary being applied in discharge of the purchase price on the sale. This is a rule of administration too well-established to require further discussion.

The question, however, then arises whether a different date should be taken, namely the date of death instead of the date of appropriation, where the appropriation is made pursuant to an exercise by the surviving spouse of the statutory right conferred by Sch 2 to the 1952 Act. It seems to me that on the terms of that statutory provision the answer to this question is plainly in the negative. Schedule 2 to the 1952 Act imports the provision for appropriation contained in s 41 of the 1925 Act, and indeed adds the bracketed words ‘and with due regard to requirements of that section as regards valuation’. The only distinction in this connection is that under the 1952 Act the spouse may mandatorily require the personal representative to exercise the power of appropriation, whereas under the 1925 Act the personal representative has a discretion whether to exercise the power or not. There is, however, no hint in Sch 2 to the 1952 Act that the appropriation is to be carried out on some basis different from that applicable in any other case where the personal representative makes an appropriation under s 41 of the 1925 Act and it seems to me that whatever is the appropriate date for valuing the appropriated assets under s 41 must equally be imported into an appropriation made pursuant to the requirement of the spouse under Sch 2 to the 1952 Act. That was the contention of counsel for the daughter and I accept it.

Counsel for the widow contended that, notwithstanding that in the ordinary case under s 41 of the 1925 Act, the value of the appropriated assets must be taken at the date of the appropriation, in this particular case of an appropriation under Sch 2 to the 1952 Act the value must be taken as at the date of death. He relied principally on the point that under Sch 2 the widow has a right to insist on an appropriation, and then he equated this position with that in which a beneficiary had an option to purchase an asset at the death of the testator or life tenant. He relied on Talbot v Talbot in the Court of Appeal, which was the case of an option given by a testator to two of his sons to purchase the farms in which they lived together with some land which went with them ‘at a reasonable valuation’. And it was held that the relevant date for the valuation was the date of death, because it was then that the rights of the option beneficiaries accrued: see Harman LJ ([1967] 2 All ER at 923, [1968] Ch at 13):

‘The valuation is to be made, according to [the order appealed from], as at the death of the testator. There is no appeal about that, and it is justified, I feel, because the right to have the land by the exercise of the option accrued at that date … ’

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It seems to me, however, that the short answer to that contention is that the 1952 Act did not confer on the surviving spouse an option to purchase. What the 1952 Act does, read in conjunction with the 1925 Act, is to confer a right on the surviving spouse to have the matrimonial home appropriated in or towards satisfaction of a fixed sum charged on the estate, that fixed sum being in the nature of an absolute interest. That being the position, I can see no valid reason for departing from the general rule applicable to appropriation under s 41 of the 1925 Act. If Parliament had intended that the appropriation should take effect retrospectively as at the date of death, one would have expected this result to be achieved by plain words. The words actually used are quite inept to achieve such a result. No injustice is involved in this conclusion. There is no reason that I can see why the widow rather than the other next-of-kin should benefit from rising house prices or indeed, in the contrary case, less familiar in the circumstances of today, suffer from a fall in house prices.

I conclude that I must answer the question in para 3 of the summons in accordance with alternative (c), ie the value thereof at the date when the personal representatives appropriate the same.

Determination accordingly.

Solicitors: Caporn, Campbell, Clare & Clare agents for George Shelton & Co, Hucknall (for the daughter); Peacock & Goddard agents for H J Hallam & Co, Nottingham (for the widow).

Evelyn Budd   Barrister.

Somerset County Council v Kingscott

[1975] 1 All ER 326

Categories:        CRIMINAL; Criminal Law        

Court:        QUEEN’S BENCH DIVISION        

Lord(s):        LORD WIDGERY CJ, MAIS AND CROOM-JOHNSON JJ        

Hearing Date(s):        15, 18 NOVEMBER 1974        

Criminal law – Compensation – Compensation order – Children and young persons – Court’s power to order parent or guardian to pay compensation instead of child or young person – Parent or guardian conducing to commission of offence by neglecting to exercise due care or control over child or young person – Local authority guardian of child – Test for determining whether local authority guilty of neglect conducing to commission of offence – Child placed in care of local authority pursuant to care order – Authority placing child in community home – Home not a secure penal institution – Purpose of home to rehabilitate children – Child absconding from home and committing offence – Whether authority having conduced to commission of offence by neglecting to exercise due care or control of child – Children and Young Persons Act 1933, s 55(as amended by the Criminal Justice Act 1972, s 64(1), Sch 5).

Three boys, aged 12, 13 and 14, were committed to the care of the appellant, a local authority, under the Children and Young Persons Act 1969. The boys were required by the authority to reside at a community home. While at the home the boys absconded and committed certain offences of breaking and entering and stealing. The boys were charged and convicted of the offences and a large number of similar offences were also taken into consideration. The justices gave each boy a conditional discharge so that he could return to the home. Thereupon the justices, in purported exercise of their powers under s 55(1)a of the Children and Young Persons Act 1933, considered

Page 327 of [1975] 1 All ER 326

whether the authority, as guardian of the boys, should be ordered to pay compensation to the victims of the offences. They found that the home was not constructed as, nor was it capable of being, a penal institution; that the chief aim of the home was the rehabilitation of the boys sent there, but that ‘the staff regard “protection of the public” as an important part of their work’; and that the boys ‘were cared for in a proper and prefessional manner and in accordance with normally accepted practice in institutions of this kind’. The justices concluded, however, that the authority had conduced to the commission of the offences by ‘neglecting to exercise due care and control over the boys’, the reasons given for that conclusion being (i) that the boys had committed the offences in question, (ii) that, on balance, the chief interest of the staff at the home had been in the boys’ rehabilitation ‘to the detriment of the members of the Public who had suffered from their depredations’, and (iii) that the boys had been allowed to play in the grounds of the home without being watched. Accordingly the justices ordered the authority to pay compensation. The authority appealed.

Held – In determining whether a local authority had been guilty of neglect conducing to the commission of offences, within s 55(1) of the 1933 Act, the justices were required to apply the same test as in the case of an individual parent or guardian, ie to determine, as a question of fact, whether in the light of the individual circumstances of each case, eg the disturbed character of the child in question, the authority had exercised a proper degree of care and control. In particular the justices were bound to ask, not whether the authority ought to have been provided with better facilities for controlling absconders, but whether the authority had made a sensible and responsible use of facilities which existed or which were in its power to provide (see p 332 b to h and p 333 g and h, post).

(ii) The facts found by the justices could not possibly lead to the conclusion that the local authority had been guilty of neglect conducing to the commission of the offences. The mere fact that the offences had been committed could not support the conclusion that the authority had been guilty of neglect; furthermore, since the home was not a secure penal institution, the boys could not be kept under perpetual supervision, nor was there material on which it could be held that the boys’ escapes had been attributable to any breach of duty to the public on the part of the authority. Accordingly the appeal would be allowed (see p 333 b to h and p 334 e to g, post).

Notes

For the court’s power to order a parent or guardian to pay compensation, see 10 Halsbury’s Laws (3rd Edn) 516, para 940.

For the Children and Young Persons Act 1933, s 55, see 17 Halsbury’s Statutes (3rd Edn) 473.

Case referred to in judgment

Dorset Yacht Co Ltd v Home Office [1969] 2 All ER 564, [1969] 2 QB 412, [1969] 2 WLR 1008, CA; affd [1970] 2 All ER 294, [1970] AC 1004, [1970] 2 WLR 1140, [1970] 1 Lloyd’s Rep 453, HL, Digest (Cont Vol C) 731, 133b.

Cases also cited

R v Croydon Juvenile Court Justices, ex parte Croydon London Borough Council [1973] 1 All ER 476, [1973] QB 426.

Somerset County Council v Brice [1973] 3 All ER 438, [1973] 1 WLR 1169.

Case stated

This was an appeal by way of case stated by the justices for the county of Gloucestershire acting in and for the petty sessional division of the city of Gloucester in respect of their adjudication as a magistrates’ court sitting at Gloucester on 13 February 1974.

Page 328 of [1975] 1 All ER 326

1. On 13 December 1973 an information was preferred by the respondent, William Herbert Stephen Kingscott, police inspector, against two boys, Andrew (aged 13) and Ian (aged 12), that on 15 November 1973, having entered as trespassers the dwelling-house of John Thomas Allin at 17 Gratton Way, Hucclecote, in the county of Gloucester, they stole two cigarette lighters, an alarm clock, two torches, £10 in money and other property valued at £32·57 belonging to Mr Allin, contrary to s 9(1)(b) of the Theft Act 1968.

2. On 13 December 1973 an information was preferred by the respondent against Andrew and Ian that on 18 November 1973, having entered as trespassers the dwelling-house of Sylvia Dilys Neale at 26 Church Lane, Barnwood, in the county of Gloucester, they stole a silver bracelet, a clock, a magnifying glass, £7 in money and other property valued at £24 belonging to Sylvia Neale, contrary to s 9(1)(b) of the 1968 Act.

3. On 31 December 1973 an information was preferred by the respondent against a third boy, Michael (aged 14), and Ian that on 2 December 1973, having entered as trespassers the dwelling-house of David Michael Blake at 70 Pickwick Road, Corsham, in the county of Wiltshire, they stole £13 in money, a gold chain and locket, a gold watch and other property valued at £106 belonging to Mr Blake, contrary to s 9(1)(b) of the 1968 Act.

4. On 31 December 1973 an information was preferred by the respondent against Michael and Ian that on 2 December 1973, having entered as trespassers the dwelling-house of Silvanus Arthur Harris, 12 Bradford Road, Corsham, in the county of Wiltshire, they stole a paper knife, a quantity of cigarettes and other property valued at £5·43 belonging to Mr Harris, contrary to s 9(1)(b) of the 1968 Act.

5. On 13 February 1974 the justices heard the information and found the following facts: (a) the informations were properly preferred and the three boys were guilty of the offences contained therein. (b) Ian was guilty of a further 21 offences of burglary which he asked the justices to take into consideration when passing sentence on him. Andrew was similarly guilty of 15 further offences of burglary which he likewise asked the justices to take into consideration, and Michael was guilty of a further eight offences of burglary which he likewise asked the justices to take into consideration when passing sentence on him. (c) At all material times the appellant, Somerset County Council, was the guardian of the three boys in respect of whom care orders had been made and the boys were required to reside at Eagle House School, Church Street, Bathford, in the county of Somerset, from which they had absconded on two occasions in November and December 1973 at the times when the various offences were committed. (d) Eagle House School was a community home controlled by the appellant and provided residential treatment for children in the care of local authorities from the south west region of England and Wales. Normal school education was provided for boys aged between nine and 15 years by experienced staff in which capacity one Maurice Dobbs had been continuously employed for 17 years, the last six of which as headmaster. (e) Boys who were admitted to Eagle House all exhibited serious signs of disturbed behaviour, and Ian, born on 14 October 1961, Andrew, born on 5 January 1960, and Michael, born on 24 October 1959, were all boys who came to Eagle House from broken homes. (f) Ian first went to Eagle House in January 1973 following a care order made by the Gloucester city juvenile court, Andrew was made the subject of a care order in August 1972 and went to Eagle House in September of that year and Michael first went to Eagle House in March 1970 by virtue of an approved school order which became a care order in January 1971. He was discharged from the school in May 1972 and readmitted in June 1973. (g) Ian was the eldest of six children who between them had three fathers. He had never been able to get on well with his current stepfather and having regard to his mother’s preoccupation with her own problems and to other factors beyond his control, Ian had never had an effective mother or father figure from whom he could gain the securities and values so important to children of all ages. He therefore tended to act out his problems in the form of

Page 329 of [1975] 1 All ER 326

delinquent behaviour and his abscondings were illustrations of that reaction. (h) Andrew was a child of divorced parents who found it hard to place faith in any adult. He had been attending special schools since he was ten years of age. He had been the subject of psychotherapy and had begun to form meaningful relationships with Eagle House. (i) Michael’s mother died when he was three and he was a sad and rootless child. The children’s home, in whose care he was after leaving Eagle House in 1972, found him impossible to control and, when he returned to the school in June 1973, he was in a highly disturbed state. Thereafter some headway had been made with him. (j) Eagle House was not constructed as, nor was it capable of being, a penal institution. The aim of the school, which had Home Office approval, was to endeavour to make the boys live as normally as possible, and any security of the kind invoked for example at Borstal institutions or prisons would have had a deleterious effect on their long-term treatment. The school comprised a Georgian house and converted outbuildings bounded at the front by a six foot wall and gate. At the back some three acres of sloping grounds were not securely fenced. The non-teaching staff of eight (of whom three were on duty at any one time) aimed to permit the 25 boys to live as normally as possible and to make them feel emotionally secure so that they did not desire to abscond. The staff did not overtly oversee the boys’ every activity and it was considered desirable that they should from time to time be allowed to play in the grounds without their being watched. (k) Although the chief aim of the school was the rehabilitation of the boys, the staff regarded the ‘protection of the public’ as an important part of their work. If a boy absconded or failed to return from home leave the police were notified. And when, in November and December 1973, Ian, Andrew and Michael absconded, the police were immediately notified. (l) The boys were cared for in a proper and professional manner and in accordance with normally accepted practice in institutions of that kind. (m) The Home Office would not have considered transferring the boys to a community home which contained more secure provision. The staff of Eagle House carried out their instructions and duties as defined above. The records of the three boys were not exceptional for schools of that kind.

6. It was contended on behalf of the appellant that the court should impose sentences on the three boys which would make possible their immediate return to Eagle House and that as the appellant had not conduced to the commission of the offences by neglecting to exercise due care and/or control over the children they should not be ordered to pay damages.

7. The justices were referred to Dorset Yacht Co Ltd v Home Office.

8. The respondent did not reply to the appellant’s contentions.

9. The justices, being of the opinion that it was desirable to allow the three boys to return to Eagle House, granted each of them a conditional discharge for a period of two years. The justices were also of the opinion that the appellant had conduced to the commission of the offences by neglecting to exercise due care and control over the boys. The reasons given by the justices for that opinion were as follows.

‘(i) On 15th and 18th November, Andrew and Ian were in Gloucester and stealing. On 2nd December 1973, Michael and Ian were in Corsham and stealing. Each boy admitted other offences and wished them to be taken into consideration. These facts impelled us to the conclusion that the appellants were not exercising due care and control in their capacity as guardians of these boys.

‘(ii) As directed in Dorset Yacht Co Ltd v Home Office we weighed on the one hand the public interest of protecting neighbours and their property from the depradations of escaping trainees and on the other hand the public interest of promoting their rehabilitation, and were of the opinion that in these cases the chief interest of the staff of the Appellants’ school had been in their rehabilitation to the detriment of the members of the Public who had suffered from their depradations.

‘(iii) The boys were allowed to play in the grounds without being watched.’

Page 330 of [1975] 1 All ER 326

10. Accordingly the justices ordered the appellant to pay the total sum of £134·49 by way of compensation to the occupiers of the burgled premises.

Donald Farquharson QC and C T Drew for the appellant.

R Ashton for the respondent.

18 November 1974. The following judgments were delivered.

LORD WIDGERY CJ. This is an appeal by case stated by the justices for the county of Gloucester sitting as a magistrates’ court in Gloucester on 13 February 1974. On that occasion there were before them a number of informations laid against three youths, who I will call Andrew, now aged 14, Ian, now aged 13, and Michael, now aged 15. The informations related to a variety of offences concerned with breaking and entering and stealing on which these young men had been engaged.

At the material time, by which I mean at the time when the offences were committed, all three youths were subject to care orders, made under the Children and Young Persons Act 1969, which had placed each of the individuals in the care of the appellant. At the relevant time again they were required to reside at a community home called Eagle House School, which is described in the case as being controlled by the appellant.

Having found all the charges proved, and having taken into account a large number of similar offences, the justices gave each of the youths a conditional discharge so that they could return to Eagle House. But in purported exercise of their powers under s 55 of the Children and Young Persons Act 1933, as amended, the justices also ordered the appellant council to pay a total sum of £134·49 by way of compensation to the occupiers of the burgled premises, and it is in regard to that order that the appeal is brought to this court today.

Section 55(1), as amended, and omitting irrelevant words, reads as follows:

‘Where a child or young person is charged with any offence for the commission of which a fine … or a compensation order may be made … if the court is of opinion that the case would be best met by the imposition of a fine … or the making of such an order, whether with or without any other punishment, the court may in any case, and shall if the offender is a child, order that the fine, compensation … be paid by the parent or guardian of the child or young person instead of by the child or young person, unless the court is satisfied that the parent or guardian cannot be found or that he has not conduced to the commission of the offence by neglecting to exercise due care or control of the child or young person.’

The facts so far as relevant are these. As I have already said, the boys at the material time were at Eagle House School, and it is not disputed before us that the appellant council was the guardian of these boys for the purposes of s 55. The boys had been at Eagle House for some time. They absconded on two occasions in November and December 1973, and it was during these abscondings that the offences were committed.

At Eagle House the appellant provides residential treatment for children in the care of the local authorities from the south west region of England and Wales. Normal school education is provided for boys aged between nine and 15 years by experienced staff in which capacity one Maurice Dobbs has been continuously employed for 17 years, the last six of which as headmaster.

The boys who are admitted to Eagle House all exhibit serious signs of disturbed behaviour, and each of the three to whom I have referred came from a broken home. The justices then go on to give a good deal of detail about the history of these individual boys, about the family difficulties from which they have suffered before they were taken into the care of the appellant, and the justices refer to such facts as that Andrew is the child of divorced parents, who finds it hard to place faith in any adult.

Page 331 of [1975] 1 All ER 326

I do not find it necessary to deal with those parts of the justices’ findings in further detail.

In para 5(i) of their findings, however, one comes to something directly relevant to the present appeal. The justices find that Eagle House is not constructed as nor is it capable of being a penal institution. The aim of the school, which has Home Office approval, is to endeavour to make the boys live as normally as possible, and any security of the kind invoked for example at Borstal institutions or prison would have a deleterious effect on their long-term treatment. These, I stress, are all findings of fact by the justices. In sub-para (i) they go on to say:

‘The School comprises a Georgian house and converted outbuildings which are bounded at the front by a six foot wall and gate. At the back some three acres of sloping grounds are not securely fenced. The non-teaching staff of eight (of whom three are on duty at any one time) aim to permit the twenty-five boys to live as normally as possible and to make them feel emotionally secure so that they do not desire to abscond. The staff do not overtly oversee the boys’ every activity and it is considered desirable that they should from time to time be allowed to play in the grounds without their being watched.’

In sub-para (k) they say:

‘Although the chief aim of the school is the rehabilitation of the boys, the staff regard “protection of the public” as an important part of their work. If a boy absconds or fails to return from home leave the police are notified.’

In the instant case, when the boys absconded, the police were immediately notified.

The justices further say in sub-para (1): ‘The boys were cared for in a proper and professional manner and in accordance with normally accepted practice in institutions of this kind.' They make some reference to the fact that the Home Office would not have contemplated transferring the boys to more secure accommodation, but I hesitate to pay any attention to that because it is not very clear how the justices have reached a conclusion of that kind.

As I have said, it is not disputed that the appellant was the guardian of these three boys for the purposes of s 55 of the 1933, Act, and the justices, when they came to their conclusions on this matter—and when I say ‘their conclusions’ I mean their conclusions on the issue as opposed to their findings of fact—they gave the following judgment:

‘We were also of the opinion that the Appellants had for the following reasons conduced to the commission of the said offences by neglecting to exercise due care and control over the said boys.’

They then give their reasons:

‘(i) On 15th and 18th November, Andrew and Ian were in Gloucester and stealing. On 2nd December 1973, Michael and Ian were in Corsham and stealing. Each boy admitted other offences and wished them to be taken into consideration. These facts impelled us to the conclusion that the Appellants were not exercising due care and control in their capacity as guardians of these boys.

‘(ii) As directed in the Dorset Yacht Co Ltd v Home Office we weighed on the one hand the public interest of protecting neighbours and their property from the depradations of escaping trainees and on the other hand the public interest of promoting their rehabilitation, and were of the opinion that in these cases the chief interest of the staff of the Appellants’ school had been in their rehabilitation to the detriment of the members of the Public who had suffered from their depradations.

‘(iii) The boys were allowed to play in the grounds without being watched.’

Page 332 of [1975] 1 All ER 326

The appellant says that these reasons are unsupported by evidence, and show that the justices had misdirected themselves as to the nature of the authority referred to and as to the meaning of ‘neglect’ in the section.

When the section was first passed in 1933, Parliament was concerned principally with the parent or guardian who was a private individual. Applying the section to those circumstances, the question which arose involved no problem with the construction of the section and no vestige of any legal difficulties at all, because in relation to a private individual the question posed for the justices in s 55 is a very homely one for which they are admirably equipped to deal, because the justices had only to ask themselves whether the particular parent or guardian had shown neglect in the due care of the child, and whether that neglect had conduced to the offences. The justices would have applied what one might describe as ‘the good parent standards’ and asked themselves, using their ordinary common sense knowledge of how children are brought up, whether there had been neglect of the kind specified in the statute or not. I cannot see how in those happy days any vestige of a legal issue or problem could possibly have arisen out of the section.

I have no doubt that in applying the section to a private individual the justices should, and would, have regard to the individual circumstances of the case. By that I mean justices, in good sense, would recognise that a widow controlling six young children could hardly achieve the same standard of supervision which is possible in a single-child family with both parents alive. That is only an example of the fact that in applying the principle of the good parent test they would have to have regard to the difficulties or advantages of the individual parent.

When one turns to consider the multiplying number of instances in which the parent or guardian referred to is not an individual but is a local authority, as in the present instance, I think that exactly the same principle must be applied.

Counsel for the appellant has helpfully taken us through all the relevant legislation, but the net result, as it seems to me, is that the authority is given the power and duty necessary to enable it to bring up the child as a good parent would bring it up, and, therefore, as I have said, I think the principle is the same whatever the character of the parent or guardian in question. But, of course, as in the case of the private individual parent, the local authority must again have its responsibility tested in the light of the individual circumstances of the case. For example, the degree of control necessary should reflect such things as the disturbed character of the children, the potential danger to the public if they absconded and the facilities available at the school for the purpose of keeping them under control.

This does not in any way depart from what I have said that the principle is the same. It merely emphasises that you must apply the principle to the circumstances prevailing at the time. In such cases the justices should in my judgment bear in mind that high policy decisions, such as whether the perimeter should consist of unclimbable fences or not, are matters for the Home Office and not for them. They should not find the authority guilty of neglect merely because they think that greater facilities for controlling absconders might have been provided, or should have been provided, by a higher authority. The justices are primarily concerned with whether the school authorities have made a sensible and responsible use of the facilities existing on the ground or within their powers to provide.

In the present case the justices’ findings of fact are not critical of the school. I come to their reasons in a moment, but their findings of fact, which I have read, are not in the main critical. They say that the school has an experienced headmaster and apparently adequate staff. The findings of fact recognise both that the school cannot be made a penal institution and that the staff show regard for the protection of the public. Even so, if the justices had merely said that they were not satisfied about the matters mentioned in s 55 of the 1933 Act, and given no reasons, it may be that we should not have been able to disturb those conclusions. In fact, however, the justices have given reasons, and if these will not bear examination, then their conclusions cannot stand.

Page 333 of [1975] 1 All ER 326

I turn, therefore, to examine the reasons. The first, it will be remembered, merely records the fact that Andrew and Ian were in Gloucester on two days, and Michael and Ian were in Corsham on one day, as the justices put it, ‘stealing’. To say that that shows that there was neglect in control is really to beg the question. What the justices have to consider is whether overall there was neglect which caused these boys to be out absconding, stealing, and in my judgment they cannot reach that conclusion merely by repeating, as it were, the symptoms of the disease. If there had been numerous abscondings by the same children, of course different factors might arise, but I do not see how the simple fact that these children had absconded in itself answers the question of whether there was neglect conducive to their absconding.

The third reason again one can dismiss quite briefly. It was that the boys were allowed to play in the grounds without being watched. One asks oneself: ‘Why shouldn’t they?’ Bearing in mind that this was not, and never attempted to be, a fully secure establishment and the fences at the back of the house were not unclimbable, unless the boys were being watched every moment of their lives, the opportunity to abscond was bound to exist. Again the justices had to ask themselves whether there was neglect in this instance, and the fact that they were not always under supervision day and night does not seem to me to be an adequate reason, because that standard seems intolerably and impossibly high when regard is had to the justices’ own reason.

Finally, they refer in their second reason to Dorset Yacht Co Ltd v Home Office. This is a case which is concerned with the obligation of the authorities responsible for penal institutions towards the public generally. Although it is helpful to remind oneself, as counsel for the appellant has reminded us, of the principles there applicable, I do not find that it helps very much in this case.

In this case we are concerned with whether there was neglect conducing to the particular offences, and in view of the findings of fact I find the reasoning given in the justices’ second reason to be contradictory to those findings. They find, as I have pointed out, that this could not be made a penal institution. They find that the staff had the protection of the public in mind. There seems to me to be absolutely no material in the case, when one has regard to the justices’ findings of fact, which could possibly make sense, if I may use the phrase, of the conclusions which they reached in the second paragraph.

Accordingly, in this case, which I confess I have not found an altogether easy one, I think that the submissions of the appellant should prevail and that the appeal should be allowed and the compensation orders quashed.

MAIS J. I agree. I find the findings of fact by the justices somewhat inconsistent; and their reasons for stating that the appellant neglected to exercise due care and control over these particular boys are not to my mind supported by the facts as found.

CROOM-JOHNSON J. I also agree. I would like to add one or two points. The justices have a mandatory duty in the case of children, and discretionary in the case of young persons, under s 55 of the Children and Young Persons Act 1933 to order the guardian to pay a fine, compensation order or costs unless they are satisfied that the guardian has not conduced to the commission of the offence by neglecting to exercise due care or control of the child or young person. ‘Control’ was inserted into the section by amendment in 1969: Children and Young Persons Act 1969, Sch 5.

Under the Children and Young Persons Act 1969, the guardian, in this case the appellant, Somerset County Council, does have a duty to the child in its care or

Page 334 of [1975] 1 All ER 326

under its control. The duty under s 55 of the 1933 Act I think can be described as the duty owed to the public on the part of the justices to see whether due care and control has been exercised, which to me implies also that there must be a duty in the guardian to do likewise. The duties which the guardian has may, of course, conflict, particularly in cases where the guardian is a public authority, like the appellant.

For the good of the child, there must be some risks taken to let it develop its personality or its sense of responsibility. On the other hand, one can visualise cases where the duty to the child is discharged, but not that which is owed towards the public.

The test by which the duty to the public is measured may well be a strict one, certainly in those cases where a child is not a first offender when he comes before the magistrates’ court for the relevant offence. But it my view it would not of itself be enough, when consideration for making an order under s 55 is before the justices, that the public authority, being the guardian, should simply be able to say to the justices: ‘This was a normally run school, and well run of its type.' I think that the evidence would have to go further and satisfy the justices that the particular child which has been before the court for this offence has also been sufficiently supervised, for it the child is very disturbed, or prone to violence or other criminal acts, some form of strict supervision may prove to be necessary. This kind of evidence, one may think, is easy to give and difficult to challenge, but this is the kind of instance in which assistance should be given to the court where the justices have to make up their minds whether to make an order under s 55. I would hope that the prosecution in a case like this would certainly regard it as part of their duty to help the court by testing the evidence that was given, as in this case, where a good deal of evidence appears to have been given as to the way in which the school was run and its physical layout and protection and so on. I hope that the prosecution would not say that this was a matter only going to penalty which did not concern them.

I entirely agree with Lord Widgery CJ’s analysis of the reasons which the justices gave. So far as the findings of fact are concerned, there was one other finding which I should like to refer to. After the finding that the staff regards protection of the public as an important part of their work, the justices went on to make another finding, saying that ‘The staff of Eagle House carried out their instructions and duties’ as defined in para 5(k).

They went on and said: ‘The records of the three boys are not exceptional for schools of this kind.' I think that finding was sufficient to justify saying here that there was before the court in fact the necessary material that the three boys concerned did not require any exceptional form of supervision and, therefore, on the general supervision which was given to the boys at the school, that the appellant had not conduced to the commission of the offences by neglecting to exercise due control of the three boys.

I agree with Lord Widgery CJ’s judgment as to the allowing of this appeal.

Appeal allowed. Compensation orders quashed.

Solicitors: Sharpe, Pritchard & Co agents for S E Harwood, Taunton (for the appellant); G R Archer, Chief Prosecuting Solicitor for Gloucestershire (for the respondent).

Lea Josse   Barrister.

Raymond Lyons & Co Ltd v Metropolitan Police Commissioner

[1975] 1 All ER 335

Categories:        CRIMINAL; Criminal Law, Police        

Court:        QUEEN’S BENCH DIVISION        

Lord(s):        LORD WIDGERY CJ, THOMPSON AND MAIS JJ        

Hearing Date(s):        27 NOVEMBER 1974        

Police – Property in possession of police – Delivery to owner – Power of magistrates’ court to order property to be delivered to person appearing to court to be owner – Owner – Meaning – Application by person having good title save against true owner by virtue of possession – True owner untraceable – Whether applicant ‘owner’ – Police (Property) Act 1897, s 1(1) (as amended by the Criminal Justice Act 1972, s 58).

A youth went to a jewellers’ shop, produced a ring and asked for it to be valued. The shop assistant and the manager suspected that the ring had been stolen and they told the youth to come back later after it had been valued. The youth gave a name and address, but never returned. On valuation the ring was found to be worth £3,500. The jewellers informed the police and handed the ring over to them for the purpose of their investigations into the suspected offence. The owner of the ring could not be traced. Accordingly, the jewellers applied under s 1(1)a of the Police (Property) Act 1897 for an order that the police should deliver the ring to them, claiming that they were the owners, within s 1(1), in that when the ring came into their possession they had acquired a title to it which was good against the whole world save for the true owner.

Held – The word ‘owner’ in s 1(1) was to be given its ordinary popular meaning, ie the person who was entitled to the goods in question and not simply the person who happened to have them in his hands at any given moment. The jewellers were not the owners in that sense and accordingly were not entitled to an order under s 1(1) (see p 338 b c and h, post).

Per Curiam. The summary procedure under the 1897 Act is not intended to be used in cases involving difficult questions on title but only in straightforward cases where there is no difficulty of law and the matter is clear (see p 338 e to h, post).

Notes

For property in possession of the police, see 30 Halsbury’s Laws (3rd Edn) 90–91, para 152.

For the Police (Property) Act 1897, s 1, see 25 Halsbury’s Statutes (3rd Edn) 280.

Cases cited in argument

Armory v Delamirie (1722) 1 Stra 505.

Marsh v Police Commissioners [1944] 2 All ER 392, [1945] KB 43, CA.

R (Curtis) v Louth County Justices (1916) 50 ILT 191.

Case stated

This was an appeal by way of a case stated by justices for the South East London Commission Area acting in and for the petty sessional division of Croydon in respect of their adjudication as a magistrates’ court sitting at Croydon on 12 July 1974.

On 7 June 1974 complaint was preferred by the appellants, Raymond Lyons & Co Ltd, against the respondent, the Metropolitan Police Commissioner, that certain property, namely, a three stone diamond ring, had come into the possession of the

Page 336 of [1975] 1 All ER 335

metropolitan police in connection with their investigation of a suspected offence and the appellants applied for an order for the delivery of the ring to them.

The justices found the following facts. (a) At all material times the appellants carried on business as retail jewellers at a shop at 1030 Upper Level, Whitgift Centre, Croydon. (b) At lunch time on 29 November 1973 a youth entered the shop and asked for a valuation of a ring which he produced and handed to a shop assistant. Subsequently it was ascertained that the ring was worth about £3,500. The youth stated that he was Mr Peter of 6 Godding Avenue, Wallington, Surrey. The shop assistant and her manager reasonably suspected that the ring was stolen, because of the youth’s age and the high value of the ring. They youth was told that it was necessary to retain the ring to value it. He was given a receipt for the ring which he left with the appellants. He was asked to return in about an hour. (c) The manager immediately telephoned the police station, Croydon, and shortly after two police officers arrived and waited for the youth. The police officers kept observation in the shop for three days but the youth never returned. On 29 November the ring was handed to the police officers by the appellants and thereafter it remained in the possession of the metropolitan police. (d) Police officers made enquiries at 6 Godding Avenue, Wallington and ascertained that the youth did not live there and was not known there. (e) The justices were satisfied that the ring had come into the possession of the metropolitan police in connection with their investigation of a suspected offence. (f) The police circulated information about the ring to police stations and to insurance companies, and on 15 December 1973 it was shown in a television programme entitled ‘Police Five’, but no third party established ownership or pursued a claim to ownership. (g) The employees of the appellants, namely their manager and shop assistant, had acted with commendable propriety and were instrumental in taking the ring from the youth and placing it in the possession of the metropolitan police; despite this conduct on the part of the appellants’ employees, the appellants did not appear to be the owners of the ring. The owner was some other person who could not be ascertained. (h) If the regulations with respect to unclaimed property made by the Secretary of State pursuant to s 2(1) of the Police (Property) Act 1897 were applied to the case, the consequences were likely to be as follows: (i) the ring would be sold by public auction in about January 1975; (ii) the appellants would be notified of the time and place of the auction; and (iii) half of the net proceeds of sale would be paid to the appellants.

It was contended by the appellants that they were the owners of the ring within the meaning of s 1(1) of the 1897 Act.

The appellants did not appear to the justices to be the owners of the ring and as the owner could not be ascertained the order which seemed meet was to direct that the ring should be dealt with in accordance with the regulations with respect to unclaimed property.

Giles Harrap for the appellants.

Raymond Sturgess for the respondent.

27 November 1974. The following judgments were delivered.

LORD WIDGERY CJ. This is an appeal by case stated by justices for the South East London Commission Area sitting as a magistrates’ court at Croydon on 12 July 1974.

I pause to observe, before going into the merits of the case, the relevant dates which are somewhat more encouraging than some in this court. The complaint was preferred on 7 June, the hearing was on 12 July, the case was stated on 21 October and actually comes before the court on 27 November, which is a time scale very much nearer to that which we hope to achieve in future than we have often achieved in the past. But enough of that and back to the substance of the matter.

Before the justices on the date in question was a complaint by Raymond Lyons & Co Ltd, who sought from the justices an order under the Police Property Act 1897,

Page 337 of [1975] 1 All ER 335

whereby there should be delivered up to them a ring, the immediate history of which had been as follows.

On 29 November 1973 a youth came into the shop of Messrs Lyons, who are jewellers, produced a ring and asked for a valuation. It was subsequently discovered that the ring was a valuable one worth £3,500. The youth gave a name and address, but the shop assistant and the manager, both suspecting that he had not come by the ring by honest means, told him that he would have to come back shortly after the ring had been valued, and on his leaving the shop they rang up the police. In fact the young man never returned and has never been seen again, and the ring in the hands of the appellants remained there until they handed it over to the police that same day on the footing that the police needed it for the purpose of their enquiries. The justices say, and there is no doubt about it, that the ring came into the possession of the metropolitan police in connection with their investigation of a suspected offence.

Efforts have been made to get the true owner of the ring to come forward and claim it, but all has been to no avail. So the ring is physically in the possession of the police, and the proceedings below were designed to enable the jewellers to obtain possession from the police.

If one looks at s 1(1) of the Police (Property) Act 1897 it is in these terms:

‘Where any property has come into the possession of the police in connexion with their investigation of a suspected offence … a court of summary jurisdiction may, on application either by an officer of police or by a claimant of the property, make an order for the delivery of the property to the person appearing to the magistrate or court to be the owner thereof, or, if the owner cannot be ascertained, make such order with respect to the property as to the magistrate or court may seem meet.’

Section 1(2) preserves the right of any person for a period of six months to bring a civil action to assert any rights of property which he may have in goods which have reached the hands of the police in the circumstances stated in s 1(1). So that even if an attempt to obtain possession via the magistrates’ court is unsuccessful, a person claiming to be the true owner of the goods has his civil remedy as long as he pursues it without unreasonable delay. Section 2(1) of the 1897 Act goes on to provide:

‘A Secretary of State may make regulations for the disposal of property which has come into the possession of the police under the circumstances mentioned in this Act in cases where the owner of the property has not been ascertained and no order of a competent court has been made with respect thereto.’

Thus as a final provision there is the power to make regulations which will determine the issue in cases where the justices are unable to do it under the terms of s 1.

The argument below was extremely short. On behalf of the appellants it was said that they were the owners at the relevant time for the purposes of s 1. The argument in a little more detail was to the effect that when the ring came into their possession they had a good title to it as against the whole would save for the true owner, and that possession of that kind valid against the world except the true owner is ownership for the purposes of s 1. The justices equally clearly rejected that argument and based their conclusions on such rejection because they say:

‘The appellants did not appear to us to be the owner of the ring and as the owner could not be ascertained the order which seemed meet was to direct that the ring should be dealt with in accordance with the said regulations with respect to unclaimed property.’

So the difference, as it were, between the argument put forward by the appellants today and the justices’ conclusions is very clear to see. Counsel contends that the

Page 338 of [1975] 1 All ER 335

appellants were the owners for the purposes of the section; the justices thought they were not. The only question, as I see it, which we really have to decide is which of those views is the right one.

I have listened to counsel for the appellants’ argument and would readily accept that in certain circumstances the word ‘owner’ can have a meaning different from the ordinary popular meaning. The popular meaning of ‘owner’ is a person who is entitled to the goods in question, a person whose goods they are, not simply the person who happens to have them in his hands at any given moment. I have little doubt that in s 1 ‘owner’ is to be given that ordinary popular meaning, which lay justices would naturally give to it, using the word in the ordinary layman’s sense. I think that that conclusion is underlined by the fact that the draftsman is distinguishing between ‘possession’ and ‘ownership’ because the section, it will be remembered, began with the phrase ‘where any property has come into the possession of the police’.

The justices in this case asked themselves whether the jewellers, who had received custody of this ring in the manner which I have described, were to be regarded as owners for the purpose of the section. They thought not; I think they were right. I do not think that the appellants were owners in the ordinary popular sense at all.

Once one reaches that conclusion, then it is clear to me that this appeal will have to be dismissed, but I must say one further word in answer to counsel for the appellants’ argument, where he recommended our giving the word ‘owner’ a wider meaning in order that this summary process for the return of goods in police possession would be more widely used.

The view which I take of this case will perhaps prevent any unnecessary or unacceptable wider user of the section. But I think it worthwhile pointing out that there is a very close parallel between this summary procedure and the summary procedure now exercised by all criminal courts under the Criminal Justice Act 1972 to make compensation to injured persons as part of the disposal of a criminal case. It has been said over and over again that the latter summary procedure is not to be used in difficult cases involving tricky questions of title or large sums of money. It is much better that the civil courts should handle disputes of that kind. What is intended both in regard to compensation orders and orders under the Police (Property) Act 1897 in my judgment is that in straightforward, simple cases where there is no difficulty of law and the matter is clear, the justices should be able to make a decision without involving the expense of civil proceedings. But I would actively discourage them from attempting to use the procedure of the Act in cases which involve a real issue of law or any real difficulty in determining whether a particular person is or is not the owner. I would dismiss this appeal.

THOMPSON J. I agree.

MAIS J. I agree.

Appeal dismissed.

Solicitors: David Alterman & Sewell (for the appellants); Solicitor, Metropolitan Police.

N P Metcalfe Esq   Barrister.

Fletcher v London (Metropolis) Licensing Planning Committee

[1975] 1 All ER 339

Categories:        LEISURE AND LICENSING        

Court:        COURT OF APPEAL, CIVIL DIVISION        

Lord(s):        LORD DENNING MR, CAIRNS LJ AND SIR JOHN PENNYCUICK        

Hearing Date(s):        25 OCTOBER 1974        

Licensing – Certificate of non-objection – Grant of certificate by licensing planning committee – Duty of committee to try to secure that number nature and distribution of licensed premises accord with local requirements – Nature of licensed premises – Meaning – Club premises – Admission to membership of club – Delay between application for and admission to membership – Application for licence containing condition that delay should be 24 hours – Committee refusing to grant certificate unless period increased to 48 hours – Whether period of delay affecting nature of licensed premises – Whether committee having jurisdiction to refuse certificate on that ground – Licensing Act 1964, s 119(2).

The applicant was employed by a company which ran numerous clubs, each of which was licensed for gaming limited to the playing of bingo under the Gaming Act 1968. One of the clubs, which was also licensed to sell intoxicating liquor, was situated in London which was a licensing planning area within Part VII of the Licensing Act 1964. The licence for that club was in the name of the applicant. The terms of the licence included a restriction against the admission of new members without a delay of at least two days from the date of their application for membership. The applicant wished to obtain a new licence limiting the delay after application for membership to 24 hours, the minimum required for bingo clubs by s 20(5) of the 1968 Act. The London (Metropolis) Licensing Planning Committee, however, refused to grant a certificate of non-objection to a new licence containing such a condition. The applicant appealed to the Divisional Court for an order of mandamus directing the committee to hear and determine the application according to law, on the ground that the committee had considered matters outside its jurisdiction under s 119(2)a of the 1964 Act. The Divisional Court granted the order sought, holding that the difference between a delay of 24 hours and one of two days was a matter affecting the conduct and not the ‘nature’ of the licensed premises within s 119(2). The committee appealed.

Held – It was not possible to draw a distinction between the nature and the conduct of licensed premises for the conduct of the premises might well affect their nature. The length of time between application for and admission to membership of a licensed club might have a direct effect on the type of members who were admitted to the club and therefore on its nature. Accordingly the matter was one which was within the purview of the committee under s 119(2). The appeal would therefore be allowed (see p 341 h to p 342 a c and f to p 343 a, post).

R v London (Metropolis) Licensing Planning Committee, ex parte Baker [1970] 3 All ER 269 doubted.

Notes

For general duties of licensing planning committees, see 22 Halsbury’s Laws (3rd Edn) 643, para 1353.

For the Licensing Act 1964, s 119, see 17 Halsbury’s Statutes (3rd Edn) 1168.

Cases referred to in judgments

R v London (Metropolis) Licensing Planning Committee, ex parte Baker [1970] 3 All ER 269, [1971] 2 QB 226, [1970] 3 WLR 758, 134 JP 662, DC, 30 Digest (Reissue) 21, 132.

Page 340 of [1975] 1 All ER 339

Case also cited

Kennedy v Birmingham Licensing Planning Committee [1972] 2 All ER 305, sub nom R v Birmingham Licensing Planning Committee, ex parte Kennedy [1972] 2 QB 140, CA.

Appeal

By a motion dated 17 July 1973 the applicant, James Stephen Grant Fletcher, applied for an order of mandamus directing the London (Metropolis) Licensing Planning Committee (‘the committee’) to hear and determine according to law the application of the applicant for the grant to him of a certificate of non-objection to the grant of a new on-licence in respect of premises known as the Top Rank Club situated at 60 Wandsworth High Street, SW18. On 4 February 1974 the Divisional Court of the Queen’s Bench Division (Lord Widgery CJ, Boreham and May JJ) granted the order sought. The committee appealed. The facts are set out in the judgment of Lord Denning MR.

David Tudor Price for the committee.

Jarlath Finney for the applicant.

25 October 1974. The following judgments were delivered.

LORD DENNING MR. Rank Leisure Services Ltd run about 50 clubs. One of them is the Top Rank Club at 60 Wandsworth High Street, London. It has a licence for the playing of bingo. If a person want to become a member—so as to play bingo—he must apply in person in writing and at least 24 hours must elapse before he is admitted. That is a statutory provision contained in the Gaming Act 1968, ss 12(3) and 20(5). For other gaming clubs—for games other than bingo—the time is 48 hours.

Now the company want to be able to sell intoxicating liquor in this bingo club. For this purpose it has to have a licence under the Licensing Act 1964. It wishes the 24 hour rule to apply to this licence also, so that a person can, after waiting 24 hours, not only play bingo but also drink intoxicating liquor.

If this club were granted an intoxicating liquor licence—with only a 24 hour condition—it would be an entirely new departure for clubs in London. The practice in London for the last 70 years has been that, in order to supply intoxicating liquor, a club must have a rule that there is a ‘48 hour’ interval between nomination of a member and his admission. This practice has been reinforced by statute: see s 28(1)(g) of the Licensing Act 1902, s 95(1)(g) of the Licensing Act 1910, s 144(1)(g) of the Licensing Act 1953, and s 41 of the Licensing Act 1964. But in the present case the Top Rank Club seek to break down that practice so far as regards bingo clubs. They wish to obtain justices’ licenses for their bingo clubs with a ‘24 hour’ condition instead of a ‘48 hour’ condition. Outside London they have been successful in getting ‘24 hour’ conditions on licenses for bingo clubs. But in London they have not so far been successful.

It is only since 1961 that a club has been enabled to hold a justices’ licence. But so far as London is concerned, a club has to pass a preliminary test before it can even apply for a justices’ licence. It has to go before a special committee called the licensing planning committee. This is because London is a licensing planning area within Part VII of the Licensing Act 1964. This committee has the task of considering the applications for justices’ licenses and seeing whether they should be objected to or not. If the committee objects to the grant of a licence, that is the end of the matter. The applicant cannot get a justices’ licence at all. If the committee does not object, it grants a certificate of non-objection. Armed with that certificate, the applicant has to go before the licensing justices. They will then grant or refuse a licence as they think fit and subject to such conditions as they think fit.

In this case the club has only got as far as the preliminary test. It applied to the committee for a certificate of non-objection. The committee said that it was unwilling to grant a certificate unless the applicant was ready to accept the ‘usual’ club conditions. These were:

Page 341 of [1975] 1 All ER 339

‘1. Intoxicating liquor may be sold only to members of the Club meeting at the within mentioned premises for consumption by those members and their bona fide guests.

‘2. No person shall be admitted to membership of the said Club without an interval of at least 2 days between nomination or application for membership and admission …

‘3. No “Off” Sales.’