All ER 1991 Volume 4

[1991] 4 All ER 1

Tudor Grange Holdings Ltd and Others v Citibank NA and Another

COMPANY INSOLVENCY: CONTRACT

CHANCERY DIVISION
SIR NICOLAS BROWNE-WILKINSON VC
17, 18, 19, 22, 23, 24 APRIL 1991

Company Receiver Appointment Effect on companys power to bring action Receivers appointed by bank Company
commencing action against bank for misrepresentation Action commenced by directors of company without receivers consent
Action prejudicing receivers position Whether company having power to commence action.

Contract Unfair terms Exemption clauses Evasion of liability by means of secondary contract Compromise or settlement
of existing dispute Contract to settle earlier disputes between plaintiffs and defendants Whether restriction on exemption
clauses extending to compromises of accrued claims or settlement of existing dispute Whether comprises subject to statutory
requirement of reasonableness Unfair Contract Terms Act 1977, ss 2(2), 10.

The two plaintiff groups of companies were engaged in scrap metal disposal and property ventures. C, who controlled both
groups, and his family were the sole shareholders in the first group and substantial shareholders in the second. The companies
embarked on an ambitious expansion programme which required long-term financing and entered into certain commitments
allegedly in reliance upon representations made by the defendant banks as to the banks preparedness to grant a substantial loan
facility and to fund the companies projects through to completion. C and his family guaranteed the liabilities of both groups of
companies. The companies projects did not prosper and they defaulted in repaying the interest on the loans. However, the
companies were in urgent need of further finance and the banks agreed to make further advances provided all claims against them
were released and the companies agreed to cross-collateralisation of all loans so that the banks would have security for all debts
of the companies against all the assets of the companies. On 13 March 1989 a deed of release was executed providing for the
release of all claims by the companies and their shareholders against the banks and in April 1989 a document, termed Heads of
Agreement, was executed which had the effect of producing full cross-collateralisation. The companies became insolvent and
the lead bank, the first defendant, appointed administrative receivers of the companies in September 1989. The companies and C
brought an action against the banks claiming, inter alia, damages for misrepresenttion and that the deed of release and the heads
of agreement had been procured by duress and, relying on ss 2(2) a and 10b of the 1 Unfair Contract Terms Act 1977, which
provided that a person was not bound by any contract term taking away his rights under another contract so far as those rights
extended to the enforcement of anothers liability which the Act prevented that other person from excluding or restricting unless
the exclusion of liability was reasonable, contended that the release was not binding on the plaintiffs because it was unreasonable.
Notwithstanding the prior appointment of administrative receivers of the companies, the action was brought without the
receivers consent, pursuant to resolutions passed by the board of directors of each of the companies. The banks counterclaimed
for repayment of principal and interest of the various loans and applied to strike out the plaintiffs claim, contending (i) that the
plaintiffs had no locus standi to bring the proceedings, (ii) that the matters relied upon in the statement of claim, based on facts
occurring prior to the release of 13 March 1989, were barred by the terms of the release and (iii) that the allegation of duress was
so improbable and the pleading and evidence in support of it so vague and unsatisfactory that the court should strike it out.
________________________________________
a Section 2(2) provides: In the case of other loss or damage [ie other than death or personal injury resulting from negligence], a person
cannot so exclude or restrict his liability for negligence except in so far as the term or notice satisfies the requirement of reasonableness.
b Section 10 is set out at p 12 d e, post

Held The statement of claim would be struck out and the action dismissed for the following reasons
(1) It was very difficult to see how it could be alleged that the defendants owed a duty of care to C personally as opposed to
the companies in which he was involved, and he could have no cause of action against the defendants, whether for breach of
contractual or tortious duty of care, innocent or fraudulent misrepresentation or any other head, unless he could allege and prove
damage suffered by him. Since all the damage pleaded in the statement of claim was damage suffered by the companies, and it
was accepted that as a shareholder C could not recover as damage suffered by him personally damage done to the company
resulting in a reduction in the value of his shareholding, the only claim that C could put forward was one for fees incurred by him
in respect of financial advice to the companies in respect of the loans, but in the absence of any evidence of his having paid such
fees there was no maintainable claim by C personally on the cause of action pleaded. It followed that C would be struck out as a
plaintiff in any event (see page 9 g to 10 c, post).
(2) Although it was established that in certain circumstances company directors had power to bring proceedings on behalf of
the company even after the appointment of a receiver who had power to bring proceedings on the companys behalf, they had no
power to do so where the receivers position would be prejudiced by their decision to bring proceedings. Since the action
commenced by the directors of the plaintiff companies in the plaintiff companies name could directly impinge on the property
subject to the receivers powers because the directors held no indemnity against the liability of the companies assets to satisfy a
hostile order for costs made against the companies, it followed that the directors had had no power to start the proceedings.
However, since there was a possibility of such an indemnity being forthcoming the action would not be struck out on that ground
alone (see p 10 e and p 11 a to c, post); Newhart Developments Ltd v Co-op Commercial Bank Ltd [1978] 2 All ER 896
distinguished.
(3) Since the purpose of the 1977 Act was to invalidate exemption clauses in the strict sense, ie clauses in a contract which
modified prospective liability and did not affect retrospective compromises of existing claims, s 10 of the Act on its true
construction did not apply to a contract to settle disputes which had arisen concerning the performance of an earlier contract.
Furthermore, s 10 did not apply where the parties to both contracts were the same. Accordingly, s 10 did not apply to the release
of 13 March 1989, which was binding on the plaintiffs and had the effect of providing a complete answer to all claims against the
banks 2 based on facts or matters occurring before the date on which it was signed (see p 12 c j, p 13 b d e h j and p 14 b f, post).
 (4) On the facts, the plaintiffs could not show that they had entered into the deed of release or heads of agreement in reliance
on a misrepresentation that the banks would continue to finance the plaintiffs projects. Although the allegation of duress could
not be struck out purely on the grounds of improbability, it was, having regard to all the factors in the case, vexatious for the
plaintiffs to pursue that one matter on its own (see p 14 h j, p 16 c to e and p 17 a f to j, post).
Quaere. Whether the directors of a company in receivership and the receivers, who may have widely differing views and
interests, can both have power to bring proceedings on the same cause of action (see p 10 h, post); Newhart Developments Ltd v
Co-op Commercial Bank Ltd [1978] 2 All ER 896 doubted.

Notes
For the effect of the appointment of a receiver, see 7(2) Halsburys Laws (4th edn reissue) para 1159, and for cases on the subject,
see 10(1) Digest (2nd reissue) 203204, 77307731.
For exclusion clauses, see 9 Halsburys Laws (4th edn) paras 363364.
For the Unfair Contract Terms Act 1977, ss 2, 10, see 11 Halsburys Statutes (4th edn) (1991 reissue) 223, 228.

Cases referred to in judgment

Newhart Developments Ltd v Co-op Commercial Bank Ltd [1978] 2 All ER 896, [1978] QB 814, [1978] 2 WLR 636, CA.
Ramsay v Hartley [1977] 2 All ER 673, [1977] 1 WLR 686, CA.
Smith v Eric S Bush (a firm) [1989] 2 All ER 514, [1990] AC 831, [1989] 2 WLR 790, HL.
Stephens v Cuckfield RDC [1960] 2 All ER 716, [1960] 2 QB 373, [1960] 3 WLR 248, CA.

Cases also cited

Lawrance v Norreys (1890) 15 App Cas 210, [188690] All ER Rep 858, HL.
Newtherapeutics Ltd v Katz [1991] 2 All ER 151, [1991] Ch 226.
Pao On v Lau Yiu [1979] 3 All ER 65, [1980] AC 614, PC.
Pearson v Naydler [1977] 3 All ER 531, [1977] 1 WLR 899.
Riches v DPP [1973] 2 All ER 935, [1973] 1 WLR 1019, CA.
Trendtex Trading Corp v Credit Suisse [1981] 3 All ER 520, [1982] AC 679, HL; affg [1980] 3 All ER 721, [1980] QB 629, CA.
Watts v Midland Bank plc [1986] BCLC 15.

Summonses
By summons dated 25 October 1990 the first defendant, Citibank NA, a bank carrying on business in London and elsewhere,
applied to strike out the statement of claim indorsed on the writ issued by the plaintiffs, Tudor Grange Holdings Ltd, London Iron
and Steel Co Ltd, London Iron and Steel Co (BMD) Ltd, Lionhope Ltd and Donald Roy Crawley, claiming, inter alia, damages
for misrepresentation and that a deed of release and head of agreement signed by the plaintiffs were procured by duress, on the
ground that the statement of claim disclosed no reasonable cause of action or was scandalous, frivolous or vexatious or was
otherwise an abuse of the process of the court. The second defendant, Den Danske Bank A/S, a bank carrying on business in
London and elsewhere, issued a summons in similar terms. The summonses were heard in chambers but 3 judgment was given
by Sir Nicolas Browne-Wilkinson V-C in open court. The facts are set out in the judgment.

Peter Goldsmith QC and Ali Malek for the first defendant.

Peter Irvin for the second defendant.
Peter Sheridan QC and Paul Lowenstein for the plaintiffs.

24 April 1991. The following judgment was delivered.

SIR NICOLAS BROWNE-WILKINSON VC. This is an application by the defendants to strike out claims in an action,
alternatively for security for costs to be given by the plaintiffs. I heard argument in chambers but, since the issues raise at least
one point of law of general importance, I am giving judgment in open court.
There are five plaintiffs. The first, Tudor Grange Holdings Ltd (TGH), is the holding company of the second and third
plaintiffs, London Iron and Steel Co Ltd and London Iron and Steel Co (BMD) Ltd. Those are companies in the Tudor Grange
group (or TGG). The Tudor Grange group was engaged in scrap metal disposal and property ventures. The fourth plaintiff,
Lionhope Ltd, was engaged exclusively in the property market. The fifth plaintiff, Donald Roy Crawley, is the moving spirit
behind both groups of companies. He and his family are the sole shareholders in the Tudor Grange group. They are also
substantial shareholders, though I think not the sole shareholders even now, in the Lionhope group. Mr Crawley and his family
and other shareholders have guaranteed the liabilities of both the Tudor Grange group and also Lionhope. The defendants are two
banks: the first, Citibank NA, the second, Den Danske Bank A/S (formerly Copenhagen Handelsbank A/S (CHB)) (the Danish
bank).
The background to the case is this. The Tudor Grange group embarked on ambitious expansion programmes. They were
introduced to Citibank and the Danish bank. In fact the Danish bank had been financing them before Citibank came onto the
scene. As a result, a number of advances were made to the Tudor Grange group for specific projects. Each advance was the
subject matter of a separate facility letter; each facility letter provided a date for repayment.
Mr Crawley and the plaintiffs allege that in discussions with Citibank it was necessary that the individual projects should be
viewed together and what was needed was long-term finance. It is alleged that Citibank told Mr Crawley and the plaintiffs that
Citibank would grant a substantial facility and would fund all the long-term Tudor Grange group projects through to completion.
In the statement of claim it is pleaded that, subject to certain conditions:

Citibank would provide long-term finance for all the projects in the TGG Business Plan. Such facilities would be
in a total sum substantially greater than that currently enjoyed by TGG.

It is said that the Danish bank was part of a bank syndicate of which the lead bank is Citibank and, as such, was aware of what
was going on.
At present the total sum outstanding to the two banks is in the region of 40m together with interest.
The plaintiffs, putting the matter very broadly at this stage, allege that, in reliance upon the representations made by the
banks as to their preparedness to finance the projects of the plaintiffs, they entered into certain commitments. The projects that
they entered into have not in the event prospered. The plaintiffs 4 were in default in repaying interest on the principal as early as
October 1988 so far as Citibank was concerned and by December 1988 to the Danish bank.
At the end of December 1988 and in early January 1989 the plaintiffs made certain general allegations that they had claims
against Citibank, though, when asked, they refused to specify what those claims were. At the same time the plaintiff companies
were in urgent need of further finance. Initially at least, they approached Citibank and the Danish bank for such finance. In the
event, the proposal changed: what was put forward was that in return for the banks holding their hand in enforcing the existing
indebtedness and agreeing to the sale of a half share in a development in Kent (the Keel development) over which the banks
enjoyed security, for the sum of 55m or thereabouts, the plaintiffs and their shareholders would agree to a cross-collateralisation
on which the banks were insisting. The cross-collateralisation arose from this fact. The sums advanced to Lionhope were
secured on the assets of Lionhope and other guarantees; the sums advanced to the Tudor Grange group were secured on,
primarily, Tudor Grange assets. There was a limited degree of interaction between the securities. What the bank was insisting
upon in early 1989 was full cross-collateralisation so that the banks would enjoy security for all the debts of both Lionhope and
the Tudor Grange group against all the assets of both groups.
The unparticularised claims against Citibank led to Citibank insisting that all such claims should be either specified or
released. In fact a release was executed on 13 March 1989. It provided:

In consideration of the sum of 1 and of Citibank not making immediate demand of certain indebtedness due from
TGH to Citibank each Releasor hereby releases the Releasees from all claims, demands and causes of action whether or not
presently known or suspected (the Claims) that such Releasor ever had, may now have, or hereafter can, shall or may
have against the Releasees or any of them based upon, arising out of or related to any and all acts or omissions of the Bank
or any other person prior to the date hereof. Each of the Releasors understands and agrees that the nature, extent and result
of the Claims hereby released may not now all be known or anticipated and declares that it nevertheless desires and hereby
agrees to settle compromise and release in full all possible claims against the Releasees arising from any and all acts or
omissions of any Releasee or other person or entity prior to the date hereof.

The releasors were defined as meaning Tudor Grange Holdings and the shareholders and each of them. The shareholders, as I
say, were broadly the members of the Crawley family and others.
Finally, the release provided:

4. In furtherance of the purposes of this Release the Releasors hereby agree jointly and severally to indemnify the
Releasees and hold each of them harmless from and against any and all claims asserted against any Releasee in any manner
by any Releasor or any past, present or future Affiliate of a Releasor and for this purpose Lionhope Limited and its
subsidiaries shall be Affiliates of TGH.

By cl 1 of the release:

Affiliate as applied to any person or entity shall mean any other person that, directly or indirectly, through one or
more intermediaries controls or is controlled by or is under common control with that person or entity.
5

The result is that TGH and the shareholders who signed the release have released all claims. Other members of the TGH
group and the Lionhope did not themselves execute the release, but Tudor Grange Holdings must indemnify Citibank against any
claims brought against Citibank. That is the first crucial document in this case.
The banks, as I have said, were further insisting on the complete cross-collateralisation of all the loans. In consequence, a
document was executed called the Heads of Agreement, which had the effect of producing full cross-collateralisation. It had
many other terms. That document bears a date of 20 April 1989. It is not clear on what date it was actually executed. Under the
heads of agreement, the banks agreed that the group would not be treated as in default until 30 June 1989. They consented to the
sale of the half share in the Keel development for 55m (which was then projected though not finally agreed). The document
contains detailed provisions as to how the 55m shall be applied, substantial sums out of it going in reduction of the borrowing
from Citibank and the Danish bank. The heads of agreement also provided for a further advance of 300,000 for specified and
limited purposes.
As I have said, the plaintiff companies projects did not prosper and they became insolvent. Citibank appointed
administrative receivers of the plaintiff companies at the beginning of September 1989. The banks also started proceedings in the
Queens Bench Division against the various shareholders in the group under their personal guarantees. The Danish bank
proceeded by way of RSC Ord 14 and were successful before the master in obtaining judgment against the guarantors. However,
the guarantors appealed. Between the decision of the master and the hearing before the judge of the Queens Bench proceedings,
this action was started. The judge in the Queens Bench Division gave leave to defend. Lionhope was put into compulsory
liquidation on 21 November 1989; the Official Receiver is the liquidator. Recently, Mr Crawley personally has proposed a
scheme of arrangement under the Insolvency Act 1986; orders were made restraining the presentation of any bankruptcy petition
against him or indeed any other proceedings which are still in force. There has been a meeting of creditors from which the
defendant banks and others were excluded. There is a hearing pending in the bankruptcy court relating to that matter.
This action was started without earlier warning by writ dated 20 August 1990. Notwithstanding the prior appointment of
administrative receivers of the four plaintiff companies, the action was brought pursuant to resolutions passed by the board of
directors of each of the companies. The actions have been brought without the consent of the receivers of each of the companies.
The directors who passed those resolutions consist of members of the Crawley family.
Before the start of the proceedings, Mr Crawley procured that the first four plaintiff companies would not be liable for their
costs of this action. The plaintiff companies bills are to be rendered and settled by Mr Crawley or his associates personally and
the solicitor acting has agreed not to charge the companies for those costs. However, the arrangements made do not include any
indemnity to the plaintiff companies against any order for costs that may be made in favour of the banks against the plaintiff
companies.
Following the winding up of Lionhope in November of last year, the Official Receiver became the liquidator. He was
apparently not prepared to continue with this action. By an assignment made by deed, dated as recently as 15 April of this year,
the Official Receiver, in consideration of the sum of 1, purported to assign the cause of action of Lionhope in these proceedings
to Mr Crawley personally.
I turn now to the claims made by the plaintiffs in the action so far as they appear from the pleadings. In the course of the
hearing before me, Mr Sheridan 6QC for the plaintiffs has sought leave to make substantial amendments to the allegations in the
statement of claim. I propose to refer to the statement of claim as it would stand if those amendments were permitted, pointing
out, where relevant, the difference between the proposed amendments and the claim as originally formulated.
The statement of claim starts by setting out the background that I have sought shortly to summarise: the proposed
expansion, the projects that were in mind, the business plan that Tudor Group had prepared. It then alleges that Citibank was told
that Tudor Grange would be unable to generate sufficient cash flow prior to the maturity of the projects to see the projects
through to a successful conclusion, that Tudor Grange group would require long-term capital investment to allow it to proceed
with the projects and would require long-term financing in order to meet its cash flow requirements pending the realisation of
profits. Further, it is alleged in para 10 that Citibank was told that it would be pointless for Citibank to advance sums for
particular projects contained within the various business plans and not for the whole.
In para 12 it is alleged that Citibank agreed to act as bankers and financial advisers for the plaintiffs and thereafter owed
them a duty of care and/or there were implied terms of the agreement that Citibank would act with all due care, skill and
diligence, would not knowingly or recklessly take steps such as to prejudice the business plan and would act towards the
plaintiffs and each of them in good faith and honestly.
 In para 13 it is alleged that Citibank told the plaintiffs that, after providing temporary loan facilities, Citibank intended to
replace that loan with a substantial facility, which Citibank assured Mr Crawley would fund all the long-term Tudor Grange
group projects and expansion programmes to completion.
In para 14, as I have mentioned, it is alleged that Citibank represented to the plaintiffs that it would provide long-term
finance for all the projects in the TGG business plan.
Those are the representations which are central to the plaintiffs case, namely representations that Citibank would provide
the necessary finance to put in hand and carry through to completion the projects which were included in the TGG business plan.
The original statement of claim pleaded no reliance on those representations. However, the proposed amended para 14A
alleges that, in reliance on those representations and induced thereby, the plaintiffs entered into certain agreements with Citibank
that caused the plaintiffs to enter into certain agreements and transactions with Citibank including the deed of release and the
cross-collateralisation agreement. There is therefore the pleading that the two crucial documents, the deed of release and the
cross-collateralisation agreement, were induced by misrepresentation.
As against the Danish bank, it is pleaded that there was an agreement for a syndicated loan, that throughout Citibank acted
as agent for the Danish bank and that the Danish bank is to be taken to have had knowledge of everything Citibank did in that
capacity.
In para 33 it is alleged that as late as August 1988 representatives of Citibank represented to Lionhope, the fourth plaintiff,
that Citibank was committed to provide full financial support for the acquisition by Lionhope of a particular site. In para 33A it
is pleaded that the plaintiffs entered into, amongst other things, the release and the cross-collateralisation agreement in reliance
on that representation made in relation to Lionhopes acquisition.
In para 33C it is alleged that the representations that I have referred to were of a continuing nature or, alternatively, by
implication were repeated on the occasion 7 of each transaction entered into by the plaintiffs and each of them with Citibank. It
is alleged in para 33D that the representations, or some of them, became false to the knowledge of Citibank and thereby
fraudulent. Two matters are relied on in support of that fraudulent misrepresentation. One is a failure to provide a comfort letter
on which, in the event, Mr Sheridan has not relied. The second and serious one is an allegation that on or about 20 December
1988 Citibank determined to get rid of the plaintiffs and Mr Crawley as a client of Citibank. That is supported by a memorandum
prepared by a gentleman on the staff of Citibank on 20 December, which records that alleged decision.
It is alleged in para 33E that Citibank failed to disclose its change of mind and that the continuing representations became
false and therefore fraudulent. Alternatively, in para 33F it is alleged that there were breaches of Citibanks contractual duties of
care which I have referred to.
Pausing there, the allegation is: that there was a representation of an intention to provide the necessary financial support,
which was true at the time it was made; that it was impliedly repeated or, alternatively, a continuing representation, which
representation became false in December 1988 when the bank no longer intended to support the plaintiffs; and that thereafter the
continuing misrepresentation relied upon became fraudulent.
When one comes to the cross-collateralisation agreement, it is pleaded in para 45 that the cross-collateralisation agreement
was entered into in reliance on the innocent or fraudulent misrepresentation which I have sought to identify. In addition, it is
alleged that it was procured by duress. The pleading in para 45 is this:

On 20th April 1989, Fabi and Kelsall on behalf of the Defendants told Crawley that unless he agreed to the cross-
collateralisation by Lionhope the Defendants would ruin him and each of his family members and would take whatever
action was necessary to bring about the financial downfall of TGG/Lionhope. The Defendants thereby represented that
they intended if such security were given to continue to support TGG/Lionhope.

That is the sole allegation of duress.

It is alleged that the cross-collateralisation agreement is, as a result, void or ought to be avoided for duress and/or undue
influence and/or by virtue of misrepresentation.
In para 52 the damage suffered is set out. It is unnecessary for me to go into it in any detail, except to notice that in para
52(vi) it is alleged:

The Plaintiffs and each of them have thrown away fees and interest payments in respect of the various Citibank and
CHB loans.

All other heads of damage claimed relate to damage which must be damage suffered by the companies, not by Mr Crawley
personally.
The statement of claim as originally delivered made no reference whatsoever to the deed of release. Citibank delivered a
defence and counterclaim which raised the release as a defence. In addition, Citibank counterclaimed against the plaintiff
companies for repayment of principal and interest of the various advances. It also asked for a declaration of the liability of TGG
and Mr Crawely to indemnify it against any claims by the other plaintiffs. The Danish bank similarly served a defence and
counterclaim.
In the reply and defence to counterclaim (which appears to have been settled and served by the directors of the plaintiff
companies without reference to the receiver or to the liquidator) the plaintiff companies plead in para 22:
8

the Release is void alternatively ought to be avoided by reason of the breaches of implied terms, fraudulent and
non-fraudulent misrepresentation, breaches of duty of care and/or instances of duress and/or undue influence and each of
them referred to in the Statement of Claim and in paragraph 15 above.

I do not think anything turns on the allegation in para 15 of the reply.

The banks make their application to strike out both under RSC Ord 18, r 19 and under the inherent jurisdiction. Mr Sheridan
on behalf of the plaintiffs submitted that I should not entertain this application as it involved a lengthy consideration of a
complicated story inappropriate for consideration on a striking out since striking out can only take place when the position is
clear. At that stage he had not raised the major submission which I will come to on the effect of the Unfair Contract Terms Act
1977.
I reject the submission that this is not a suitable case. Although the facts fundamentally at issue in the action, if it ever goes
for trial, are complex, the matters which Mr Goldsmith QC and Mr Irvin on behalf of the defendants are relying on to strike out
are essentially in a fairly narrow compass. It is a case in which complicated claims, very expensive to defend, are being brought
which, on the submissions made to me, are hopeless. It seems to me an appropriate case to go into.
However, I do accept that it is not appropriate for me to go into a detailed analysis of much conflicting evidence or
documentation, save where it can be shown that the documentation all points one way.
The banks found their claim to strike out under three heads. First, they say that the plaintiffs have no locus standi to bring
these proceedings. Second, they claim that all the matters relied upon in the statement of claim, based on facts occurring prior to
the release of 13 March 1989, are barred by the release. Thirdly, if they are right on that, the only remaining claim is the claim to
set aside the heads of agreement on the grounds of duress, that such claim is so improbable and the pleading and evidence in
support of it so vague and unsatisfactory that the court should strike it out. I will consider each of those bases of claim to strike
out in turn.

THE LOCUS STANDI OF THE PLAINTIFFS

Mr Crawley
The position here is not strictly one of locus standi. What is said is that the pleading as delivered discloses no cause of
action so far as Mr Crawley is concerned. I find it very obscure how it can be alleged that the banks came under a duty of care to
Mr Crawley personally as opposed to the companies in which he was involved. However, I will assume that such a case can be
made out. Even so, Mr Crawley can have no cause of action against the banks whether for breach of contractual or tortious duty
of care, innocent misrepresentation, fraudulent misrepresentation or any other head unless he can allege and prove damage
suffered by him. As I have said, all the damage pleaded in the statement of claim is damage suffered by the company. Mr
Sheridan has accepted, quite correctly, that Mr Crawley as shareholder cannot recover as damage suffered by him personally
damage done to the company resulting in a reduction in the value of his shareholding.
Accordingly, the only possible allegation founding Mr Crawleys claim is that which I have read from para 52(iv) of the
amended statement of claim. The claim for interest payments plainly is not a claim that he can put forward: it is a claim 9 by the
companies only. That leaves the claim for fees thrown awayfees incurred by Mr Crawley. I gave Mr Crawley an opportunity
to put in an affidavit showing how it came about that he had incurred such fees. An affidavit was produced. It contained no
evidence of Mr Crawley having paid such fees. The affidavit repeated the unmaintainable claim that he was entitled to recover
damages, being the diminution in the value of his shares resulting from the wrongs done to the company. It also put forward a
wholly new claim based on breach of contract by Citibank to advise him in respect of his own personal wealth and the wealth of
his family. There was not and is not, even in the amended claim, a trace of the factual allegations necessary to found such a
claim. There is no application to amend to plead them. Accordingly, there is no maintainable claim by Mr Crawley personally on
the cause of action pleaded, and I propose to strike him out as a plaintiff in any event.

The Tudor Grange group

It is common ground that the causes of action alleged by these plaintiffs, being property of the companies, are the subject
matter of charges to the banks. The causes of action are therefore part of the property subject to the rights of the receiver
appointed by the banks. Further, although I have not seen the charges themselves, it is, I think, common ground that the receivers
have the right to bring proceedings based on those causes of action: see the powers conferred by the Insolvency Act 1986, s 42
and Sch 1, para 5.
It is therefore surprising if the directors of the first three plaintiffs also have power to bring proceedings to enforce such
cause of action. However, it appears to be established by authority that company directors do in certain circumstances have
power to bring proceedings even after the appointment of a receiver having power to conduct legal proceedings on the companys
behalf (see Newhart Developments Ltd v Co-Op Commercial Bank Ltd [1978] 2 All ER 896, [1978] QB 814). In that case
directors were held to have residual powers to bring proceedings against the debenture holder who had appointed the receiver. In
that case the Court of Appeal was very impressed by two matters. First, the fact that the company had been indemnified by
outside sources against all liability not only for its own costs but also for costs which the company might be ordered to pay to the
other party. Therefore the bringing of proceedings by the directors in the companys name could not in any circumstances
prejudice the property for which the receiver was responsible. The court was also impressed by the fact that the receiver was in
the invidious position in deciding whether or not to take proceedings by reason of the fact that he was being invited to sue those
who had appointed him.
I have substantial doubts whether the Newhart case was correctly decided in any event. That may have to be looked at again
in the future. The decision seems to ignore the difficulty which arises if two different sets of people, the directors and the
receivers, who may have widely differing views and interests, both have power to bring proceedings on the same cause of action.
The position is exacerbated where, as here, the persons who have been sued by the directors bring a counterclaim against the
company. Who is to have the conduct of that counterclaim which directly attacks the property of the company? Further, the
Court of Appeal in the Newhart case does not seem to have had its attention drawn to the fact that the embarrassment of the
receiver in deciding whether or not to sue can be met by an application to the court for directions as to what course should be
taken, an application now envisaged in s 35 of the Insolvency Act 1986.
However, whatever may be the fate of the Newhart decision in the future, I am undoubtedly bound by it now and must
follow it where it exactly covers the 10 point in issue. It does not directly cover the present case. Unlike the position in the
Newhart case, when the directors of the plaintiff companies decided to start proceedings in the name of the company they were
starting proceedings which could directly impinge on the property subject to the receivers powers in that they held no indemnity
against the liability of the companies assets to satisfy a hostile order for costs made against the companies. That brings this case
outside both the decision and the reasoning in the Newhart case since, unlike the Newhart case, the receivers position was
prejudiced by the decision taken. In my judgment, the directors had no power to start the proceedings in those circumstances.
When this was pointed out, Mr Sheridan took instructions and has obtained instructions that it may be possible within 28
days to provide an indemnity against all liability of the companies in costs to the defendants to the sum of 200,000. Given the
possibility of such an indemnity now being forthcoming, if the case is otherwise appropriate to go on, I would not strike out on
this ground alone, but wait to see whether this 200,000 was available and the terms offered at that stage.

Lionhope
The proceedings by Lionhope were started in the same way as by the other three plaintiff companies, that is to say by the
directors, notwithstanding the receivership. After the liquidation of Lionhope, the cause of action was assigned by the liquidator
to Mr Crawley by deed in consideration of 1. Mr Goldsmith and Mr Irvin for the banks have submitted that this was an
astonishing act for the Official Receiver as liquidator to be party to. The payment of 1 nominal consideration provides no
benefit to the company of which the Official Receiver is the custodian. The Official Receiver has chosen to assign to an assignee
who is insolvent and is putting forward a proposal to his creditors. The result appears to be, says Mr Goldsmith, that the rights to
sue on this cause of action have been transferred by the Official Receiver to a man of straw who is in a position then to proceed
with the case. Although Ramsay v Hartley [1977] 2 All ER 673, [1977] 1 WLR 686 establishes that in the case of individual
insolvency the trustee can assign the cause of action to the bankrupt for valuable considerable, it has never been decided and was
left open in that case whether a trustee in bankruptcy or a liquidator could assign otherwise than for value received by the estate
of which he is the trustee. Mr Goldsmith also contended that the assignment was champertous.
As at present advised, I share Mr Goldsmiths surprise at what has been done. But the Official Receiver has not had an
opportunity to explain his actions. I certainly cannot hold the assignment void in his absence. However, if the action is otherwise
to proceed, I would grant a stay of proceedings by Lionhope until the defendant banks have had an opportunity to apply to the
Companies Court for an order under s 168(5) of the Insolvency Act 1986, so that the matter can be properly investigated with the
Official Receiver having an opportunity to be heard on it. If the assignment is found to be improper or ultra vires, the Companies
Court would have power to set it aside.

THE RELEASE OF 13 MARCH 1989

 Mr Sheridan concedes that if the release takes effect according to its tenor it provides a complete answer to all claims against
Citibank based on facts or matters occurring before 13 March 1989, including the claim based in fraud. Therefore the release
provides a complete answer to claims other than the heads of agreement claim.
Mr Sheridan further accepts, for the purposes of this hearing only, that the 11 release also provides the Danish bank with a
complete answer to those claims. The plaintiffs claim against Danish bank arises only through the alleged responsibility of the
Danish bank for the acts and omissions of Citibank. It is accepted that if Citibank is released from liability the claim cannot lie
against the Danish bank.
The only question therefore is the validity and effect of the release itself. Mr Sheridan alleges that the plaintiffs have an
arguable case that the release does not take effect according to its tenor. He founds that on two bases. (1) Under s 10 of the
Unfair Contract Terms Act 1977 the release is not binding on the plaintiffs since it was not reasonable. (2) The release was itself
induced by the fraudulent or innocent misrepresentations made by the defendants.

THE UNFAIR CONTRACT TERMS ACT 1977

Mr Sheridan accepts that the 1977 Act is normally regarded as applying to exemption clauses in the strict sense, namely
clauses in a contract exempting prospectively against a future liability. However, he submits that s 10 of the Act according to its
plain meaning operates so as to make subsequent compromises and waivers of accrued claims subject to the tests of
reasonableness introduced by the 1977 Act. Section 10 reads as follows:

A person is not bound by any contract term prejudicing or taking away rights of his which arise under, or in connection
with the performance of another contract, so far as those rights extend to the enforcement of anothers liability which this
Part of this Act prevents that other from excluding or restricting.

Mr Sheridan puts his case in this way. He says what the banks were under contractual duties of care to the plaintiffs under
the banking contracts. The release purports to take away the plaintiffs rights to complain of breaches of the banking contracts
and the duty of care contained in it. Therefore, says Mr Sheridan, the case comes directly within the words of the section.
Reading the section with the interpolation of the characters in this case, he said it would read like this:

A person [ie the plaintiffs] is not bound by any contract term [ie the release] taking away rights of [the plaintiffs]
which arise under another contract [ie the banking contracts], so far as those rights [ie the rights under the banking
contracts] extend to the enforcement of anothers [ie the banks] liability which this Part of this Act prevents that other [ie
the bank] from excluding or restricting.

He submits, in my view correctly, that under s 2(2) of the Act, the bank could not itself by contract exclude or restrict its
liability for breach of its contractual duty of care unless such exclusion or restriction was reasonable. Therefore, he says, the
release is only binding if it satisfies the requirement of reasonableness, a matter which requires full investigation of all the facts
and cannot be the subject matter of a striking-out application.
This argument that s 10 of the Act may apply to compromises or settlement of existing disputes has been foreseen by a
number of textbook writers as an unfortunate possibility. They are unanimous in their hope that the courts will be robust in
resisting it. If Mr Sheridans construction is correct, the impact will be very considerable. The 1977 Act is normally regarded as
being aimed at exemption clauses in the strict sense, that is to say clauses in a contract which aim to cut down prospective
liability arising in the course of the performance of the contract in which the exemption clause is contained. If Mr Sheridans
argument is correct, the Act will apply to all compromises or waivers of existing claims arising from past actions. Any
subsequent agreement to compromise contractual 12 disputes falling within s 2 or s 3 of the Act will itself be capable of being put
in question on the grounds that the compromise or waiver is not reasonable. Even an action settled at the door of the court on the
advice of solicitors and counsel could be reopened on the grounds that the settlement was not reasonable within the meaning of
the Act.
If I am forced to that conclusion by the words of s 10 properly construed, so be it. But, in my judgment, it is improbable that
Parliament intended that result: it would be an end to finality in seeking to resolve disputes.
The starting point in construing s 10 is, in my judgment, to determine the mischief aimed at by the Act itself. For this
purpose, it is legitimate to look at the second report of the Law Commission on Exemption Clauses (Law Com no 69) (see per
Lord Griffiths in Smith v Eric S Bush (a firm) [1989] 2 All ER 514 at 530, [1990] AC 831 at 857). This report was the genesis of
the 1977 Act. The report is wholly concerned with remedying injustices which are caused by exemption clauses in the strict
sense. So far as I can see, the report makes no reference of any kind to any mischief relating to agreements to settle disputes.
Next, the marginal note to s 10 reads as follows: Evasion by means of secondary contract. Although the marginal note to a
section cannot control the language used in the section, it is permissible to have regard to it in considering what is the general
purpose of the section and the mischief at which it is aimed: see Stephens v Cuckfield RDC [1960] 2 All R 716, [1960] 2 QB
372. This sidenote clearly indicates that it is aimed at devices intended to evade the provisions of Pt 1 of the 1977 Act by the use
of another contract. In my judgment, a contract to settle disputes which have arisen concerning the performance of an earlier
contract cannot be described as an evasion of the provisions in the Act regulating exemption clauses in the earlier contract. Nor is
the compromise contract secondary to the earlier contract.
The textbooks, to my mind correctly, identify at least one case which s 10 is designed to cover. Under contract 1, the
supplier (S) contracts to supply a customer (C) with a product. Contract 1 contains no exemption clause. However, C enters into
a servicing contract, contract 2, with another party (X). Under contract 2, C is precluded from exercising certain of his rights
against S under contract 1. In such a case s 10 operates to preclude X from enforcing contract 2 against C so as to prevent C
enforcing his rights against S under contract 1. The extent of the operation of s 10 in such circumstances may be doubtful (see
Treitel Law of Contract (7th edn, 1987) p 206). But there is no doubt that such a case falls squarely within the terms of s 10.
In the case that I have just postulated, the references in s 10 to anothers liability and that other are references to someone
other than X, ie to the original supplier, S. On Mr Sheridans construction the words another and that other are taken as
referring to someone other than C, the customer whose rights are restricted, so as to make the section apply to a case such as the
present where there is no third party, X. Although as a matter of language the words of the section are capable of referring to
anyone other than C, in my judgment, read in context and having regard to the purpose both of the Act and of the section itself,
the reference to another plainly means someone other than X, that is to say someone other than the party to the secondary
contract. In my judgment, s 10 does not apply where the parties to both contracts are the same.
This view is reinforced by a further factor. If the Act were intended to apply to terms in subsequent compromise agreements
between the same parties as the original contract, s 10 would be quite unnecessary. Under ss 2 and 3 there is no express
requirement that the contract term excluding or restricting Ss liability to C has to be contained in the same contract as that giving
rise to Ss liability to C. If S and C enter into two contracts, it makes no difference if the exemption clause 13 is contained in a
different contract from that under which the goods are supplied. Sections 2 and 3 by themselves will impose the test of
reasonableness. Why then should Parliament have thought that in s 10 there was some possibility of evasion in such
circumstances?
In my judgment, the 1977 Act is dealing solely with exemption clauses in the strict sense (ie clauses in a contract modifying
prospective liability) and does not affect retrospective compromises of existing claims. Section 10 is dealing only with attempts
to evade the Acts provisions by the introduction of such an exemption clause into a contract with a third party. This view does
not in any way conflict with the construction of s 23 of the Act, which has similar application to Scottish law.
My only doubt is raised by Sch 1, para 5. Schedule 1 provides that ss 2 to 4 of the Act are not to extend to various matters.
Paragraph 5 reads as follows:

Section 2(1) does not affect the validity of any discharge and indemnity given by a person, on or in connection with an
award to him of compensation for pneumoconiosis attributable to employment in the coal industry, in respect of any further
claim arising from his contracting that disease.

At first site, the express exclusion from the operation of the Act of one category of compromise agreement suggests that other
compromise agreements are within the Act. However, I am not persuaded of this. Paragraph 5 shows all the signs of a provisions
inserted at the insistence of one lobby, the coal industry, out of an abundance of caution. Why should Parliament have intended
to exclude only one type of latent damage, pneumoconiosis, but leave all compromises involving other types of latent damage
subject to the test of reasonableness? Moreover, para 5 only excludes from the test of reasonableness the provision barring future
claims. On Mr Sheridans construction, this would leave the other terms of settlement in the pneumoconiosis claim subject to the
test of reasonableness imposed by the Act. That is not a conclusion that I think Parliament can have intended.
Accordingly, for those reasons, s 10 cannot apply to the release of 13 March 1989.

MISREPRESENTATION
The claim faces considerable difficulties at the outset. The alleged representation is that Citibank would provide long-term
finance for all the products in the TGG business plan. That is either a representation as to future conduct or a representation as to
the then intention of Citibank. A representation as to future conduct has no effect unless it constitutes a contract. Therefore the
only legally effective representation is a representation of existing fact, namely that at the date of the representation it was the
intention of Citibank to provide the finance. In those circumstances, I find it difficult to see how the allegation of a continuing
representation to that effect is of any avail. The continuing representation would be that it was Citibanks intention back in 1988,
a matter of irrelevance in 1989.
However, I will assume that factor in favour of the plaintiffs since, when one turns to the facts, it is in my judgment
impossible for this claim to succeed. The plaintiffs have got to show that they entered into the deed of release on 13 March 1989
in reliance on a misrepresentation by the banks that the banks would continue to finance the plaintiff companies projects. By the
end of 1988 both banks had declared the plaintiffs in default on their existing borrowings. The plaintiff companies were very
short of finance and needed more. Vague allegations had been made that the plaintiffs had some claims against the banks but no
details had been supplied.
The chief executive of the plaintiff group at that time was a Mr Moir. At the 14 end of January he wrote to Citibank
concerning the suggestion of cross-collateralisation and the release of the claims. The letter includes this passage:

We have not discussed with them [that is to say the shareholders] the question of full cross-collateralisations. If this
were to be effected we would be relying very heavily on your assurance that the object of the exercise is to justify a
refinancing and not just an effort whereby a small additional advance of capital created such a surplus of security as to
enable the bank to withdraw quickly and speedily by way of forced sales.

On 31 January Mr Moir wrote again, saying that the plaintiff group had an urgent need for an immediate cash facility of
2m, failing which the group would have to cease to trade. Citibank was asked to advance that money. The bank responded that
it would not advance that simply as asked but it was prepared to consider lending some additional money as an interim measure.
Apparently in consequence of the lack of cash, Mr Moir ceased to be chief executive at that time and Mr Crawley took over. At a
late stage in the course of the hearing Mr Moir put in an affidavit saying that he had received the assurance of continued support,
referring to that correspondence. He also went on to say that that assurance was continued. However, he did not explain how he
could have known about that after he ceased to be chief executive. Indeed, it seems to me regrettable that his affidavit does not
mention the fact that he had ceased to be chief executive.
When one looks at the correspondence as it continues between Mr Crawley and Citibank, it is in my view transparently
obvious that the bank is not in any sense saying that it is going to provide anything other than interim finance. What was under
discussion was a refinancing of the plaintiff groups by different banks, not by the defendant banks. The proposal was that the
refinancing or the sale of the half share in the Keel development would provide funds out of which the defendant banks could be
paid off. The refinancing was not being discussed as being a refinancing by these banks.
There are references to refinancing them throughout the correspondence. By way of example, Mr Sealey, a partner in a firm
of solicitors called Keeble Hawson, writing on behalf of the plaintiffs on 28 February 1989, says this:

I would like to discuss with you how best to deal with the remaining Tudor Grange defaults in order that the
Greenwich Reach loan can be processed as soon as possible. I understand that the valuations will be available this week.
Assuming they are satisfactory we will then be in a position to agree with Charterhouse the terms of the loan and determine
the period required to drawdown.

Later in the same letter:

So far as the refinancing of Lionhope is concerned we are able to demonstrate that Lionhope can be refinanced, solve
Citibanks liability, debts in total will be repaid.

So there is a clear statement that the refinancing on one side was to be by Charterhouse and on the Lionhope side the debts to the
defendant banks were to be repaid.
On 1 March there was limited agreement called Heads of Terms, para 6 of which reads:

Citibank recognise that Lionhope intends to raise finance from a third party and to use that finance, inter alia, to repay
the existing loan from Citibank to Lionhope of 155 million plus fees (total now approximately 194 million) as soon
as possible.
15

Paragraph 8 records:

Pending the putting in place of the above mentioned security Citibank intend to commence legal action in respect of
the sum of 1 million owed to Citibank by Mr.D R Crawley. If the security mentioned above is put in place by Wednesday
8 March those proceedings will be held in abeyance until 30 June 1989 when the sum of 1 million is to be paid.

That is an express agreement to hold off pending repayment, an agreement totally inconsistent with a continuing representation
that the defendant banks are going to go on financing a group which was obviously in very great financial difficulty.
 In the light of the correspondence from which I have quoted, in my judgment it is impossible that the plaintiffs could show
any continuing representation by the defendant banks that they would support the plaintiff groups beyond what in fact they
agreed to do in the heads of agreement. I am therefore satisfied that there is no way in which the plaintiffs can succeed in setting
aside the release on the grounds of misrepresentation.
Accordingly, the release provides a complete answer to all claims other than the claims relating to the heads of agreement.
The claims, other than the claims relating to the heads of agreement, should be struck out even if the amendments proposed in the
statement of claim were permitted.

The heads of agreement

This is the agreement that contained the terms for full cross-collateralisation. The plaintiffs claim is based on two heads.
First, they say that the heads of agreement were induced by the same misrepresentation as induced the release. That claim is
hopeless for the reasons that I have already given in relation to the release.
Second, they allege that it was procured by duress. I have already read the extract from para 45 of the statement of claim
alleging the duress. On any footing, in my judgment, that is a grossly inadequate pleading of a claim in duress. It should be most
carefully pleaded where, when and by whom the duress was exercised and the gist of the words used. The claim based on duress
is supported by a series of affidavits by Mr Crawley. Broadly, he speaks of an occasion when Mr Fabi and Mr Kelsall insisted on
seeing him alone when there were legal advisers available, at which he was subjected to excessive pressure, threatening, as it is
said, the ruin of himself and members of his family, as a result of which he came into an acute state of shock and was left in a
state of collapse when it was most inappropriate for him to be required to sign documents. He also says that they insisted that he
should not speak to his solicitor, Mr Sealey, who was there. He also relies on the fact that his brothers funeral was on 21 April
and that he was very upset about that.
His account, I am bound to say, is extremely confused. In his first affidavit he says that all this took place on 27 April. The
document itself bears the date 20 April. As I think I understand his latest evidence, it is that the threatening interview took place
on 20 April but the document was not signed by him until 21 April. His evidence received some support from an affidavit by Mr
Sealey, who was present. The document in question was held in escrow until 27 April. Company meetings were held in the
interim, during which the necessary consequential documents were approved by meetings at which Mr Crawley was himself
present. Yet, despite the delay of a week, the documents were handed over. No allegation of duress was made at the time nor
indeed until very many months later. All this has to be viewed against the background of proceedings which were only started
after the banks had sued Mr Crawley and his family on their personal guarantees.
16
My own view is that this is a very thin case indeed and one most unlikely to succeed. However, I am here only to strike out
cases which cannot succeed, not ones that I do not feel are likely to succeed. Mr Crawley has gone on oath, so has Mr Sealey, as
to conduct about which, if the judge is satisfied it occurred, could in my judgment constitute duress. I do not think that, apart
from other factors, I could strike out this aspect of the case purely on the grounds of its improbability.
I therefore stand back and look at all these many factors that exist in this case. The only claim left on any footing is the
claim by the plaintiff companies to set aside the cross-collateralisation agreement on the grounds of duress. The proceedings, in
my judgment, have been wrongly brought by the directors of the plaintiff companies, an impropriety which could possibly be
cured by the provision of 200,000 security offered. The claim by the fourth plaintiff, Lionhope, is not maintainable in this
action unless the assignment to Mr Crawley is good, a matter surrounded by doubt, and one which the defendant banks are fully
entitled to challenge in the Companies Court.
There is a counterclaim by each of the banks in the actions. The person entitled to conduct the defence of those
counterclaims is obscure. If it is the receivers who ought to be conducting it, it will produce the bizarre result that one has a
claim being conducted by one set of people, the directors, and a counterclaim being defended by a different set of people, that is
to say the receivers. The chaos is likely to be considerable.
What is left in the action are simply questions of the respective rights of the banks on the one hand and the plaintiff
companies creditors and shareholders on the other in the various properties subject to security. If the collateralisation agreement
stands, then the creditors and shareholders of all the companies will all be liable to the banks for the full indebtedness. If it is set
aside, the incidence will be different. There will be questions arising therefore between the creditors and shareholders of each of
the plaintiff companies, inter se. The determination of this question affects not simply the companies themselves but their
creditors and shareholders, who are not parties to this action.
In all the circumstances, in my judgment, the present proceedings are entirely inappropriate for the determination of the
validity of the heads of agreement. The questions will affect the rights of the creditors of Lionhope, who are not and will not be
bound by any outcome in this action. If the shareholders and Mr Crawley wish to pursue their claim, that is perfectly possible by
claims raised in the liquidation and receivership of the plaintiff companies, which would determine the issues between all persons
affected. The conduct of the proceedings will be in the hands of those who are undoubtedly the right people. Mr Crawley will
have locus standi to put forward his own case on his own behalf. In my judgment, it is vexatious for the banks to be pursued by
this separate action which will not settle the questions between all parties by plaintiffs of doubtful locus standi, in order to decide
a case which is primarily one of the incidence of the liabilities as between various groups of people.
In no sense would the striking out of this case be driving the plaintiff companies or Mr Crawley from the judgment seat. It
is that factor which leads the court to be so careful in striking out. A man is entitled to have his day in court on anything other
than a vexatious piece of litigation. Mr Crawley and those of like mind can have their day in court in properly constituted
proceedings in the Companies Court. It is vexatious, in my judgment, to pursue this one matter on its own in these proceedings.
I therefore propose to strike out all the claims in the action.

Statement of claim struck out. Action dismissed.

Solicitors: Wilde Sapte; Wedlake Bell; William Stockler & Co.

Celia Fox Barrister.

17
[1991] 4 All ER 18

Director of Public Prosecutions v Vivier

TRANSPORT; Road

QUEENS BENCH DIVISION

MANN LJ AND SIMON BROWN J
14 FEBRUARY, 11 MARCH 1991
Road traffic Road Caravan park Public access Admittance to caravan park restricted to persons registering at reception
area and obtaining vehicle pass Admittance granted to any person satisfying conditions for admission Admittance not
restricted to persons having characteristics personal to themselves Whether users of park constituting special class distinct
from members of general public Whether caravan park a public place Road Traffic Act 1988, s 5(1)(a).

The respondent, after being involved in a traffic accident in a caravan park, was charged with driving a motor vehicle on a road
or other public place while the proportion of alcohol in his breath was above the prescribed limit, contrary to s 5(1)( a) of the
Road Traffic Act 1988. The caravan park was a privately owned caravan site of about 80 acres with facilities for about 1,000
caravans. At any given time there were between 800 and 3,500 people at the park. There were three to four miles of road on the
site, the entrance to which was guarded by a security firm. Members of the public could gain access to the park by registering at
the reception area by the site entrance and obtaining a vehicle pass which allowed them to go to and from the site. The justices
acquitted the respondent on the ground that the caravan park was not a public place for the purposes of the Road Traffic Acts.
The prosecutor appealed, contending that the justices were not entitled as a matter of law to reach the conclusion that the users of
the park constituted a special class distinct from members of the general public.

Held Where persons seeking entry to a place to which the public had access did so for their own rather than the occupiers
purposes and were screened to ensure that they satisfied the conditions for admission, the test to be applied in order to determine
whether the screening process operated to make those passing through it part of a special class distinct from members of the
general public was whether those admitted passed through the screening process for a reason or on account of some characteristic
personal to themselves or whether they were merely members of the public who were being admitted as such and processed
simply to make them subject to payment and to whatever other conditions the occupier or owner of the land chose to impose.
Since those entering the caravan park were not selected for admission because of any characteristic personal to themselves but
merely because they wished to enter and were prepared to accept the modest conditions imposed for entry, there was no sufficient
segregation or selection of campers and caravanners passing through the control system operated at the caravan park to cause
them to cease to be members of the general public and to become a special class. It followed that the justices had not been
entitled to reach the conclusion that the caravan park was not open to the general public or that the respondent was part of a
special class distinct from members of the general public. The caravan park was therefore a public place for the purposes of s
5(1)(a) of the 1988 Act and the prosecutors appeal would accordingly be allowed (see p 24 e f j to p 25 c, post).
Dicta of Lord MacDermott in Montgomery v Loney [1959] NI 171 at 177 and of Lord Parker CJ in Panama (Piccadilly) Ltd
v Newberry [1962] 1 All ER 769 at 772 applied.
18

Notes
For what constitutes a public place for the purposes of traffic regulation, see 40 Halsburys Laws (4th edn) para 481, and for
cases on the subject, see 39(1) Digest (Reissue) 485486, 36383643.
For the Road Traffic Act 1988, s 5, see 38 Halsburys Statutes (4th edn) 836.

Cases referred to in judgments

Bowman v DPP [1990] Crim LR 600, DC.
Buchanan v Motor Insurers Bureau [1955] 1 All ER 607, [1955] 1 WLR 488.
Cawley v Frost [1976] 3 All ER 743, [1976] 1 WLR 1207, DC.
Cox v White [1976] RTR 248, DC.
Deacon v AT (a minor) [1976] RTR 244, DC.
Harrison v Hill 1932 JC 13, HC of Just.
Montgomery v Loney [1959] NI 171, NI CA.
OBrien v Trafalgar Insurance Co Ltd (1945) 61 TLR 225, CA.
Panama (Piccadilly) Ltd v Newberry [1962] 1 All ER 769, [1962] 1 WLR 610, DC.
Paterson v Ogilvy 1957 JC 42, HC of Just.
R v Beaumont [1964] Crim LR 665, CCA.
R v Waters (1963) 47 Cr App R 149, CCA.

Case stated
The Director of Public Prosecutions appealed by way of a case stated by the magistrates sitting at Burnham-on-Sea Magistrates
Court in respect of their adjudication on 16 November 1989 whereby they acquitted the respondent, Jonathan Vivier, of driving a
motor vehicle in a public place, namely Unity Farm Caravan Park, Brean, having consumed alcohol in such quantity that the
proportion thereof in his breath exceeded the prescribed limit, contrary to s 5(1)(a) of the Road Traffic Act 1988 and s 9 of and
Sch 2 to the Road Traffic Offenders Act 1988. The question for the High Court was whether the justices were correct in finding
that Unity Farm Caravan Park when open for business between 24 March and 26 October was not a public place for the purposes
of the Road Traffic Acts. The facts are set out in the judgment of Simon Brown J.

Ian Glen for the Director of Public Prosecutions.

Simon Morgan for the respondent.

Cur adv vult

11 March 1991. The following judgments were delivered.

SIMON BROWN J (giving the first judgment at the invitation of Mann LJ). This is a prosecutors appeal by way of case stated
from the adjudication on 16 November 1989 of justices for the county of Somerset acting in and for the petty sessional division
of Sedgemoor sitting as a magistrates court at Burnham-on-Sea. By their adjudication the justices acquitted the respondent of
the charge of driving a motor vehicle in a public place, namely Unity Farm Caravan Park, Brean, Somerset, on 23 July 1989
having consumed alcohol in such a quantity that the proportion thereof in his breath exceeded the prescribed limit, contrary to s
5(1)(a) of the Road Traffic Act 1988.
Section 5(1)(a) applies only to those driving on a road or other public place. By s 192(1) of the 1988 Act road is defined
to mean any highway or any other road to which the public has access. It is well established on the authorities that for the 19
purposes of s 5 other public place falls to be construed ejusdem generis with road and accordingly has to be read as meaning a
place to which the public has access.
The respondent had been involved in a traffic accident shortly after midnight. He admitted before the justices that at the
material time he had consumed excess alcohol. Thus the only point at issue was whether Unity Farm Caravan Park was a road
or other public place within the meaning of the section. (It is unclear, and immaterial, whether the respondent was driving upon
one of the roads or at some other place within the caravan park.)
 The facts found by the justices were these:

(b) Unity Farm Caravan Park is a privately owned camp site. The site covers an area of approximately 80 acres and
has 3 to 4 miles of road. There is provision on the site for 450 static owner occupied caravans and pitches for a further 600
touring caravans. The site is open from a week before Easter until the end of October and depending on the time of year
there are between 800 and 3,500 people present. (c) Unity Farm site is surrounded by a ditch. There are field gates that are
kept padlocked. The main entrance [consists of] two wide gates with a pillar in the middle. One gate is open the majority
of the time. Even when shut the gate is not locked in order to allow access by emergency vehicles. There is an automatic
barrier in use at times. This barrier is put down after 1 a.m. There is a bridleway running through the site. There is a
seasonal full Justices on-licence on the site, allowing sales of intoxicating liquor to persons residing in caravans or tents
situated within Unit Farm Caravan Park or bona fide guests of such persons. (d) The owners of Unity Farm Caravan Site
had had a problem a few years before with car loads of youths driving around the site without permission. As a result a
security firm had been employed. There had been no further problems for two or three years. Although someone slips in
every now and again, 90% had been stopped. (e) There is a reception area by the site entrance and anyone staying on the
site must register. Visitors to the site must have a car pass. Casual people wanting to stay are asked by sign to report to
reception where they are then allocated an area on payment of a fee. On Fridays and Saturdays reception closes at about
ten oclock but may be open until midnight depending on the season. People booking in late would be required to give
their name and registration number and pay the next day. There is no curfew. (f) Two security firms are employed on site.
There is a camera surveillance system with traffic movements recorded on video tape. A night security guard is on duty
from 6 p.m. to 6 a.m. From 1800 to 2100 hours his main priority is around the gate. Vehicles are stopped and a vehicle
without a pass would not be allowed in. From 2100 to 0600 hours the guard is on general patrol, is on call on the radio and
checks back to the gate every 2030 minutes. The guard puts the barrier down at 1.00 a.m. After 9.00 p.m. there would be
nothing to prevent someone driving in and around the site and then out again.

Having been referred to a number of authorities and heard the rival contentions of the parties the justices expressed their
opinion as follows:

(a) The owners of the site had taken steps to reduce the small numbers of persons that used to enter without consent.
There was no evidence to show that even this very small number were present by the tolerance of the owner. (b) At the
material time Unity Farm was open to the public, but it was not open to the general public, but only to a special class of
members of the public. (c) The fact that this special class of members contained a large number of persons did not make
Unity Farm a public place.
20

The question posed for the opinion of this court is:

Whether the Justices were correct in finding that Unity Farm Holiday Centre when open for business between 24th
March and 26th October was not a public place for the purposes of the Road Traffic Acts.

Given, as many of the decided cases observe, that the question whether a place is public or private is largely a matter of fact
and degree, this court ought more appropriately to be asked whether on the facts found the justices were entitled to come to their
conclusion. That question properly is one of law, as was said by Lord MacDermott LCJ in the Northern Ireland Court of Appeal
in Montgomery v Loney [1959] NI 171 at 186:

Generally, the decision will be a matter of fact and degree, but whether the material for consideration suffices to
support one view or the other is a matter of law.

We turn at once to the decided cases in this far from straightforward area of law. What principles emerge as to the correct
approach to follow not merely here but in the very many different factual situations and analogous statutory contexts in which the
same question arises?
We take as our starting point the oft-cited decision of the Scottish High Court of Justiciary in Harrison v Hill 1932 JC 13.
The road there in question was an ordinary farm road forming the access to a farm from a public highway. Although in no sense
a public road it was found that members of the public not having business at the farm frequently walked upon it. The question
arising was, as always, whether the road was one to which the public had access. The Lord Justice General (Clyde) said (at 16):

I think that, when the statute speaks of the public in this connexion, what is meant is the public generally, and not the
special class of members of the public who have occasion for business or social purposes to go to the farmhouse or to any
part of the farm itself; were it otherwise, the definition might just as well have included all private roads as well as all
public highways. I think also that, when the statute speaks of the public having access to the road, what is meant is
neither (at one extreme) that the public has a positive right of its own to access, nor (at the other extreme) that there exists
no physical obstruction, of greater or less impenetrability, against physical access by the public; but that the public actually
and legally enjoys access to it. It is, I think, a certain state of use or possession that is pointed to. There must be, as matter
of fact, walking or driving by the public on the road, and such walking or driving must be lawfully performedthat is to
say, must be permitted or allowed, either expressly or implicitly, by the person or persons to whom the road belongs.

Lord Sands said (at 17):

In my view, any road may be regarded as a road to which the public have access upon which members of the public
are to be found who have not obtained access either by overcoming a physical obstruction or in defiance of prohibition
express or implied.

That farm road was found to be one to which the public had access, not on account of the special class of members of the
public who have occasion for business or social purposes to go to the farmhouse or any part of the farm itself, but rather because
the public generally did have access to the private road in question without objection.
In Cox v White [1976] RTR 248 at 251 Lord Widgery CJ in this court cited that short passage from Lord Sandss judgment
and said:
21

I think that in 99 cases out of 100 that direction is all that the justices need to decide whether a road is a road for
current purposes.

Alas, this seems to us the one hundredth case. Certainly, we find Lord Sandss approach an insufficient touchstone by which
to decide the present appeal. Let us explain. What Lord Sands, and indeed Lord Clyde, say in Harrison v Hill can really be
summarised thus. A road is one to which the public have access if (a) it is in fact used by members of the public and (b) such use
is expressly or implicitly allowedor, putting it the other way round, not achieved by overcoming physical obstruction or
defying express or implied prohibition.
Factor (b) presents no problem. But factor (a) does. In particular, as it seems to us, (a) essentially begs rather than answers
the other crucial question whether those who use the road are members of the public. Take our case. We have not the least
hesitation in accepting that the only material use of this caravan park was by those who had complied with the various site
requirements and been properly admitted, in short those who had been expressly or implicitly allowed into the caravan park,
either as caravanners or campers or as their bona fide guests. We think it right to ignore both the few trespassers who escaped the
security controls and also the users of the bridleway (which in any event could not affect the character of the park as a whole).
And, indeed, we do not understand Mr Glen for the prosecutor to contend otherwise.
What that leaves outstanding, however, is the critical question: are the caravanners, campers and guests to be regarded,
within the park, still as members of the general public or are they instead, as the justices found, at that stage a special class of
members of the public?
Upon that question, Harrison v Hill helps but little: there is simply Lord Clydes reference to the special class of members
of the public who have occasion for business or social purposes to use the farm road.
This point was examined further in Montgomery v Loney [1959] NI 171, the Northern Ireland case, concerning a filling
station forecourt. Lord MacDermott LCJ, turning to consider the private carriageway or drive which only tradesmen and friends
and relations of the owner or occupier are permitted to use, said (at 177):

The invitees and licensees who use such carriageways are, it is true, members of the public. But permission to enter is
not given to them as such, but because there is some reason personal to them for their admittance. They may come as
guests or to deliver the mail or to read the meters: whatever their particular purpose, they form a class which is distinct
from that composed of those who are invited or permitted to enter as members of the public.

Later in his judgment he said (at 187):

those who are allowed to enter private property, not as members of the public, but for reasons in some way
personal to the individuals admitted, will not be regarded as the general public or a substantial section thereof, and their
admission will not constitute the giving of access to the public for the purposes of the definition. Pass holders entering a
dock area, or employees going to work along a factory road, for example, do not bring the definition into play because they
obtain access, not as members of the public, but on the strength of a relationship between the individual and the owner or
occupier concerned. So, too, with those who visited the farm in Harrison v. Hill (1932 JC 13) for social or business
purposes. Apart from any question as to whether, as a class, they could be reckoned a significant section of the public, the
invitation or permission under which they entered was in no 22 sense addressed or given to the public. This decision marks
the clear distinction existing between these visitors and those allowed to walk on the road. The latter gained access as
members of the public.

It is time to look at one or two of the English authorities although we confess to finding little in them to illuminate the
problem.
Lord MacDermott LCJs illustration of the factory road was, perhaps, based upon OBrien v Trafalgar Insurance Co Ltd
(1945) 61 TLR 225, in which the Court of Appeal approved this from the judgment of Stable J (at 226):

Public meant something more than a lot of individuals; indeed, the quantity test was not the right one. The class of
persons allowed in the area on business, though very numerous and constituting a wide category, did not come within the
definition of the word public in the Act.

Lord MacDermott LCJs reference to a dock area likewise no doubt had in mind Buchanan v Motor Insurers Bureau [1955]
1 All ER 607, [1955] 1 WLR 488, where it was held that roads within the premises of the Port of London Authority were not ones
to which the general public, in contradistinction to pass-holders, had access.
In R v Waters (1963) 47 Cr App R 149 at 154 the Court of Criminal Appeal said:

If only a restricted class of person is permitted to have access or invited to have access, then clearly the case would fall
on the side of the line of it being a private place. If, on the other hand, only a restricted class is excluded, then it would fall
on the other side of the line and be a public place.

That case, however, was one of many concerned with public house car parks and provides little assistance in deciding just what is
encompassed within the concept of a restricted class of person.
A decision heavily relied upon by Mr Morgan for the respondent is R v Beaumont [1964] Crim LR 665, in which the Court
of Criminal Appeal was unable to accept the contention that where a particular class of persons uses a road the number of
persons in the class makes the road one to which the public has access. In respect of an occupation road leading to a farm, to
land (also owned by the farmer) occupied by 200 to 250 caravans, and to a river where anglers went by leave of the farmer, the
court held that there was no evidence that the general public used the road.
The final case relied upon by Mr Morgan is Deacon v AT (a minor) [1976] RTR 244, in which this court dismissed a
prosecutors appeal against the justices finding that a road on a council housing estate was not one to which the public had
access. Lord Widgery CJ regarded the residents and their visitors, the only proved users of the estate, as a special class of
members of the public within the meaning of that phrase in Lord Clydes judgment in Harrison v Hill 1932 JC 13 at 16.
For the appellant prosecutor in the present case Mr Glen relied more upon the sort of premises found in various of the cases
to constitute public places than on the precise language of the judgments given. He prays in aid, for instance, Cawley v Frost
[1976] 3 All ER 743, [1976] 1 WLR 1207, where this court held the whole premises of Halifax Town Football Club to be a public
place, Bowman v DPP [1990] Crim LR 600, where this court upheld the justices view, arrived at in light of their own local
knowledge, that a multi-storey car park was a public place, the various decisions in which public house car parks have been held
to be public places, and Paterson v Ogilvy 1957 JC 42, referred to in Montgomery v Loney [1959] NI 171,in which the High
Court of Justiciary reversed the sheriff-substitutes decision and found that a field used (on payment) as the official parking
ground 23 for the Royal Highland show was a public place. In Paterson v Ogilvy 1957 JC 42 at 45 Lord Mackintosh said:

It is really a false distinction to draw between the public in general and the more or less selective class of the public
who were entitled to use this field, namely, those who were motorists and were attending the Show and were ready to pay
the necessary fee.

The justices here, submits Mr Glen, in regarding the caravanners and campers using Unity Farm Caravan Park as a special
class, drew the same false distinction between them and the public in general.
 How then, in cases where some particular road or place is used by an identifiable category of people, should justices decide
whether that category is special or restricted or particular such as to distinguish it from the public at large? What, in short, is
the touchstone by which to recognise a special class of people from members of the general public?
Some light is thrown upon the problem by the passage already cited from Lord MacDermott LCJs judgment in Montgomery
v Loney [1959] NI 171 at 177: one asks whether there is about those who obtain permission to enter some reason personal to
them for their admittance. If people come to a private house as guests, postmen or meter readers, they come for reasons personal
to themselves, to serve the purposes of the occupier.
But what of the rather different type of case such as the present where those seeking entry are doing so for their own (rather
than the occupiers) purposes and yet are screened in the sense of having to satisfy certain conditions for admission. Does the
screening process operate to endow those passing through with some special characteristic whereby they lose their identity as
members of the general public and become instead a special class?
Our approach would be as follows. By the same token that one asks in the earlier type of case whether permission is being
granted for a reason personal to the user, in these screening cases one must ask: do those admitted pass through the screening
process for a reason, or on account of some characteristic, personal to themselves? Or are they in truth merely members of the
public who are being admitted as such and processed simply so as to make them subject to payment and whatever other
conditions the landowner chooses to impose.
In approaching the matter in this way we have, we confess, been influenced by the decided cases on closely analogous
language in the law of public entertainment. Panama (Piccadilly) Ltd v Newbury [1962] 1 All ER 769, [1962] 1 WLR 610 raised
the question whether club membership as a precondition to admission to a strip show would preclude its being held a public
entertainment. No, said Lord Parker CJ

there being no evidence whatsoever of any selective process, and, indeed, a rule which enables [election of] members
without knowing anything about them no sufficient segregation has occurred which would prevent the members from
continuing to be members of the public.

(See [1962] 1 All ER 769 at 772, [1962] 1 WLR 610 at 616.)

Turning now with that approach in mind to the facts of the present appeal, we conclude that there was similarly no sufficient
segregation or selection of the caravanners and campers passing through the control system operated at Unity Farm to cause them
to cease to be members of the general public and to become instead a special class. They passed through the gate, not for any
reason or characteristic personal to themselves, not because they were in any way selected, but rather because they wished to
enter and were prepared to satisfy the modest conditions imposed upon them. In our judgment a mere fondness for camping 24
and caravanning cannot constitute a peculiarity sufficient to distinguish those who display it from their fellow citizens. Up to the
boundary of this caravan site those seeking entry are unarguably members of the general public pure and simple. In our judgment
it is quite unreal to suggest that at the gate some transformation occurs whereby they alter their legal character, shed their identity
as members of the general public and take on instead a different status as caravanners and campers.
It follows that in our judgment the justices here were not entitled as a matter of law to reach the conclusion that the users of
this park constituted a special class distinct from members of the general public. On the contrary, applying to the facts as found
what we believe to be the correct approach in law, they had no alternative but to find that the general public does indeed have
access to the park. Accordingly we would answer the question posed No, and remit the case to the justices for the respondent to
be duly convicted in conformity with the law.

MANN LJ. The appeal is allowed, the question is answered No and the case is remitted with a direction to convict.

Appeal allowed. Case remitted with direction to convict.

Solicitors: Crown Prosecution Service, Taunton; Hawks & Scofield, Burnham-on-Sea.

Dilys Tausz Barrister.

[1991] 4 All ER 25

Simmons v Dobson and another

LAND; Property Rights

COURT OF APPEAL, CIVIL DIVISION

FOX, MCCOWAN AND BELDAM LJJ
12, 13 FEBRUARY, 27 MARCH 1991

Easement Right of way Prescription Lost modern grant Leasehold interest Easement claimed by leaseholder over land
occupied by another leaseholder Both leaseholders holding under same landlord Whether right of way can be acquired by
leaseholder under doctrine of lost modern grant.

In 1953 the plaintiff purchased a leasehold property and in 1983 the defendants purchased the adjoining leasehold property. The
fee simple of both properties was vested in the same landlord. In 1989 the plaintiff brought proceedings against the defendant
claiming that he was entitled to a right of way for all purposes and at all times over and along a passageway on the defendants
premises. The judge held that the plaintiff was entitled to the right of way by virtue of an implied grant in an indenture made in
1925 between the landlord of both properties and the former lessees whereby it had been agreed that all rights to light, flow of
water, drainage, way and other easements or quasi-easements should be held to remain as they had hitherto existed and also under
the doctrine of lost modern grant. On appeal by the defendants the issue arose whether the plaintiff could succeed on the basis of
lost modern grant, since he conceded that there was no real evidence to justify the conclusion that the right of way had been
established by implied grant.

Held A person with a leasehold interest in land could not acquire an easement under the doctrine of lost modern grant against
another leaseholder holding under the same landlord since the doctrine of lost modern grant was merely a form of common law
prescription and was therefore subject to the fundamental 25 principle of common law prescription that stipulated that the user
had to be by or on behalf the owner of a fee simple interest in land against another fee simple owner. It followed that there could
be no lost modern grant by or to a person who owned a lesser estate in land than a fee simple. Accordingly, the plaintiff was not
entitled to a right of way over the defendants premises by virtue of the doctrine of lost modern grant. The appeal would
therefore be allowed (see p 28 g h and p 29 f to j, post).
Kilgour v Gaddes [19047] All ER Rep 679 and dictum of P O Lawrence J in Cory v Davies [1923] 2 Ch 95 at 107108
applied.

Notes
For prescription under the doctrine of lost modern grant, see 14 Halsburys Laws (4th edn) paras 8996, and for cases on the
subject, see 19 Digest (Reissue) 7884, 509545.

Cases referred to in judgments

Cory v Davies [1923] 2 Ch 95.
Dalton v Henry Angus & Co (1881) 6 App Cas 740, [18815] All ER Rep 1, HL.
Derry v Saunders [1919] 1 KB 223, CA.
Flynn v Harte [1913] 2 IR 322, Ir KBD.
Kilgour v Gaddes [1904] 1 KB 457, [19047] All ER Rep 679, CA.
Tallon v Ennis [1937] IR 549, Ir HC.
Wheaton v Maple & Co [1893] 3 Ch 48, CA.
Wheeldon v Burrows (1879) 12 Ch D 31, [187480] All ER Rep 669, CA.

Appeal
The defendants, Christopher Dobson and Yvonne Dobson, appealed from the decision of Miss Elizabeth Steel sitting as an
assistant recorder on 5 July 1989 at Leigh County Court upholding the claim of the plaintiff, John Charles Simmons, to be
entitled to a right of way for all purposes and at all times over and along a pathway on the defendants premises at 151
Smallbrook Lane, Leigh. The facts are set out in the judgment of Fox LJ.

Mark Halliwell for the defendants.

Guy Vickers for the plaintiff.

Cur adv vult

27 March 1991. The following judgments were delivered.

FOX LJ. This is an appeal by the defendants from a decision of Miss Elizabeth Steel sitting as an assistant recorder at the Leigh
County Court.
The plaintiff is the owner of the leasehold property 153 Smallbrook Lane, Leigh. The defendants are the owners of 151
Smallbrook Lane, which is also a leasehold.
The plaintiff claims a right of way for all purposes and at all times over and along a passageway on the defendants
premises.
The particulars of claim plead that the plaintiff is entitled to the right of way by virtue of an indenture of 7 September 1925
and made between the Tyldesley Permanent Building Society of the first part, Hannah Scott of the second part and Joseph Moule
of the third part by which Hannah Scott declared and agreed with Joseph Moule that as between the premises known as 153
Smallbrook Lane thereby assigned and the premises known as 151 Smallbrook Lane (which were retained by Hannah Scott) all
rights to light, flow of water, drainage, way and 26 other easements or quasi-easements shall be held to remain as they had
hitherto existed.
The devolution of the title to the two properties so far as material was as follows:

7 October 1891
Lease (which included both properties) to Israel Clegg.
30 September 1926
Assignment of lease by personal representatives of Israel Clegg to W J Scott.
7 September 1925
The pleaded indenture transferred 153 to Joseph Moule.
6 November 1928
Assent by personal representatives of Joseph Moule to vesting of 153 in Eleanor Moule.
26 April 1953
Lease of 153 assigned to the plaintiff.
22 February 1983
Lease of 151 assigned to the defendants.

The plaintiffs case is put in two ways: first, as the basis of the rule in Wheeldon v Burrows (1879) 12 Ch D 31, [187480]
All ER Rep 669 and, secondly, on the basis of lost modern grant. The assistant recorder, who gave a very full judgment, decided
in favour of the plaintiff on both bases.
Wheeldon v Burrows decided that on the grant of part of a tenement there passes to the grantee, as easements, all quasi-
easements over the retained land which (a) were continuous and apparent and (b) had been and were at the time of the grant used
by the grantor for the benefit of the part granted.
Mr Vickers for the plaintiff accepts that there was no evidence before the assistant recorder which could justify her
conclusion that a right of way was established under Wheeldon v Burrows (1879) 12 Ch D 31, [187480] All ER Rep 669. He
does not, therefore, seek to sustain the holding.
I come then to the contention that the plaintiff succeeds on the basis of lost modern grant.
That doctrine arises from the inadequacies of common law prescription. At common law, acquisition of a prescriptive right
depended upon the claimant establishing (amongst other things) the requisite period of user. Thus, common law prescription was
based upon a presumed grant. The grant would be presumed only where the appropriate user had continued from time
immemorial. That was fixed as the year 1189; that date originated in a medieval statute. It was usually impossible to satisfy that
test. Accordingly, the courts held that if user as of right for 20 years or more was established, continued user since 1189 would
be presumed. That was satisfactory as far as it went, but there were gaps. In particular the presumption of immemorial user
could be rebutted by showing that, at some time since 1189, the right did not exist. For example, an easement of light could not
be claimed in respect of a house built after 1189.
It was because of the unsatisfactory nature of common law prescription that the doctrine of lost modern grant was
introduced. It was judge made. The doctrine presumed from long usage that an easement had, in fact, been granted since 1189
but the grant had got lost.
 The form which the doctrine took was, initially, that juries were told that from user during living memory, or even during 20
years, they could presume a lost grant. After a time the jury were recommended to make that finding and finally they were
directed to do so. Nobody believed that there ever was a grant. But it was a convenient and workable fiction. The doctrine was
ultimately approved by the House of Lords in Dalton v Henry Angus & Co (1881) 6 App Cas 740, [18815] All ER Rep 1.
Now, in relation to common law prescription generally, user had to be by or on behalf of a fee simple owner against a fee
simple owner. An easement can be granted expressly by a tenant for life or tenant for years so as to bind their respective limited
interests, but such rights cannot be acquired by prescription 27(see Wheaton v Maple & Co [1893] 3 Ch 48 and Kilgour v
Gaddes [1904] 1 KB 457, [19047] All ER Rep 679). Thus Lindley LJ in the former case said ([1893] 3 Ch 48 at 63):

The whole theory of prescription at common law is against presuming any grant or covenant not to interrupt, by or
with any one except an owner in fee. A right claimed by prescription must be claimed as appendant or appurtenant to land,
and not as annexed to it for a term of years.

In Kilgour v Gaddes [1904] 1 KB 457 at 465, [19047] All ER Rep 679 at 683 that was cited with approval by Collins MR.
Mathew LJ said ([1904] 1 KB 457 at 467, [19047] All ER Rep 679 at 684):

I agree. In this case the fee simple of the supposed dominant and servient tenements belonged to the same person. It
is clear that, under such circumstances, an easement like a right of way could not have been created by prescription at
common law. Such an easement can only be acquired by prescription at common law where the dominant and servient
tenements respectively belong to different owners in fee, the essential nature of such an easement being that it is a right
acquired by the owner in fee of the dominant tenement against the owner in fee of the servient tenement. If authorities
were necessary for that proposition, the case of Wheaton v. Maple & Co. and 2 Wms. Saunders, 175(f), (i), would suffice.

In Derry v Saunders [1919] 1 KB 223 at 237 Scrutton LJ said:

It is established by decisions binding on this Court that one tenant cannot acquire an easement of way by prescription
against another tenant holding of the same landlord: Kilgour v. Gaddes ([1904] 1 KB 457, [19047] All ER Rep 679).
This has the result that in parts of the country where lands are let for 99 or even 999 years, no right of way can be acquired
between two tenements where they have the same owner in fee simple.

In Cory v Davies [1923] 2 Ch 95 at 107108 P O Lawrence J said:

It is well settled that a lessee cannot acquire a right of way over the land of another lessee under the same lessor, either
by prescription at common law or under the doctrine of a lost grant or by prescription under the Prescription Act, 1832

It is common ground that all material times the fee simple of numbers 151 and 153 has been vested in the same person.
Against that background I take the view that, as a matter of authority, it is established that one tenant cannot acquire an
easement by prescription at common law against another tenant holding under the same landlord. The position is, I think, the
same in relation to s 2 of the Prescription Act 1832. The purpose of that section is to shorten the period required by common law
prescription to 20 years prior to the bringing of the action. In Dalton v Henry Angus & Co (1881) 6 App Cas 740 at 800, [1881
5] All ER Rep 1 at 11 Lord Selborne LC said:

The effect of [s 2], as I understand it, is to apply the law of prescription, properly so called, to an easement enjoyed as
of right for twenty years, subject to all defences to which a claim by prescription would previously have been open, except
that of shewing a commencement within time of legal memory.

What we are concerned with here is neither common law prescription strictly so called nor a claim under the Prescription
Act 1832 but a claim based on the lost modern grant doctrine. The question is whether the restrictive rule as to prescription by
and against leaseholders applies to cases of lost modern grant.
28
In terms of practicalities, it is difficult to see if one were starting from scratch that there is serious objection to leaseholders
prescribing against each other for the duration of their limited interests (but it has to be said that to introduce such a rule
retrospectively now could affect what were hitherto bought and sold as clear titles). And, as Mr Vickers says, in a modern urban
situation it is hard to see why two householders on one side of the street should be able to prescribe for easements against each
others land because each holds in fee simple while on the other side of the street one leaseholder under the residue of a 999year
lease can for 20 years or more walk along a path at the back of his neighbours garden (also held on a long lease) without
acquiring any rights in respect thereof. That, however, is the way the law has gone in England. The point about long leaseholds
held of the same landlord was recognised by Scrutton LJ in the passage in Derry v Sanders [1919] 1 KB 223 to which I have
referred where he regarded the law as clear.
In Wheaton v Maple & Co [1893] 3 Ch 48 at 63 Lindley LJ said:

I am not aware of any authority for presuming, as a matter of law, a lost grant by a lessee for years in the case of
ordinary easements, or a lost covenant by such a person not to interrupt in the case of light, and I am certainly not prepared
to introduce another fiction to support a claim to a novel prescriptive right.

He then continued with the passage as to the theory of the common law prescription to which I have already referred.
The statements of Scrutton LJ and P O Lawrence J to which I have referred are wholly in line with Lindley LJs view.
Moreover, Collins MR in Kilgour v Gaddes [1904] 1 KB 457 at 465, [19047] All ER Rep 679 at 683 plainly agreed with
Lindley LJs exposition of the law in Wheaton v Maple & Co [1893] 3 Ch 48 and the tenor of the judgments of Romer and
Mathew LJJ in Kilgour v Gaddes is that they agree with it also.
While, therefore, there appears to be no case which directly decides that there can be no lost modern grant by or to a person
who owns a lesser estate than the fee, the dicta are to the contrary and are very strong and of long standing. I take them to
represent settled law. I should mention for completeness that the law in Ireland has gone the other way: see Flynn v Harte
[1913] 2 IR 322 and Tallon v Ennis [1937] IR 549.
As to any departure from that state of the law, there are, I think, difficulties of principle. It is clear that common law
prescription and prescription under the 1832 Act are, as a matter of decision, not available by or to owners of less estates than the
fee. Lost modern grant is merely a form of common law prescription. It is based upon a fiction which was designed to meet, and
did meet, a particular problem. It would, I think, be anomalous to extend the fiction further by departure, in relation to lost
modern grant, from the fundamental principle of common law prescription referred to by Lindley LJ.
I would allow the appeal.

McCOWAN LJ. I agree.

BELDAM LJ. I also agree.

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

Solicitors: Widdows, Leigh; Stephensons, Leigh).

Frances Rustin Barrister.

29
[1991] 4 All ER 30

Howe and others v David Brown Tractors (Retail) Ltd (Rustons Engineering
Co Ltd, third party)
CIVIL PROCEDURE

COURT OF APPEAL (CIVIL DIVISION)

NICHOLLS, STUART-SMITH LJJ
23 APRIL, 14 MAY 1991

Limitation of action Period of limitation Personal injury claim Writ claiming damages for negligence and/or breach of
statutory duty Statement of claim alleging breach of implied term or warranty that agricultural machinery supplied by
defendant would be fit for purpose and of merchantable quality Plaintiffs claim outside three-year limitation period Order
made disapplying three-year limitation period Plaintiff thereafter seeking to amend writ by adding second plaintiff and claim
by himself and father in partnership Partnership claiming in contract and tort under proposed amendment Whether limitation
period three years or six years in respect of firms claim Whether damages claimed by firm for negligence and breach of
contractual duty consisting of and including damages in respect of personal injuries Limitation Act 1980, s 11 (1) RSC Ord
15, r 6(5).

Practice Parties Adding plaintiff Amendment of writ Application to disapply limitation period Personal injuries action
Whether leave to amend may be given after application to disapply limitation period granted Whether application for leave to
amend to add additional plaintiff should be made before or at same time as application to disapply limitation period Limitation
Act 1980, s 33(1) RSC Ord 15, r 6(5), Ord 20, r 5(5).

The plaintiff and his father were farmers trading under a firm name. In August 1982 the firm bought a tractor with a recotiller
attached to it from the defendant, a supplier of agricultural machinery. On 23 January 1985 the plaintiff was standing on the
recotiller when the guard gave away with the result that his leg was injured and had to be amputated. The primary period of
limitation in respect of any claim by the plaintiff in respect of his injuries expired on 22 January 1988. On 8 July 1988 the
plaintiff issued a generally indorsed writ claiming damages for personal injuries sustained as a result of the accident arising out of
the defendants negligence and/or breach of statutory duty. In his statement of claim he claimed that as suppliers of the machine
the defendant owed him a duty of care and was in breach of an implied condition, term or warranty that the machine would be fit
for its purpose and of merchantable quality. The defendant denied negligence, breach of contract and causation, pleading that the
machine was supplied to the firm and not to the plaintiff, that the plaintiff was not entitled to advance a claim for breach of
contract since such a claim was not indorsed on the writ and that the plaintiffs claim was statute-barred. On 19 December 1988
the district registrar made an order by consent disapplying s 11 a of the Limitation Act 1980, which imposed a three-year
limitation period where the damages claimed by the plaintiff consisted of or included damages in respect of personal injuries. On
14 November 1989 the plaintiff applied to join the firm as second plaintiff for leave to amend the writ and statement of claim to
include a claim by the firm for damages for breach of contract by the sale to the firm of goods which were not safe and also a
claim in negligence. The damages claim was also amended to enable the plaintiffs claim for special damage and continuing loss
30 to be quantified on the basis that he was entitled to 50% of the profits of the partnership and that those profits had been
substantially diminished as a result of his incapacity. The firms claim for loss and damage covered the whole of the loss of
profit. The district registrar gave leave to amend and the judge affirmed his decision. The defendant appealed, contending that
the firms claim fell within s 11 of the 1980 Act because the plaintiffs injuries had been caused by the breach of duty in contract
and therefore the relevant period was three years from the cause of action or date of knowledge, that since the relevant period was
not current at the date of the commencement of the proceedings within RSC Ord 15, r 6(5)( a)b the claim was statute-barred under
Ord 15, r 6(5)(b), which provided, inter alia, that no person could be added as a party after the expiry of the relevant limitation
period where the relevant period arose under, inter alia, s 11, in the absence of a direction by the court under s 33(1) c of the 1980
Act that the section was not to apply to the action by the new party. The questions arose (i) whether the damages claimed by the
firm for negligence or breach of contractual duty consisted of or included damages in respect of personal injuries to the plaintiff
and therefore fell within s 11 of the 1980 Act and (ii) whether an application had to be made and granted under s 33 of the 1980
Act disapplying the relevant limitation period before leave to add the additional plaintiff could be given under Ord 15, r 6(5)( b)
or whether an application under s 33(1) could be made after leave to add the additional plaintiff had been granted.
________________________________________
a Section 11, so far as material, is set out at p 35 a b, post
b Rule 6(5), so far as material, is set out at p 34 f g, post
c Section 33(1), so far as material, provides: If it appears to the court that it would be equitable to allow an action to proceed having regard to
the degree to which(a) the provisions of section 11 of this Act prejudice the plaintiff or any person whom he represents; and (b) any
decision of the court under this subsection would prejudice the defendant or any person whom he represents; the court may direct that those
provisions shall not apply to the action, or shall not apply to any specified cause of action to which the action relates.

Held (1) Although the defendants breach of duty in supplying a dangerous machine to the firm only caused financial loss of
profit to the firm by reason of the loss resulting from the plaintiffs injury, the firms claim nevertheless consisted of or included
damages in respect of personal injuries to the plaintiff or any other person within s 11(1) of the 1980 Act. Accordingly, s 11
applied to the claim and since the relevant period was not current at the date of the commencement of the proceedings under RSC
Ord 15, r 6(5)(a) the application fell to be considered under Ord 15, r 6(5)(b) and was statute-barred unless an order was made
under s 33(1) of the 1980 Act disapplying the limitation period (see p 36 c to g and p 42 j to p 43 c, post), Ackbar v CF Green &
Co Ltd [1975] 2 All ER 65 considered.
(2) Where it was sought to add an additional party to the proceedings in circumstances where RSC Ord 15, r 6(5)( b) applied
it was necessary for an application to be made under s 33(1) of the 1980 Act disapplying the limitation period applicable to the
claim before or at the same time as the application for leave to amend the writ was made. Accordingly, the order for the addition
of the firm as an additional plaintiff was premature and the defendants appeal would be allowed on that ground (see p 38 a b, p
40 b, p 43 h j and p 45 d j to p 46 a, post); Kennett v Brown [1988] 2 All ER 600 distinguished.
(3) However, although there was no valid claim for breach of contract on the pleadings because the original writ did not
expressly refer to the cause of action in contract and the facts giving rise to the cause of action in tort pleaded by the plaintiff
were not the same as or did not include or form part of the plaintiffs claim in contract, which in any event was misconceived, the
court had power under RSC Ord 20, r 5(5)d to give leave to amend the writ to add such a claim 31 despite the expiry of the three-
year limitation period because the effect of the amendment would be to add a new cause of action which arose out of
substantially the same facts as the existing claim in negligence. Accordingly, it would be open to the plaintiff and his father to
make a fresh application under s 33(1) of the 1980 Act disapplying the limitation period applicable to the claim and at the same
time apply for leave to amend the writ (see p 38 g, p 39 g to j, p 45 h j and p 46 c, post); Brickfield Properties Ltd v Newton
[1971] 3 All ER 328 applied.
________________________________________
d Rule 5(5) is set out at p 38 j, post

Notes
For time limits in personal injury actions, see 28 Halsburys Laws (4th edn) paras 691694, and for cases on the subject, see 32
Digest (Reissue) 486, 37343736.
For amendments of a writ after expiry of the limitation period, see 36 Halsburys Laws (4th edn) para 69 and 37 Halsburys
Laws (4th edn) paras 274, 277, and for cases on the subject, see 37(1) Digest (Reissue) 264265, 17321737.
For the Limitation Act 1980, ss 11, 33, see 24 Halsburys Statutes (4th edn, 1989 reissue) 657, 686.

Cases referred to in judgments

Ackbar v CF Green & Co Ltd [1975] 2 All ER 65, [1975] QB 582, [1975] 2 WLR 773.
Brickfield Properties Ltd v Newton [1971] 3 All ER 328, [1971] 1 WLR 862, CA.
Hill v Luton Corp [1951] 1 All ER 1028, [1951] 2 KB 387.
Kennett v Brown [1988] 2 All ER 600, [1988] 1 WLR 582, CA.
Letang v Cooper [1964] 2 All ER 929, [1965] 1 QB 232, [1964] 3 WLR 573, CA.
McGahie v Union of Shop Distributive and Allied Workers 1966 SLT 74, Ct of Sess.
Pontin v Wood [1962] 1 All ER 294, [1962] 1 QB 594, [1962] 2 WLR 258.

Cases also cited

Batting v London Passenger Transport Board [1941] 1 All ER 228, CA.
Graff Bros Estates Ltd v Rimrose Brook Joint Sewerage Board [1953] 2 All ER 631, [1953] 2 QB 318, CA.
Grounsell v Cuthell [1952] 2 All ER 135, [1952] 2 QB 673.
Johnson v Palmer (1879) 4 CPD 258.
Large v Large [1877] WN 198.
Marshall v London Passenger Transport Board [1936] 3 All ER 83, CA.
Paterson v Chadwick [1974] 2 All ER 772, [1974] 1 WLR 890.

Interlocutory appeal
The defendant, David Brown Tractors (Retail) Ltd, appealed with the leave of the Court of Appeal given on 14 May 1990 from
the order of Evans J dated 15 March 1990 whereby he dismissed the defendants appeal from the order of Mr District Registrar
Dixon made on 11 January 1990 granting the first plaintiff, Neville Keith Howe, leave to amend the writ and statement of claim
in the action by joining as second plaintiff, Neville Keith Howe and Ronald Howe, trading as W & J Howe (a firm), and
including in the writ and statement of claim a joint claim by the plaintiffs in partnership for breach of contract and negligence.
The third party, Rustons Engineering Co Ltd, took no part in the proceedings. The facts are set out in the judgment of Stuart-
Smith LJ.

Bernard Livesey QC for the defendant.

Iain McLeod for the first plaintiff.

Cur adv vult

32

14 May 1991. The following judgments were delivered.

STUART-SMITH LJ. This is an appeal brought with the leave of this court from a judgment of Evans J given on 15 March
1990 in which he dismissed the defendants appeal from the decision of Mr District Registrar Dixon giving leave to the first
plaintiff to amend the writ and statement of claim by adding Ronald Howe as a second plaintiff and including in the writ and
statement of claim a joint claim by the two plaintiffs in partnership for breach of contract and negligence. I shall refer to Neville
Keith Howe as the plaintiff, Ronald Howe as the father and the firm as the firm.
The facts are these. The plaintiff and his father are farmers trading under the name W & J Howe (a firm). The defendant
supplies agricultural machinery. On 10 August 1982 the firm bought from the defendant a tractor and a recotiller, which is a
machine attached to and driven by the power of the tractor and designed to produce a smooth seed bed. On 23 January 1985 the
plaintiff was standing on the recotiller when the guard gave way and his leg came into contact with the machinery which was in
motion. As a result of his injuries the leg had to be amputated.
The primary limitation period in respect of any claim by the plaintiff in respect of his injuries expired on 22 January 1988,
three years after the accident.
On 8 July 1988 the plaintiff issued a generally indorsed writ. It was in these terms:

The Plaintiffs claim is for personal injuries sustained and losses and expenses incurred as a result of an accident
which occurred on or about the 23rd January 1985 at the Plaintiffs premises at Mill Grange, Ely Road, Prickwillow,
Cambridgeshire arising out of the negligence and/or breach of statutory duty of the Defendants their servants or agents.

It was a claim in tort.

 On 16 July 1988 a statement of claim was served. After reciting the plaintiffs business as a partner of the firm and the
circumstances of the accident the statement of claim alleged:

3. The Defendants supplied the said machine to the Plaintiff on or about the 10th August 1982 and as suppliers of the
machine the Defendants owed a duty of care to the Plaintiff.
4. Further or in the alternative there was an implied term or warranty that the said machine would be fit for its said
purpose and of merchantable quality.
5. In breach of the said implied condition, term and warranty hereinbefore pleaded the said machine was not of
merchantable quality or fit for the purpose in that the said guard platform collapsed.

Particulars of negligence
There then follow allegations of negligence, which I need not rehearse, and particulars of the injury. By its defence, in
addition to denying negligence, breach of contract and causation, the defendant pleaded: (1) that the machine was supplied to the
firm and not the plaintiff; (2) that the plaintiff was not entitled to advance a claim for breach of contract since such a claim was
not indorsed on the writ; and (3) that the plaintiffs claim was statute-barred.
Thereafter the plaintiff took out a summons seeking an order of the court pursuant to s 33 of the Limitation Act 1980
disapplying the provisions of s 11 of that Act, which imposed the three-year limitation period in respect of the plaintiffs claim.
On 19 December 1988, by consent, the district registrar made such an order.
33
On 14 November 1989 the plaintiff applied by summons to add the father and/or the firm as second plaintiff in the action
and leave to amend the writ and statement of claim. In substance the amendment to the writ was to include a claim by the firm as
follows:

The Second Plaintiffs claim is for damages for breach of contract of sale made on the 10th day of August 1982
between the Second Plaintiff and the Defendants, their servants or agents and/or as a result of their negligence.

The proposed amendment to the statement of claim made it clear that the only claim advanced on behalf of the plaintiff was
in negligence. The firms claim was for damages for breach of the implied terms in the contract as to fitness for the purpose and
merchantability. It was also alleged that the defendant was negligent and in breach of duty to the firm (a claim in tort). The
damage claim was also amended. So far as the plaintiff is concerned, apart from a claim for general damages for the serious
injury to his leg and a claim for loss of earning capacity, his claim for special damage and continuing loss is quantified on the
basis that he is entitled to 50% of the profits of the partnership and that these profits have been substantially diminished as a
result of his incapacity. Additional machinery has had to be obtained; outside contractors and additional help employed to work
the farm, all matters which have caused loss to date and will contribute to lower profits in future.
The claim for loss and damage alleged to have been sustained by the firm covers much of the same ground as that by the
plaintiff but is for the whole, as opposed to 50% of the loss of profit. Certain matters of additional expenditure on machinery,
labour and outside contractors are itemised and there is a claim for loss of profit in future years.
The defendant opposed the application for leave to amend but, as I have indicated, the district registrar granted leave and
Evans J dismissed the defendants appeal.
The provision which is at the heart of this appeal is RSC Ord 15, r 6(5), which provides:

No person shall be added or substituted as a party after the expiry of any relevant period of limitation unless either
(a) the relevant period was current at the date when proceedings were commenced and it is necessary for the determination
of the action that the new party should be added, or substituted; or (b) the relevant period arises under the provisions of
section 11 or 12 of the Limitation Act 1980 and the Court directs that those provisions should not apply to the action by or
against the new party. In this paragraph any relevant period of limitation means a time limit under the Limitation Act
1980

Before I turn to the consideration of this rule it is necessary to decide what is the relevant period of limitation in respect of
the firms claim. Mr Livesey QC for the defendant submits that the firms claim falls within s 11 of the Limitation Act 1980; the
relevant period is therefore three years from the cause of action or the date of knowledge (s 11(4)). Accordingly the relevant
period was not current at the date of the commencement of the proceedings within Ord 15, r 6(5)( a) and the matter falls to be
considered under Ord 15, r 6(5)(b).
Mr McLeod, on the other hand, contends that the firms claim (as opposed to the plaintiffs) does not fall within s 11 and the
relevant period of limitation is six years from the breach of contract so far as the contractual claim and six years from the accident
so far as the claim in negligence is concerned.
Section 11(1) of the Limitation Act 1980 provides:
34

This section applies to any action for damages for negligence, nuisance or breach of duty (whether the duty exists by
virtue of a contract or of provision made by or under a statute or independently of any contract or any such provision)
where the damages claimed by the plaintiff for the negligence, nuisance or breach of duty consist of or include damages in
respect of personal injuries to the plaintiff or any other person.

The question is whether the damages claimed by the firm for negligence or breach of contractual duty (to provide a machine
that was fit for the purpose and/or of merchantable quality) consist of or include damages in respect of personal injuries to the
plaintiff.
There is only one reported English authority on the meaning of this section, namely Ackbar v CF Green & Co Ltd [1975] 2
All ER 65, [1975] QB 582. The plaintiff, who had been injured in an accident while travelling as a passenger in his own lorry,
discovered that the defendants, his insurance brokers, had failed to carry out his instructions to obtain passenger liability
insurance for the lorry. Being unable to recover his losses from the insurers of the vehicles concerned he sued the defendants for
breach of contract. The proceedings were issued more than three years but less than six years after the accident. The defendants
contended that the claim was statute-barred because the three-year period applied under s 2(1) of the Limitation Act 1939(as
amended), which is effectively in the same terms as s 11(1) of the 1980 Act. Croom-Johnson J rejected the defendants argument
and held that the relevant period of limitation was six years from the breach of contract. The learned judge said ([1975] 2 All ER
65 at 68, [1975] QB 582 at 587588):

The proper test in my view in the present case is to ask what is the action all about? The plaintiffs answer to that
question is that this action is all about breach of contract which resulted in damage to the plaintiff. The compensation for
that damage is an award of money called damages, the assessment of which is to be measured by the award which he
would have got against the tortfeasor, the negligent driver. This action, says the plaintiff, is not one where damages in
respect of personal injuries within the wording of the proviso [to s 2(1) of the 1939 Act] are sought, because to fulfil that
 wording the personal injuries must have been sustained by the same breach of duty as gives rise to the action. For that
reason it is said that it does not matter whether the instant action is framed in contract, as it is, or in tort In the end if
one asks the question here What is this action all about? one gets the answer that it is about an alleged breach of contract
by the defendants, as a result of which the plaintiff lost the chance or right to recover his loss either from the driver or from
his own insurers. I do not think that the damages sought in this action consist of or include damages in respect of personal
injuries. Those damages, which might have been recovered heretofore, are only the measure of the damages now claimed.

In McGahie Union of Shop Distributive and Allied Workers 1966 SLT 74 Lord Fraser was contemplating a similar provision
in the relevant Scottish statute. He said (at 75):

There is, in my opinion, only one item of loss in the damages claimed in this action, that item being the loss caused by
the lapse of the pursuers right to sue her employers. The lapse of that right did not cause her any personal injury. The
matter was put correctly thus:The expression damages in respect of personal injuries may be paraphrased as
compensation for a wrong consisting of personal injuries; but the pursuer in this action seeks 35 compensation for a wrong
consisting of allowing her right of action against her employers to lapse without having been exercised. Therefore, said
senior counsel [for the pursuer], the damages are not in respect of personal injuries. No doubt this action will necessitate
inquiry into the nature and extent of the personal injuries sustained by the pursuer, but that is, in my opinion, only for the
purpose of evaluating the right that she has lost or (what is the same thing) of quantifying her loss.

Mr Livesey submits that the firms claim is within the section because the breach of duty in contract caused the plaintiffs
injuries; he also submits that it would be anomalous if the plaintiffs claim was within the section but the firms was not. If one
asks the question: What is the firms action all about? the answer is that it is a claim for damages consisting of loss of profit
caused by breach of contract or negligence on the part of the defendant, resulting from the personal injury to the plaintiff. The
essential distinction between the present case and Ackbars case is that the same facts which give rise to the personal injury and
breach of duty to the plaintiff give rise to the breach of duty, albeit a different duty, owed to the firm. It is the supply of a
dangerous machine which constitutes the breach of duty in tort to the plaintiff and causes his personal injury and pecuniary loss
resulting from such injury. It is the supply of the dangerous machine which constitutes the breach of contractual duty owed to the
firm to supply a machine of merchantable quality and fit for its purpose; this breach of duty only causes financial loss to the firm
because of the loss resulting from the personal injury to the plaintiff. In my judgment the words in respect of are wide enough
to embrace such a claim and I find nothing inconsistent in this result with the reasoning of Croom-Johnson J in Ackbars case.
A typical case is where a plaintiff workman is injured by defective machinery provided for his use by his employer. He can
sue the employer in tort under the Employers Liability (Defective Equipment) Act 1969 and perhaps also for negligence.
Section 11 of the Limitation Act 1980 applies. The employer can sue in contract the supplier of the machinery; the measure of
damages is an indemnity in respect of the workmans claim. Such a claim in my judgment also plainly falls within s 11. If the
employer adds a claim in respect of his own losses resulting from the plaintiffs injury (assuming such a claim will lie in law) the
nature of the claim is not so different as to take it outside the section. Effectively this is what the firms claim is here, though of
course it is not coupled with any claim for indemnity against a claim of the plaintiff. The final words of the section in respect of
personal injuries to the plaintiff or any other person, in my judgment, add point to this construction. Accordingly the application
falls to be considered under Ord 15, r 6(5)(b).
The next question that falls to be determined is whether under this rule leave to amend to add the party should be given, it
then being for the defendant to take the limitation defence, whereupon an application under s 33 of the 1980 Act must be made,
or whether such application must be made and granted before leave to add the additional plaintiff can be given. The learned
judge, who did not find it necessary to decide whether the relevant limitation period was three or six years, held, on the
assumption that it was three, that the application under s 33 could be made subsequently to the addition of the second plaintiff. In
so doing he purported to follow the decision of this court in Kennett v Brown [1988] 2 All ER 600, [1988] 1 WLR 582. In that
case the plaintiff suffered personal injuries in a road accident and brought an action against the first defendant claiming damages.
Subsequently the second defendant was joined as a party. Shortly after the expiry of three years from the accident the first
defendant served a contribution notice on the second defendant. He claimed an indemnity in respect of any liability he 36 might
incur to the plaintiff and damages for personal injury. The first defendant applied for directions, and the district registrar held that
there could be no claim by the first defendant in respect of his own injuries until he had applied under s 33 of the Limitation Act
1980 to disapply the provisions of s 11. He stood the application over.
On appeal to the judge in chambers by the first defendant it was held that it was for the second defendant to raise the
limitation defence in the contribution proceedings and, if and when he did so, for the first defendant to apply under s 33. The
appeal to the Court of Appeal was dismissed. It is important to appreciate that that case turned solely on the construction of s 35
of the 1980 Act. There was no question of the addition of a party to the proceedings, since the second defendant was already
properly joined as a party in the contribution proceedings. The claim in respect of the first defendants personal injury was a new
claim within the meaning of s 35(1)(b). Section 35(3) is in the following terms:

Except as provided by section 33 of this Act or by rules of court, neither the High Court nor any county court shall
allow a new claim within subsection (1)(b) above, other than an original set-off or counterclaim, to be made in the course
of any action after the expiry of any time limit under this Act which would affect a new action to enforce that claim. For
the purposes of this subsection, a claim is an original set-off or an original counterclaim if it is a claim made by way of set-
off or (as the case may be) by way of counterclaim by a party who has not previously made any claim in the action.

The Court of Appeal held that the subsection did not prevent the bringing of a new claim but merely operated as a
procedural bar which the defendant to such a claim could raise if he wished. Lord Donaldson MR said ([1988] 2 All ER 600 at
602603, [1988] 1 WLR 582 at 585):

So I look at the wording of the subsection. Parliament must be deemed to have been aware of the way in which,
subject to special provisions made in rules of court, the Limitation Acts have always been applied, namely as procedural
bars which a defendant to a particular claim could raise if he wished, but which he was not obliged to raise if he did not
wish. If the view of the statute which is put forward by counsel for Mr Teagle is accepted, it would be necessary in every
case where a new claim falling within s 35(1)(b) was raised after the expiry of the limitation period for the person raising
the claim to make an application under s 33 to have the Limitation Act 1980 disapplied. I can see no reason of policy why
that should be the case and why Parliament should ever have intended it, and so I approach the words in s 35(3), neither
the High Court nor any county court shall allow a new claim to be made in the course of any action, without feeling
that I am in any way bound by the literal meaning of those words. In s 11 and the various other sections the wording of the
1980 Act is An action shall not be brought. We know that Parliament does not mean by that that no action shall be
brought; it means that no action shall succeed. I see no reason why the words here, neither the High Court nor any county
court shall allow a new claim to be made, should receive any other construction.

But s 35(3) contains the crucial words Except as provided by section 33 of this Act or by rules of court. It is plain
therefore that rules of court may present an additional bar or hurdle. It has always been the position that unlike an initiating
action which can be started without leave even if apparently statute-barred, leave is required to amend (except under certain
limited cases: see Ord 20, r 1), and will 37 not be granted where the existing plaintiffs new claim or the new plaintiffs claim is
statute-barred, except again in certain limited cases. In my judgment the words of Ord 15, r 6(5), are clear and unambiguous; no
person shall be added as plaintiff. To adopt a similar approach to construction as that adopted by the Court of Appeal in
Kennetts case would be to go contrary to the principle which has pertained for many years in relation to amendments and
addition of parties. The relevant words cannot be construed as such a person can be added, but a claim cannot be allowed to
succeed against him. In my judgment Kennets case is distinguishable and has no application where Ord 15, r 6(5) applies.
Accordingly it is necessary where it is sought to add a plaintiff in circumstances where Ord 15, r 6(5)( b) applies for the plaintiff
to make an application under s 33 of the 1980 Act before or at the same time as the application for leave to amend. If the only
question was whether or not a new party should be added, then it would in my opinion be open to the plaintiff to reapply for leave
to amend to add a party accompanied by an application under s 33 of the 1980 Act. But this assumes that before the plaintiff
sought to amend there was then a valid claim for breach of contract on the pleadings.
Mr McLeod submits that this is so and the learned judge accepted the argument. The argument is this: the original writ did
not expressly refer to the cause of action in contract; in this respect it was not a nullity but was defective inasmuch that it failed to
identify the contract, breach of which gave rise to the negligence; the defect was however cured by the statement of claim.
Reliance was placed on Hill v Luton Corp [1951] 1 All ER 1028, [1951] 2 KB 387 and Pontin v Wood [1962] 1 All ER 294,
[1962] 1 QB 594. The difficulty with this argument, in my judgment, lies in Ord 18, r 15(2), which was introduced for the first
time in 1964 after the decision in those two authorities. That rule provides:

A statement of claim must not contain any allegation or claim in respect of a cause of action unless that cause of action
is mentioned in the writ or arises from facts which are the same as, or include or form part of, facts giving rise to a cause of
action so mentioned; but, subject to that, a plaintiff may in his statement of claim alter, modify or extend any claim made
by him in the indorsement of the writ without amending the indorsement.

It is plain, in my judgment, that the cause of action in contract was not mentioned in the writ and that it did not arise from
facts which were the same as or formed part of the facts giving rise to the cause of action so mentioned. For the cause of action
in contract it was necessary to allege further facts than those which give rise to the claim in negligence; and the expression forms
part of postulates that only some of the facts giving rise to the cause of action alleged in the writ will suffice to ground the new
claim. Difficulty, however, is presented by the word include. This rule was considered by the Court of Appeal in Brickfield
Properties Ltd v Newton [1971] 3 All ER 328, [1971] 1 WLR 862, a case which was not drawn to the judges attention. That was
a claim against architects for breach of contract. The writ alleged negligence in relation to supervision only; but the statement of
claim alleged negligent, supervision and design.
Each member of the court pointed out that Ord 18, r 5(2) was in substantially narrower terms than Ord 20, r 5(5), which
provides:

An amendment may be allowed under paragraph (2) notwithstanding that the effect of the amendment will be to add or
substitute a new cause of action if the new cause of action arises out of the same facts or substantially the same facts as a
cause of action in respect of which relief has already been claimed in the action by the party applying for leave to make the
amendment.
38

In relation to Ord 18, r 15(2) Sachs LJ said ([1971] 3 All ER 328 at 333, [1971] 1 WLR 862 at 870):

Without wishing to lay down any general formula as to how the sub-rule should be applied, it seems that in general it
is meant to relate to cases in which some part of the facts necessary to establish the claim made in the writ would suffice to
establish some other, perhaps narrower, cause of action. It has somewhat the same effect as the rule in criminal cases that
one may include in an indictment any count which is supported by evidence disclosed in the depositions but none which
requires the proof of additional facts.

Edmund Davies LJ said ([1971] 3 All ER 328 at 339, [1971] 1 WLR 862 at 876):

I agree with Sachs LJ, and for the reason which he has given, that, in the light of the restricted form of endorsement on
the writs, it was impermissible for the plaintiffs to add in their statement of claim the further allegation relating to negligent
design, thereby contravening RSC Ord 18, r 15(2). If no objection had been taken, however, the matter would have cured
itself and the proceedings been regularised without the necessity for amending the writ.

So too in the present case the defendant could have waived the irregularity, in which case it would have been cured. But it did
not do so; it took the point in its defence.
Cross LJ said ([1971] 3 All ER 328 at 342, [1971] 1 WLR 862 at 880):

So far as I can judge, the facts out of which the new cause of action for negligent design alleged in the statement of
claim arises will include many but not all of the facts out of which the cause of action for negligent supervision alleged in
the writ arises and will also include further facts which are not relevant to the claim in the writ. If this be so, then, as I read
RSC Ord 18, r 15(2) the plaintiffs cannot raise the new cause of action without amending their writ. When the rule speaks
of facts which are the same as, or include or form part of, facts giving rise to a cause of action mentioned in the writ, the
word the is, I think, to be implied before the second occurrence of the word facts. It is not enough for a plaintiff to
show that there is some overlapsubstantial or insubstantialbetween the two sets of facts.

Mr McLeod points out that both Sachs and Edmund Davies LJJ qualified their opinion with the words Without wishing to
lay down any general formula and the use of the words in general. But in my judgment all three members of the court gave a
restricted interpretation to the rule. Adopting this approach I have no hesitation in holding that the facts giving rise to the cause
of action in tort pleaded by the plaintiff were not the same as or included or formed part of the plaintiffs claim in contract, which
was in any event misconceived.
While, however, as Mr McLeod conceded, the plaintiff could not have applied to amend the writ under Ord 20, r 5(5) to
include a claim in contract by him alone because he accepted that the contract was made by the firm, it may well be that if and
when the court disapplies s 11 of the Limitation Act 1980 pursuant to an application made by the father and/or the firm under s 33
of that Act, the court will also permit the writ to be amended under Ord 20, r 5(5) to include a claim in contract by the firm. This
is because the new cause of action arises out of substantially the same facts as the original claim in negligence.
I have not dealt in any detail with the judges judgment. That is not out of any disrespect for him; although his judgment
was ex tempore it was very careful and full. But, as both counsel accept, the arguments presented to this court have 39 differed
substantially from those presented to the judge. In particular before him the defendant had not nailed its colours to the mast on
the limitation point and even appeared to accept that the plaintiffs claim in contract was subject to a six-year limitation period,
which in my view is clearly wrong. His attention was not drawn to the Brickfield case or the fact that Ord 18, r 15(5) was
introduced after the decisions in Hill v Luton Corp [1951] 1 All ER 1028, [1951] 2 KB 387 and Pontin v Wood [1962] 1 All ER
294, [1962] QB 594.
I would allow the appeal.

NICHOLLS LJ. The dreadful accident which occurred to Mr Neville Howe on 23 January 1985 caused loss not only to him.
Mr Howe was farming in partnership with his father, and his father also suffered financial loss as a result of the severe injuries
sustained by Mr Howe junior in the accident. So in November 1989 the son applied to join his father as an additional plaintiff in
the action to enable them to advance a claim for damages for breach of contract. He applied to join his father, because it was the
partnership which had purchased the rotary harrow in August 1982 from the defendant, David Brown Tractors (Retail) Ltd. All
the sons financial loss was already embraced in his existing personal claim for damages for negligence. Adding the contract
claim would be of no advantage to him. But the claim in contract would enable Mr Howe senior to claim the financial loss which
he had suffered if, indeed, as he and his son claim but the defendant denies, the harrow was unsafe and not fit for its purpose or of
merchantable quality.
The first question which has to be considered is whether the limitation period applicable to this new claim is three years or
six years. The application to amend was made more than three years after the date of the accident. Furthermore, over six years
had elapsed since the harrow had been purchased, and it was at the date of purchase of the harrow that the breach of contract
asserted in the new claim occurred. On either basis, therefore, the limitation period had already run against the new claim. But
there is an important difference between the two periods. In the case of a three-year limitation period under s 11 of the Limitation
Act 1980, the court has power to disapply the time limit. The court has no such power in respect of the ordinary six-year
limitation period applied by s 5 to actions for breach of contract.

The limitation period

I turn therefore to consider whether the proposed new claim by the partnership falls within s 11. Section 11(1) provides:

This section applies to any action for damages for negligence, nuisance or breach of duty (whether the duty exists by
virtue of a contract or of provision made by or under a statute or independently of any contract or any such provision)
where the damages claimed by the plaintiff for the negligence, nuisance or breach of duty consist of or include damages in
respect of personal injuries to the plaintiff or any other person.

It is helpful to approach by stages the question posed in the present case. Take first the simple case of a patient who is
treated privately by a doctor or a dentist. The doctor and the dentist owe to him a duty to exercise reasonable skill and care in
their treatment of him. There is an implied term to that effect in the contract between the patient and the doctor or dentist: see s 3
of the Supply of Goods and Services Act 1982. There is also a duty to that effect quite apart from the contract. If the patient
suffers physical injury as a result of negligent treatment by his doctor or dentist, he may bring an action in negligence or for
breach of contract. The damages recoverable will include general damages in respect of the physical 40 injury and pain and
suffering. They will also include damages for financial loss resulting from the physical injury, such as loss of future earnings. In
such a case the claim for financial loss is as much a claim for damages in respect of personal injuries as is the claim for damages
in respect of the physical injury itself. The plaintiff could not step outside the three-year limitation period prescribed by s 11 by
abandoning any claim for damages in respect of the physical injury and claiming only damages in respect of his loss of earnings.
Take next the case of a plaintiff who buys from a retailer a defective product which subsequently injures him. He brings an
action claiming damages for breach of implied terms as to merchantable quality and fitness for purpose. Is such an action for
breach of contract within s 11? In Letang v Cooper [1964] 2 All ER 929 at 936, [1965] 1 QB 232 at 245 Diplock LJ observed
that in their ordinary meaning the words breach of duty in the predecessor section to s 11 are wide enough to cover any cause of
action which gives rise to a claim for damages for personal injuries. He considered that there was no reason for giving those
words any different meaning. He said ([1964] 2 All ER 929 at 936, [1965] 1 QB 232 at 246):

The mischief against which all limitation Acts are directed is delay in commencing legal proceedings; for delay may
lead to injustice, particularly where the ascertainment of the relevant facts depends upon oral testimony. This mischief, the
only mischief against which the section is directed, is the same in all actions in which damages are claimed in respect of
personal injuries. It is independent of any category into which the cause of action which gives rise to such a claim falls

Those observations were made in a case where the contention was that a claim formulated as damages for trespass to the
person, when a car accidentally ran over the plaintiffs legs, was outside what is now s 11. The court was not addressing a case
where the claim was for breach of contract. As to that, the phrase breach of duty does seem to me to be an unusual way to refer
to a breach of contract consisting of breaches of implied terms as to merchantable quality and fitness for purpose. Despite this,
the words in parentheses in sub-s (1) seem to me to leave no room for doubt. The section applies to any action for damages for
breach of duty (whether the duty exists by virtue of a contract or independently of any contract ). I do not think it is
possible to say that s 11 applies to an action for breach of contract where the terms breached is to exercise reasonable skill and
care, but that s 11 does not apply to an action for breach of contract where the term breached is one as to merchantable quality or
fitness for purpose. The phrase breach of duty must apply in both cases or neither. In my view, and the contrary was not argued
before us, it applies in both cases.
My third example is of a case where P buys a defective product from D and in consequence Ps employee is injured while
using it in the course of his employment. The employee recovers damages from his employer P for breach of statutory duty or
negligence. P then brings proceedings against D, by way of third party proceedings in the employees action or by way of a
separate action. P seeks to recover from D as damages for breach of contract an indemnity in respect of Ps liability in damages
to his employee. In my view Ps claim in contract against D falls within s 11. The crucial feature is that the breach of contract
upon which P founds his action caused the personal injuries in respect of which the damages claim arises. P is claiming damages
to compensate him for the loss suffered by him as a result of a breach of contract which caused personal injuries. The
consequence of Ds supply of the defective tool or whatever was personal injury to the employee. True, in this example, the
personal injuries were sustained 41 by Ps employee and not by P himself. But s 11 expressly caters for this possibility when
providing that the damages claimed consist of or include damages in respect of personal injuries to the plaintiff or any other
person.
My third example is to be contrasted with a case where, although the recoverable damages fall to be measured or assessed
by reference to the loss flowing from personal injuries, the personal injuries were not caused by the negligence or breach of duty
which is the subject of the action. If a solicitor negligently fails to launch a personal injuries action on behalf of his client within
the three-year period, the client may bring an action in negligence against the solicitor. The damages recoverable will fall to be
assessed by reference to the damages which the client could be expected to have recovered in the action, making any appropriate
discount to reflect the chances that the action might not have succeeded. In such a case, the action against the solicitor for
damages for professional negligence is not within s 11, because the damages claimed do not consist of or include damages in
respect of personal injuries. The damages claimed comprise damages in respect of the solicitors failure to issue a writ in time.
That failure did not cause any personal injuries. Thus, in McGahie v Union of Shop Distributive and Allied Workers 1966 SLT 74
a member of a trade union sued the union for damages in respect of the unions failure to pursue a claim on her behalf against her
employers concerning an injury she had sustained in their employment. Lord Fraser, sitting in the Outer House of the Court of
Session, held that the limitation provision in Scotland corresponding to what is now s 11 of the 1980 Act did not apply to that
action. He said (at 75):

There is, in my opinion, only one item of loss in the damages claimed in this action, that item being the loss caused by
the lapse of the pursuers right to sue her employers. The lapse of that right did not cause her any personal injury. The
matter was put correctly, I think, by senior counsel for the pursuer, thusThe expression damages in respect of personal
injuries may be paraphrased as compensation for a wrong consisting of personal injuries; but the pursuer in this action
seeks compensation for a wrong consisting of allowing her right of action against her employers to lapse without having
been exercised. Therefore, said senior counsel, the damages are not in respect of personal injuries. No doubt this action
will necessitate inquiry into the nature and extent of the personal injuries sustained by the pursuer, but that is, in my
opinion, only for the purpose of evaluating the right that she has lost or (what is the same thing) of quantifying her loss.

Likewise, some years later in England, in Ackbar v CF Green & Co Ltd [1975] 2 All ER 65, [1975] QB 582. There the plaintiff
sued his insurance brokers for negligently failing to carry out his instructions to obtain passenger liability insurance for his lorry.
He was injured while a passenger in the lorry when it was involved in a road accident. The plaintiff was unable to recover
damages from any other insurer. Croom-Johnson J held that the action was not within the predecessor section to s 11 (see [1975]
2 All ER 65 at 68, [1975] QB 582 at 588). The action was for a breach of contract by the defendants as a result of which the
plaintiff lost the chance or right to recover his loss from insurers.
If those principles are applied in the present case, the answer is clear. The new claim is for damages for breach of contract
by the sale to the partnership of goods which, so it is alleged, were not safe to use. The guard platform was defective. That
breach of contract resulted in personal injuries to Mr Howe junior. Damages are claimed in respect of the loss suffered by him
and his father by reason of that breach. In the third of my three examples the employers claim against the supplier of the
defective product for an indemnity (ie damages) in respect of the 42 damages claimed by the injured employee was within s 11. I
can see no material distinction between that example and the partnerships claim in the present case. In each instance the claim is
to make good financial loss flowing to the contracting party by reason of personal injury to another sustained as a result of using
the goods which, in breach of contract, were defective. Here the partnership claim is for expenses and losses incurred as a direct
result of Mr Neville Howes injury: the cost of buying an additional automatic car for use by him, and a tractor with a flat floor
in its cab, and additional crop irrigation equipment, the cost of engaging contractors to carry out crop-spraying in 1986 when he
was unable to do so, and loss of profits. Those are expenses and losses claimed as damage arising from the very breach of
contract which is the foundation of the claim the partnership seeks to pursue against the defendant. The breach of contract caused
the personal injuries. In my view this claim falls within s 11.
I should add this. The partnership also seeks to advance, but very much as a secondary claim, a claim for damages for
negligence. Whether such a claim in tort by the partnership is maintainable in law was not a point argued before us. But to this
claim also the three-year period would be applicable, for reasons which will be apparent from what I have already said regarding
the claim for damages for breach of contract.
Adding a new party after expiry of the three-year period
On that footing the application to amend the writ by adding Mr Ronald Howe as an additional plaintiff, which is the effect of
adding the partnership as second plaintiff, comes within RSC Ord 15, r 6(2)(b)(i) and (5)(b). The courts power, under r 6(2), to
make an order that Mr Howe senior be added as a party is applicable here, because he is a person whose presence before the court
is necessary to ensure that all matters in dispute in the cause or matter may be effectually and completely determined and
adjudicated upon (sub-para (b)(i)). However, bounds are set to that power by r 6(5):

No person shall be added or substituted as a party after the expiry of any relevant period of limitation unless either-( a)
the relevant period was current at the date when proceedings were commenced and it is necessary for the determination of
the action that the new party should be added, or substituted, or ( b) the relevant period arises under the provisions of
section 11 or 12 of the Limitation Act 1980 and the Court directs that those provisions should not apply to the action by or
against the new party. In this paragraph any relevant period of limitation means a time limit under the Limitation Act
1980

The present case, in accordance with the view I have already expressed, falls within sub-para (b). I consider that the natural,
indeed the inescapable, meaning of para (5) is that the courts discretionary power to make an order adding or substituting a
person as a party after the expiry of any relevant period of limitation is not to be exercised unless the requirements stated in sub-
para (a) or (b) are fulfilled: No person shall be added as a party unless either ( a) or (b) Thus, in the case of sub-
para (a), the court needs to be satisfied that it is necessary for the determination of the action that the new party should be added
or substituted before exercising its power to make an order adding or substituting that person as a party. Under sub-para (b), the
new party is not to be brought in unless the court gives a direction disapplying the provisions of s 11 or s 12 so far as the new
party is concerned. Until such a direction is given the new party is not to be added.
The effect of this reading of para (5)(b) is to draw a distinction between a case 43 where a person is sought to be added as a
new party in an existing action on the one hand and a case where the claim by or against the new party is made in a new action.
In the latter case the action would be started, limitation would be pleaded by way of defence, and in the normal way it would be
thereafter that the s 33 application would be made. I do not find this distinction surprising. I can see good reason why, in the
ordinary way, the convenient course in most cases will be for a fresh action to be started rather than an application made to
amend the existing action and add a new plaintiff or defendant. The s 33 issue would then be decided in due time in the course of
the fresh action. But if, instead of starting a new action, an amendment application is made, the court is being asked to exercise a
discretionary power. It is not surprising that when an application seeks the exercise of such a power in his favour after the expiry
of a period of limitation under s 11 or s 12, the court should be required at that stage to consider and decide whether or not the
limitation provisions should be disapplied, and only if it has directed that they should be disapplied should the court be able to
order that the new party may be added. By his own application the appellant has brought the matter before the court. There is a
certain degree of sense and convenience in the court considering that application and the s 33 issues at one and the same time.
Mr McLeod submitted otherwise. He submitted that the registrar and, on appeal, the judge were correct in making the order
adding the partnership as a new party, and leaving the question of whether or not the limitation provisions should be disapplied
until a future date. I cannot reconcile this course with the clear language of para (5). Mr McLeod prayed in aid the decision of
this court in Kennett v Brown [1988] 2 All ER 600, [1988] 1 WLR 582. I do not think that decision provides an answer to the
point arising in the present case. There one defendant served a contribution notice on another defendant in a personal injuries
action more than three years after the accident occurred. That constituted a new claim within the meaning of s 35 of the
Limitation Act 1980. Section 35(3) provides that, except as provided by s 33 or by rules of the court, the court shall not allow a
new claim to be made in the course of an action after the expiry of any time limit under the Act which would affect a new action
to enforce that claim. This court held that this provision, like other provisions in limitation Acts, raised a procedural bar which a
defendant to a particular claim could raise if he so wished. The provision did not preclude new claims being brought. What it did
was to provide a defence for a defendant, against whom a new claim had been brought, if he chose to raise this as a defence and a
successful application under s 33 was not made.
 Kennett v Brown does assist Mr McLeod to a limited extent. A new claim is defined in s 35(2) as including a claim which
involves the addition of a new party. Thus the decision in Kennett v Brown on the proper interpretation of s 35(3) applies as
much to a claim which involves the addition of a new party as it does to a claim which involves the addition of a new cause of
action. But this does not take Mr McLeod far enough. Section 35(4) envisages that rules of court may impose further restrictions
on the circumstances in which new claims may be allowed. In Kennett v Brown the court was not concerned to address or
consider the interpretation of Ord 15, r 6(5). Further, that case was not one in which the new claim could be got on foot only with
the leave of the court. Leave was not needed for the service of the contribution notice. In contrast, the present case concerns the
construction of a rule which itself prescribes limits on the circumstances in which the discretionary power the applicant is
invoking may be exercised in his favour. He needs the leave of the court before he can even institute his new claim. This is an
altogether different situation. I can see nothing in the Kennett v Brown 44decision which requires the language of Ord 15, r 6(5)
to be given a meaning different from its natural meaning.
Mr McLeod also submitted that there was a further difficulty with this construction of para (5). A direction under s 33
disapplying the provisions of s 11 or s 12 is an order which binds the parties to an action. But a person ordered to be added as a
party under r 6 does not become a party until the writ has been amended in relation to him and, if he is a defendant, has been
served on him (Ord 15, r 8(4)). Thus a s 33 direction cannot be given in regard to the new party as envisaged by r 6(5) until a
later stage than the courts decision on whether or not to order the addition of the new party. I cannot accept this. Persons who
are not parties to an action may come before the court on many matters, including applications under Ord 15, r 6. Rule 6(3)
expressly provides for one example of this. The person sought to be joined may himself be the applicant. I see no procedural
difficulty here. The proposed additional plaintiff or defendant can be heard on the question whether he ought to be added, and
whether a s 33 direction should be made, even before he has become a party.
In the present case the question whether or not a direction under s 33 should be made in relation to the partnerships
proposed breach of contract claim has not yet been considered by the court. No evidence or arguments were produced or
advanced to the registrar of the judge. Accordingly an order for the addition of the partnership as an additional plaintiff was
premature. The order should not have been made. The necessary precondition to the making of such an order under para (5)( b)
was not fulfilled.

Adding a new cause of action after expiry of the threeyear period

The amendments which are sought are not confined to the addition of a new party. The indorsement on the writ was for
personal injuries sustained and losses and expenses incurred as a result of an accident, which was then identified, arising out of
the negligence and/or breach of statutory duty of the defendants, their servants or agents. No mention was made of any claim for
breach of contract. The amendment seeks to add a claim by the partnership for damages for breach of contract and in negligence.
I can deal with this point very shortly. Argument was advanced to the effect that the proposed amendment to the writ did not
involve adding a new cause of action, because a claim for damages for breach of contract was made in the statement of claim, and
this operated to introduce such a claim effectually into the action, either pursuant to Ord 18, r 15(2) or otherwise. I need not go
further into the rival arguments on this point, for this reason. Let me assume, in favour of the defendant, that before amendment
the action did not include an effectual claim for breach of contract because no such claim was mentioned in the writ. Even so the
court would still have power to give leave to amend the writ to add such a claim, despite the expiry of the three-year limitation
period, under Ord 20, r 5. It was common ground before us that the effect of the amendment would be to add a new cause of
action which arises out of substantially the same facts as the existing claim in negligence. Thus the requirements of Ord 20, r
5(5) are satisfied. The court has a discretion. Not surprisingly, it was not suggested to us that if hereafter the court were to
consider that this is a case for a direction under s 33 in respect of the claims by the partnership, the court should not exercise its
discretion under Ord 20, r 5 in favour of carrying back into the indorsement on the writ a claim for breach of contract which has
been set out in the statement of claim ever since it was served in July 1988, eight days after the issue of the writ.
Thus I see no difficulty under this head. However, the appeal must be allowed, and the judges order set aside, because of
the failure to comply with the 45 requirements of Ord 15, r 6(5). This will leave the plaintiff and his father at liberty, if they wish,
to make a fresh application which this time will also seek the necessary direction under s 33.

Appeal allowed.

Solicitors: Hextall Erksine & Co; Roythorne & Co, Spalding.

Mary Rose Plummer Barrister.

[1991] 4 All ER 46

Proetta v Times Newspapers Ltd

CIVIL PROCEDURE

COURT OF APPEAL, CIVIL DIVISION

NEILL, RUSSELL AND FARQUHARSON LJJ
12, 13, 15 NOVEMBER 1990

Practice Payment into court Acceptance Time for acceptance Extension of time Whether court should extend time for
acceptance where risks have changed appreciably Whether change of plea amounting to appreciable change in risks RSC
Ord 22, rr 3(1)(a), 5.

In the same way that the court should not, more than 21 days after a defendant has paid money into court in satisfaction of the
plaintiffs claim, make an order under RSC Ord 22, r 5 a for the payment out to the plaintiff if there has been a substantial change
in the risks, so also the court should not grant the plaintiff an extension of time for accepting, under Ord 22, r 3(1)(a)b, money
paid in if there has been a substantial change in the risks. Although a mere change of plea may not alter the risks to any
appreciable extent, the introduction into an action for libel of a plea of justification instead of or in addition to a plea of fair
comment will probably be an appreciable change in the risks such that an extension of time for acceptance of money paid into
court should not be allowed (see p 48 b c h j and p 49 g, post).
________________________________________
a Rule 5 is set out at p 48 g, post
b Rule 3(1), so far as material, is set out at p 48 e f, post

Gaskins v British Aluminium Co Ltd [1976] 1 All ER 208 applied.

Notes
For acceptance of money paid into court in satisfaction of a plaintiffs claim, see 37 Halsburys Laws (4th edn) paras 290291,
and for cases on the subject, see 37(2) Digest (Reissue) 427428, 26082613.
For the distinction in libel cases between fair comment and justification, see 28 Halsburys Laws (4th edn) para 144, and for
cases on the subject, see 32 Digest (Reissue) 272273, 22442245.

Cases referred to in judgments

Ford (an infant) v Lewis [1971] 2 All ER 983, [1971] 1 WLR 623, CA.
Gaskins v British Aluminium Co Ltd [1976] 1 All ER 208, [1976] QB 524, [1976] 2 WLR 6, CA.
Morris v Stratford-upon-Avon RDC [1973] 3 All ER 263, [1973] 1 WLR 1059, CA.

Interlocutory appeal
By a writ dated 26 January 1989 and served on 28 January the plaintiff, Carmen Proetta, claimed as against the defendants, Times
Newspapers Ltd, the publishers 46 of the Sunday Times, damages for libel and an injunction in respect of an article entitled The
SAS in the Dock published in the Sunday Times dated 1 May 1988 concerning the shooting by the Special Air Service on 6
March 1988 in Gibraltar of three members of the Irish Republican Army. By para 4 of her statement of claim served on 1 March
1989 the plaintiff set out what she claimed were the ordinary and natural meaning of the words complained of, namely that the
plaintiff had lied in an interview broadcast by Thames Television in a programme about the shooting entitled Death on the
Rock, being motivated by antiBritish feeling, and that she earned her living by running, in partnership with known British
criminals, an escort agency in Spain for rich Arabs. On 7 April the defendants served a defence denying that the words were
defamatory and, by para 5, raising a defence of fair comment. On 9 June Master Creightmore made an order for discovery and
for setting down, the length of the trial being estimated at three days. On 15 June the defendants made a payment into court, on
24 July the action was set down for trial and on 1 August the defendants made a further payment into court. On 1 September, on
an application by the plaintiff to strike out para 5 of the defence and particulars thereunder, Brooke J struck out, inter alia, those
parts of the defence referring to the escort agency and criminal associates of the plaintiff. On 20 September Brooke J allowed in
part an application by the defendants to amend their defence to plead justification in lieu of fair comment. On 2 March 1990 on
an application by the plaintiffs Michael Davies J ordered the defendant to give security for costs in the sum of 85,000 but gave
the defendants liberty to apply to vary that sum if the Court of Appeal allowed an appeal by the defendants from the decision of
Brooke J on 20 September 1989. On 21 March 1990 the Court of Appeal substantially allowed the defendants appeal and on 22
March the defendants served an amended defence which included particulars relating to an alleged link between the plaintiff and
an escort agency and between her and certain named criminals. On 10 May Michael Davies J gave the defendants leave to
reamend their defence and further security was ordered. On 27 June Michael Davies J granted the defendants an extension of
time to serve certain notices under the Civil Evidence Act 1968 and the plaintiff an extension of time for accepting the money
paid into court. The plaintiff and the defendants appealed to the Court of Appeal. The case is reported only with respect to the
defendants appeal from the judges decision granting the plaintiff an extension of time for accepting the money paid into court.

Richard L Hartley QC and Thomas Shields for the plaintiff.

Michael Burton QC and B Clive Freedman for the defendants.

Cur adv vult

15 November 1990. The following judgments were delivered.

NEILL LJ. In this action the plaintiff claims damages for libel alleged to have been contained in an article entitled The SAS in
the Dock published in the issue of the Sunday Times dated 1 May 1988. The defendants are the publishers of the Sunday Times.
[His Lordship, having outlined the facts of the case and the course of the proceedings, dealt first with the plaintiffs appeal,
referring to Ford (an infant) v Lewis [1971] 2 All ER 983, [1971] 1 WLR 623 and Morris v Stratford-upon-Avon RDC [1973] 3
All ER 263, [1973] 1 WLR 1059. His Lordship said that the 47 extension of time for serving notices under the Civil Evidence
Act 1968 was a matter for the judge and that he could see no reason to interfere with the judges exercise of his discretion. His
Lordship continued:]
I turn now to the appeal by the defendants.
It is submitted that payment into court is a procedure whereby the defendants can provide an opportunity to the plaintiff to
dispose of the action by acceptance of the sum paid in. But the sum is paid in in the light of the defendants perception of the
case at the time of payment in. Accordingly, the court should not extend the time laid down in the rules for acceptance if the risks
of the case change adversely to the plaintiff. Moreover, it is said, there is binding authority for the proposition that, if there is a
substantial change in the risk, the court cannot, or at any rate should not, extend the time.
On the facts of this case I, for my part, see no answer to this submission. I read RSC Ord 22, insofar as it is relevant. Rule
1(1) provides:

In any action for a debt or damages any defendant may at any time pay into court a sum of money in satisfaction of the
cause of action in respect of which the plaintiff claims or, where two or more causes of action are joined in the action, a
sum or sums of money in satisfaction of any or all of those causes of action.

Rule 3 is in these terms, so far as material:

(1) Where money is paid into court under rule 1, then subject to paragraph (2) within 21 days after receipt of the notice
of payment or, where more than one payment has been made or the notice has been amended, within 21 days after receipt
of the notice of the last payment or the amended notice but, in any case, before the trial or hearing of the action begins, the
plaintiff may(a) where the money was paid in respect of the cause of action or all the causes of action in respect of which
he claims, accept the money in satisfaction of that cause of action or those causes of action by giving notice [in a
prescribed form] to every defendant to the action

If that does not happen, then r 5 comes into operation as to money remaining in court. That provides:

If any money paid into court in an action is not accepted in accordance with rule 3, the money remaining in court shall
not be paid out except in pursuance of an order of the Court which may be made at any time before, at or after the trial or
hearing of the action; and where such an order is made before the trial or hearing the money shall not be paid out except in
satisfaction of the cause or causes of action in respect of which it was paid in.

Where a plaintiff accepts money paid into court he is entitled to his costs of the action incurred up to the time of giving notice of
acceptance: see Ord 62, r 5(4).
 In my judgment in this case there was a substantial alteration of the risks in this case once a plea of justification was
allowed. The defence of fair comment in its original form was unsatisfactory. It was criticised by Brooke J and indeed it was
criticised from the start by the plaintiffs solicitor. In many cases I accept that a mere change of plea may not alter the risks to
any appreciable extent, but in this case it seems to me that the introduction of a plea of justification was an important factor. A
fortiori the risks were again substantially altered when the Court of Appeal allowed the further amendment and then again when
the notices under the Civil Evidence Act 1968 were allowed out of time.
Once there is a substantial alteration in the risks, the time for acceptance should not be extended. This was laid down in
Gaskins v British Aluminium Co Ltd [1976] 481 All ER 208, [1976] QB 524 in the Court of Appeal, a decision which, in my
judgment, is binding on this court. In that case Lord Denning MR said ([1976] 1 All ER 208 at 211, [1976] QB 524 at 530531):

I think a distinction must be drawn between an application made before the trial, and one made at or after it. When the
application is made before the trial, it will usually be made to the master. He can make an order allowing it. If the chances
of success or failureor of greater or less damagesare substantially the same as they were at the time of the payment
into court, the master may allow the payment out to the plaintiff, but he will usually allow it only on the terms that the
plaintiff pays all the costs from the date of the payment into court. If the chances have substantially altered, then the master
should not allow the plaintiff to take the payment out: for the simple reason that it would be unfair to hold the defendant to
a sum which he offered in different circumstances. He can say: Non haec in foedera veni. I think the defendant should
indicate to the master the circumstances which have altered the position, such as a decision of the courts which has changed
the way in which damages are to be assessed, or the discovery of further evidence or information affecting the chances
(Lord Denning MRs emphasis.)

It has been said that the machinery for payment into court is not comparable with a settlement, but nevertheless it seems to me
that those words of Lord Denning MR cover the present situation.
I have considered carefully whether the position is different because the extension was granted not on an application made
for that purpose but as a condition of the extension granted to the defendants. At one time we were told that that might provide
an acceptable basis for distinguishing Gaskinss case, and other cases, to the same effect. But I can see no difference in principle.
I can understand why the learned judge, with his great experience, trying to do justice between the parties made the order which
he did make, but I am bound to say that I think he was wrong to do so. In my view the decision of this court in Gaskinss case
was indistinguishable and in any event I do not think it is appropriate to grant an extension of time for acceptance as a condition
for extending the time for notices to be served under Ord 38.
For these reasons I would dismiss the appeal by the plaintiff and allow the appeal by the defendant.

RUSSELL LJ. I agree. There is nothing that I can usefully add.

FARQUHARSON LJ. I agree.

Plaintiffs appeal dismissed. Defendants appeal allowed.

Solicitors: Wright Webb Syrett; Alastair J Brett.

Raina Levy Barrister.

49
[1991] 4 All ER 50

Re 14 White Row Cottages, Bewerley

LAND; Property Rights

CHANCERY DIVISION
MUMMERY J
21, 23 MAY 1991

Commons Registration Town or village green Register Rectification of register Land on which dwelling house situated
Dwelling house Uninhabited and dilapidated cottage Cottage not occupied for 20 years Whether dwelling house Common
Land (Rectification of Registers) Act 1989, s 1.

In 1972 four derelict and uninhabited stone cottages which were over 100 years old were, at the instigation of the parish council
and without dispute, included in the registration of a village green in the register of town and village greens maintained by the
county council under the Commons Registration Act 1965. Under that Act registration was conclusive evidence of the matters
registered. In 1970 the cottages had been condemned as unfit for human habitation and they had not been occupied since 1972.
In 1990 the person claiming title to the cottages lodged an objection under s 1 a of the Common Land (Rectification of Registers)
Act 1989, which provided for the rectification of registers of common land and town and village greens if land on which a
dwelling house had been situated since 5 August 1945 was included in the register. The commons commissioner held that the
cottages were not dwellinghouses because they had been condemned as unfit for human habitation and had not been occupied
for some 20 years and dismissed the objection. The objector appealed.
________________________________________
a Section 1, so far as material, is set out at p 52 a to c, post

Held In the absence of any express definition of the term dwellinghouse in the 1989 Act that term was to be construed
according to its ordinary meaning and so construed the cottages remained dwellinghouses after they became uninhabited and
dilapidated and did not cease to be dwelling houses merely because they were not dwelt in, since although empty and neglected
they retained their physical structure and character. The appeal would therefore be allowed (see p 53 f to p 54 b j to p 55 a, post).

Notes
For amendment of registers of common land and town and village greens, see 6 Halsburys Laws (4th edn reissue) para 682.
For the Commons Registration Act 1965, see 6 Halsburys Statutes (4th edn) 1116.
Cases referred to in judgment
Ford v Barnes (1885) 55 LJQB 24.
Morleys (Birmingham) Ltd v Slater [1950] 1 All ER 331, [1950] 1 KB 506, CA.

Case stated
Richard Henry Piers, seventeenth Viscount Mountgarrett, being the person claiming title to 14 White Row Cottages, Bewerley,
appealed by way of a case stated by the commons commissioner, Mr Martin Roth, in respect of his decision to disallow the
objection lodged by Viscount Mountgarrett under s 1 of the Common Land (Rectification of Registers) Act 1989 to the inclusion
of 14 White Row Cottages and certain land at the front and rear of the cottages in the 50 registration of Greenhow Village Green
in the register of town and village greens maintained by the North Yorkshire County Council. The question of law for the
decision of the court is set out at p 53 a, post. The facts are set out in the judgment.

Martin O Rodger for Viscount Mountgarrett.

Cur adv vult

23 May 1991. The following judgment was delivered.

MUMMERY J. On Greenhow Village Green at Bewerley in North Yorkshire there are four stone-built cottages. They are well
over 100 years old. They have never had any running water or indoor sanitation. There had been a communal stone built privy
about 25 yards away, but that collapsed some time ago and the stone has been removed. The cottages are in a derelict state. The
stone structure and stone tile roofs are largely intact, but there are no windows or secure outer doors. The cottage at the north-
east end of the row once had a two storey extension at the rear; that has collapsed and some of the stone tiles have recently been
removed.
The cottages have not been occupied for the last 20 years or so. Four notices dated 2 February 1970 were given under the
Housing Act 1957 condemning the cottages as unfit for human habitation and incapable of being made fit at reasonable cost.
Two of the cottages had already been vacated by then. The other two had ceased to be occupied by 1972.
In recent years numerous inquiries have been made by people interested in restoring the cottages for occupation. The
obstacle to sale and renovation of the buildings is the existence of the registration of them and of land on which they stand as
forming part of Greenhow Village Green. Registration is in the land section of the register unit number VG104 in the register of
town and village greens maintained by the North Yorkshire County Council under the Commons Registration Act 1965. In s
22(1) of the 1965 Act a town or village green is defined as follows:

town or village green means land which has been allotted by or under any Act for the exercise or recreation of the
inhabitants of any locality or on which the inhabitants of any locality have a customary right to indulge in lawful sports and
pasttimes or on which the inhabitants of any locality have indulged in such sports and pasttimes as of right for not less than
twenty years.

The relevant period of 20 years referred to is the period immediately prior to the passing of the 1965 Act. That Act was passed on
5 August 1965 so that the immediately preceding period of 20 years takes one back to 5 August 1945.
The buildings and land, along with the rest of the village green were registered on the application of the parish council. In
the ownership section of the register the parish council is registered as owner of the whole of the land comprised in the register
unit. The registration was not disputed at the time. Registration became final on 1 August 1972 and became conclusive evidence
of the matters registered (see ss 7 and 10 of the 1965 Act). Under the 1965 Act there are no grounds available in this case either
for amending the register under s 13 or for rectifying it under s 14 so as to exclude the four cottages or the land on which they
stand from the register.
On 21 July 1989 the Common Land (Rectification of Registers) Act 1989 came into force. It is a short Act. I need only
refer to the first section of it. Section 1 provides, so far as material:
51

(1) Within three years of the passing of this Act any person may, by notice in writing given to the registration authority
maintaining a register of common land and of town and village greens under the Commons Registration Act 1965, object to
the inclusion on either of the registers of the whole or part of any land in respect of which the requirements specified in
subsection (2) below are satisfied.

(2) Those requirements are(a) that(i) there is a dwellinghouse on the land and, if and so far as the land is not the
site of that dwellinghouse, it is ancillary to that dwellinghouse; or (ii) the land is ancillary to a dwellinghouse which is not
on the land; and (b) that the requirements of paragraph (a) above have been satisfied at all times since 5 August 1945.
(3) For the purposes of subsection (2) above land ancillary to a dwellinghouse means a garden, private garage or
outbuildings used and enjoyed with the dwellinghouse; and in that subsection dwellinghouse includes a building
consisting of two or more separate dwellings

It is not necessary for me to refer to the remainder of that section or to the other two sections of the Act.
The procedure under the 1989 Act, as set out in the Act and as prescribed in the Common Land (Rectification of Registers)
Regulations 1990, SI 1990/311, made under it which came into force in March 1990, was set in motion on 5 July 1990 when
notice of objection was given by Viscount Mountgarrett to the inclusion of 1 to 4 White Row Cottages in the register. On 7
September 1990 the objection was referred by the North Yorkshire County Council to a commons commissioner who held an
inquiry at Harrogate on 5 December 1990. At the inquiry he heard representations from counsel on behalf of Lord Mountgarrett
and from representatives of the parish council. There was also before the commons commissioner, Mr Martin Roth, a letter from
the Open Spaces Society making representations against the notice of objection. The commons commissioner inspected the
properties.
On 14 December he gave his written decision in which he set out in lucid detail the background and procedural history of
the matter, his findings of fact, the relevant statutory provisions and a summary of the submissions which had been made to him.
He stated his conclusion in these terms:

I reach the conclusion that the word dwellinghouse in the 1989 Act means a building which is actually dwelt in or is
at least capable of being dwelt in. I have no hesitation in deciding that the building which was occupied as four dwellings
until some 20 years ago but which was then condemned as unfit for human habitation and has since remained unoccupied
does not satisfy the requirements of the 1989 Act.

He went on to make observations about the shortcomings of the 1989 Act. He stated that, in his view, the result was
unsatisfactory as it meant that the cottages would remain derelict. Both Lord Mountgarrett and the parish council wanted to see
the cottages restored, but the properties had been rendered sterile by the existence of the registration. The council had even
expressed the fear that the properties might be occupied by squatters.
It was therefore decided to take the matter further. On 15 January 1991 a request was made on behalf of Lord Mountgarrett
to the commons commissioner to state a case on a point of law for the decision of the High Court. A case was stated on 27
February 1991 in which the point of law was formulated by the commons commissioner in these terms:
52

The question of law for the decision of this Honourable Court is whether on the facts found by me I erred in law in
holding that the requirements specified in section 1(2) of the Act of 1989 were not satisfied in respect of any part of the
land to which this Objection related.

I was informed by counsel that this is in fact the first occasion on which the 1989 Act has come before the High Court on the case
stated procedure.
The point of law stated may be rephrased as follows in respect of each of the four cottages by specific reference to the
relevant statutory requirements in s 1(2): has there been a dwellinghouse on the land in question at all times since 5 August 1945;
are these cottages dwelling houses when there is no one dwelling in any of them?
The commons commissioner considered two authorities in which the meaning of the word dwellinghouse had been
discussed in different statutory contexts: see Morleys (Birmingham) Ltd v Slater [1950] 1 All ER 331, [1950] 1 KB 506, a
decision on the Rent Restriction Acts, and Ford v Barnes (1885) 55 LJQB 24, a case on the Representation of the People Acts.
He also referred to various dictionary definitions and concluded that the word dwellinghouse contemplated the actual use and
enjoyment of the premises in question. On that basis the cottages were dwelling houses during the respective periods of
occupation, but ceased to be dwelling houses when they became empty. They have not been dwelling houses at all times since 5
August 1945 and therefore fall outside the scope of the 1989 Act.
He found support for this construction in the words used and enjoyed in s 1(3) in relation to gardens, private garages and
outbuildings used and enjoyed with the dwelling house. In his view those words meant actual use and enjoyment of the gardens,
private garages and outbuildings in question. It was, therefore

logical to conclude that actual use and enjoyment of the dwellings is also contemplated.

In my judgment, the commons commissioner construed the provisions of s 1 of the 1989 Act too restrictively. In some statutory
contexts and often in ordinary everyday language the word dwellinghouse is indeed used to describe a house in which people
are actually living as a private residence. Actual residential occupancy is not, however, a necessary characteristic of a dwelling
house.
As a matter of ordinary language dwellinghouse is capable of including not only a house which is dwelt in but also a house
which is constructed or adapted for dwelling in although it may at the relevant time be vacant or even not fit and ready for
occupation. For example, a family may be forced out of their dwelling house by fire, flood or other natural disaster. The house
may remain empty for a long period while building works are carried out on it. I do not think it would be a misuse of the English
language to say of such a house that it was at all times, even when empty, a dwelling house.
Turning to the language of the 1989 Act I note three things. (1) There is no statutory definition of dwellinghouse; s 1(3)
says that a dwelling house includes a building consisting of two or more separate dwellings, but it does not define the word. (2)
There is no express statutory requirement in the 1989 Act that the dwelling house in question is resided in or occupied or
inhabited or in actual use as a place of abode for the relevant period. This is to be contrasted with legislation in which such
requirements are sometimes imposed in express terms. (3) In the absence of any statutory definition the word dwellinghouse
should be construed in its ordinary meaning both in the context of the particular statutory provision and of the 1989 Act as a
whole.
53
Adopting that approach I conclude that the 1989 Act operates in the following fashion in this case. 14 White Row Cottages
were dwelling houses at all times during the period from 5 August 1945 to the respective dates on which they were vacated, that
is 1968 in the case of two of the cottages and 1971 and 1972 respectively in the case of the other two. After they were vacated
the cottages did not cease to exist; they were not demolished; they were not converted to other uses, such as use as a shop or
warehouse or office. The physical structure, character and nature of the cottages remained the same, save that they were empty
and neglected and became tumbledown. I do not think that they ceased to be dwelling houses simply because they were not
dwelt in. They became dilapidated dwelling houses, but were still dwelling houses, as distinct from other sorts of houses such as
public houses or warehouses.
In my judgment, this result is more consistent with the object of the 1989 Act than the result which follows from the
decision of the commons commissioner. The provisions of the 1989 Act are designed to provide a procedure for removing from
the registers maintained under the 1965 Act certain land on which there is a dwelling house or land ancillary to a dwelling house.
Such a procedure for rectification of the register is not, as I have already observed, available under the 1965 Act, even in cases
where it transpires that the land in question never was appropriate to be entered on the register but has been entered on the
register in the absence of any objection made at the relevant time.
It is clear, having regard to the definition of town or village green in s 22 of the 1965 Act, that it never was appropriate to
register 14 White Row Cottages as part of Greenhow Village Green. This was so whether the cottages were at the relevant time
dwelt in or were empty I cannot discern any sensible purpose in Parliament seeking to draw a distinction between a house which
is lived in for the whole of the relevant period and a house which is constructed for living in but is not in fact lived in at all times
during the relevant period and I do not think that Parliament did in fact draw any such distinction.
As to the reference in s 1(3) to a garden, private garage or outbuildings used and enjoyed with the dwelling house, I do not
think that these words necessarily connote actual use and enjoyment any more than the word dwellinghouse in this context
necessarily connotes actual residence. Again, as a matter of ordinary English, I do not think that used and enjoyed are
synonymous with being used and enjoyed or actual use and enjoyment.
In the context of s 1(3) the purpose of the expression used and enjoyed is to define the link that must exist between the
garden, the private garage or outbuildings and the relevant dwelling house in order to qualify as ancillary land. Thus, for
example, a garden which is not used and enjoyed in relation to any dwelling house would not qualify as ancillary land within the
meaning of s 1 of the 1989 Act.
In this case the commons commissioner found that there were small front gardens with no walls fronting on to a track which
runs across the village green. They should be removed from the registration along with the cottages. I should add that before me
the claim for removal of ground at the rear of the cottages was not pursued. This was rightly conceded since the commons
commissioner had found as a fact that there was no definable area of garden ground at the rear of the cottages.
For these reasons I decide that on the question of law stated for my decision the commons commissioner erred in law in
holding that the requirements specified in s 1(2) of the 1989 Act were not satisfied in respect of any part of this land to which this
objection related. I hold that those requirements were satisfied 54 in respect of 14 White Row Cottages and the front gardens of
those cottages enclosed by the low walls that separate the gardens from the track across the village green.

Appeal allowed.
Solicitors: May May & Merrimans.

Hazel Hartman Barrister.

[1991] 4 All ER 55

Hudson and another v Elmbridge Borough Council and others

CIVIL PROCEDURE

COURT OF APPEAL (CIVIL DIVISION)

PURCHAS, PARKER AND STUART-SMITH LLJ
15, 16 OCTOBER, 20 NOVEMBER 1990

Costs Payment into court Costs before payment in Two or more causes of action Payment in by defendant in satisfaction
of one cause of action Plaintiff accepting payment in and abandoning other claims Costs of abandoned claims exceeding
costs of claims in respect of which payment is made Whether plaintiff entitled to all costs of action including costs of
abandoned claims RSC Ord 22, r 4(1)(2), Ord 62, r 5(4).

In May 1987 the plaintiffs brought an action against six defendants claiming damages arising out of subsidence and structural
damage to their house. The plaintiffs claim against the third defendants alleged distinct causes of action in contract and tort, the
claim in contract being breach of a contract of insurance to indemnify the plaintiffs for the cost of remedial works and the claim
in tort being breach of a duty of care in supervising the original construction work. On 29 September 1989 the third defendants
made a payment into court of 132,20265 in respect of the claim in contract only. On 20 October 1989 the plaintiffs served
notice of acceptance stating that they were abandoning the other causes of action against the third defendants. On 25 October
1989 the plaintiffs applied by summons for an order for payment out of the money paid into court and payment by the third
defendants of the plaintiffs costs in the action. On the same day the third defendants applied by summons for an order for
payment out to the plaintiffs and (i) for the plaintiffs to be given leave to tax only those costs incurred in relation to the claim in
contract and (ii) for judgment to be entered against the plaintiffs in respect of the claim in negligence or alternatively for the third
defendants to be at liberty to tax their costs in respect of the abandoned claim in negligence up to the date of the service of the
plaintiffs notice of acceptance of payment in. The costs of both parties in relation to the claim in tort were substantial and
greatly exceeded the costs of the claim in contract. The judge granted the plaintiffs application on the ground that RSC Ord 62, r
5(4)a, which provided that where a plaintiff accepted money paid into court in satisfaction of one or more of his causes of action
and gave notice that he abandoned the others he was entitled to his costs of the action incurred up to the time of giving notice of
acceptance, made automatic provision for payment of all the plaintiffs costs in respect of all his causes of action up to the time
of giving notice of acceptance and 55 that there was no discretion in the matter. The third defendants appealed, contending (i)
that since they had been sued jointly with the other defendants the matter fell to be dealt with as a matter of discretion under Ord
22, r 4(1) and (2)b and not under Ord 62, r 5(4) and (ii) the notice of acceptance of the money paid in and abandonment of the
claim in tort was equivalent to a notice of discontinuance or withdrawal of that cause of action and therefore they were entitled to
tax their costs in respect of the claim in tort under Ord 62, r 5(3).
________________________________________
a Rule 5, so far as material, is set out at p 60 f g, post
b Rule 4, so far as material, is set out at p 60 c d, post

Held The appeal would be dismissed for the following reasons-

(1) Although the court had a discretion under RSC Ord 22, r 4(1) to deal with costs where the plaintiff accepted any sum
paid into court by some but not all of the defendants sued jointly or in the alternative by him, the term sued jointly related to a
claim where there was one cause of action but more than one defendant liable thereon jointly with another or others. Since,
however, the third defendants were severally liable with the other defendants, payment of the plaintiffs costs by the third
defendants did not fall to be dealt with as a matter of discretion under Ord 22, r 4(1); (see p 60 j to p 61, b, p 63 j and p 64 e,
post); Townsend v Stone Toms & Partners (a firm) [1981] 2 All ER 690 applied.
(2) Where a plaintiff alleged more than one cause of action against a defendant who subsequently paid money into court in
satisfaction of only one cause of action and the plaintiff served notice accepting the payment in and abandoning the other claims
the plaintiff was entitled under RSC Ord 62, r 5(4) to all his costs of the action, including the costs of the abandoned claims,
notwithstanding that the defendant had denied liability in respect of the abandoned claims or that the costs of the abandoned
claims exceeded the claim in respect of which the payment in had been made. Although it produced an unsatisfactory and unjust
result, it followed that the third defendants were liable for payment of all the plaintiffs costs in respect of all their causes of
action against the third defendants up to the time of giving notice of acceptance (see p 63 c e f h j and p 64 e, post).

Notes
For payment into court, see 37 Halsburys Laws (4th edn) paras 285293, and for cases on the subject, see 37(2) Digest (Reissue)
422427, 25842607.

Cases referred to in judgments

MIlwraith v Green (1884) 14 QBD 766, CA.
Smith v Northleach RDC [1902] 1 Ch 197.
Townsend v Stone Toms & Partners (a firm) [1981] 2 All ER 690, [1981] 1 WLR 1153, CA.

Case also cited

Legal Aid Board v Russell [1990] 3 All ER 18, [1990] 2 QB 607, CA.

Appeal
By writ dated 1 May 1987 the plaintiffs, Ronald and Andrea Hudson, claimed damages for (1) negligence and/or nuisance and/or
breach of statutory or other duty on the part of the defendants, (1) Elmbridge Borough Council, (2) Anda Cribb Ltd, (3) National
House Building Council, (4) David C Cole (a firm), (5) Taylor Whalley & Spyra (a firm) and (6) Castle Eaton Estates Ltd,
resulting in loss, damage and inconvenience suffered as a result of structural damage sustained to their property at Treetops, 2a
The Gardens, Pelhams Walk, Esher, Surrey, in or 56 about 1985 and which was still continuing, (2) breach of a contract (a house
purchasers agreement) made on 28 March 1985 between the plaintiffs and the sixth defendants and (3) breach of a contract (a
house purchasers insurance policy) made between the plaintiffs and the third defendants in 1985. On 29 September 1989 the
third defendants paid into court the sum of 132,20265 in satisfaction of the claim in contract. On 20 October 1989 the plaintiffs
served notice of acceptance accepting the sum and abandoning the other causes of action against the third defendants. On 25
October 1989 the plaintiffs applied by summons for an order that the money in court be paid out to the plaintiffs solicitors and
that the third defendants pay the plaintiffs costs of the action against the third defendants. On the same date the third defendants
applied by summons for an order that there be payment out to the plaintiffs of the money in court and, in addition, (1) that the
plaintiffs have leave to tax only those costs if not agreed incurred in relation to the claim in contract against the third defendants,
such taxed costs to be limited to those incurred in relation to the claim in contract up to 7 November 1987 or in the alternative up
to the date of service of the third defendants notice of payment in, namely 29 September 1989, and (2) that there be judgment
against the plaintiffs in respect of the claims in negligence against the third defendants or, in the alternative, that the third
defendants be at liberty to tax their costs if not agreed in respect of the abandoned claims in negligence, such taxation to relate to
costs incurred up to the date of service of the plaintiffs notice of acceptance of payment in and notice of abandonment, namely
20 October 1989. On 31 October 1989 Judge Fox-Andrews QC hearing official referees business granted the plaintiffs
application and gave leave for payment out of court to the plaintiffs of the 132,20265 paid into court by the third defendants on
29 September 1989 and ordered that the plaintiffs have leave to tax their costs of the action. The third defendants appealed with
leave of the judge against the order for costs. The facts are set out in the judgment of Stuart-Smith LJ.

Nigel Pleming for the third defendants.

John Marrin QC and Ian Pennicott for the plaintiffs.

Cur adv vult

20 November 1990. The following judgments were delivered.

STUART-SMITH LJ (giving the first judgment at the invitation of Purchas LJ). This is an appeal from a judgment of Judge
Fox-Andrews QC hearing official referees business given on 31 October 1989. It relates solely to costs and is brought with the
leave of the judge. It raises an important point as to the parties entitlement to costs where the plaintiff alleges two or more
causes of action, a defendant pays money into court in satisfaction of one only of those causes of action and the plaintiff serves
notice of acceptance in accordance with the rules and abandons those causes of action in respect of which the defendant has
denied liability and made no payment in.
The plaintiffs brought an action against six defendants alleging various causes of action in contract and in tort against them,
in respect of serious subsidence and structural damage occurring to their house in Esher. So far as the third defendants are
concerned the plaintiffs alleged two distinct causes of action. The first related to a contract of insurance under which the
plaintiffs claimed to be indemnified against the costs of certain remedial works (the claim in contract). The second was 57 a
claim in negligence (the claim in tort) by which the plaintiffs claim damages for breach of a duty of care in supervising the
original construction work.
On 29 September 1989 the third defendants made a payment into court in respect of the claim in contract. The notice was in
these terms:

TAKE NOTICE THAT: 1. The Third Defendant, National House Building Council, has paid 132,20265 into court.
The said 132,20265 is in satisfaction of the Plaintiffs cause of action in contract only against the Third Defendants
pursuant to the House Purchasers Insurance Policy dated March 1985 entered into by the Plaintiffs and the Third
Defendants in respect of which the Plaintiffs claim: (a) A declaration that the Third Defendants be liable for all the costs of
the proposed remedial works alternatively such proportion of those costs as may be deemed appropriate pursuant to the
contract of insurance. (b) Interest pursuant to Section 35A of the Supreme Court of Judicature Act 1981

They also explained that the sum paid in included interest and set out how it was calculated.
On 20 October 1989 the plaintiffs served notice of acceptance in the following terms (sic):

TAKE NOTICE that the Plaintiffs accept the sum of 132,20265 paid in by the Third Defendant, National House
Building Council, in satisfaction of the cause of action in respect of which it was paid in and in respect of which it was paid
in and in respect of which the Plaintiffs claim against the Third Defendant and abandon the other causes of action in respect
of which they claim against the Third Defendant in this action.

On 25 October 1989 two applications were made by summonses. One was by the plaintiffs in which they sought an order
for payment out of the money in court and that the third defendants pay the plaintiffs costs of the action against the third
defendants. The second was by the third defendants in which they also sought an order for payment out to the plaintiffs of the
money in court; but in addition sought an order that:

(2) the Plaintiffs have leave to tax only those costs (if not agreed) incurred in relation to the claim in contract against
the Third Defendants as pleaded under Paragraph 8 of the Statement of Claim, such taxed costs to be limited to those
incurred in relation to the claim in contract up to the 7th November 1987 or in the alternative up to the date of service of
the Third Defendants Notice of Payment In, the 29th September 1989; (3) there be judgment against the Plaintiffs in
respect of the claims in negligence against the Third Defendants or, in the alternative, the third Defendants be at liberty to
tax their costs (if not agreed) in respect of the abandoned claims in negligence, pleaded under paragraph 7.6. (a) to (e) of
the Statement of Claim, such taxation to relate to costs incurred up to the date of service of the Plaintiffs Notice of
Acceptance of Payment In and Notice of Abandonment, the 20th October 1989.

It is common ground that the costs of both parties in relation to the claim in tort are very substantial and greatly exceed the costs
in relation to the claim in contract.
The learned judge acceded to the plaintiffs application. He considered that the point was governed by RSC Ord 62, r 5(4)
and that he had no discretion in the matter. It is plain that, if the judge had felt that he had a discretion, he would have made an
order more favourable to the third defendants. And indeed the plaintiffs concede that if the third defendants succeed in
persuading this court 58 that the matter is one for the exercise of discretion it would be proper for this court to make an order for
their costs in relation to the claim in tort as sought in para 3 of their summons.
Mr Pleming makes two submissions in support of the third defendants appeal. First he submits that the judge was wrong in
holding that he had no discretion. He submits that the matter fell to be considered and an order made under Ord 22, r 4 and not
Ord 62, r 5(4). Further, he submits that, if the matter is one of discretion, not only should the third defendants have their costs of
the claim in tort, but the plaintiffs should not have their costs of the claim in contract down to 20 October 1989, the date of the
notice of acceptance of the payment into court, and that some such order as is sought in para 2 of their summons should be made.
 Secondly, he submits that, if that submission is wrong, then the notice of acceptance of the money in court and abandonment
of the claim in tort is equivalent to a notice of discontinuance or withdrawal of that cause of action and that the third defendants
are entitled to tax their costs in respect of the claim in tort pursuant to Ord 62, r 5(3) and to have an order of the court to that
effect. Mr Pleming accepts that, if the matter falls to be determined by the provisions of Ord 62, r 5, then the plaintiffs are
entitled to their costs of the claim in contract down to 20 October 1989.
Before considering these submissions I must set out the relevant provisions of the Rules of the Supreme Court. Order 22, r 1
provides:

Payment into Court

(1) In any action for a debt or damages any defendant may at any time pay into Court a sum of money in satisfaction of
the cause of action in respect of which the plaintiff claims or, where two or more causes of action are joined in the action, a
sum or sums of money in satisfaction of any or all of those causes of action
(4) Where two or more causes of action are joined in the action and money is paid into Court under this rule in respect
of all, or some only of, those causes of action, the notice of payment(a) must state that the money is paid in respect of all
those causes of action or, as the case may be, must specify the cause or causes of action in respect of which the payment is
made

Acceptance of money in court is governed by Ord 22, r 3, which provides, so far as is relevant:

(1) Where money is paid into Court under rule 1, then subject to paragraph (2) within 21 days after receipt of the
notice of payment or, where more than one payment has been made or the notice has been amended, within 21 days after
receipt of the notice of the last payment or the amended notice but, in any case, before the trial or hearing of the action
begins, the plaintiff may (b) where the money was paid in respect of some only of the causes of action in respect of
which he claims, accept in satisfaction of any such cause or causes of action the sum specified in respect of that cause or
those causes of action in the notice of payment,by giving notice in Form No. 24 in Appendix A to every defendant to the
action

It will be noted that there is no reference to abandonment of a cause of action in Ord 22, r 3. But this is to be found in Form 24,
which is in the following terms:

Notice of acceptance of money paid into court (O. 22, r. 3)

Take notice that the plaintiff accepts the sum of paid in by the defendant C.D. in satisfaction of the cause[s] of
action in respect of which it was paid in and in respect of which the plaintiff claims [against that 59 defendant] [and
abandons the other causes of action in respect of which he claims in this action]

This was the form of the plaintiffs notice of acceptance. Order 22, r 3(4) provides:

On the plaintiff accepting any money paid into Court all further proceedings in the action or in respect of the specified
cause or causes of action, as the case may be, to which the acceptance relates, both against the defendant making the
payment and against any other defendant sued jointly with or in the alternative to him shall be stayed.

Order 22, r 4 provides:

(1) Where a plaintiff accepts any sum paid into Court and that sum was paid into Court( a) by some but not all of the
defendants sued jointly or in the alternative by him the money in Court shall not be paid out except under paragraph (2)
or in pursuance of an order of the Court, and the order shall deal with the whole costs of the action or of the cause of action
to which the payment relates, as the case may be.
(2) Where an order of the Court is required paragraph (1) by reason only of paragraph (1)( a) then if, either before or
after accepting the money paid into Court by some only of the defendants sued jointly or in the alternative by him, the
plaintiff discontinues the action against all other defendants and those defendants consent in writing to the payment out of
that sum, it may be paid out without an order of the Court

Order 62, r 5 provides:

(1) No order for costs is required in the circumstances mentioned in this rule
(3) Where a party by notice in writing and without leave discontinues an action or counterclaim or withdraws any
particular claim made by him as against any other party, that other party shall be entitled to his costs of the action or
counterclaim or his costs occasioned by the claim withdrawn, as the case may be, incurred to the time of receipt of the
notice of discontinuance or withdrawal.
(4) Where a plaintiff by notice in writing in accordance with Order 22, rule 3(1), accepts money paid into court in
satisfaction of the cause of action or of all the causes of action in respect of which he claims, or accepts money paid in
satisfaction of one or more specified causes of action and gives notice that he abandons the others, he shall be entitled to
his costs of the action incurred up to the time of giving notice of acceptance

Mr Plemings first submission is that the third defendants were sued jointly with one or more of the other five defendants
and that, since there was no notice of discontinuance served by the plaintiffs on those defendants or consent by them as envisaged
by Ord 22, r 4(2), the matter falls to be dealt with as a matter of discretion under Ord 22, r 4(1) and not under Ord 62, r 5(4) at all;
that rule, as Ord 62, r 5(1) indicates, is an automatic provision where no order of the court is made or required. While I agree that
if the matter falls to be dealt with under Ord 22, r 4 the court has a discretion as to costs which is not fettered by Ord 62, r 5(4),
this provision does not, in my judgment, assist the third defendants in this case. Despite the note in The Supreme Court Practice
1991 para 22/4/2, which states that the term sued jointly does not mean the same as joint liability, but only that the defendants
have been joined together in the same action, that is plainly not correct. In Townsend v Stone Toms & Partners (a firm) [1981] 2
All ER 690, [1981] 601 WLR 1153 this court held that the expression sued jointly in RSC Ord 22, r 3(4) related to the case of a
claim made where there was one cause of action but more than one defendant liable thereon jointly with the other or others. The
distinction is between joint and several liability. In my judgment it is impossible to give a different meaning to the same
expression used in Ord 22, r 3(4) from that in Ord 22, r 4. It is not suggested in this case that the third defendants liability was
joint with any other defendant in this sense, nor that it was in the alternative. Accordingly, I would reject Mr Plemings first
submission.
In order to consider the third defendants second submission it is necessary to refer to the history of the relevant provisions
and such authority as there is upon the point.
Under RSC 1883 the relevant rules were as follows. Order 22 provided:
 1. Where any action is brought to recover a debt or damages, any defendant may, before or at the time of delivering his
defence, or at any later time by leave of the Court or a Judge, pay into Court a sum of money by way of satisfaction, which
shall be taken to admit the claim or cause of action in respect of which the payment is made; or he may, with a defence
denying liability, (except in actions or counter-claims for libel or slander) pay money into Court which shall be subject to
the provisions of Rule 6
6. When the liability of the defendant, in respect of the claim or cause of action in satisfaction of which the payment
into Court has been made, is denied in the defence, the following rules shall apply:(a) The plaintiff may accept, in
satisfaction of the claim or cause of action in respect of which the payment into Court has been made, the sum so paid in, in
which case he shall be entitled to have the money paid out to him as herein-after provided ( b.) If the plaintiff accepts
the money so paid in, he shall, after service of such notice in the Form No. 4 in Appendix B. as is in Rule 7 mentioned, or
after delivery of a reply accepting the money, be entitled to have the money paid out to himself
7. The plaintiff, when payment into Court is made before delivery of defence, may within four days after the receipt of
notice of such payment, or when such payment is first signified in a defence, may before reply, accept in satisfaction of the
claim or cause of action in respect of which such payment has been made the sum so paid in, in which case he shall give
notice to the defendant in the Form No. 4 in Appendix B., and shall be at liberty, in case the entire claim or cause of action
is thereby satisfied, to tax his costs after the expiration of four days from the service of such notice, unless the Court or a
Judge shall otherwise order

Form 4 was in these terms:

Take notice that the plaintiff accepts the sum of paid by you into Court in satisfaction of the claim in respect
of which it is paid in.

Three points are to be observed about these rules. (1) The circumstances in which the plaintiff is entitled to tax his costs
without an order of the court are strictly limited in r 7 and do not apply where there has been a payment in with denial of liability.
(2) Even where the plaintiff is entitled to tax his costs without an order, it is subject to the proviso unless the Court or a Judge
shall otherwise order. These words were a common feature of all such provisions relating to automatic taxation of costs until the
latest change in the rules introduced in 1986. (3) The form of acceptance made no provision for other causes of action which
were not covered by the payment in. There was no provision for the plaintiff to abandon them.
61
In MIlwraith v Green (1884) 14 QBD 766 the plaintiffs statement of claim alleged two distinct breaches of the same
contract. The defendant denied liability but paid money into court in respect of one breach. The plaintiffs gave notice under Ord
22, r 7 that they accepted the money in full satisfaction of the causes of action in the statement of claim. They did not use Form
4. It was held that the plaintiffs were entitled to their costs only in respect of the breach in respect of which the money had been
paid in. The notice of acceptance was to be considered as a notice of discontinuance or withdrawal of the cause of action in
respect of which no payment in had been made and accordingly the defendant was entitled to his costs on that issue. Brett MR
said (at 768):

What the plaintiffs have done is equivalent to an acceptance of the payment into court in respect of the one breach, and
a discontinuance of the action in respect of the other breach. When the costs are taxed, the plaintiffs must not be paid in
respect of the causes of action which they have abandoned: they must be paid costs only in respect of the breach as to
which they have succeeded; and if the defendants have been put to any unnecessary costs by the course which the plaintiffs
have taken, they must be reimbursed those costs.

That decision was followed in Smith v Northleach RDC [1902] 1 Ch 197.

As the rules then stood there was no machinery by which the plaintiff could accept the payment in in respect of one cause of
action, abandon the rest of his claim and obtain automatic taxation of his costs of the action.
The rules remained the same until 1933. Ord 22 was amended and, so far as is material, was as follows:

1.(1). In any action for a debt or damages or in an an admiralty action the defendant may at any time upon notice to
the plaintiff pay into Court a sum of money in satisfaction of the claim or (where several causes of action are joined in one
action) in satisfaction of one or more of the causes of action; provided that with a defence setting up tender before action
the sum of money alleged to have been tendered must be brought into Court.
(2) Where the money is paid into Court in satisfaction of one or more of several causes of action the notice shall specify
the cause or causes of action in respect of which payment is made and the sum paid in respect of each such cause of action,
unless the Court of a Judge otherwise order
2.(1) Where money is paid into Court under Rule 1, the plaintiff may, within seven days of the receipt of the notice
of payment into Court, accept the whole sum or any one or more of the specified sums in satisfaction of the claim or in
satisfaction of the cause or causes of action to which the specified sum or sums relate, by giving notice to the defendant in
Form 4 in Appendix B.; and thereupon he shall be entitled to receive payment of the accepted sum or sums in satisfaction
as aforesaid.
(2) Payment shall be made to the plaintiff or on his written authority to his solicitor, and thereupon proceedings in the
action or in respect of the specified cause or causes of action (as the case may be) shall be stayed

Form 4 introduced the words and abandons his other claims in this action, as in the present Form 24. Rule 2(3) provided:

If the plaintiff accepts money paid into Court in satisfaction of his claim, or if he accepts a sum or sums paid in respect
of one or more of specified causes of action, and gives notice that he abandons the other cause or causes 62 of action, he
may, after four days from payment-out and unless the Court or a Judge otherwise order, tax his costs incurred to the time of
payment into Court, and forty-eight hours after taxation may sign judgment for his taxed costs.

Mr Pleming submitted that the introduction of the ability to abandon causes of action introduced by the new Form 4 was to
give effect to the decision in MIlwraiths case. He submits that the abandonments to be treated as a notice of discontinuance or
withdrawal of the other cause of action and the plaintiffs only entitlement to tax his costs is in relation to the cause of action in
respect of which the payment in has been made.
I cannot accept this. In my judgment, the new rule did give effect to MIlwraiths case by producing a form that would meet
what the plaintiff in that case sought to do, without it being construed as a discontinuance or withdrawal. The safeguard for the
defendant on costs is to be found in the words unless the Court or a Judge otherwise order. Plainly under these rules the third
defendants would have been protected.
There was no relevant change in the rules between 1933 and 1986, save that the provision as to taxation of costs in Ord 22, r
2(3) became first r 10 of the Supreme Court Costs Rules 1959, SI 1959/1947, and later Ord 62, r 10(2). In each case the
safeguard remained for the defendant that he could ask for a special order for costs.
 I find it impossible to say that the word abandon in Ord 62, r 5(3) has the same meaning as discontinue or withdraw in
Ord 62, r 5(2). If it had been intended to give effect to MIlwraiths case in the way Mr Pleming submits was done, it would have
been perfectly possible to use these words in the terms of acceptance. It is clear in my judgment that the amendment of the rules
in 1933 was intended to introduce machinery by which the plaintiff could accept a payment in in satisfaction of his whole claim if
he so wished, not proceeding with the balance of his claim and proceed to tax his costs automatically, unless the defendant
objected.
I find nothing surprising in this. It is probably only the exceptional case, of which the present is one, where had the matter
proceeded to trial without a payment into court an unsuccessful defendant could expect to get an order for costs in his favour on
the issue in which he had succeeded. Moreover, costs are not usually significantly increased simply because a plaintiff has two or
more different causes of action, at least if the matter is disposed of before trial. What is surprising and undoubtedly involves
injustice in this case to the defendant is that the defendants right to apply to the court for a different order has now been removed
from Ord 62, r 5(4).
Moreover the circumstances in which a plaintiff can discontinue an action or withdraw any particular claim without leave
are strictly limited. It must be done within 14 days of service of the defence: see Ord 21, r 2(1). It is only in these very limited
circumstances that the automatic right to costs arises under Ord 62, r 5(3). And I cannot see how Mr Pleming claims that this rule
entitled him to an automatic taxation of the defendants costs when the notice of abandonment is served many months after close
of proceedings.
I acknowledge that this is an unsatisfactory and unjust result in this case. The solution is the reintroduction into Ord 62, r
5(4) of the words, unless the Court or a Judge otherwise orders.
I would dismiss the appeal.

PARKER LJ.: I agree with both the conclusion and the reasons of Stuart-Smith LJ. The conclusion is forced upon us by the
omission in the present rule of the words unless the Court or a Judge otherwise order.
63
I do not know what the omission was designed to achieve. I suspect that it was for the purpose of preventing unnecessary
applications. I am confident, however, that situations such as the present cannot have been contemplated.
To take an extreme example, suppose a defendant is faced with a claim for 40,000 in contract and 300,000 in fraud. He is
prepared, if he can, to dispose of the contract claim by paying 25,000 into court and paying the costs of that claim. He therefore
pays that sum into court in respect of that claim. At the time of payment in the costs incurred in advancing and defending the
contract claim are only one-tenth of the like costs in respect of the fraud claim. It seems to me grossly unjust to permit the
plaintiff to take the money in court and to recover his costs not only of that claim but also of the fraud claim, and thus to achieve
the same result as if the defendant had paid in the 25,000 in respect of all causes of action instead of in respect of the contract
claim only.
Under Ord 21, r 3(1)(b) he can only take the money out in satisfaction of the cause of action in respect of which it was paid
in. If this is so, the remaining claims should clearly be left in being or discontinued under the rules with the consequences in
costs of such action. To give him the absolute right to abandon them and recover his costs when, had he wished to discontinue
them, he would almost certainly have had to pay the costs as a condition of leave appears to me wholly unjustified. The matter is
one which, in my view, demands the urgent attention of the Rule Committee and an early change in the rules.

PURCHAS LJ.: I agree with considerable reluctance that, for the reasons given in the judgment of Stuart-Smith LJ, this appeal
must be dismissed. I would only wish to add that I also consider that in the circumstances of this case, which are by no means
unique, the omission of the words unless the Court or a judge otherwise order from the current version of Ord 62, r 5(4) has
prevented the court from achieving a fair result as between the parties. I too hope that those responsible will consider an
appropriate amendment to the rules.

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

Solicitors: Masons; Merricks, Ipswich.

Dilys Tausz Barrister.

64
[1991] 4 All ER 65

Minister of Foreign Affairs Trade and Industry v Vehicles and Supplies Ltd
and another
ADMINISTRATIVE

PRIVY COUNCIL
LORD KEITH OF KINKEL, LORD ACKNER, LORD OLIVER OF AYLMERTON, LORD LOWRY AND SIR EDWARD EVELEIGH
22 APRIL, 13 MAY 1991

Jamaica Civil proceedings Proceedings for leave to apply for certiorari to quash ministers allocation of imported motor
vehicles Whether civil proceedings Whether proceedings should be brought against Attorney General rather than minister
Crown Proceedings Act (Jamaica), s 18(2).

Practice Leave Leave on ex parte application Revocation of leave Jurisdiction Whether High Court judge having
jurisdiction to vary or revoke ex parte order made by another High Court judge Judicature (Civil Procedure Code) Law
(Jamaica), s 686 RSC Ord 32, r 6.

Judicial review Application for judicial review Application for leave to apply for judicial review Leave to apply for order of
prohibition or certiorari Stay of proceedings Grant of leave operating as stay of proceedings Whether grant of leave
operating as injunction Whether stay having any effect on executive decision already made.

The applicants, who were retail motor dealers in Jamaica, were aggrieved at a reduction in the allocation of imported motor
vehicles made to them for the year 198889 by the sole importer which was licensed by the Minister of Foreign Affairs, Trade
and Industry to import motor vehicles into Jamaica. The importer was a corporation owned or controlled by the Jamaican
government and the allocation was made at the direction of the minister. The applicants issued a summons for leave to apply for
an order of certiorari to quash the allocations, alternatively an order of prohibition directed to the minister prohibiting him from
implementing the allocation or alternatively an order of mandamus directing the minister to make a fair allocation and further
seeking an order that all allocations be stayed pending final determination of the proceedings. The judge in chambers made an ex
parte order granting the relief sought including the stay of allocations. The applicants threatened to bring contempt proceedings
against the minister if any contract to import vehicles was concluded by the import corporation. The minister applied for the
order to be set aside on the grounds that the allocation had already been made and that well before the order was made by the
judge instructions had been given to the import corporation to order vehicles. At the hearing of the ministers summons by
another judge the stay was lifted. On appeal by the applicants the Court of Appeal of Jamaica allowed the appeal and reimposed
the stay. The minister appealed to the Privy Council. The issues arose (i) whether the proceedings were civil proceedings as
defined by s 18(2)a of the Crown Proceedings Act of Jamaica and ought therefore 65 by virtue of s 13 of that Act to have been
brought against the Attorney General rather than the minister, (ii) whether a judge of the High Court of Jamaica had jurisdiction
to discharge an ex parte order made by another judge and (iii) whether a stay of proceedings which arose when leave was granted
pursuant to s 564B(4)b of the Judicature (Civil Procedure Code) Law of Jamaica to apply for an order of prohibition or certiorari
was in the nature of injunctive relief and, if so, whether injunctive relief could be granted against the Crown and/or officers of the
Crown.
________________________________________
a Section 18(2), so far as material, provides: Subject to the provisions of this section, any reference in this Part to civil proceedings against
the Crown shall be construed as a reference to the following proceedings only(a) proceedings for the enforcement or vindication of any
right or the obtaining of any relief which, if this Act had not been passed, might have been enforced or vindicated or obtained by any such
proceedings as are mentioned in paragraph 2 of Schedule 1; (b) proceedings for the enforcement or vindication of any right or the obtaining
of any relief which, if this Act had not been passed, might have been enforced or vindicated or obtained by an action against the Attorney-
General or any officer of the Crown as such or by proceedings taken by virtue of any of the enactments set out in Schedule 2; and ( c) all
such proceedings as any person is entitled to bring against the Crown by virtue of this Act .
b Section 564B(4), so far as material, is set out at p 71 f, post.

Held (1) On the true construction of s 18(2) of the Crown Proceedings Act proceedings which were instituted for the purpose of
reviewing a ministers exercise of his statutory powers were not civil proceedings and therefore the minister and not the
Attorney General was the proper respondent to such proceedings (see p 70 a b, post).
(2) A judge of the Supreme Court had jurisdiction under RSC Ord 32, r 6 c, as applied to Jamaica by s 686d of the Civil
Procedure Code, to vary or revoke an ex parte order made by another judge, and in the light of the new material put forward by
the minister in support of his application for the order to be set aside the second judge had acted within his discretion in setting
aside the ex parte order made by the first judge (see p 70 j to p 71 b, post).
________________________________________
c Rule 6 is set out at p 70 h, post.
d Section 686, so far as material, is set out at p 70 g, post.

(3) A stay of proceedings was an order which put a stop to the further conduct of proceedings in court or before a tribunal at
the stage then reached, the object being to prevent the hearing or trial taking place. As such it merely meant that any proceedings
taking place while the stay was in force were ineffective and it was not an order enforceable by proceedings for contempt since
by its nature it was not capable of being breached by anyone and thus could have no possible application to an executive decision
which had already been made. Furthermore, a stay could not act as an injunction by a sidewind. The judge when granting the ex
parte stay of allocations had either granted relief which was inappropriate and inapplicable in the circumstances because there
were no proceedings on which a stay could take effect or sought to grant an injunction against the minister by inappropriate
means, but in either case the order was meaningless. The appeal would therefore be allowed and the order staying the allocations
set aside (see p 71 d e g j to p 72 a d, post).

Notes
For the powers of the court when granting leave to apply for judicial review and for judicial review generally, see 37 Halsburys
Laws (4th edn) paras 572, 567583, and for cases on the subject, see 16 Digest (Reissue) 321435, 33624797.
For ex parte applications, see 37 Halsburys Laws (4th edn) para 332337, and for cases on the subject, see 37(2) Digest
(Reissue) 442445, 27032720.

Cases referred to in judgment

Becker v Noel [1971] 2 All ER 1248, [1971] 1 WLR 803, CA.
La Grange v McAndrew (1879) 4 QBD 210.
R v Secretary of State for the Home Dept, ex p Herbage (No 2) [1987] 1 All ER 324, [1987] QB 1077, [1987] 2 WLR 226, CA.
WEA Records Ltd v Visions Channel 4 Ltd [1983] 2 All ER 589, [1983] 1 WLR 721, CA.
66

Cases also cited

Factortame Ltd v Secretary of State for Transport [1989] 2 All ER 692, [1990] 2 AC 85, HL.
R v Licensing Authority, ex p Smith Kline & French Laboratories Ltd (Generics (UK) Ltd intervening) (No 2) [1989] 2 All ER
113, [1990] 1 QB 574, CA.
R v Secretary of State for the Home Dept, ex p Herbage [1986] 3 All ER 209, [1987] QB 872.
R v Secretary of State for the Home Dept, ex p Kirkwoood [1984] 2 All ER 390, [1984] 1 WLR 913.
R v Secretary of State for the Home Dept, ex p Mohammed Yaqoob [1984] 1 WLR 920, CA.

Appeal
The Minister of Foreign Affairs, Trade and Industry of Jamaica appealed with the leave of the Court of Appeal of Jamaica against
the judgment of that court (Rowe P, Carey and Forte JJA) given on 16 June 1989 allowing an appeal by the respondents, Vehicles
and Supplies Ltd and Northern Industrial Garage Ltd, from the order of Ellis J made in chambers on 2 February 1989 in the
Supreme Court of Jamaica, whereby the judge set aside part of the ex parte order of Clarke J made in chambers in the Supreme
Court on 11 January 1989 staying all allocations of quotas and/or proceedings consequent on the allocations made by the Jamaica
Commodity Trading Co on the direction of the minister pending final determination of the respondents application for orders of
certiorari to quash the allocations, alternatively prohibition directed to the minister prohibiting him from implementing the
allocation or alternatively mandamus directing the minister to make a fair allocation. The facts are set out in the judgment of the
Board.

The Solicitor General of Jamaica and The Assistant Attorney General of Jamaica for the minister.
The respondents were not represented.

13 May 1991. The following judgment of the Board was delivered.

LORD OLIVER OF AYLMERTON. This is an appeal from a judgment dated 16 June 1989 of the Court of Appeal of Jamaica
(Rowe P, Carey and Forte JJA), allowing with costs the respondents appeal from an order made by Ellis J in the Supreme Court
of Jamaica on 2 February 1989 and restoring a previous order of Clarke J dated 11 January 1989.
Although events occurring subsequent to the order of Ellis J have rendered the litigation entirely academic so far as the
respondents are concerned and they have not appeared to argue before their Lordships Board, it was considered by the appellant
that the order of the Court of Appeal raised questions of general public importance in Jamaica which it was desirable should be
considered by their Lordships.
The background to the litigation lies in the Trade Act of Jamaica, s 8 of which enables the minister (in this case the Minister
of Foreign Affairs, Trade and Industry) to prohibit the importation of goods and to regulate the distribution, purchase or sale of
goods or any class of goods. In pursuance of this power there was made the Motor Vehicle (Sale and Distribution) Order 1985,
the effect of which was that approved motor vehicles were permitted to be imported into Jamaica only by specified importers for
distribution to dealers whose business is 67 to purchase motor vehicles for resale. An approved motor vehicle is defined as one
imported under credit facilities which are guaranteed by the government of Jamaica. In fact there was at the material time only
one specified importer. This was the Jamaica Commodity Trading Co Ltd (JCTC) which their Lordships have been given to
understand is a registered limited company the issued share capital of which is owned or controlled by the Jamaican government
but which is managed by a board of directors in the ordinary way. It is under government control in the sense that the directors
can be removed and replaced by the government by virtue of its shareholding, but it is not in any relevant sense an agent or organ
of the government. In practice, the way in which the system works is that JCTC issues annual invitations to car retailers to
indicate within specified categories and subject to certain specified maxima the number of vehicles which they require for the
year. Once the retailers requests for allocations are received, they are forwarded to the minister for him to make the allocation.
The retailers are subsequently informed, through JCTC, of the allocation made to them and JCTC is instructed to contract with
the foreign suppliers for the supply of the vehicles allocated.
Regulations 3, 4 and 5 of the 1985 order provide as follows:

3. All approved motor vehicles shall be allocated among dealers in such manner and in such numbers and subject to
such terms and conditions as the Minister may, in his absolute discretion, determine.
4. (1) The Minister shall notify in writing each specified importer of the determination made pursuant to paragraph 3.
(2) The specified importer shall notify in writing all dealers affected by the determination communicated to him by the
Minister.
5. Every specified importer shall give effect to the determination by the Minister and upon receipt of payment from the
dealer of the price of the approved motor vehicle, forthwith deliver or cause to be delivered to the dealer, such motor
vehicle.

It will thus be seen that in making the determination the minister, though no doubt acting within a discretion which must be
properly exercised, performs a purely executive function which is exhausted once the determination has been made. The
responsibility for implementing the determination then devolves upon the specified importer to whom the communication has
been issued.
The respondents are motor dealers carrying on retail businesses in Jamaica. Both applied for allocations of vehicles for the
year 198889. Allocations were made and on 25 November 1988 JCTC was instructed to place orders for vehicles of the types
and in the quantities allocated. On 7 December 1988 JCTC notified the respondents of their allocations, which were for
quantities substantially less than in the previous year. They protested but without result and on 4 January 1989 they issued an ex
parte summons for leave to apply for an order of certiorari to quash the allocations, alternatively for an order of prohibition
directed to the minister prohibiting him from implementing the allocation, alternatively for an order of mandamus directing the
minister to make a fair allocation. Paragraph (ii) of the summons asked that all allocations of quotas and/or proceedings
consequent on the said allocations be stayed pending a final determination of this matter. On 11 January 1989 Clarke J in
chambers made an ex parte order granting the relief sought by the summons, including the stay sought by para (ii). That order
was served on the minister on 13 January 1989 and on 17 January the respondents attorneys wrote threatening proceedings for
contempt if a contract was concluded by JCTC for the importation of motor vehicles. The response to this threatwhich, for
reasons which appear hereafter, their Lordships consider 68 to be entirely misconceivedwas a summons by the appellant for the
ex parte order to be set aside either in whole or in part, the summons being supported by an affidavit deposing to the fact that the
allocation had already been made and that instructions had, well prior to the order, been given for JCTC to order the vehicles
concerned and also adverting to the irreparable damage to the economy which would be caused if the importation were to be
delayed and to the escalation of prices consequent upon any further delay.
Clarke J was absent from Kingston on circuit at the return date for the hearing of the summons and the matter was heard in
chambers by Ellis J who, after hearing both parties, set aside that part of the order of Clarke J which granted a stay but gave leave
to the respondents to appeal. On 16 June 1989 the Court of Appeal reversed the decision of Ellis J and restored the stay
contained in the order of Clarke J, although the court appears to have accepted that the relief was now academic since, in the
interim, the vehicles had been ordered and the allocations affected. The court also dismissed the cross-appeal by the appellant
seeking to have the order of Clarke J granting leave to apply set aside in its entirety.
It was the appellants contention before the Court of Appeal that an application for leave to apply for an order of certiorari or
prohibition in respect of a ministerial decision was a proceeding against the Crown to which the only proper party was the
Attorney General so that the proceedings before Clarke J were, in any event, misconceived. This argument rested upon the
provisions of the Crown Proceedings Act of Jamaica, s 13 of which expressly provides that civil proceedings against the Crown
shall be instituted against the Attorney General. The Act, however, contains, in s 18, a restrictive definition of civil proceedings
and the court was unanimous in holding that the proceedings from which the appeal arises were not civil proceedings within the
Act. There was thus no statutory requirement rendering the Attorney General either a necessary or a proper party. The
appellants primary ground of attack on the order of 11 January 1989, however, was that the stay granted by para (2) of the order
was in fact in the nature of an injunction and that no injunction could be granted against the Crown. Carey and Forte JJA were at
one in concluding that in Jamaica an interim injunction could not be granted against the Crown but that the grant of a stay (which
they seem to have assumed would have the same effect) was permissible by virtue of s 564B(4) of the Judicature (Civil Procedure
Code) Law. Rowe P felt it unnecessary to consider whether injunctive relief could be granted against the Crown in civil
proceedings since this remedy was irrelevant to proceedings on the Crown side for prerogative remedies. There, in his view,
interim relief was always obtainable in Crown side proceedings in that the order nisi acted as a stay in Crown side proceedings.
The principal ground, however, upon which the court concluded that the appeal must be allowed and the stay restored was
that Ellis J had no jurisdiction to discharge an ex parte order made by another judge.
Leave to appeal to Her Majesty in Council was granted by an order made on 21 July 1989 in which it was certified that four
questions ought, by reason of their general or public importance, to be submitted to Her Majesty in Council. These were as
follows: (1) Whether the stay of proceedings granted pursuant to s 564B(4) of the Civil Procedure Code is in the circumstances
of the case in the nature of an injunctive relief? (2) If the answer to question 1 is Yes, then whether any relief which is in the
nature of an injunctive relief can be granted against the Crown and/or its officers in these proceedings having regard to the
provisions of the Crown Proceedings Act and the unavailability of such relief on the Crown side of the Queens Bench Division
or otherwise? (3) Whether or in what circumstances a High Court judge can review and set aside the ex parte order of 69 another
High Court judge made on an application for leave to issue a prerogative order? (4) Should the Attorney General be named as the
respondent in these proceedings instead of the Minister of Foreign Affairs, Trade and Industry?
As regards the last of these questions, their Lordships entertain no doubt whatever that the Court of Appeal was correct in
concluding that the proceedings were not civil proceedings, as defined by the Crown Proceedings Act, and that the appellant
and not the Attorney General was the proper party to proceedings instituted for the purpose of reviewing the exercise of his
statutory powers.
On the principal ground upon which the decision of Ellis J was reversed, however, their Lordships take an entirely contrary
view to that taken by the Court of Appeal. Although the three members of the court were unanimous in their conclusion on this
point, they reached it by rather different routes. Rowe P, whilst acknowledging that in civil proceedings commenced by writ the
ex parte interim order of a judge is reviewable and may be varied or discharged either by the judge who made the order or, in an
appropriate case, by another judge, nevertheless held that in proceedings under s 564B of the Civil Procedure Code the only
method of varying or revoking an ex parte order was by way of appeal to the Court of Appeal except in the case where the order
itself gives a liberty to apply to vary or discharge. Carey JA, with whom Forte JA agreed, accepted that a judge of the Supreme
Court has an inherent jurisdiction to set aside or vary an order made ex parte and even to revoke leave given ex parte, but that this
only applied where new matters are brought to his attention either with respect to the facts or the law. In his view Ellis J did not
have before him any material which enabled him to exercise the jurisdiction.
An ex parte order is, in its nature, provisional only and Carey JA was plainly right in following and adopting what was said
to this effect by Sir John Donaldson MR in WEA Records Ltd v Visions Channel 4 Ltd [1983] 2 All ER 589 at 593, [1983] 1 WLR
721 at 727 and by Lord Denning MR in Becker v Noel [1971] 2 All ER 1248, [1971] 1 WLR 803. Rowe P considered that s
564B, in providing for an appeal to the Full Court against a refusal of leave, impliedly ousted any reconsideration of the matter
either by the same judge or by another judge. This, with respect, is a non sequitur and it would, if correct, produce the absurd
result that, even in a case where an order had been obtained by deliberate concealment of material facts and misleading evidence,
the judge who had been wrongly persuaded to make the order would be incapable of revoking it. All other considerations apart, it
is provided by s 686 that:

Where no other provision is expressly made by law or by Rules of Court the procedure and practice for the time being
of the Supreme Court of Judicature in England shall, so far as applicable, be followed

Neither the Civil Procedure Code nor the rules contain express provisions relating to the discharge of ex parte orders but
RSC Ord 32, r 6 provides in terms: The Court may set aside an order made ex parte. Leave granted to institute proceedings for
judicial review can, in an appropriate case, be revoked by a judge under this rule (see R v Secretary of State for the Home Dept,
ex p Herbage (No 2) [1987] 1 All ER 324 at 335, [1987] 1 QB 1077 at 1092).
Their Lordships entertain no doubt that Ellis J was acting within his jurisdiction in making the order which he made on the
appellants application and they have difficulty in understanding Carey JAs assertion that the judge had before him no new
material justifying his exercise of the jurisdiction. He had in fact most material evidence, adduced before the court for the first
time, first as to the supposed effect of the stay which Clarke J had purported to grant, and secondly that in fact the allocation had
been made already and the instructions given to 70 JCTC which, in so far as the stay could have had any effect, was not bound
by the order and was not even a party to the proceedings. In their Lordships judgment, Ellis J was entitled, on an application
properly made, in his discretion to vary or revoke the ex parte order which had been made by Clarke J and no ground has been
shown for any interference by an appellate court with his exercise of discretion, which seems to their Lordships perfectly proper
on the supposition, which everybody connected with the court seems to have adopted, that the order for a stay had some
inhibiting effect.
This by itself is sufficient to dispose of the appeal but it has to be remarked that, quite apart from the factual material
adduced in support of the appellants application for the variation of the order, and regardless of any question whether the
evidence adduced in support of the respondents application to Clarke J provided even prima facie ground for the grant of the
leave sought, there was every ground for challenging the order for a stay as a matter of law. It seems in fact to have been based
upon a fundamental misunderstanding of the nature of a stay of proceedings. A stay of proceedings is an order which puts a stop
to the further conduct of proceedings in court or before a tribunal at the stage which they have reached, the object being to avoid
the hearing or trial taking place. It is not an order enforceable by proceedings for contempt because it is not, in its nature, capable
of being breached by a party to the proceedings or anyone else. It simply means that the relevant court or tribunal cannot,
whilst the stay endures, effectively entertain any further proceedings except for the purpose of lifting the stay and that, in general,
anything done prior to the lifting of the stay will be ineffective, although such an order would not, if imposed in order to enforce
the performance of a condition by a plaintiff (eg to provide security for costs), prevent a defendant from applying to dismiss the
action if the condition is not fulfilled (see La Grange v McAndrew (1879) 4 QBD 210). Section 564B(4) of the Civil Procedure
Code provides:

the grant of leave under this section to apply for an order of prohibition or an order of certiorari shall, if the judge
so directs, operate as a stay of the proceedings in question until the determination of the application or until the court or
judge otherwise orders.

This makes perfectly good sense in the context of proceedings before an inferior court or tribunal, but it can have no possible
application to an executive decision which has already been made. In the context of an allocation which had already been
decided and was in the course of being implemented by a person who was not a party to the proceedings it was simply
meaningless. If it was desired to inhibit JCTC from implementing the allocation which had been made and communicated to it or
to compel the appellant, assuming this were possible, to revoke the allocation or issue counter-instructions, that was something
which could be achieved only by an injunction, either mandatory or prohibitory, for which an appropriate application would have
had to be made. The appellants apprehension that that was what was intended by the order is readily understandable, but if that
was what the judge intended by ordering a stay, it was an entirely inappropriate way of setting about it. He had not been asked
for an injunction nor does it appear that he considered or was even invited to consider whether he had jurisdiction to grant one.
Certainly none is conferred in terms by s 564B. An injunction cannot be granted, as it were, by a sidewind and if that was the
judges intention it should have been effected by an order specifying in terms what acts were prohibited or commanded. As it
was there were no proceedings in being upon which the stay could take effect. One is left with only two possibilities. Either
Clarke J was granting relief which was entirely inappropriate 71 and inapplicable to the circumstances before him or he was
seeking to enjoin the activities of JCTC, which was not a party to the action, and to do so by wholly inappropriate machinery. In
either event, the order was meaningless.
The answer to the first of the certified questions must, therefore, be in the negative and the second question does not arise.
Their Lordships do not feel called upon to answer what is now an entirely academic question upon the hypothesis that injunctive
relief is what Clarke J may have intended to grant. They can well understand the anxiety of the Solicitor General for Jamaica to
have an authoritative answer to an important question and they are greatly indebted to him for his clear and illuminating
submissions. But the point is far from easy. Attention has been drawn to some of the difficulties in this area of the law in a
recent note by Sir William Wade QC, What has happened to the sovereignty of Parliament (1991) 107 LQR 4, and there are, in
addition, considerations regarding the status of ministers of the Crown which are peculiar to Jamaica. Despite Dr Rattrays most
helpful address, their Lordships do not think it appropriate to express an opinion on what is, in any event, now a hypothetical as
well as an academic question and without having the benefit of a full inter partes argument.
Their Lordships will, accordingly, humbly advise Her Majesty that the appeal should be allowed and the order for costs
made in the Court of Appeal discharged.

Appeal allowed.

Solicitors: Kenneth Rattray QC; Oswald Burchenson; Charles Russell.

Mary Rose Plummer Barrister.

[1991] 4 All ER 72

R v Secretary of State for the Home Department, ex parte Muboyayi

IMMIGRATION

COURT OF APPEAL, CIVIL DIVISION

LORD DONALDSON OF LYMINGTON MR, GLIDEWELL AND TAYLOR LJJ
16, 17, 18, 25 JUNE 1991

Immigration Leave to enter Refugee Asylum Application for asylum refused without consideration of claim Detention
pending removal to safe third country Applicant obtaining writ of habeas corpus Whether writ of habeas corpus appropriate
remedy Whether prior administrative decision refusing leave to enter open to investigation on application for writ of habeas
corpus Whether appropriate remedy judicial review of administrative decision Whether application for leave to move for
judicial review should be granted.

The applicant, a citizen of Zaire, sought leave to enter the United Kingdom with his family on the ground that he had a well-
founded fear that he would be persecuted in Zaire. The Secretary of State refused his application for political asylum and
directed that the applicant and his family be returned to France on the basis that, having spent a day in France on the way from
Zaire to the United Kingdom, they could properly be returned there and that France, being a signatory to the United Nations 1951
Convention and 1961 Protocol relating to the Status of Refugees, would not further remove them to Zaire without first
considering a claim for asylum. The applicant was detained pending such removal pursuant to para 16(2) of Sch 2 to the
Immigration Act 1971. The applicant made representations to the Secretary of State that his application for asylum would not 72
be properly considered by France and when those representations were rejected he applied for the issue of a writ of habeas
corpus. At the hearing of the application, which took place about an hour before the applicant was due to be removed from the
jurisdiction, the judge asked for an undertaking from the Secretary of State that the applicant would not be removed until the
court had decided the application. Counsel for the Secretary of State declined to give the undertaking on the ground that he had
no express authority to do so, with the result that the judge ordered the issue of the writ. The Secretary of State appealed, seeking
to have the writ set aside on the basis that, since the applicants challenge lay not to the jurisdiction to detain under para 16(2) of
Sch 2 to the 1971 Act but to the prior administrative decision refusing him leave to enter, the proper procedure for advancing the
applicants complaint was to seek leave to apply for judicial review of the decision and that unless and until that decision was
quashed the applicants detention was unimpeachable. The applicant contended that on the return of a writ of habeas corpus the
court was not limited to a consideration of errors on the face of the warrant of detention but could and should investigate whether
the warrant was properly issued, which involved considering the justification for refusing leave to enter, and that therefore he had
a choice whether to seek leave to apply for judicial review or to seek a writ of habeas corpus. At the hearing the applicant, on the
invitation of the court, applied for leave to move for judicial review of the Secretary of States refusal to consider his application
for asylum.

Held (1) Where a person who had been lawfully detained pending his removal from the United Kingdom sought to challenge
the underlying administrative decision refusing him leave to enter on the ground that, due to some procedural error, a
misapprehension of the law, a failure to take account of relevant matters or the fundamental unreasonableness of the decision, the
decision should never have been taken, the appropriate means of challenging the decision was by way of an application for
judicial review and not by an application for a writ of habeas corpus, and unless and until the underlying decision was set aside
his detention could not be impugned. In such circumstances a writ of habeas corpus was not an appropriate remedy since, on
return of the writ, the court was limited to examining whether the precedent facts necessary to justify the detention had been
established and the court would not investigate the propriety of the prior administrative decision refusing the applicant leave to
enter nor would it consider any matters urged by the applicant as justifying the court to set aside the decision. Accordingly, the
applicants proper remedy was to apply for judicial review of the decision refusing leave to enter, but that was subject to the
important qualification that the fact that counsel for the Secretary of State had been unable to give the judge an undertaking that
the applicant would not be removed from the jurisdiction before the court had considered his application justified the issue of the
writ of habeas corpus in the particular circumstances, although it should have been coupled with an application for leave to apply
for judicial review. The Secretary of States appeal would therefore be allowed and the writ of habeas corpus would be set aside
on the Secretary of State giving an undertaking that the applicant would not be removed before a given date (see p 78 j to p 79 b,
p 80 g h, p 81 b c, p 82 c, p 85 f, p 88 j, p 89 c and p 90 c to e, post); R v Secretary of State for the Home Dept, ex p Cheblak
[1991] 2 All ER 319 applied; Khawaja v Secretary of State for the Home Dept [1983] 1 All ER 765 distinguished.
(2) Having regard to the Secretary of States policy regarding the removal of persons seeking asylum to a safe third country
and to evidence that France would comply with its international obligations in considering a persons claim for asylum, it was
clear that the Secretary of States decision to remove the applicant to 73 France, as a safe third country, was unimpeachable.
Accordingly, there were no grounds for granting leave to seek judicial review and the applicants application would therefore be
refused (see p 83 h, p 85 e f, p 88 j, p 89 b and p 90 e f, post).
Per Lord Donaldson MR and Taylor LJ. (1) The court has jurisdiction to stay a decision of the Secretary of State refusing a
would-be immigrant leave to enter the United Kingdom where that person has sought the protection and assistance of the court
and any subsequent order would be less effective (see p 81 d e and p 91 a c, post); R v Secretary of State for Education and
Science, ex p Avon CC [1991] 1 All ER 282 considered.
(2) The removal of a would-be immigrant may be temporarily stayed by the use of the power to issue a writ of habeas corpus
or by the adaptation of the writ ne exeat regno (see p 82 a and p 91 c, post).
Notes
For the power to give or refuse leave to enter the United Kingdom, see 4 Halsburys Laws (4th edn) paras 10031010, and for
cases on the subject, see 2 Digest (Reissue) 203207, 11601176.
For judicial review generally and the writ of habeas corpus ad subjiciendum, see 1(1) Halsburys Laws (4th edn reissue)
paras 6065, 222264, and for cases on the subject, see 16 Digest (Reissue) 280435, 26694797.
For the writ of ne exeat regno, see 16 Halsburys Laws (4th edn) para 1288, and for cases on the subject, see 20 Digest
(Reissue) 663667, 48954938.
For the Immigration Act 1971, Sch 2, para 16, see 31 Halsburys Statutes (4th edn) 96.

Cases referred to in judgments

Associated Provincial Picture Houses Ltd v Wednesbury Corp [1947] 2 All ER 680, [1948] 1 KB 223, CA.
Azam v Secretary of State for the Home Dept [1973] 2 All ER 765, [1974] AC 18, [1973] 2 WLR 1058, HL; affg [1973] 2 All ER
741, [1974] AC 18, [1973] 2 WLR 949, CA.
Chief Adjudication Officer v Foster [1991] 3 All ER 846, CA.
Derby & Co Ltd v Weldon (No 2) [1989] 1 All ER 1002, sub nom Derby & Co Ltd v Weldon (Nos 3 and 4) [1990] Ch 65, [1989]
2 WLR 412, CA.
Factortame Ltd v Secretary of State for Transport [1989] 2 All ER 692, [1990] 2 AC 85, [1989] 2 WLR 997, HL.
Khawaja v Secretary of State for the Home Dept [1983] 1 All ER 765, [1984] AC 74, [1983] 2 WLR 321, HL.
Liversidge v Anderson [1941] 3 All ER 338, [1942] AC 206, HL.
Minister of Foreign Affairs Trade and Industry v Vehicles and Supplies Ltd [1991] 4 All ER 65, [1991] 1 WLR 550, PC.
R v Brixton Prison Governor, ex p Ahson [1969] 2 All ER 347, [1969] 2 QB 222, [1969] 2 WLR 618, DC.
R v Home Secretary, ex p Greene [1941] 3 All ER 104, [1942] 1 KB 87, CA; affd [1941] 3 All ER 388, [1942] AC 284, HL.
R v Secretary of State for Education and Science, ex p Avon CC [1991] 1 All ER 282, [1991] 1 QB 558, [1991] 2 WLR 702, CA.
R v Secretary of State for the Home Dept, ex p Akhtar [1980] 2 All ER 735, [1981] QB 46, [1980] 3 WLR 302, CA.
R v Secretary of State for the Home Dept, ex p Cheblak [1991] 2 All ER 319, [1991] 1 WLR 890, CA.
R v Secretary of State for the Home Dept, ex p Khan [1980] 2 All ER 337, [1980] 1 WLR 569, CA.
74
R v Secretary of State for the Home Dept, ex p Mughal [1973] 1 WLR 1133, DC; affd [1973] 3 All ER 796, [1974] QB 313,
[1973] 3 WLR 647, CA.
R v Secretary of State for the Home Dept, ex p Phansopkar [1975] 3 All ER 497, [1976] QB 606, [1975] 3 WLR 322, DC and
CA.
R v Secretary of State for the Home Dept, ex p Sultan Mahmood [1981] QB 58, [1980] 3 WLR 312, CA.
R v Secretary of State for the Home Dept, ex p Turkoglu [1987] 2 All ER 823, [1988] QB 398, [1987] 3 WLR 992, CA.
Zamir v Secretary of State for the Home Dept [1980] 2 All ER 768, [1980] AC 930, [1980] 3 WLR 249, HL.

Cases also cited or referred to in skeleton judgments

Armah v Government of Ghana [1966] 3 All ER 177, [1968] AC 192, HL.
Board of Education v Rice [1911] AC 179, [191113] All ER Rep 36, HL.
Bugdaycay v Secretary of State for the Home Dept [1987] 1 All ER 940, [1987] AC 514, HL.
Miller v Immigration Appeal Tribunal [1988] Imm AR 358, CA.
Padfield v Minister of Agriculture, Fisheries and Food [1968] 1 All ER 694, [1968] AC 997, HL.
R v Lords Comrs of the Treasury, ex p Lord Bougham and Vaux (Trustee for HM Queen Adelaide) (1851) 16 QB 357, 117 ER
916.
R v Miller [1985] 2 SCR 613, Can SC.
R v Secretary of State for the Environment, ex p Brent London BC [1983] 3 All ER 321, [1982] QB 593, DC.
R v Secretary of State for the Home Dept, ex p Ruddock [1987] 2 All ER 518, [1987] 1 WLR 1482.
R v Superintendent of Chiswick Police Station, ex p Sacksteder [1918] 1 KB 578, CA.
Schtraks v Government of Israel [1962] 3 All ER 529, [1964] AC 556, HL.

Appeal
The Secretary of State for the Home Department appealed from a decision of Brooke J given on 23 May 1991 to issue a writ of
habeas corpus requiring the production before the High Court on 19 June 1991 of the applicant, Bioli Muboyayi, a citizen of
Zaire seeking political asylum, who had been refused leave to enter the United Kingdom and detained pending removal to
France. The facts are set in the judgment of Lord Donaldson MR.
At the conclusion of argument Lord Donaldson MR announced that the appeal would be allowed, that an application for leave to
move for judicial review of the Secretary of States decision made during the hearing at the courts invitation would be refused
and that leave to appeal to the House of Lords would be refused for reasons to be given later.

Robert Jay for the Secretary of State; Michael Shrimpton and Judith Maxwell for the applicant.

25 June 1991. The following judgments were delivered.

LORD DONALDSON OF LYMINGTON MR. Mr Muboyayi (the applicant) is a citizen of Zaire. Accompanied by his wife
and child he left that country on 22 April 1991 arriving in Italy on 16 May. From there they took a train to Paris, where they
arrived on 18 May. On the following day they flew to London Airport. On arrival the applicant claimed that he, his wife and
child, should be given leave to enter on the grounds that he had a well-founded fear of persecution in Zaire for reasons of race,
religion, nationality or membership of a particular social group or political opinion within the meaning of the United Nations
1951 75Convention and 1967 Protocol relating to the Status of Refugees(( Geneva, 28 July 1951; TS 39(1954); (Cmd 9171) and
(New York, 31 January 1967; TS 15(1969); Cmnd 3906)).
On 22 May after an examination pursuant to para 2 of Sch 2 to the Immigration Act 1971 all three were refused leave to
enter and were given notice of intention to remove them to Paris at 1.30 pm on 23 May. The reasons given were twofold, but
only one is of significance. This was:

Zaire is not the only country to which you can be removed. You arrived from France where you spent 1 day. You
are under paragraph 8(1)(c) of Schedule 2 of the Immigration Act 1971 properly returnable to France and I am satisfied on
the information available that you will be re-admitted there. Moreover France is a signatory to the 1951 UN Convention
Relating to the Status of Refugees and, on the basis of the information available to him about the policies and practice of
France and having considered the individual circumstances of your case, the Secretary of State is satisfied that the French
authorities would not further remove you to Zaire without first considering in accordance with its obligations under the
1951 UN Convention, any application you may make, for asylum in that country. In these circumstances your application
for asylum here has not been considered.
The other reason:

As nationals of Zaire you are required under the Immigration Rules to have a visa in order to enter the United
Kingdom, but you have no visa.

The applicant was then detained pursuant to para 16(2) of Sch 2 to the 1971 Act as being a person in respect of whom
directions might be given under paras 8 to 14, the relevant paragraphs on the facts of this case being para 8 or para 10. His wife
and child were granted temporary admission pursuant to para 21.
Solicitors acting for the applicant then made representations to the Home Office to the effect that France was not properly to
be considered a safe third country in that, as the applicant alleged, his application for political asylum would not be properly
considered by that country and that he would be likely to be returned to Zaire. The officials in the Home Office rejected this
representation, but said that no special assurance had been sought from the French authorities that an application by the applicant
and his family for political asylum would be considered.

The application for a writ of habeas corpus

Application was then made to Brooke J for the issue of a writ of habeas corpus ad subjiciendum. The application was heard
at about noon on 23 May and at about 12.30 pm the judge ordered that such a writ be issued addressed to the Chief Immigration
Officer, Gatwick Airport. It required him

to have the body of [the applicant] before this Court on the 19th day of June 1991 at 10.30 oclock and to make a
return to the said Writ

namely informing the court of the day and cause of his being taken and detained.

The first stage of the appeal

The Secretary of State and the Chief Immigration Officer thereupon immediately appealed to this court seeking to have the
writ set aside. The applicant equally promptly challenged the jurisdiction of this court to entertain such an appeal. This latter
issue was considered as a matter of urgency by Parker, 76Nourse and Nolan LJJ, who on 24 May ruled that the Court of Appeal
had jurisdiction and adjourned further consideration of the appeal.

The second stage of the appeal

Relatively large numbers of would-be immigrants to this country seek leave to enter upon grounds that they are in need of
asylum and some seek judicial review of any refusal of leave to enter. What is highly unusual is for application instead to be
made for the issue of a writ of habeas corpus. There was, however, an unusual background which needs to be explained. On a
recent occasion another citizen of Zaire had applied for leave to seek judicial review of a decision to refuse him leave to enter as
one seeking asylum. His application was dismissed by the High Court and, on renewal, by this court. Thereafter some further
similar application was made to the High Court at or about the time when he was due to be removed from this country. There is
an issue as to whether counsel for the Secretary of State on that occasion gave the court an undertaking that his removal would be
delayed, but in fact it was not so delayed and he was returned to Zaire. I say no more about this, since it is the subject of further
proceedings, but Mr Jay, counsel appearing for the Secretary of State and the Chief Immigration Officer before Brooke J, had that
case in mind and I should be surprised if the same could not have been said of Brooke J.
As I have said, the application for the writ of habeas corpus came before Brooke J within about an hour of the intended time
for the removal of the applicant from this country. The judge asked for an undertaking that the removal would be delayed until
he had had an opportunity of considering the matter. Mr Jay declined to give any such undertaking and let me say at once that he
is not to be criticised in any way for so doing. He had only just been instructed, he had no express authority to give such an
undertaking and he feared that it might not be practicable to prevent the removal of the applicant at that late stage. The judge, for
his part, is equally not to be criticised. He had a very short time in which to decide what to do in order to ensure, so far as
possible, that the court should not be put in a position in which any consideration of the applicants complaint, whatever its
procedural defects, would be rendered academic.

Habeas corpus or judicial review?

The essence of the argument advanced by Mr Jay on behalf of the Secretary of State is that the proper procedure for
advancing the applicants complaint was to seek leave to apply for judicial review of the decision to refuse leave to enter and that,
unless and until leave was granted and that decision was quashed, the applicants detention under the authority of the Chief
Immigration Officer was unimpeachable. The essence of the argument advanced by Mr Shrimpton was that on the return of a
writ of habeas corpus the court is not limited to a consideration of errors on the face of the warrant of detention, but can and will
investigate whether the warrant was properly issued. This, on the facts of this and similar cases, would involve considering the
justification for refusing leave to enter. Accordingly an applicant, such as the present applicant, has a choice whether to seek
leave to apply for judicial review or, as Mr Shrimpton put it, to seek the constitutional high ground of a writ of habeas corpus.
That the habeas corpus route is more attractive to disappointed aspiring immigrants in that traditionally the highest priority is
given to applications for such a writ and that a refusal to issue it is potentially appealable to the House of Lords, whereas a refusal
of leave to apply for judicial review it not, is nothing to the point.
In these circumstances it seemed to us at a very early stage in the argument that 77 the applicants complaints ought to be
considered and determined at the earliest possible moment and that there should be no question of saying to him that he had
embarked on the wrong route and either must now start again or, worse still, could not do so. We therefore invited Mr Shrimpton
to apply to us for leave to seek judicial review, notwithstanding that he had made no previous application to the High Court, that
having been held to be a permissible procedure in Chief Adjudication Officer v Foster [1991] 3 All ER 846. Mr Shrimpton
accepted the invitation without prejudice to his primary submission that the applicant was entitled to proceed by way of habeas
corpus. We are therefore seised both of an appeal and of an application for leave to seek judicial review.
In a skeleton argument served on behalf of the Secretary of State Mr Jay advanced a number of arguments which
individually or cumulatively were said to support the proposition that Habeas Corpus is not open to the Respondent; the correct
avenue was [RSC] Order 53. I will advert to them as necessary hereafter, but in view of its constitutional importance I must first
refer to para E(ii)(h):

the practical effect of issuing the Writ of Habeas Corpus under RSC Order 54 rule 2 is to enjoin the Crown: this is
contrary to the principles laid down by the House of Lords in [Factortame Ltd v Secretary of State for Transport [1989] 2
All ER 692, [1990] 2 AC 85].

Although Mr Jay in oral argument disavowed any intention of asserting that the Crown and its servants are not subject to a
writ of habeas corpus, the skeleton argument is capable of such a construction and it must be made clear beyond a peradventure
that this is not correct. Magna Carta (1297) (25 Edw 1) provides in c 29:
 No freeman shall be taken or imprisoned, or be disseised of his freehold, or liberties, or free customs, or be outlawed,
or exiled, or any other wise destroyed; nor will we not pass upon him, nor condemn him, but by lawful judgment of his
peers, or by the law of the land. We will sell to no man, we will not deny or defer to any man either justice or right.

The duty of the courts is to uphold this classic statement of the rule of law and if, in particular circumstances, a writ of
habeas corpus is the appropriate procedure for doing so, it is wholly immaterial that the practical effect may be the same as
enjoining the Crown. The issue in Factortame Ltd v Secretary of State for Transport was whether there was jurisdiction to grant
injunctions against the Crown in proceedings for judicial review. The House of Lords was not concerned to consider any
argument as to the scope of the writ of habeas corpus.
Mr Jay accepts, and it is clear law, that where the power to detain is dependent upon the existence of a particular state of
affairs (a precedent fact) and the existence of that fact is challenged by or on behalf of the person detained, a challenge to the
detention may be mounted by means of an application for a writ of habeas corpus under RSC Ord 54, even if there are alternative
procedures available. If authority is required for this proposition, it is to be found in the decision of the House of Lords in
Khawaja v Secretary of State for the Home Dept [1983] 1 All ER 765 at 773774, 781, 790, 795, [1984] AC 74 at 101102, 110,
122123 per Lord Wilberforce, Lord Scarman, Lord Bridge and Lord Templeman.
In the present case the right to detain does indeed depend upon a precedent fact or series of facts. They are that (a) the
applicant was a person who might be required to submit to examination under para 2 of Sch 2 to the 1971 Act and he was
detained pending a decision to give or refuse him leave to enter and/or (b) he was a person in respect of whom directions might
be given under paras 8 to 14 and he was detained pending the giving of directions and his removal in 78 pursuance of any
directions given. However, and this is what distinguishes it from Khawajas case, the existence of this precedent fact is not
challenged. What the applicant alleges is something quite different, namely that, although he was liable to be examined and was
examined and although upon the conclusion of that examination he was refused leave to enter and directions were given for his
removal, he should not have been refused leave to enter and no question of his removal should have arisen. In other words there
was no challenge to jurisdiction, but only to a prior underlying administrative decision. This is a quite different challenge and,
unless and until it succeeds, there are no grounds for impugning the legality of his detention.
Put in another way, in the first category an applicant alleges that the detention is and always was unlawful. In the second
category he alleges that it will become unlawful, if and when a court of competent jurisdiction destroys the precedent fact, as
contrasted with finding that it never existed. The issue in this appeal is whether a writ of habeas corpus is an appropriate remedy
in the latter type of case.
In R v Secretary of State for the Home Dept, ex p Turkoglu [1987] 2 All ER 823, [1988] QB 398 this court was concerned
with the powers of the High Court to grant bail in a case in which an application for judicial review of a refusal of leave to enter
had been refused. With the agreement of Croome-Johnson and Bingham LJJ I said, admittedly obiter ([1987] 2 All ER 823 at
824, [1988] QB 398 at 399):

Clearly we could grant bail ancillary to or as part of proceedings for habeas corpus, but there is no way that
proceedings for habeas corpus can be brought in a case of this nature. The power of the Secretary of State to detain under
the 1971 Act is clear and the only issue which would arise is whether, as a matter of public law, his decision to exercise
those powers was a proper one.

In R v Secretary of State for the Home Dept, ex p Cheblak [1991] 2 All ER 319, [1991] 1 WLR 890 the applicant was
arrested and served with notice of intention to deport upon grounds that his deportation would be conducive to the public good.
He sought leave to apply for judicial review and also a writ of habeas corpus. When both were refused, he appealed against the
refusal to issue the writ and renewed his application for leave. This court held that the remedy of habeas corpus was not
available.
I put the matter in this way ([1991] 2 All ER 319 at 322323, [1991] 1 WLR 890 at 894):

Although, as I have said, the two forms of relief which Mr Cheblak seeks are interrelated on the facts of his case, they
are essentially different. A writ of habeas corpus will issue where someone is detained without any authority or the
purported authority is beyond the powers of the person authorising the detention and so is unlawful. The remedy of judicial
review is available where the decision or action sought to be impugned is within the powers of the person taking it but, due
to procedural error, a misappreciation of the law, a failure to take account of relevant matters, a taking account of irrelevant
matters or the fundamental unreasonableness of the decision or action, it should never have been taken. In such a case the
decision or action is lawful, unless and until it is set aside by a court of competent jurisdiction. In the case of detention, if
the warrant, or the underlying decision to deport, were set aside but the detention continued, a writ of habeas corpus would
issue.

Nolan LJ impliedly indorsed this view because, whilst accepting that judicial review was available, although refusing relief upon
the facts, he held that 79 para 18(4) of Sch 2 to the 1971 Act precluded the issue of a writ of habeas corpus, that paragraph
providing that A person shall be deemed to be in legal custody at any time when he is detained under paragraph 16 (see
[1991] 2 All ER 319 at 343, [1991] 1 WLR 890 at 916).
I had similarly relied upon para 18(4) (see [1991] 2 All ER 319 at 327, [1991] 1 WLR 890 at 898899).
Mr Shrimpton attacked my judgment and that of Nolan LJ on the grounds that we had misunderstood the purpose and effect
of para 18(4). He traced its ancestry from para (8) of reg 18B of the Defence (General) Regulations 1939, SR & O 1939/927,
which was considered in R v Home Secretary, ex p Greene [1941] 3 All ER 104, [1942] 1 KB 87. This court then held ([1941] 3
All ER 104 at 122, [1942] 1 KB 87 at 117(per Goddard LJ)):

The object of the paragraph, in my opinion, is to provide that once an order of detention is made, the person named in
the order may be kept in custody anywhere, and not only in a lawful prison, even if the Secretary of State has not specified
in the order a particular place for his internment, which he can do later.

The same point arose in Liversidge v Anderson [1941] 3 All ER 338 at 380, [1942] AC 206 at 273, where Lord Wright said: It is
inserted to settle possible doubts as to prison law and practice.
It is not for me to plead guilty on behalf of Nolan LJ and Beldam LJ fell into no such error (see [1991] 2 All ER 319 at 340,
[1991] 1 WLR 890 at 913). So far as I am concerned, I accept the criticism unreservedly. Whether this vitiates the binding
authority of Cheblaks case is perhaps immaterial, because equally unreservedly I stand by and repeat my statement of the
principle, which I have already quoted. It is supported by a decision of this court in R v Secretary of State for the Home Dept, ex
p Phansopkar [1975] 3 All ER 497, [1976] 1 QB 606. The facts were somewhat different in that the applicant was claiming a
right to enter on the basis that she was the wife of a patrial, but I do not think that this is a material distinction. The court made
an order of mandamus requiring the Home Secretary to consider and determine whether the applicant was indeed the wife of a
patrial, but it held that there were no grounds for the issue of a writ of habeas corpus (see [1975] 3 All ER 497 at 508, 510, [1976]
1 QB 606 at 622, 625 per Lord Denning MR and Lawton LJ).
Subject to one important qualification, I have no doubt that the application which should have been made to Brooke J was
for leave to apply for judicial review of the refusal of leave to enter and not for the issue of a writ of habeas corpus. That
qualification arises out of Mr Jays refusal to give an undertaking that the applicant would not be removed from the jurisdiction
before his complaint had been considered by the court. I have already said, and I repeat, that in the unusual circumstances Mr Jay
is in no way to be criticised. However, this refusal fully justified the issue of the writ, but it should have been coupled with an
application for leave to apply for judicial review, a position which was only reached in this court.
Mr Shrimpton submitted that if the issue of a writ of habeas corpus was justified, there was no need to seek leave to apply
for judicial review since all the issues which would arise on a substantive application for judicial review could be canvassed and
decided upon the return of the writ of habeas corpus. Whilst it is correct that in dim and distant times a writ of habeas corpus
used to be coupled with a writ of certiorari, but as time went on the issues arising in the context of certiorari were considered and
decided upon the return of the writ of habeas 80 corpus (see Sharpe The Law of Habeas Corpus (2nd edn, 1989) pp 5, 4445),
this submission is not I think well founded. Habeas corpus was originally confined to errors of jurisdiction which were patent on
the face of the committal order, certiorari being required to bring up the record on which it was based with a view to quashing the
committal if latent jurisdictional errors emerged. The extension of habeas corpus to include what at that time could also be
considered under certiorari would not have been sufficient to bring in all the considerations which are relevant on an application
for judicial review and, in particular, the matters urged by the applicant as justifying the court in setting aside the refusal of leave
to enter. In any event, the evolution of the new and extended system of judicial review under RSC Ord 53 with its in-built
safeguards would, I think, justify us in confining the ambit of the writ of habeas corpus in the way in which I held that it was
confined in my judgment in Cheblaks case.
As has been said in the context of Mareva injunctions (see Derby & Co Ltd v Weldon (No 2) [1989] 1 All ER 1002 at 1006
1007, [1990] 1 Ch 65 at 76):

within the limits of its powers, no court should permit a defendant to take action designed to ensure that
subsequent orders of the court are rendered less effective than would otherwise be the case.

In this context designed to does not mean intended, but rather having the consequence that. The court should not permit
a would-be immigrant to be compulsorily removed from its jurisdiction if he has sought the protection and assistance of the court
and the result would be to render any subsequent order quashing a decision to refuse leave to enter less effective.
This raises the question of how this should be done. The Factortame case [1989] 2 All ER 692, [1990] 2 AC 85 is authority
for the proposition that an interim injunctive order cannot be made against the Crown. However, this court has held in R v
Secretary of State for Education and Science, ex p Avon CC [1991] 1 All ER 282, [1991] 1 QB 558 that it is within the
jurisdiction of the court to stay a decision of a Secretary of State and Brooke J could therefore have stayed the decision to refuse
leave to enter. This, perhaps only temporarily, would have put the applicant back into the position of someone seeking leave to
enter who could be detained pending a new decision being made. There are only two possible disadvantages to this remedy. The
first is that it has been suggested on the strength of a very recent decision of the Privy Council (see Minister of Foreign Affairs
Trade and Industry v Vehicles and Supplies Ltd [1991] 4 All ER 65, [1991] 1 WLR 550) that, whilst the Avon case is binding
upon this court and upon the High Court, it might not survive an appeal to the House of Lords. As to this I express no opinion.
Second, it is possible that the imposition of a stay might enable the applicant to argue that his examination under para 2 of Sch 2
had long since been concluded and that he was entitled to leave to enter pursuant to para 6. Again I express no opinion as to
whether such an argument would succeed, save to say that it has, so far as I know, never been advanced, let alone succeeded,
when a decision to refuse leave to enter has been quashed with the result that the immigration officer has had to reconsider and
could in theory have reaffirmed his refusal.
Since any compulsory removal from this country necessarily involves some deprivation of the liberty of the person
concerned, a writ of habeas corpus is an obvious alternative remedy. The effect of service of such a writ is to make the gaoler
responsible to the court in place of the authority which ordered the detention, leaving it to the court to determine on the return of
the writ whether the detention should or should not continue. If it be objected, and shown, that 81 the use of a writ of habeas
corpus quia timet is a novelty, so be it. This, the greatest and oldest of all the prerogative writs, is quite capable of adapting itself
to the circumstances of the times. An alternative might be to adapt the writ of ne exeat regno, which was designed to prevent
debtors fleeing the country, to suit a situation in which far from wishing to leave the jurisdiction someone is being compulsorily
removed therefrom.
By the time that the matter came before this court, Mr Jay was in a position to give an undertaking on behalf of the Secretary
of State that the applicant would not be removed from this country on or before Monday, 24 June. He was unable to give a more
extended undertaking, because there was doubt whether France would be prepared to allow the applicant to enter its territory for
the purposes of considering his application for political asylum if further time had elapsed since his flight from Paris to London.
In these circumstances, the rationale for the issue of the writ of habeas corpus has disappeared and, at the conclusion of the
argument, we indicated that the appeal would be allowed and the issue of the writ set aside for reasons to be delivered later. We
also refused leave to appeal to the House of Lords, without prejudice to Mr Shrimptons contention that no such leave was
required, that not being a matter for decision by this court.
In the course of the hearing Mr Jay very helpfully obtained express instructions on the practice of the Home Office in
relation to removal. Although the existence of this practice forms no part of the reasons why I considered that the appeal should
be allowed, it is right that it should be widely known and, of course, not departed from without due notice. That practice is as
follows:

1. Where leave to move is granted the Home Office will not remove the applicant until the case is disposed of in the
High Court either by the dismissal of the application or by the setting aside of the grant of leave.

2. If removal takes place notwithstanding the grant of leave either because the application is made extremely late or
because of a mistake, the Secretary of State will do his best to return the applicant to this jurisdiction.
3. In all cases removal directions are made in advance of removal and notice given to the person to be removed. In
cases where applications for leave to the High Court or the Court of Appeal are pending adequate notice will be given to
enable the necessary application to be made.

Judicial review
This brings me to the application for leave to seek judicial review. The applicants complaint is not that the Secretary of
State has not fully considered his claim to be a refugee within the meaning of the United Nations Convention of 1951 and
Protocol of 1967 relating to the Status of Refugees, but that he has not considered it at all and instead has referred that
consideration to the French authorities. The basis of this complaint is twofold. First Mr Shrimpton submits that such a refusal is
not contemplated by the convention and protocol and, as such, is contrary to paras 21 and 75 of the Immigration Rules (see the
Statement of Changes in Immigration Rules (HC Paper (1990) no 251)). Accordingly he submits that it is unlawful. Second he
submits that the applicant has adduced evidence, namely an affidavit by Mr Davies, a trainee solicitor, on information received
from the applicant and an affidavit from a French advocate, Matre Piquois, which should lead the court to conclude that France
will not, or may not, give proper consideration to the applicants claim to be such a refugee and will summarily remove him to
Zaire.
 The policy of the Secretary of State was the subject of a written answer to a 82 parliamentary question in the House of
Commons on 25 July 1990, when the then Home Secretary said (177 HC Official Report (6th series) written answers cols 262
263):

The United Kingdom is committed to its obligations under the 1951 United Nations convention relating to the status of
refugees. In accordance with this convention, no refugee will be moved by the United Kingdom to a territory in which his
life or freedom would be threatened on account of his race, religion, nationality, membership of a particular social group or
political opinion. It is an internationally accepted concept that a person fleeing persecution, who cannot avail himself of
the protection of the authorities of a country of which he is a national, should normally seek refuge in the first safe country
reached. I agree entirely with the concept. The conventions primary function is to give refugees who cannot turn to their
own authorities the protection of the international community. It is an instrument of last resortnot a licence for refugees
to travel the world in search of an ideal place of residence. Where protection issues do not arise, an application should
therefore be dealt with in accordance with normal immigration criteria. Accordingly, an application for asylum from a
passenger who has arrived in the United Kingdom from a country other than the country in which he fears persecution, will
not normally be considered substantively. The passenger will be returned to the country from which he embarked, or to
another country in which he has been since he left the country of feared persecution or, if appropriate, to his country of
nationality, unless I am satisfied that the country is one in which his life or freedom would be threatened on account of his
race, religion, nationality, membership of a particular social group or political opinion, or that it would return him to such a
country. However, in considering any individual case I shall take into account any evidence of substantial links with the
United Kingdom which in my view would make it reasonable for the claim for asylum exceptionally to be considered here.
All western European countries which are signatories to the United Nations Convention operate safe third-country
procedures and the approach is consistent with the convention determining the state responsible for examining applications
for asylum lodged in one of the member states of the European Communities signed in Dublin on 15 June 1990, but not as
yet in force [EC 40(1991); Cm 1623].

Whilst it is true that neither the convention nor the protocol expressly address the problem of which country should consider
granting and, if appropriate, grant asylum, I can see nothing in the Secretary of States statement of policy or in the Dublin
Convention which is in any way inconsistent with their provisions. Nor is there anything in Mr Shrimptons contention that it is
unlawful for the Secretary of State in effect to implement the Dublin Convention, to which France is a signatory, before it comes
into force if France will accept obligations under or consistent with it.
According to Mr Daviess affidavit, the applicant had

direct evidence of Zairean asylum applicants not having their applications considered properly in France and being
returned to Zaire, where they are put in prison. The basis of his belief was conveyed to me in notes I took when
interviewing him at Gatwick.

Mr Davies exhibited those notes.

Matre Piquoiss affidavit shows that the French system for dealing with claims 83 for political asylum is not the same as the
English system, which is not altogether surprising, and that there have been complaints against both the system and the way in
which it is administered, something which is equally true of the English system. The French procedure for dealing with
applications for asylum involves a two-stage process. They are first referred to the Ministry of the Interior for a decision on
whether they merit detailed consideration. At this stage the applicant is held in the international zone or air side to use our
terminology. If they do, the applicant is granted the equivalent of temporary admission whilst such consideration is being
undertaken. If they do not, the applicant is not permitted to proceed beyond the international zone and is removed to another
country, usually that from which he came. Rights of appeal and representation are not usually accorded to those whose
applications are determined summarily and without being granted temporary admission.
In reply to Mr Daviess affidavit, Mr Sprunt, an official in the Home Office Immigration and Nationality Department, swore
an affidavit on 31 May in which he stated:

I refer to the affidavit of Matthew Kennedy Picton Davies sworn on 23rd May 1991 in these proceedings. I refer in
particular to paragraphs 4 and 5 of that affidavit where it is alleged the Applicant informed the Immigration Service he had
strong reasons for believing France would not be a safe third country and he has direct evidence of Zairean asylum
applicants not having their applications considered properly in France. The Home Office through its officials has regular
dealings with the French Authorities in asylum matters. On the basis of that experience France is regarded by the Home
Office as a safe third country which can be relied upon to meet its obligations under the United Nations Convention. This
view is shared by the United Nations High Commissioner for Refugees (UNHCR). Neither the Home Office nor the
UNHCR is aware of any instance of a citizen of Zaire being refouled by France. In this case the French Authorities have
confirmed that they will receive the Applicant should he be returned to France. In view of the delay caused by these
proceedings the United Kingdom immigration authorities have taken the exceptional course of seeking a prior assurance
from the French authorities. It is not the normal practice so to do.

In reply to Matre Piquoiss affidavit, Mr Sprunt swore a second affidavit dated 18 June, in which he stated:

3. Mr. Piquois outlines what he states to be the present procedure for the consideration of claims for asylum in France.
I have described to Peter Wrench, a grade 7 Officer at the Asylum and Special Cases Division of the Home Office, the
procedure for determining claims for asylum in France as outlined by Mr. Piquois in his said affidavit. I have also outlined
this procedure to Antonio Fortin, the Deputy Representative in the United Kingdom for the United Nations High
Commissioner of Refugees. I spoke to both Mr. Wrench and Mr. Fortin on 18th June 1991. Both Mr. Wrench and Mr.
Fortin confirm the procedure to be broadly correct. Mr. Wrench, from his own experience and from his discussions with
the French authorities, informed me that applications for asylum are initially referred to the French Ministry of the Interior.
Applicants whose claims are considered to be manifestly unfounded are not admitted to France. This procedure results in
the great majority of asylum seekers being allowed entry to France in order that their asylum claim is fully considered. Mr.
Fortin informs me that this 84 is his understanding of the French asylum determination procedure and practice. As a result
both the Secretary of State and the United Nations High Commissioner of Refugees are satisfied that the French authorities
can be relied upon to meet their obligations under the United Nations Convention.

4. Where the Secretary of State proposes to remove an Applicant back to France, in accordance with normal procedure
and accepted international practice, in cases similar to this, and where the Applicant has no legal representation, the United
Kingdom Immigrants Advisory Service (UKIAS) are given an opportunity to make representations to the Secretary of
State on behalf of the Applicant. I am not aware of any instance where UKIAS have objected to a removal to France on the
basis that France does not have a satisfactory procedure for determining claims for asylum in accordance with its
international obligations.
 5. At paragraph 8 of Mr Piquois affidavit he refers to three Zairean students whose allegations were originally brought
to the attention of the Secretary of State by the Respondent in his affidavit sworn on 14th June 1991. Mr. Piquos admits to
having no direct knowledge of these three cases. The Secretary of State also has no knowledge of these cases and is
therefore not in a position to comment upon these cases.

Unless it can be said that it is Wednesbury unreasonable (see Associated Provincial Picture Houses Ltd v Wednesbury Corp
[1947] 2 All ER 680, [1948] 1 KB 223) for the Secretary of State in the context of the applicants case to regard France as a safe
third country, his decision to remove the applicant to France is unimpeachable. On the evidence adduced any such contention is
unarguable and there are accordingly no grounds for granting leave to seek judicial review.

GLIDEWELL LJ. I have had the advantage of reading in draft the judgment of Lord Donaldson MR. I agree that the appeal
should be allowed, that the writ of habeas corpus should be set aside, and that the application for leave to move for judicial
review should be refused. As, however, we are discharging the order of Brooke J that the writ of habeas corpus be issued, I think
it right to set out shortly my own reasons for allowing the appeal. I emphasise that the argument that procedure by way of an
application for a writ of habeas corpus was not appropriate in the circumstances of this case was not advanced before Brooke J,
and it is therefore entirely understandable that he made no reference to it.
I gratefully adopt and do not repeat the recital of the facts, and of the earlier stages of the proceedings, in Lord Donaldson
MRs judgment.
It is common ground that Mr Muboyayi, his wife and child, being nationals of Zaire, might not lawfully enter the United
Kingdom unless given leave to do so (see the Immigration Act 1971, s 3(1)). By s 4 of the 1971 Act, the power to give or refuse
such leave is to be exercised by immigration officers, in this case by the Chief Immigration Officer, Gatwick Airport. In relation
to the exercising of that power, and the power to remove persons refused leave, Sch 2 to the 1971 Act applies. The combined
effect of paras 8(1) and 16(2) of Sch 2 is to empower an immigration officer to direct the captain and owners of the aircraft in
which the applicant for leave arrived to remove him from the United Kingdom and transport him to another country, which may
be the country in which he embarked, and to detain him pending his removal. It is common ground that in this case the
immigration officer acted under those powers, and his good faith in so doing is not challenged.
Mr Jay, for the Secretary of State, argues that the admitted fact that the officer 85 is detaining the applicant under the powers
given him by para 16(2) of Sch 2 is a conclusive answer to the writ of habeas corpus, which should therefore be discharged. It
follows, he submits further, that in a case such as this in which an applicant is refused leave to enter the United Kingdom and
thereupon detained pending removal, habeas corpus is an inappropriate remedy.
Mr Shrimpton, for Mr Muboyayi, argues that the fact that the detention under para 16(2) is consequent upon the refusal of
leave to enter is not a conclusive answer to the writ of habeas corpus. He submits that a court asked to issue a writ of habeas
corpus is entitled, and indeed required, to consider not merely the immediate answer, ie that detention under s 16(2) is lawful
because it follows the refusal of leave to enter, but also the underlying justification for the exercise of the power. Thus in this
case the court on the application for the writ is empowered to consider whether the immigration officer acted properly in deciding
to refuse leave to enter. This question the court should answer applying normal principles of administrative law.
Thus the issues are, where leave to enter has been refused and detention follows under para 16(2): (i) are those facts alone a
sufficient answer to a writ of habeas corpus? and if so (ii) is habeas corpus therefore an inappropriate remedy in such a case?
Whatever be the answer to these questions, it is also common ground that the propriety of the immigration officers decision
to refuse leave to enter can properly be challenged by way of judicial review, ie an application for an order of certiorari to quash
that decision. Such an application, of course, may only be made under RSC Ord 53 with the leave of the court. Moreover, Mr
Shrimpton argues that, while an application for leave was pending, the applicant might be removed from the United Kingdom in
accordance with the para 8 direction. To this latter point there are two answers, one in practice, the other in law. In practice, the
risk of this happening after leave to move for judicial review has been granted, or an application for such leave made, is
substantially lessened by the Home Office practice, in accordance with the statement set out in Lord Donaldson MRs judgment.
The answer in law is that the decision of this court in R v Secretary of State for Education and Science, ex p Avon CC [1991] 1
All ER 282, [1991] QB 558 that the court may order a stay of a ministerial decision is binding on this court. Doubt is, however,
cast on the correctness, or the expectation of life, of that authority as a result of the Privy Council decision in Minister of Foreign
Affairs Trade and Industry v Vehicles and Supplies Ltd [1991] 4 All ER 65, [1991] 1 WLR 550.
I return to the main issue we have to decide. It is clear that there are situations in which, on an application for a writ of
habeas corpus, the court has not been content to rely upon the apparent authority of the detainer as a sufficient answer to the writ,
but has considered whether that authority was properly and validly given. This is standard practice in relation to extradition.
Moreover, the courts have entertained such an inquiry in some cases of detention under para 16(2) of Sch 2 to the 1971 Act. All
such decisions of which I am aware, however, were cases in which it was alleged by the Home Office that the applicant for
habeas corpus was an illegal entrant into the United Kingdom in relation to whom directions for removal were given under para 9
of Sch 2, or leave to re-enter a second time was refused under para 8 (see eg Azam v Secretary of State for the Home Dept [1973]
2 All ER 765, [1974] AC 18 and the decisions of this court in R v Secretary of State for the Home Dept, ex p Khan [1980] 2 All
ER 337, [1980] 1 WLR 569, R v Secretary of State for the Home Dept, ex p Sultan Mahmood [1981] QB 58 and R v Secretary of
State for Home Dept, ex p Akhtar [1980] 2 All ER 735, [1981] QB 8646). In Khans case the challenge by habeas corpus
succeeded, and the writ was issued; in the other cases cited the writ was refused. In none of these cases did the court consider
whether habeas corpus was an appropriate remedy.
However, the Divisional Court and this court have considered whether habeas corpus is an appropriate remedy, or bound to
fail, in two cases of detention under para 16(2) of Sch 2. In R v Secretary of State for the Home Dept, ex p Mughal [1973] 1
WLR 1133 at 11351136 Lord Widgery CJ said:

The first question which one has got to consider is what is the proper approach to the issue on the proceedings now
before us, and where does the burden of proof lie, and what has to be established and by whom. To begin with, I would not
regard this as a true habeas corpus case. I say that because where a man is free in this country and going about his ordinary
business, and is arrested by the police and charged with being an illegal immigrant, his proper remedy is habeas corpus,
and the burden in such matters may very well not lie on him. I say deliberately may not lie on him because we have
other cases of the kind to which I have just referred coming before this court shortly where the matter will have to be
specially considered, and it is also to be remembered that in Reg. v. Governor of Pentonville Prison, Ex parte Azam ([1973]
2 All ER 741 at 750751, [1973] 2 WLR 949 at 960961), Lord Denning M.R. in the Court of Appeal emphasised that in a
true habeas corpus case it was not really open to the court to refuse the writ merely because some other procedure for
disposing of the issue might be more convenient. Also we have been referred today by Mr. Kadri to Reg. v. Governor of
Brixton Prison Governor, Ex parte Ahsan ([1969] 2 All ER 347, [1969] 2 QB 222), where a number of Commonwealth
immigrants who had entered this country and remained in this country for a period were arrested, and who sought relief,
and properly so, by an application for habeas corpus. The issue in that case was whether they had been apprehended within
24 hours of their arrival, and this court held on the application for habeas corpus that it was the duty of the authorities to
establish that they had been in this country for less than that period, and not the duty of the immigrants to show that they
had been in for longer. I find all that quite consistent with a general proposition that a man walking freely in this country
who is arrested under this legislation can properly seek habeas corpus with the sort of consequence to which I have
referred. But this is not in truth a habeas corpus matter at all, because it is quite clear that the immigration officer when
 refusing him permission did act within his jurisdiction. Accordingly the answer to the writ of habeas corpus in this case
will at once be the decision to refuse him admission which was given by the immigration officer.

The court refused to issue the writ. The point was not referred to in the judgments in this court, which dismissed the appeal.
R v Secretary of State for the Home Dept, ex p Phansopkar [1975] 3 All ER 497, [1976] QB 606 was a straightforward case
in which leave to enter the United Kingdom was refused to a lady who did not hold a current entry certificate. She applied for
habeas corpus, certiorari and mandamus. Refusing the application, Lord Widgery CJ in the Divisional Court said ([1975] 3 All
ER 497 at 501, [1976] QB 606 at 611):

as has been said more than once in the past, this type of case is not really a habeas corpus case at all.

This court allowed the appeal in relation to mandamus, but not in relation to 87 habeas corpus or certiorari. Lord Denning
MR said ([1975] 3 All ER 497 at 508, [1976] QB 606 at 622):

Nor do I see any ground for habeas corpus. The immigration officer was authorised to detain under paras 2 and 16 of
Sch 2 to the 1971 Act, and to give temporary admission under para 21.

Lawton LJ said ([1975] 3 All ER 497 at 510, [1976] QB 606 at 625):

Both these appellants had their cases considered under s 1(2). They were given notice of refusal of leave to enter
which referred to their lack of current entry certificates, not of certificates of patriality. These notices were issued under
para 6 of Sch 2 to the 1971 Act. They were correct in form. As the appellants were not in possession of certificates of
patriality, they could not prove their right to enter. They could only get in if they could bring themselves under s 1(2)
which they could not do because they had no entry certificates. It follows that the claim to have the notices of refusal
quashed by orders in the nature of certiorari fail as does Mrs Phansopkars claim to habeas corpus. Once she had been
lawfully refused leave to enter, she could be detained under para 16 of Sch 2.

What, then, distinguishes the cases in which, on a refusal of leave to enter the United Kingdom which is challenged by an
application for a writ of habeas corpus, it is a sufficient answer for the immigration officer to say that he was acting under the
powers given him by paras 8 and 16(2) of Sch 2 from those in which the officer must go further and show that he had sound
reasons for his refusal to grant leave to enter? In my view the answer to the question is that, in the first category, the immigration
officer need not be satisfied of any facts other than those which are admitted; in the second category, the officer must have
evidence which establishes, to the required standard, the existence of some precedent facts.
Thus, if a foreign national, who neither has nor claims to have a right of abode in the United Kingdom, seeks leave to enter,
the immigration officer is entitled on those facts to refuse leave to order his removal and to detain him pending removal. There is
no obligation on the officer to be able to prove any other facts. If the would-be entrant has himself sought to prove particular
facts which he claims justify him being granted leave to enter (eg that he is a refugee), and argues that the officer failed to take
them into account, his remedy is judicial review, not habeas corpus.
But if, as in Khawaja v Secretary of State for the Home Dept [1983] 1 All ER 765, [1984] AC 74 and similar cases, a person
has earlier been granted leave to enter the United Kingdom, and the Home Office receives information that he is an illegal entrant
because he obtained that leave by deception, the Home Office must be in a position to prove that precedent fact to the required
standard. If he has left the United Kingdom and, on seeking leave to re-enter, is refused leave on this ground, there is equally an
obligation on the immigration officer to have evidence proving the earlier illegal entry. If then he is detained under para 16(2) the
question whether he did obtain his earlier leave by deception may properly be raised by an application for habeas corpus.
For these reasons, in addition to those contained in the judgment of Lord Donaldson MR, I agree that this appeal should
succeed and the writ of habeas corpus be set aside. I wish to make only two further brief comments.
Firstly, it follows that I agree with the brief passage cited by Lord Donaldson MR from his judgment in R v Secretary of
State for the Home Dept, ex p Turkoglu 88[1987] 2 All ER 823, [1988] QB 398, in relation to the facts of that case. Secondly, in
view of the Home Secretarys undertaking set out in Lord Donaldson MRs judgment, I do not wish to express a view about his
suggestion that the removal of a would-be entrant might be temporarily stayed by the use of the power to issue a writ of habeas
corpus quia timet, or by the adaptation of the old writ of ne exeat regno. A debate on those questions, interesting though it would
be, can be left to a later case.
On the application for leave to apply for judicial review, I agree entirely with Lord Donaldson MRs reasoning, and would
therefore refuse this application.

TAYLOR LJ. The primary point raised on this appeal is whether habeas corpus is available to the applicant as the appropriate
mode of challenging the Secretary of States decision not to permit him entry and not to consider his application for asylum. I
agree with Lord Donaldson MR and Glidewell LJ that it is not.
The applicant was detained pursuant to para 16(2) of Sch 2 to the Immigration Act 1971. He accepts that he was in fact
refused entry. Accordingly there was power to detain him under para 16(2) unless the anterior decision to refuse entry could be
successfully attacked. The applicant does not therefore challenge his detention on grounds of jurisdiction but because he says the
Secretary of State should have admitted him to the United Kingdom, considered his application for political asylum and granted
it. Mr Shrimpton contends that the writ of habeas corpus can be used to challenge not merely the vires or jurisdictional authority
for detention but the reasons for the anterior decision to refuse entry. He seeks by analogy with Khawaja v Secretary of State for
the Home Dept [1983] 1 All ER 765, [1984] AC 74 to argue that the court can in habeas corpus proceedings examine and
determine the precedent facts upon which the decision to detain was based. However, in Khawajas case the precedent fact to be
determined was whether the applicant was an illegal entrant or not. If he had entered the United Kingdom by fraud he was an
illegal entrant and lawfully detained. If not, his detention was unlawful. The House of Lords made it clear that what the court
could consider, beyond the jurisdiction to detain, was whether an objective fact necessary to justify the detention was established.
Thus, Lord Scarman said ([1983] 1 All ER 765 at 781, [1984] AC 74 at 110):

in the common law habeas corpus was itself of limited scope, though a rapid and effective remedy where it
applied. It brought the gaoler and his prisoner into court; but, if the respondents return to the writ was valid on its face,
that was the end of the matter. The court could not take the case further. The great statute of 1816, Habeas Corpus Act
1816, An Act for more effectually securing the Liberty of the Subject, substantially extended the scope of the process. It
conferred on the judges the power in non-criminal cases to inquire into the truth of the facts contained in the return.
Section 3 is the beginning of the modern jurisprudence, the effect of which is to displace, unless Parliament by plain words
otherwise provides, the Wednesbury principle in cases where liberty is infringed by an act of the executive [see Associated
Provincial Picture Houses Ltd v Wednesbury Corp [1947] 2 All ER 680, [1948] 1 KB 228]. The section deserves
quotation: In all cases provided for by this Act, although the return to any writ of habeas corpus shall be good and
sufficient in law, it shall be lawful for the justice or baron before whom such writ may be returnable, to proceed to examine
into the truth of the facts set forth in such return and to do therein as to justice shall appertain The courts duty is
to examine into the truth of the facts set 89 forth in the return: the section thereby contemplates the possibility of an
 investigation by the court so that it may satisfy itself where the truth lies. There is here a principle which the judges, faced
with decisions by statutory authorities which restrict or take away liberty, have accepted as being justly met by the rule, the
existence of which was recognised in Zamir v Secretary of State for the Home Dept [1980] 2 All ER 768, [1980] AC 930
though not applied, that where the exercise of executive power depends upon the precedent establishment of an objective
fact, the courts will decide whether the requirement has been satisfied.

Here, what Mr Shrimpton wishes to attack by habeas corpus is an administrative decision to refuse entry which involves making
a judgment after consideration of a number of circumstances and factors. That is quite different from challenging an objective
precedent fact. I would reject this attempt to extend the principle laid down in Khawajas case to allow habeas corpus to cover
the review of administrative decisions which are properly within the wide scope of judicial review as it has developed in recent
years. Leave is required to move for judicial review of such administrative decisions so that, in the interests of good
administration, cases cannot be brought and fought so as to frustrate administrative action in hopeless circumstances. Whilst I
appreciate that ex hypothesi we are concerned here with cases involving liberty of the subject, I do not consider that applications
for habeas corpus, which require no leave, can be admitted to attack such administrative decisions provided that other effective
means for challenging the basis of the detention are available.
I therefore agree that the right mode of challenge to the Secretary of States refusal of entry and the refusal to consider the
application for asylum here was by judicial review. I also agree that, an application for leave to move for judicial review having
been entertained by this court, there were on the evidence no grounds for granting it for the reasons given by Lord Donaldson
MR.
That is sufficient to decide this case. However, the circumstances in which it came before Brooke J raise grave anxiety as to
the need for machinery to enable judicial review in this class of case to be made an effective procedure. It would be a mockery of
justice if an applicant for asylum, refused entry, threatened with removal and possible return to the country he fears, could be
granted leave for judicial review but be flown out of the country before his case was determined. Should his fears prove well
founded it would be little comfort to his relatives to hear that his application for judicial review had been allowed posthumously.
It is true that in the course of this appeal the Secretary of State has helpfully put forward the statement of policy set out by
Lord Donaldson MR. That policy adopts a humane approach. But, (a) policies may be changed, (b) cases must be considered
individually and exemption from the application of the policy might be thought justified and (c) although para 3 of the policy
provides that notice of removal directions will be adequate to enable an application for judicial review to be made, it raises the
prospect of a race against time which could well produce eleventh hour crises and possible removals through inadvertence or
time running out.
It is therefore essential that the courts should provide against its determinations being made in vain. Two principle
procedures to achieve this end have been suggested. First, the grant of a stay. I adhere to my support for the reasoning of my
Lord, Glidewell LJ, in R v Secretary of State for Education and Science, ex p Avon CC [1991] 1 All ER 282, [1991] 1 QB 558. If
the Secretary of State is willing to give an undertaking not to remove a particular applicant until his proceedings for 90 judicial
review are determined, all well and good. If not, a stay on the administrative proceedings flowing from his removal directions
would seem the simplest and most logical way of preserving the status quo pending the courts determination. It is submitted that
the decision in the Avon case may not be upheld by the House of Lords (a) because it involves enjoining the Crown and (b)
because proceedings should be held to mean judicial proceedings only. In Minister for Foreign Affairs Trade and Industry v
Vehicles and Supplies Ltd [1991] 4 All ER 65, [1991] 1 WLR 550, a Privy Council case, Lord Oliver, giving the advice of the
Board, held that proceedings relates to judicial proceedings not to executive decisions. However, the case was concerned with
the Jamaican Judicature (Civil Procedure Code) Law and s 564B thereof is in different terms from those contained in RSC Ord
53, r 3(10). Further, the Avon case was not cited to the Privy Council.
If a stay cannot be granted, then I see no reason why habeas corpus should not be available to transfer the custody of the
applicant from the control of the immigration authorities to the control of the courts. On this issue I would add only a few
observations to those of Lord Donaldson MR, with which I agree. The basis for the use of habeas corpus in this context would be
that, although the detention was not presently shown to be unlawful, the issue of its legality was before the court on grounds
shown by the grant of leave to be arguable. The court must inherently have the power to prevent its decision from being pre-
empted by administrative action. The great writ of habeas corpus has over the centuries been a flexible remedy adaptable to
changing circumstances. Time was when it was used in conjunction with certiorari in a manner characterised as certiorari in aid
of habeas corpus. I see no reason why, in the changed circumstances of the 1990s and especially in immigration cases involving
applicants entering and being removed from the jurisdiction, the roles of these two remedies should not be reversed so as to
provide habeas corpus in aid of certiorari.

Appeal allowed. Writ of habeas corpus set aside. Leave to apply for judicial review refused. Leave to appeal to the House of
Lords refused.

Solicitors: Treasury Solicitor; Wilson & Co.

Frances Rustin Barrister.

91
[1991] 4 All ER 92

Woolwich Equitable Building Society v Inland Revenue Commissioners

TAXATION; Income Tax: BANKING & FINANCE

HOUSE OF LORDS
LORD KEITH OF KINKEL, LORD BRIGHTMAN, LORD OLIVER OF AYLMERTON, LORD GOFF OF CHIEVELEY AND LORD LOWRY
11, 12, 13, 18, 19, 20, 21 JUNE, 25 OCTOBER 1990

Income tax Building society Interest and dividends paid to depositors Transitional provision in respect of on payments of
interest and dividends in 198586 Transitional provision made by regulations made pursuant to income tax legislation
Regulations charging tax on interest and dividends paid by building societies between end of accounting period ending in 1985
86 and 1 March 1986 Whether regulations ultra vires Income and Corporation Taxes Act 1970, s 343 (1A) Finance Act
1986, s 47(1) Income Tax (Building Societies) Regulations 1986, regs 3, 11.Statutory instrument Validity Part of instrument
invalid Severance of invalid part Effect of severance Validity of remaining part Test Alteration of substance of
remaining part Taxing regulation Invalid part specifying rate of tax Severance of invalid part resulting in remaining part
providing for different rate of tax from that contemplated by taxing authority Whether whole provision invalid Income Tax
(Building Societies) Regulations 1986, reg 11.

Before the tax year 198687 building societies, including the appellant, paid to the Revenue a lump sum representing income tax
on interest and dividends paid to investors in the year of assessment pursuant to voluntary annual arrangements entered into with
the Revenue under s 343(1)a of the Income and Corporation Taxes Act 1970. The amount so paid to the Revenue by a society
was calculated by reference to payments to investors shown in the societys annual accounts and was paid on 1 January of the
year of assessment. In the case of the appellant, whose accounting year ended on 30 September each year, the amount paid for
198586 only took into account payments to investors up to 30 September 1985, with the result that interest paid during the
period from 1 October 1985 to 5 April 1986 (the gap period) was not taken into account in calculating the amount payable to the
Revenue on 1 January 1986. In 1986 the Board of Inland Revenue made the Income Tax (Building Societies) Regulations 1986
under powers conferred by s 343(1A)b of the 1970 Act to make regulations requiring building societies to account for amounts
representing income tax for the year 198687 and subsequent years calculated in part at the basic rate and in part at a reduced
rate. Regulation 3c required building societies to pay tax in respect of payments of dividends or interest made after February
1986. Regulation 7d provided for the payment of tax on a quarterly basis in respect of interest actually paid or credited in the
quarter concerned. Regulation 11 e contained transitional provisions requiring building societies to account for tax in respect of
interest payments made to investors after the end of the last accounting period in 198586 but before 1 March 1986, ie during the
gap period, with the result that sums shown accrued due in the appellants accounts for the year ended 30 September 921985 but
actually paid after the end of the appellants accounting year would be brought into account for the purpose of the regulations
even though account of them had already been taken for the purpose of the arrangements for that year. Regulation 11(4)
purported to charge tax at the 198586 rates in respect of the sum so brought into account. The appellant challenged the validity
of the 1986 regulations by an application for judicial review but before the hearing of the application s 343(1A) f of the 1970 Act
was amended by s 47g of the Finance Act 1986, which provided that s 343(1A) should have effect and be deemed always to
have had effect as providing for regulations to be made requiring building societies to account for sums paid or credited before
the beginning of the year but not previously brought into account. The judge granted the application and declared that reg 11
was void in its entirety and that the 1986 regulations were void in so far as they purported to apply to payments and receipts prior
to 6 April 1986. The Crown appealed, contending that for the purposes of s 343(1A) as amended the omitted sums consisted of
sums paid or credited before the beginning of 198687 but not previously brought into account under s 343(1). The Crown
conceded that reg 11(4) was ultra vires in charging tax at the 198586 rates in respect of the sum so brought into account, but
submitted that the partial invalidity did not invalidate the rest of reg 11. The Court of Appeal allowed the appeal on the ground
that Parliament in enacting s 47 of the 1986 Act had clearly intended retrospectively to put an end to the appellants challenge to
the validity of the regulations and that the admittedly invalid reg 11(4) was severable. The appellant appealed to the House of
Lords.
________________________________________
a Section 343(1), so far as material, is set out at p 96 d e, post.
b Section 343(1A) is set out at p 98 c d, post.
c Regulation 3, so far as material, is set out at p 99 e, post.
d Regulation 7, so far as material, is set out at p 99 g, post.
e Regulation 11 is set out at p 100 a to h, post.
f Section 343(1A), as amended, is set out at p 111 f to h, post.
g Section 47, so far as material, is set out at p 101 j, post.

Held (1) (Lord Lowry dissenting) Section 343(1A) of the 1970 Act as retrospectively amended by s 47 of the 1986 Act, read in
its ordinary and natural meaning, clearly authorised the Revenue to make regulations requiring, in respect of identified years of
assessment, payment of an amount representing income tax on any sums paid before the year in question and not previously
brought into account and therefore authorised the taxation in the 198687 year of assessment of a sum in respect of interest in
fact paid before the commencement of that year. Furthermore, in view of the irresistible conclusion that Parliament intended to
enable the Revenue to take account of and to charge to tax sums which it regarded as otherwise representing windfalls in the
hands of building societies, the presumption against double taxation and the presumption that income tax, being an annual tax,
was only payable on the income of a particular year were clearly rebutted by the express words used in the subsection and the
circumstances surrounding the legislation, and the inevitable inference was that Parliament intended that those presumptions
should not apply (see p 94 j, p 102 g h, p 103 f g, p 104 b c and p 107 g, post).
(2) In determining the effect of the admittedly ultra vires reg 11(4) of the 1986 regulations the test was whether excision of
para (4) would so alter the substance of what would be left that it would become a substantially different provision from what it
was before the excision, and if it did so it could not be assumed that Parliament would have enacted it in its altered form, with the
result that the whole regulation would be invalid. Since the excision of para (4) meant that reg 11 would provide for rates of tax
different from those intended or contemplated by the Revenue, thus making the provision a substantially different one from what
it was before deletion, and since it could not be assumed that reg 11 would have been made in its altered form, the regulation was
invalid in toto. Accordingly, 93the whole of reg 11 and reg 3 so far as it related to sums paid or credited after 28 February and
before 6 April 1986 were void. The appeal would therefore be allowed (see p 94 j, p 104 g h, p 105 j to p 106 b d g, p 107 c to f,
p 108 e to h, p 109 a to f j and p 124 b, post).

Notes
For payment of tax by building societies, see 4 Halsburys Laws (4th edn) para 1512, and for regulations for the deduction of tax,
see 23 Halsburys Laws (4th edn reissue) para 1391.
In relation to tax for the year 198889 and subsequent years of assessment s 343(so far as not spent or otherwise repealed) of
the Income and Corporation Taxes Act 1970 was replaced by s 476 of the Income and Corporation Taxes Act 1988. For s 476 of
the 1988 Act, see 44 Halsburys Statutes (4th edn) 572.
For the Income Tax (Building Societies) Regulations 1986, regs 3, 11, see 19 Halsburys Statutory Instruments 161, 165.

Cases referred to in opinions

DPP v Hutchinson [1990] 2 All ER 836, [1990] 2 AC 783, [1990] 3 WLR 196, HL.
Duckering (Inspector of Taxes) v Gollan [1965] 2 All ER 115, [1965] 1 WLR 680, HL; affg [1964] 3 All ER 95, [1964] 1 WLR
1178, CA; rvsg [1964] 1 All ER 556, [1964] 1 WLR 414.
Partington v A-G (1869) LR 4 HL 100.

Appeal
Woolwich Equitable Building Society (Woolwich) appealed with the leave of the Court of Appeal from the decision of that court
(Sir Nicolas Browne-Wilkinson V-C, Parker LJ and Sir Roualeyn Cumming-Bruce) ([1989] STC 463) on 12 April 1989 allowing
in part an appeal by the Crown from the decision of Nolan J ([1987] STC 654) hearing the Crown Office list on 31 July 1987
granting an application by Woolwich for judicial review of the Income Tax (Building Societies) Regulations 1986, SI 1986/482,
by way of a declaration that reg 11 of those regulations was void in its entirety and that the remainder of those regulations were
void in so far as they purported to apply to sums paid or credited by Woolwich prior to 6 April 1986. The facts are set out in the
opinion of Lord Oliver.

John Gardiner QC, Nicholas Underhill and Jonathan Peacock for Woolwich;.
S A Stamler QC and Alan Moses QC for the Crown.

Their Lordships took time for consideration.25 October 1990. The following opinions were delivered.

25 October 1990. The following opinions were delivered.

LORD KEITH OF KINKEL. My Lords, I have had the opportunity of considering in draft the speech to be delivered by my
noble and learned friend Lord Oliver. I agree with it, and would allow the appeal for the reasons he gives.

LORD BRIGHTMAN. My Lords, I also have considered in draft the speech to be delivered by my noble and learned friend
Lord Oliver, and for the reasons given by him would allow the appeal.
94

LORD OLIVER OF AYLMERTON. My Lords, the appellants in this appeal, to whom it may be convenient to refer simply as
Woolwich, call in question the validity of regulations made pursuant to s 343(1A) of the Income and Corporation Taxes Act
1970, which they claim were ultra vires. The question reduces, in the end, to a short, but by no means simple, question of
construction of the relevant statutory provisions, but in order to understand the problem it is necessary to say something of the
historical background to the section. This has been conveniently and intelligibly set out in the judgment of Nolan J in the High
Court ([1987] STC 654) and to do more than merely to summarise it would be a work of supererogation.
The collection of income tax from the recipients of annual interest and dividends by means of deduction at source, enshrined
at the date of the commencement of these proceedings in ss 52, 53 and 232 of the 1970 Act, is a system which has been
established for many years and would, but for the arrangements described below, have applied to investment income from
building societies in the same way as it applied to other investment income. Under this system, income tax at the basic rate is
accounted for to the Revenue by the paying institution and the recipient is treated, for tax purposes, as having received a grossed-
up amount which, after deduction of tax at the basic rate, is equal to the income actually received by him. If he is a high-rate
taxpayer he pays additional tax on that amount. If his total income is such that he is not liable to pay even basic rate tax, he is
entitled to reclaim the tax deducted or the appropriate proportion of it from the Revenue.
Building societies have traditionally provided a safe and simple form of investment for persons of relatively modest means,
many of whom are not liable to pay basic rate income tax on the whole of their income, a circumstance which would either have
given rise to a very large number of small repayment claims or would have resulted in the Revenue retaining more tax than was
actually due owing to the failure of investors, either from ignorance of the law or inertia, to make claims for repayment.
Accordingly, in the year 1894, the Revenue offered to the building societies two alternative arrangements, A and B, for the
discharge of the tax liability of investors in a way which obviated the necessity for claims for repayment. Under arrangement
B, which was the one elected by Woolwich, the society discharged the liability for income tax payable in the tax year 189495
in respect of interest paid to its investors by paying to the Revenue tax at one-half of the standard rate on the amount of interest
paid and in practice this was, then and thereafter, treated as applying equally to dividends. The purpose of this was to achieve a
position of revenue neutrality, the calculation being that the Revenue would thus receive, as nearly as may be, the same amount
in tax as it would have received under the ordinary system of tax deduction if investors qualified to make repayment claims had
availed themselves of their right to do so.
The basic features of this arrangement have been repeated in each year since 1895 up to and including the tax year 198586,
although there have been refinements. In 1925 a distinction was made between investors who were clearly liable for tax at the
basic rate, such as corporate investors or commercial undertakings, and individual investors. As regards interest or dividends
paid to the former, the societies account for tax at the basic rate, whilst as regards the latter, they accounted for a reduced rate of
tax which was arrived at each year on the basis of statistical evidence and was calculated to produce a position of revenue
neutrality. An important complication in this procedure, which has given rise to the problem raised by this appeal, is that, no
doubt for administrative convenience 95 both to the societies and to the Revenue, the amount payable under each annual
arrangement was calculated not by reference to the payments made in the actual fiscal year for which the tax was due but by
reference to the payments shown as made or accrued in each societys annual accounts. Originally it was calculated by reference
to the accounts of the accounting period ending in the previous year of assessment, but in the year 194041 societies were given
the right to elect, once and for all for that and all subsequent years, that the calculation should be based on the accounts for each
societys accounting year ending in the current year of assessment. Woolwich, whose accounting years end on 30 September in
each year, made that election.
These arrangements, which were entirely voluntary on the part of the societies, were renewed annually and were, up to
1951, entirely extra-statutory. Section 23 of the Finance Act 1951, however, accorded them statutory recognition and from 1970
until the end of the tax year 198586 they were regulated by s 343 of the 1970 Act.
Sections 343(1) provided:

The Board and any building society may, as respects any year of assessment, enter into arrangements whereby( a) on
such sums as may be determined in accordance with the arrangements the society is liable to account for and pay an
amount representing income tax calculated in part at the basic rate and in part at a reduced rate which takes into account the
operation of the subsequent provisions of this section; and (b) provision is made for any incidental or consequential
matters, and any such arrangements shall have effect notwithstanding anything in this Act

There followed a proviso obliging the Board to secure the position of tax neutrality already referred to. It is unnecessary to set it
out here, for, as will be seen, the Finance Act 1984 transferred the function of fixing the reduced rate for the purposes of the
section from the Board to the Treasury and s 26(3) of that Act contained provisions to the same effect, to the terms of which I will
refer a little later. Section 343(2) provided for the deduction of dividends and interest paid for the purposes of the societys
corporation tax and also regulated the treatment for corporation tax purposes of dividends and interest paid by a society to
company investors. The position of investors in and borrowers from a building society are dealt with in sub-ss (3) and (4), which,
so far as material, provide:

(3) Where any arrangements under this section are in force in the case of any society as respects any year of
assessment(a) notwithstanding anything in Part II of this Act, income tax shall not be deducted from any dividends or
 interest payable in that year in respect of shares in or deposits with or loans to that society, ( b) subject to subsection (2)(b)
above no repayment of income tax and, subject to paragraph (i) of the proviso below, no assessment to income tax shall be
made in respect of any such dividends or interest on or to the person receiving or entitled to the dividends or interest, ( c)
any amounts paid or credited in respect of any such dividends or interest shall, in computing the total income of an
individual entitled thereto, be treated as income for that year received by him after deduction of income tax from a
corresponding gross amount Provided that(i) paragraph (b) above shall not prevent an assessment in respect of
income tax at a rate other than the basic rate; (ii) for the purpose of determining whether any or what amount of tax is, by
virtue of paragraph (c) above, to be taken into account as having been deducted from a gross amount in the case of an
individual whose total 96 income is reduced by any deductions so much only of that gross amount shall be taken into
account as is part of his total income as so reduced

(4) Where any arrangements under this section are in force in the case of any society as respects any year of assessment
then, notwithstanding anything in Part II of this Act, income tax shall not be deducted upon payment to the society of any
interest on advances, being interest payable in that year.
Thus it will be seen that the payment by a society under an arrangement made under this section in any year of assessment has the
effect of discharging entirely any liability for individual investors for basic rate tax on dividends or interest received by them in
that year of assessment even though, as previously noted, the amount representing income tax is in fact calculated not on the
income actually received in that year but on those sums which have been paid or accrued in the societys accounts for the
accounting period ending in that year. So long, of course, as successive arrangements continue to be made on the same basis,
amounts paid during the period between the end of the societys accounting year and the beginning of the next year of assessment
will be brought into account for the purposes of the computation of the societys liability in that year of assessment. If, however,
the arrangement is discontinuedif, for instance, the society declines to enter into an arrangement for the next year of assessment
and elects to deduct and account for tax on dividends and interest actually paid in that year of assessmentthere will be what has
been referred to as a gap period which will never be brought into account. That is, in effect, what has occurred in this case and
it is this that has given rise to these proceedings.
Just to complete the picture, under s 343 as it originally stood there are two further matters which ought to be mentioned.
Obviously in the case of any building society whose accounting year-end did not coincide with the end of the fiscal year the
amounts on which tax fell to be calculated straddled two financial years in respect of which different rates of tax might be
applicable. Thus from the year 197576 onwards the practice was to apportion dividends and interest paid on a time basis and to
calculate the reduced rate separately for each apportioned part according to the tax rate for the actual year of assessment into
which it fell. Secondly, and no doubt for administrative convenience, it was the universal rule that the tax payable by each
society under the arrangement was paid on 1 January of the year of assessment to which the arrangement related.
The 1984 Act introduced new arrangements with regard to tax on interest payments on bank deposits and, as already
mentioned, transferred to the Treasury the responsibility for fixing the reduced rate in each year for arrangements with buildings
societies under s 343. The proviso to sub-s (1) of that section was repealed and was replaced by s 26(3) of the 1984 Act, which
was in the following terms:

Whenever they exercise their powers under this section the Treasury shall aim at securing that (assuming for the
purposes of this subsection that the amounts payable by building societies under section 343 of the Taxes Act and by
deposit-takers under section 27 of this Act are income tax) the total income tax becoming payable to, and not being
repayable by, the Crown is (when regard is had to the operation of those sections) as nearly as may be the same in the
aggregate as it would have been if those sections had not been enacted.

In his budget statement delivered on 19 March 1985 the Chancellor of the Exchequer indicated that since, on 6 April of that
year, the banks were to move over to the composite rate system for the payment of tax on bank interest (which 97 tax, I observe
in parenthesis, was accounted for quarterly and calculated on payments made or credited during the quarter) it was now necessary
to put the building societies payments onto a similar footing as from the beginning of the following tax year. For reasons which,
I confess, are not entirely clear to me, Parliament determined to effect this, not directly by primary legislation, but by
empowering the Board of Inland Revenue to introduce the new system by regulation. By s 40 of the Finance Act 1985, s 343(1)
of the 1970 Act was amended by adding to the words in respect of any year of assessment the words ending before 6 April
1986, thus terminating, as from that date, the system of annual voluntary arrangements. Two new subsections, numbered
respectively (1A) and (1B), were added in the following terms:

(1A) The Board may by regulations made by statutory instrument make provision with respect to the year 198687
and any subsequent year of assessment requiring building societies, on such sums as may be determined in accordance with
the regulations, to account for and pay an amount representing income tax calculated in part at the basic rate and in part at
the reduced rate determined for the year of assessment concerned under section 26(1)(a) of the Finance Act 1984; and any
such regulations may contain such incidental and consequential provisions as appear to the Board to be appropriate,
including provisions requiring the making of returns.
(1B) A statutory instrument made in the exercise of the power conferred by subsection (1A) above shall be subject to
annulment in pursuance of a resolution of the Commons House of Parliament.

At the same time amendments, to take effect for the year 198687 and subsequent years, were made to sub-ss (2) and (3) to
substitute reference to the regulations under sub-s (1A) for references to arrangements made under sub-s (1).
So matters stood on 25 October 1985 when Woolwich entered into arrangements under the amended s 343(1) for the year of
assessment 198586. Under those arrangements a sum of 138,201,856 became payable in respect of dividends and interest
payable during that year of assessment, such sum being calculated in the usual way on the sums shown as paid or credited in
Woolwichs accounts for the financial year ended 30 September 1985. These arrangements, by virtue of s 343(3), had the effect
of discharging once and for all any liability of investors for basic rate tax on dividends or interest paid to them by the society
during that year of assessment and on 1 January 1985 the sum was duly paid, thus discharging in full the societys liability to the
Revenue under the arrangements.
On 13 March 1986 the Commissioners of Inland Revenue made regulations (the Income Tax (Building Societies)
Regulations 1986, SI 1986/482), the broad effect of which was, as from 6 April 1986, to impose on the building societies a
compulsory system of collection of tax in respect of dividends and interest paid and to require the tax to be accounted for
quarterly and to be calculated in each quarter not, as previously, on the sums shown in the audited accounts ending in the year
then current but on the sums actually paid or credited in the quarter concerned. The quarter days were fixed, presumably as a
matter of administrative convenience, as the last days of February, May, August and November. These regulations were laid
before Parliament on 14 March 1986 and came into operation on 6 April 1986.
It can readily be seen that, in the absence of any further taxing provision, the effect of a changeover from calculating the tax
payable by reference to each societys annual accounts for the year ending in the current year of assessment (198586) to
calculation on the actual payments made during the year of 98 assessment (198687) would have the result that payments made
or credited between the end of the accounting year and 6 April 1986 would never be brought into account for the purposes of
calculating the tax payable, for they related to the year 198586, the tax liability for which had already been discharged by the
arrangements made for that year. On one view of the matter this is an entirely equitable result because, it is argued, if one goes
back through the years, there must have been, when arrangements first came to be made on the basis of the societys annual
accounts, an element of double counting which balances the period falling out of account. Whether that is right or wrong in fact,
the commissioners were clearly of the view that provision was required to prevent sums paid during the gap period from
escaping, as they would put it, liability for tax. It was quite evidently with this in mind that they introduced into the 1986
regulations transitional provisions designed to bring these sums into account. The question is whether, on their true construction,
the provisions of s 343(1A) enabled them to do so.
Turning now to the 1986 regulations, reg 2 contains a number of definitions, the material one for present purposes being
payment, which is defined to include credit, and payment quarter, meaning a period of three months ending with the last
day of February, May, August or November. The obligation on a building society to pay taxthat is the charging provisionis
in reg 3, which, for relevant purposes, provides:

a building society shall pay to the Board on the relevant payment date for each payment quarter or other period to
which Regulation 7 applies, in respect of any payments of dividends or interest made after February 1986, a sum made
up of the reduced rate amount and the basic rate amount for that payment quarter or period.

Regulation 7 (which deals with the collection of amounts in respect of income tax payable) incorporates Sch 20 to the Finance
Act 1972 and applies it to building societies with certain modifications. Broadly that schedule regulates the collection of income
tax from companies, imposes a duty to make returns and provides for payment to be due without assessment. As regards the
obligation to make returns in the case of a building society, reg 7(3)(d) provides that a return shall be made for

(a) each complete payment quarter within the accounting period, beginning with the payment quarter ending 31st May
1986; (b) each part of an accounting period being a part which begins after February 1986 and which is not a complete
payment quarter.

Paragraph 5 of Sch 20 enables a company to set off against its tax liability the tax on payments which it itself has received under
deduction of tax. Regulation 7(3)(e) applies this only in relation to payments received after February 1986. Regulation 4(1)
applies the reduced rate amount to dividends and interest paid (in broad terms) to individuals and reg 5 applies the basic rate
amount (again in broad terms) to payments made to corporate investors beneficially entitled.
It will be seen, therefore, that reg 3 has the effect of charging to tax in 198687 payments which in fact were made between
28 February 1986 and 6 April 1986, that is to say during the year of assessment 198586. This forms one branch of Woolwichs
attack on the validity of the 1986 regulations. The same point, but of greater quantitative importance, arises in relation to reg 11,
which contains transitional provision designed to charge to tax any balance of dividends and interest paid during 198586
between the end of a societys accounting year and 9928 February 1986. It is headed: Transitionalpayments in 198586 not
taken into account under 198586 arrangements and provides:

(1) This Regulation applies with respect to any payment by a building society, after the end of the societys last
accounting period which ends in the year 198586, but before the 1st March 1986(a) made to an investor by way of
dividends or interest in respect of an investment; or (b) which is a section 53 payment.

(2) Subject to the provisions of these Regulations, any such payment shall be treated in all respects as a payment to
which these Regulations apply and as made in the payment quarter to which the payment dates specified in paragraph (3)
below relate.
(3) The accounting periods concerned, the specified payment dates to which paragraph (2) refers, and the amounts in
respect of the sum payable to the Board to which Regulation 3 applies which shall be payable on or before those dates, are
as follows:

Accounting period ending

Payment Date
Amount
In December 1985, January or February 1986
14 March 1987
The Whole
In September, October or November 1985
14 March 1987
14 March 1988
One half
One half
In June , July or August 1985
14 March 1987
One third

14 March 1988
One third

14 March 1989
One third
Before June 1985
14 March 1987
One quarter

14 March 1988
One quarter

14 March 1989
One quarter

14 March 1990
One quarter

(Publishers Note: Refer to printed volume for illustrative material)

 (4) Subject to paragraph (5), the sum payable to the Board to which paragraph (3) refers is the sum of the reduced rate
amount arrived at by reference to a rate of 2525 per cent. and the basic rate amount arrived at by reference to a rate of 30
per cent.
(5) Regulation 7(3) shall apply for the purposes of this Regulation with the substitution of the following paragraph for
paragraph (e)(e) as if, for the purposes of paragraph 5 (set off against companys income tax payable), the period
from the end of the societys last accounting period ending in the year 198586 down to the end of February 1986 were an
accounting period.
(The reference in para (1)(b) to a section 53 payment is a reference to payment by building societies of annuities or other annual
payments from which tax is to be deducted at source within the meaning of s 53(1)(a) of the 1970 Act.)
If these regulations stood alone the effect would, of course, be that sums shown as accrued due in a societys accounts for
the year ended in the fiscal year 198586 but actually paid after the end of the societys accounting year would be brought into
account for the purpose of the regulations even though they are already taken account of for the purposes of the arrangements for
that year. That position, however, is catered for by reg 12, which underlines the intention behind reg 11 and is in the following
terms:
100

The above Regulations shall not apply to any payment of dividends or interest in respect of an investment or to any
section 53 payment to the extent that account was taken of any such payment in computing the amounts representing
income tax payable by a building society under the arrangements as respects the year 198586 to which subsection (1) of
section 343 applies.

So far as Woolwich is concerned the effect of these regulations is to subject it over a period of 24 months to tax on 29
months income, with the result that, on the calculations contained in the evidence, the Revenue receives for the fiscal years
198687 and 198788 some 76m more than it would otherwise have received in respect of the dividends and interest paid or
credited during those years. It is, therefore, perhaps not altogether surprising that on 17 June 1986 Woolwich commenced
proceedings for judicial review seeking a declaration that the 1986 regulations were unlawful.
My Lords, for my part I entertain very little doubt that, as the legislation in fact stood at the date when these regulations
were made, Woolwich was entitled to succeed. Income tax, as has been forcefully pointed out in the course of the argument, is an
annual tax which is assessed in respect of a particular year of assessment. Whilst the concept of calculating the amount of tax
payable in respect of that year by reference to the income received during another periodfor instance, the previous year of
assessmentis a familiar one, no precedent exists for charging tax for a particular year on the income of a period of more than a
year. Section 343(1A) enables the Revenue only to make provision with respect to the year 198687 and any subsequent year of
assessment and to require a building society to account for and pay an amount representing income tax. That cannot, clearly,
refer to the societys income tax because the society does not pay income tax. The amount which the society is required to pay
can only sensibly represent income tax which would otherwise be payable by its depositors and it is to be calculated in part at
the basic rate and in part at the reduced rate determined for the year of assessment concerned under section 26(1)( a) of the
Finance Act 1984. That section requires the Treasury to determine the rate individually for each year of assessment and with the
aim of producing a position of tax neutrality for that year of assessment. The words such sums as may be determined cannot, on
any ordinary principles of statutory construction, be read as unrelated to the year of assessment with respect to which the 1986
regulations are made and as unrelated to the income tax which those sums are to represent. On no ordinary analysis could it be
read as embracing a power to make provision for the taxation of sums paid or credited in the year 198586.
The subsection did not, however, remain in the form in which it stood at the date when these proceedings were commenced.
Section 47(1) of the Finance Act 1986, which received the royal assent on 25 July 1986, introduced a deliberately retrospective
amendment. It provides:

In section 343 of the Taxes Act (building societies), subsection (1A) (which was inserted by the Finance Act 1985 and
enables the Board to make regulations requiring societies to account for amounts representing income tax on certain sums)
shall have effect and be deemed always to have had effect with the insertion after the words in accordance with the
regulations of the words (including sums paid or credited before the beginning of the year but not previously brought into
account under subsection (1) above or this subsection).
101

It is the effect of these additional and retrospective words which forms the real issue on this appeal. In the argument on the
application for judicial review before Nolan J they played a relatively insignificant part (see [1987] STC 654). Nolan J could see
nothing in s 343(1A) which authorised the commissioners to go back on the arrangements made with Woolwich for 198586 and
he treated the provisions of reg 11(4), which seek to charge tax at the 198586 rates and which the Crown now accepts are ultra
vires, as a clear indication that the regulations went beyond the power conferred by s 343(1A). On no analysis could Parliament
have intended to delegate to civil servants the power to fix the rate of tax payable for a year of assessment. He found himself
unable to ascribe any sensible meaning to the words added by s 47 of the 1986 Act save, possibly, to authorise what was probably
unnecessary, that is to say the utilisation of sums paid or credited in a previous year as an artificial measure of the tax payable in
the year 198687 in the same way as sums shown in a societys accounts had been used under the previous arrangement as the
measure of the tax payable in respect of the fiscal year in which the accounting period expired. He accordingly made the
declaration sought by Woolwich.
From this decision the Crown appealed to the Court of Appeal, which, on 13 April 1989 unanimously reversed the decision
of Nolan J on the short ground that, whatever might have been the effect if the section had remained unamended, the words
introduced by s 47 of the 1986 Act fairly and squarely covered the interest paid between 30 September 1985 and 5 April 1986.
The pith of the courts decision lies in the following short passage from the judgment of Sir Nicolas Browne-Wilkinson V-C
([1989] STC 463 at 469):

As a matter of ordinary construction, I find the conclusion contended for by counsel for the Crown inescapable. The s
47 words are clear and they cover the present case. Moreover the regulations had been made and their validity challenged
before Parliament had to consider the Finance Bill 1986. It was in those circumstances that Parliament enacted s 47 of the
Finance Act 1986 which introduced the s 47 words. In such circumstances, in the absence of any other reason for
Parliament to have enacted s 47 so as to deem s 343(1A) always to have included the s 47 words, the inference must be that
Parliament intended to put to rest the existing challenge to the validity of the regulations.

Before your Lordships Woolwich has argued strenuously that this is altogether too simple an approach. For my part, I
confess that I find the conclusion irresistible that Parliament intended by these words to enable the Revenue to take account of
and to charge to tax sums which, rightly or wrongly, it regarded as otherwise representing windfalls in the hands of building
societies. One has only to look at the circumstances. The 1986 regulations had been made and had been objected to. They were
made the subject of a direct challenge in legal proceedings, the evidence in support of which clearly adumbrated the arguments
advanced before the judge and the Court of Appeal. The notion that Parliament should go to the trouble of enacting an expressly
retrospective amendment in order to provide, unnecessarily, for the use of these sums as a measurement of tax liabilitya matter
never remotely in issueis simply fanciful. But that is not, of course, a total answer to the issue raised, for it is said that the
question is ultimately not one of what, subjectively, Parliament may (or must) have intended to do but whether, by the words
which it has used, it has effectively done it.
I hope that I shall not be thought to be lacking in deference to the lengthy, and in many respects, cogent arguments which
have been advanced by Mr Gardiner QC, for Woolwich, if I do not set them out here in extenso. They 102 highlighted a number
of anomalies, not the least of which is that s 343(1) provides in terms that for the year 198586 arrangements entered into shall
have effect notwithstanding anything in this Act. To create in relation to sums paid in that year and therefore covered by that
arrangement a liability to tax in the following year of assessment must involve to some extent going back on that arrangement.
The difficulties are far from unreal but the argument failed on what appears to me to be the salient point, that is to say the
necessity for ascribing some sensible meaning other than that suggested by the Crown to the words which the legislature has
advisedly chosen to use. I confess that I have not found the problems raised as easy of resolution as have the majority of your
Lordships, and I have been oppressed by what appeared to me and still appears to me to be very real difficulties, not altogether
dispelled, for me at any rate, by Mr Stamler QCs robust arguments for the Crown. I console myself that I am not alone in
finding the problem a difficult one. It is rightly said that the application of what is essentially an annual tax on income of a
particular year of assessment to a period in excess of a year is without precedent. I see force in the argument that an intention to
produce what Nolan J, with his long experience in matters of taxation, described as a truly astonishing result (see [1987] STC
654 at 660) should not be ascribed to Parliament without very clear words. Again, it is not easy to see how, on the footing that
sums paid or credited in the gap period are to be brought into account and taxed at the reduced rate in another year of assessment
as an addition to the sums paid or credited in that year, the Treasury is to exercise its powers under s 26 of the 1984 Act, for these
powers have to be exercised in relation to a particular year of assessment, in this case 198687. In exercising its powers the
Treasury has to assume that the sums payable by the society are income taxwhich can only mean income tax for the year of
assessmentand to produce the net result that the total income tax becoming payable to the Revenue (again in that year of
assessment) is no more than it would have been if s 343 (including sub-s (1A)) had not been enacted. In the end, however, I have
been persuaded that the Court of Appeal was right in its conclusion that no other sensible meaning can be given to what were
conveniently referred to as the s 47 words than that they were intended to authorise the taxation in the year 198687 and
subsequent years of assessment of sums paid or credited in the gap period and not previously brought into account.
It is, of course, true that the ultimate test of parliamentary intention is by reference to the words which Parliament has
chosen to use. But here there is no real difficulty in construing Parliaments words. Read in their ordinary natural meaning s
343(1A), as amended, authorises the Revenue to make regulations requiring, in respect of identified years of assessment,
payment of an amount representing income tax on any sums paid before the year in question and not previously brought into
account. On here must I think mean in respect of and, indeed, s 343(2) as amended by s 47 of the 1986 Act says as much. On
the face of it, that clearly authorises, for instance, a requirement to pay in the year of assessment 198687 a sum in respect of
interest in fact paid before the commencement of that year. One then asks: what, as a matter of construction, prevents the
Revenue from requiring such payment in addition to payment of sums in respect of interest paid during that year of assessment?
The suggested inhibition against such cumulative taxation lies not in the words which Parliament has chosen to use but in certain
well-established presumptions or principlesa presumption against double taxation, a presumption that income tax, being an
annual tax, is payable only on the income of a particular year and so on. But these are only presumptions. They are clearly
rebuttable if sufficiently clear express 103 words are used. But they can also be rebutted, as it seems to me, by circumstances
surrounding the enactment of the particular legislation which lead to an inevitable inference that Parliament intended, in using the
words that it did, that these presumptions or principles should not apply. I am bound to say that I think it unfortunate that the
Revenue, through Parliament, should have chosen by secondary rather than primary legislation to take what was, on ordinary
principles, the very unusual course of seeking to tax more than one years income in a single year of assessment, but s 47 of the
1986 Act is, on any analysis, a very unusual provision and I have, in the end, found myself irresistibly driven to the conclusion
that this was what Parliament intended should occur. It may beI do not knowthat the legislature did not appreciate fully that
the effect of the arrangements made in 1985 was to discharge all liability for tax on interest paid in the year of assessment 1985
86, including tax on interest paid after the end of a societys accounting year, and that, accordingly, to tax those sums again in a
subsequent year was, in a sense, to tax them twice. But even making that assumption it amounts to no more than saying that the
legislature should not have intended to do that which it plainly set out to do. I would, for my part, therefore, reject Woolwichs
principal argument.
That is not, however, the end of the matter, for an alternative argument is advanced. This arises out of the Crowns
concessionclearly rightly madethat reg 11(4) is ultra vires. What is said here is that this has the effect of invalidating reg 11
in toto. On the other side, it is argued that the only effect of invalidating reg 11(4) is that it is notionally deleted from the 1986
regulations, so that there is simply no specification of a rate of tax applicable. It would follow that the appropriate rate is simply
that which s 343(1A) prescribes, that is to say the rate for the year of assessment into which the sums are brought. That argument
found favour with the Court of Appeal, which held reg 11 to be valid save to the extent that para (4) purported to fix a rate of tax.
Before your Lordships, Mr Underhill, for Woolwich, has submitted that this case cannot be approached on such a simple blue-
pencil basis. Clearly severance, to use the convenient and conventional expression, by a process of simple deletion is
practicable here without altering the grammatical sense of what is left. But Mr Underhill has submittedand, in my judgment,
rightly submittedthat this does not provide the complete answer. One has to ask also the question whether the deletion of that
which is in excess of the power so alters the substance of what is left that the provision in question is in reality a substantially
different provision from that which it was before deletion. If it is, it cannot be assumed that the legislator would have enacted it
in its altered form and the whole must be declared bad. Your Lordships have been referred to a number of authorities, but I do
not think the principles, at any rate as they apply to this case, are seriously in doubt. The matter is in essence one of reading and
construing the provision in question and if, on a fair reading, the provision shorn of the offensive part is, in substance and effect,
a different provision from that which the legislator, on his own showing, intended to enact then, for my part, I do not see how any
of it can stand.
Turning to the 1986 regulations, the essential scheme adopted is to begin with a charging provision (reg 3), which, in terms,
does not apply to payments made prior to 1 March 1986. Those are brought into charge by reg 11, but they are brought in a very
particular way, that is to say by subjecting them to reg 3, deeming them under that regulation to be paid at times when they were
not in fact paid, and then avoiding, by reg 11(4), the taxation consequences which would otherwise have flowed from this
scheme, that is to say that they would be taxed for the rates appropriate for the periods in which they are deemed to have been
104 paid. If one follows the regulations through and relates reg 11 back to reg 3 it becomes immediately apparent how vitally
important reg 11(4) was to the scheme which the draftsman adopted. The starting assumption was, quite clearly, that the intention
of s 343(1A) was that sums paid prior to the specified years of assessment but not previously brought into account would be
charged to tax at the rate appropriate for the year of assessment in which they were actually paid or credited. There is nothing in
sub-s (1A) which justifies this, but it was clearly assumed to be so. This is borne out by the fact that in respect of the period from
1 March 1986 to 5 April 1986 tax has in fact been levied at the 198586 rate, a course of action which the Crown now admits and
asserts was a mistake. Similarly, reg 11(5) is all of a piece with this scheme, for it authorises the set-off against the sums to be
paid in respect of tax on payments made by the society during the gap period of the tax deducted from those payments made to
the society in the same period which have been paid under deduction tax. Whether this provision was strictly authorised by the
power in s 343(1A) to make regulations with respect to the year 198687 may be open to doubt, but the intention was clearly to
levy tax, albeit payable in a subsequent year, in exactly the same way as if it had become payable for the year of assessment
198586.
 In considering the 1986 regulations it may be convenient, by way of shorthand, to refer to interest as including also
dividends. If we go first to reg 3 we see that what the building society is required to pay is a sum in respect of payments of
interest made after February 1986. Nothing else is charged by this regulation and it is the only charging provision. The payment
is to be made on the payment date for each payment quarter to which reg 7 applies and it is a sum made up of the reduced rate
and basic rate amount for that payment quarter. The payment quarters have been defined already by reg 2, to which I have
already referred, and those to which reg 7 applies are, by reg 7(3)(d) each complete payment quarter beginning with the
payment quarter ending 31 May 1986. So far, therefore, there is nothing which charges tax in respect of payments of interest
made in the year 198586 except in so far as those payments were made after February 1986. Regulation 11 then seeks to bring
them into charge. Paragraph (1) defines the payments to which the regulation relates and the charging provision is in para (2).
This has a dual purpose. First, notwithstanding that reg 3 applies only to post-February 1986 payments, it subjects the para (1)
payments to that regulation. If that stood alone it would be self-contradictory, so the second part of the paragraph deems them to
have been paid, not when they were in fact paid, but at dates after February 1986. This is done by treating them in all respects
as if made in the payment quarters which are set out in para 3(3)that is to say, in the case of Woolwich, as if they were made as
to one half in the payment quarter ending on 28 February 1987 and as to the other half in that ending on 28 February 1988. If
then we relate that back to reg 3 we find that the sums which the building society is obliged to pay are to be calculated at the
reduced and basic rates applicable for the years of assessment in which those payment quarters fall. No other rate of tax is
prescribed. But this would contradict the basic assumption on which the 1986 regulations have been framed, namely that the
applicable rate for the sum should be the rate for the year of assessment in which they were actually paid, ie 198586. Thus para
(4) is introduced to correct this.
It thus becomes apparent that the one thing that the draftsman did not intend was that the sums artificially deemed to be paid
in the specified payment quarters in 1987 and 1988 in order to bring them into charge under reg 3 should be taxed at the rate
applicable for those years of assessment. Yet, if para (4) is deleted, as the Crown concedes that it must be, that it exactly what reg
11 now achieves. It 105 seems to me, accordingly, that it is beyond argument that reg 11 without para (4) is in substance quite
different from the regulation which the draftsman actually produced and intended. Whether such a result is one which is strictly
authorised by s 343(1A) may be open to doubt, for it seems extremely unlikely that Parliament can have intended to confer on the
Revenue a discretion to tax the sums paid during the gap period at differential rates according to the adventitious dates on which,
during 198586, individual societies had chosen to close their financial years. But this is in any event immaterial, for the one
thing that is perfectly clear is that this was not the result that the Revenue intended or contemplated.
Counsel for the Crown had really no answer to this save to suggest that a combination of regs 3 and 11(2) produced, by a
process of reasoning that I confess that I was unable to follow, the result that the sums deemed to be paid in 1987 and 1988 fell to
be taxed according to the rates fixed for the year of assessment 198687. That might be possible for the payments falling to be
made on 14 March 1987 but I find it quite impossible to ascribe that result to the regulation in relation to the remaining payment
dates referred to in para (3) and it quite clearly does not accord with the intention to which the Revenue and its draftsman
intended to give effect. The Court of Appeal was prepared to treat the remainder of reg 11 as unaffected by the deletion of para
(4) because, it was said, s 343(1A) itself contained the formula for fixing the rate of tax which could apply in the absence of para
(4) and which, it surmised, the draftsman would have been prepared to allow to operate had he appreciated the invalidity of the
paragraph. I cannot agree that this is a correct approach. The draftsmans hypothetical intention is by no means obvious. If, as
Mr Stamler submitted, the whole purpose of the transitional provision was to compel societies to disgorge to the Revenue tax
which, in fixing their interest rates, they notionally and indirectly deducted from payments to investors in the gap period, there
can be no logic at all in subjecting those payments to rates of tax which bear no relation to, and indeed might well exceed, the tax
notionally deducted. That becomes even clearer when one considers that reg 11(1) applies not only to payments of interest and
dividends but to payments of annuities to which s 53 of the 1970 Act applies and where tax would have been deducted at source
by the society. It cannot rationally have been intended that the society should come under an obligation to account to the
Revenue for tax at a higher rate than that which obtained at the time when the tax was deducted. What form the regulation might
have taken if the invalidity of para (4) had been appreciated is a matter of pure speculation.
Nor does the matter stop simply with reg 11. The same erroneous assumption which produced para (4) of that regulation
appears in a slightly different form also in reg 3. That this is so is demonstrated by the fact that the Revenue, as it is now
admitted mistakenly, applied the tax rates for the year 198586 to payments made in the period from the end of February 1986 to
6 April 1986. It is suggested that this can be rectified simply by a refund of the excess amount of tax demanded. The matter is
not, however, as simple as that. It has to be remembered that what s 343(1A) authorisesand this is all that it authorisesis the
making of regulations requiring societies to pay, on the sums determined, an amount calculated in part at the basic rate and in part
at the reduced rate determined for the year of assessment concerned under s 26(1)(a) of the 1984 Act. The year of assessment
concerned, as a result of the opening words of the section, can only be the year 198687 or some subsequent year. Regulation 3,
however, requires payment on the relevant payment date for each payment quarter of a sum made up of the reduced rate amount
and the basic rate amount for that payment quarter or 106 period. As already mentioned, the regulation applies expressly to
payments made after February 1986 and therefore covers, as the first payment quarter, the period 1 March 1986 to 6 April 1986
(falling in the year of assessment 198586) and the period 7 April 1986 to 31 May 1986 (falling in the year of assessment 1986
87). These payments therefore fall between two stools. There is no single reduced rate amount or basic rate amount for that
quarter. This is the first difficulty. Regulation 7, it is true, contemplates (in para (3)( d)) a period which is not a complete
payment quarter and may be said to enable the references to the basic rate amount and the reduced rate amount to be read plurally
as referring to the amounts applicable to the separate periods of the quarter in question according to whether they fall within the
year 198586 or the year 198687. But that could only have the result of making the amounts for the period 1 March 1986 to 6
April 1986 the amounts determined for the year 198586. Thus the regulation is manifestly ultra vires to this extent because the
section under which it is made does not authorise the application of any rate other than that for the year of assessment
concerned and that, as already explained, has to be either the year 198687 or some subsequent year. Again, this is not a defect
which can be cured by deletion. The whole regulation would have to be rewritten and it is entirely a matter of speculation what
form the rewriting would take if the draftsman had appreciated the error into which he was falling.
Whether it is open to the commissioners now to lay before Parliament new regulations containing different transitional
provisions is not a matter which it is necessary to consider nor, indeed, would it be appropriate to do so. If they can and do, then
the exercise on which Woolwich is engaged may seem a singularly sterile one. Nevertheless, although I am very sensible of the
manifest inconvenience which this will involve, it is, I think, clear on analysis that the admitted invalidity of reg 11(4) infects the
whole of that regulation and I see no alternative to declaring it to be wholly void and ineffective. It follows that, whilst
dismissing the appeal as regards the power to make regulations having the effect of imposing tax on sums paid during the gap
107 period, I would allow the appeal as regards the invalidity of reg 11 and of reg 3 so far as it relates to the period after February
and before 6 April 1986.

LORD GOFF OF CHIEVELEY. My Lords, I have had the advantage of reading in draft the speech of my noble and learned
friend Lord Oliver. I agree with him that Woolwichs principal argument, that the regulations were unlawful in so far as they
purported to require building societies to pay an amount representing income tax in respect of sums paid or credited before 6
April 1986, must fail. On this point, I do not wish to add anything to what has been said in the speech of my noble and learned
friend.
I turn to Woolwichs second argument, which arises from the Crowns concession that reg 11(4) is ultra vires. This is that,
because that paragraph cannot be severed from the remainder of reg 11, no other part of that regulation can be saved.
 Since my noble and learned friend has so fully analysed the Income Tax (Building Societies) Regulations 1986, SI
1986/482, in terms with which I am very substantially in agreement, I am relieved from the burden of setting out the terms of the
1986 regulations in extenso or of indulging in a complete analysis of them. I can proceed straight to reg 11, which is described as
a transitional provision, being concerned with certain payments made after the end of the societys last accounting period which
ends in the year 198586 but before 1 March 1986. It is therefore concerned with payments made in the so-called gap period,
but not with those made after 28 February and before 6 April 1986, since those are dealt with directly by reg 3. Paragraph (2) of
reg 11 provides:

Subject to the provisions of these Regulations, any such payment shall be treated in all respects as a payment to
which these Regulations apply and as made in the payment quarter to which the payment dates specified in paragraph (3)
below relate.

So far as Woolwich is concerned, para (3) has the effect that payments made by it during the specified period are thereby treated
as paid in part on 14 March 1987 and in part on 14 March 1988. Paragraph (4) specifies the applicable reduced rate amount and
basic rate amount which together produce the sum payable to the Revenue by the building societies in respect of the relevant
payments. The trouble with para (4) is that the basic rate amount so specified is plainly based on the basic rate of tax applicable
in 198586 (30%), whereas s 343(1A) of the Income and Corporation Taxes Act 1970 provides that the relevant rates shall be
those for the year of assessment into which the omitted sums are broughtwhich, however, cannot be before 198687, when the
basic rate was 29%.
I wish to add that, in my opinion, reg 3 reveals that (as one would expect) a similar mistake was made in so far as the
regulation refers to payments made after February 1986 and before 6 April 1986. Under the regulation, the sum payable by the
building society to the Revenue on the relevant payment date for each payment quarter is to be made up of the reduced rate
amount and the basic rate amount for that payment quarter or period. Those words must be read, in my opinion, as referring to
the reduced rate and the basic rate applicable in the year of assessment in which the relevant payment quarter or period falls. It
follows that, consistently with reg 11(4), the applicable rates for that part of the first payment quarter which fell before 6 April
1986 were the rates for 198586; and so to this extent reg 3 is also ultra vires.
Reverting to reg 11, the contention of the Crown has been that, in these circumstances, the problem can be solved if the
court simply excises para (4). However, as my noble and learned friend has pointed out, the problem cannot be solved as easily
as that, for the simple reason that para (4) forms an integral part of reg 11. Paragraph (2), which is the central paragraph, has
been drafted on the assumption that para (4) will specify the relevant reduced rate amount and basic rate amount; and, if para (4)
is simply excised, this will leave para (2) providing, unqualified, that the payments shall be treated in all respects as made in the
relevant payment quarters specified in para (3), which would lead to the basic rate amount being arrived at not by reference to a
rate of 30%, but in part by reference to the basic rate for 198687, and in part to that for 198788. In any event, the Crowns
contention does not deal with the problem that, for the reasons I have explained, reg 3 is also in part ultra vires.
Now it is true that, so far as severance is concerned, the court no longer has to proceed on the basis of what has been called
the blue pencil test, under which the court can only sever the good from the bad where the bad can be excised by a simple
deletion of words from the instrument in question. It is now open to the court, taking advantage of the remedy of a declaration, to
declare that the instrument in question shall not take effect in so far as the maker of the instrument has acted beyond his powers,
even though verbal severance of the offending provision is not possible on the old blue pencil approach (see DPP v Hutchinson
[1990] 2 All ER 836 at 839, [1990] 2 AC 783 at 804 per Lord Bridge). But the court must nevertheless be satisfied that, in so
proceeding, it is effecting no damage to the substantial purpose and effect of the instrument.
108
However, as I see it, the problem in the present case is that the mistake made by the Revenue in regs 3 and 11(4) cannot be
cured, either by the simple excision of particular words (as proposed by the Crown with regard to reg 11(4)) or by a declaration.
In the case of reg 11, this is because what is left after the excision of reg 11(4) has the effect of providing for rates of tax different
from those intended by the Revenue. What is required in these circumstances is not merely the excision of reg 11(4), but the
introduction of a new provision in its place. The same applies, in my opinion, to reg 3, for there too a new provision is required
in relation to payments made after February 1986 and before 6 April 1986.
The Court of Appeal considered that, in relation to reg 11, the invalidity of reg 11(4) did not leave a complete blank as to the
applicable rate, because s 343(1A) provided that the omitted interest should be brought into account at the rate fixed for the year
of assessment under which it has to be brought in. But the difficulty with reg 11 is that, once para (4) is removed, para (2) is left
free to operate in unqualified terms and specifies the payment quarters in which the relevant payments are treated in all respects
as made; and plainly the Revenue did not intend para (2) to operate to fix the reduced rate amount and basic rate amount
applicable in relation to such payments. So far as reg 3 is concerned, if it is declared ultra vires so far as it relates to payments
made after February 1986 and before 6 April 1986, then there is no provision which identifies the year of assessment under which
such payments have to be brought in. In truth, what is required in relation to the offending parts of both regs 11 and 3 is not
merely that they should be quashed or declared ineffective in so far as they are ultra vires, but that fresh provision should be
made for the appropriate rates of tax in place of those which were unlawfully specified. It is, however, in my opinion, no part of
the courts function to legislate in this way. It is for the Revenue, if it is still able to do so, to amend both regulations to bring
them in accordance with its statutory powers.
For these reasons I would, like my noble and learned friend Lord Oliver, allow the appeal as regards the invalidity of reg 11,
and also allow the appeal as regards the invalidity of reg 3 in so far as it relates to the period after February and before 6 April
1986.

LORD LOWRY. My Lords, in this appeal I have concluded that neither in its original form nor as amended by s 47(1) of the
Finance Act 1986 did s 343(1A) of the Income and Corporation Taxes Act 1970 authorise the collection of additional tax from
Woolwich (amounting to 69m) which was referable to the period from 1 October 1985 to 5 April 1986. For convenience I shall
call it the gap period, but without accepting the implication which might thereby gain credence that this appellation signifies a
gap in the rightful revenues of the Crown, as the Crown would contend.
I gratefully adopt the description which Nolan J has given of the historical background and the scheme of taxation (see
[1987] STC 654 at 655658), and also the summary contained in the speech of my noble and learned friend Lord Oliver, which I
have had the advantage of reading in draft. Therefore I can go straight to the main question.
Not surprisingly, there is much in my noble and learned friends reasoning which I happily accept, including his cogently
expressed opinion that s 343(1A), as first enacted, did not, with regard to the gap period, authorise what the Income Tax
(Building Societies) Regulations 1986, SI 1986/482, purported to achieve. It is only when I come to consider the s 47(1)
amendment that I feel obliged to adopt a different view. I cannot, however, take a short cut by starting there, 109because I think
it is important for me to consider the meaning first of s 343(1), then of the original s 343(1A) and finally of s 343(1A) as
amended. Although these provisions are found in my noble and learned friends speech, it will be convenient to set them out
again, together with s 26 of the Finance Act 1984 and s 47(1) of the 1986 Act. Section 343(3) is, of course, also important but I
can refer to the text of my noble and learned friends speech.
Here are s 343(1) and (1A) as they had effect at the time the 1986 regulations were made on 13 March 1986 to come into
operation on 6 April 1986:
 (1) The Board and any building society may, as respects any year of assessment ending before 6th April 1986, enter
into arrangements whereby(a) on such sums as may be determined in accordance with the arrangements the society is
liable to account for and pay an amount representing income tax calculated in part at the basic rate and in part at a reduced
rate and (b) provision is made for any incidental or consequential matters, and any such arrangements shall have effect
notwithstanding anything in this Act
(1A) The Board may by regulations made by statutory instrument make provision with respect to the year 198687 and
any subsequent year of assessment requiring building societies, on such sums as may be determined in accordance with the
regulations, to account for and pay an amount representing income tax calculated in part at the basic rate and in part at the
reduced rate determined for the year of assessment concerned under section 26(1)(a) of the Finance Act 1984; and any such
regulations may contain such incidental and consequential provisions as appear to the Board to be appropriate, including
provisions requiring the making of returns.

To begin with, s 343(1) had ended with a proviso:

Provided that in exercising their powers of entering into arrangements under this section, the Board shall at all times
aim at securing that (if the amount so payable by the society under the arrangements is regarded as income tax for the year
of assessment) the total income tax becoming payable to, and not becoming repayable by, the Crown is, when regard is had
to the operation of the subsequent provisions of this section, as nearly as may be the same in the aggregate as it would have
been if those powers had never been exercised.

This was repealed on the enactment of s 26 of the 1984 Act, which applied to arrangements under s 343(1) for the year of
assessment 198586 and continued to apply to the year 198687 and subsequent years. So far as material, it provides:

(1) In the year 198485 and in every subsequent year of assessment the Treasury shall by order made by statutory
instrument determine a rate which shall, for the following year of assessment, be(a) the reduced rate for the purposes of
section 343 of the Taxes Act (building societies); and (b) the composite rate for the purposes of section 27 of this Act.
(2) The order made under subsection (1) above in each year of assessment shall(a) be made before 31st December in
that year; and (b) be based only on information relating to periods before the end of the year of assessment in which the
order is made.
(3) Whenever they exercise their powers under this section the Treasury shall aim at securing that (assuming for the
purposes of this subsection that the amounts payable by building societies under section 343 of the Taxes Act and by
deposit-takers under section 27 of this Act are income tax) the total income tax becoming payable to, and not being
repayable by, the Crown is 110(when regard is had to the operation of those sections) as nearly as may be the same in the
aggregate as it would have been if those sections had not been enacted.
(4) In relation to the exercise of their powers under this section at any time before the year 198889, the Treasury may
regard subsection (3) above as directed only to amounts payable by building societies under section 343 and to the
operation of that section.
(5) In section 343(1) of the Taxes Act, the proviso and in paragraph (a) the words from which takes to this section
shall cease to have effect as from 6th April 1985

Section 47(1) of the 1986 Act was enacted in July 1986 and provided:

In section 343 of the Taxes Act (building societies), subsection (1A) (which was inserted by the Finance Act 1985 and
enables the Board to make regulations requiring societies to account for amounts representing income tax on certain sums)
shall have effect and be deemed always to have had effect with the insertion after the words in accordance with the
regulations of the words (including sums paid or credited before the beginning of the year but not previously brought into
account under subsection (1) above or this subsection).

(I have emphasised the words which gave the amendment retrospective effect.)
Accordingly, s 343(1) and (1A) must be read for all purposes as follows:

(1) The Board and any building society may, as respects any year of assessment ending before 6th April 1986, enter
into arrangements whereby(a) on such sums as may be determined in accordance with the arrangements the society is
liable to account for and pay an amount representing income tax calculated in part at the basic rate and in part at a reduced
rate; and (b) provision is made for any incidental or consequential matters, and any such arrangements shall have effect
notwithstanding anything in this Act.
(1A) The Board may by regulations made by statutory instrument make provision with respect to the year 198687 and
any subsequent year of assessment requiring building societies, on such sums as may be determined in accordance with the
regulations (including sums paid or credited before the beginning of the year but not previously brought into account under
subsection (1) above or this subsection), to account for and pay an amount representing income tax calculated in part at the
basic rate and in part at the reduced rate determined for the year of assessment concerned under section 26(1)(a) of the
Finance Act 1984; and any such regulations may contain such incidental and consequential provisions as appear to the
Board to be appropriate, including provisions requiring the making of returns.

I shall call the amendment introduced by s 47(1) the s 47 amendment.

I have been impressed by and grateful for the cogent and often persuasive arguments of counsel on either side, but I remain
unimpressed by talk of injustice and inequity on the one hand and by references to lost interest and the gap period on the other.
Nor am I affected by ingenious examples of the strange financial results which could conceivably arise from the adoption of one
construction or the other. If something unforeseen were to happen, it might be dealt with by enactment or regulation, but in
reality such figures as your Lordships have seen tend to show a fairly steady investors income from year to year. But, subject
always to interpreting the words of s 343(1A), Woolwich is entitled to say that it would be surprising and prima facie contrary to
accepted tax principles for the 111 amount representing the investors income tax for the years of assessment 198687 and 1987
88 to be based on the income of two and a half years. As Sir Nicolas Browne-Wilkinson V-C said in the Court of Appeal ([1989]
STC 463 at 470):

As to counsel for Woolwichs second submission, there is no doubt that in relation to the charging of income to income
tax it is fundamental that in any one tax year the income brought into tax must be the income of a period of one year only.
Tax payable in any one tax year may be measured by the income of some other year; but in all cases the income brought
into tax is the income of one year and no more.

The words I have emphasised show that the Vice-Chancellor was expressing a general view about income tax, which of course
must be subject to the meaning of the relevant provisions in this case, to which I now turn.
 Section 343(1) allows the Board of Inland Revenue and a building society as respects any year of assessment ending before
6 April 1986 to enter into arrangements whereby on such sums as may be determined in accordance with the arrangements the
society is liable to account for and pay an amount representing income tax calculated in part at the basic rate and in part at a
reduced rate: as respects any year of assessment refers to the year of assessment of the societys investors (in the instant case
the fiscal year 6 April 1985 to 5 April 1986), the period of charge and all payments and credits of dividends and interest by the
society to investors during that period would, but for the arrangements, be charged by deducting the tax before payment. The
phrase on such sums as may be determined means by reference to such sums as may be determined; in the instant case this is
by reference to the sums paid or credited to investors during the societys accounting year 1 October 1984 to 30 September 1985
(this choice of arrangement having been made by Woolwich in 194041). The building society then becomes liable to account
for and pay to the Revenue an amount representing the investors income tax for the year of assessment 198586. The reduced
rate of income tax was calculated under the arrangements, when the proviso was part of s 343(1), in order to achieve what has
been called revenue neutrality, as described by my noble and learned friend Lord Oliver. My explanation is illustrated by the
arrangements (which were put in evidence) entered into by the Revenue with building societies for the year of assessment 1985
86. The arrangements (giving here only the words needed to illustrate the point) provide:

1. Charge to income tax at composite rates

By virtue of Section 343 the Society shall be liable to account for and pay an amount representing income tax
calculated at the rate of 2525 per cent for 198485 and 2525 per cent for 198586 [the rates by chance coincided but
could have differed] on the total of the following sums: (a) the sum of the dividends and interest payable in the
basis period by the Society to its investors
2. Charge to income tax at basic rates
The Society shall also be liable to account for and pay an amount representing income tax calculated at the basic rates
for 198485 and 198586 on the total of the following sums: (a) the sum of the dividends and interest payable in the basis
period by the Society to its investors
3. Determination of basis period
(1) Subject to the provisions of this paragraph the basis period shall be determined as follows: (a) If an account is made
up for a period of one year to a date in the year of assessment 198586 and is the only account made up to a date in that
year of assessment, that period shall be the basis period. (b) In any 112 other case the Board of Inland Revenue shall
decide what period of 12 months ending in the year of assessment 198586 shall be the basis period. (2) If during the year
of assessment 198586 the Society ceases or unites with another Society to which paragraph (3) below applies, the basis
period shall be that period ending on the date of cessation or union and commencing on 6 April 1985

The words I have italicised above show on what sums it was determined that the building society was liable to account for
and pay an amount representing income tax. Those sums were payable to investors in the basis period, that is the accounting year
of the society ending during the year of assessment.
The word on in s 343(1) and in the arrangements made thereunder is very important. It is a neutral word and, like many
words in the English language, including statutory language, takes its colour, like a chameleon, from its surroundings or, more
literally, its meaning from its context. The societys accounting year, called the basis period in the arrangements (a familiar
concept in relation to the income tax liability of a taxpayer), is the measurement period and the amount representing the investors
income tax in respect of the fiscal year 198586 which the building society is liable to account for and pay is measured by
reference to the sums payable to the investors in the basis period (in the case of Woolwich 1 October 1984 to 30 September
1985). In the context of s 343(1) on means by reference to and not charged on or in respect of. That this must be so is
obvious when one recalls that part of the basis period (1 October 1984 to 5 April 1985) lies outside the year of assessment and is
not part of a chargeable period for the purposes of 198586 income tax. Mr Gardiner QC, for Woolwich, referred your Lordships
to ss 108 and 109 for the use of the phrase in respect of and to ss 115(1), 116(1), 117(2), 118(1), 119 and 120(1) of the 1970 Act
as exemplifying the use of on meaning by reference to and also cited Duckering (Inspector of Taxes) v Gollan [1964] 1 All ER
556, [1964] 1 WLR 414. I need only refer to the case stated (see [1964] 1 All ER 556 at 557558, 560561, [1964] 1 WLR 414
at 415418) and to s 132 of the Income Tax Act 1952 for further examples of on used in this sense.
The grammatical structure of s 343(1) should be noted. The building society is liable to do something, namely account for
and pay. The object of those verbs is an amount representing income tax, and the verbs are modified by the adverbial phrase
on such sums as may be determined, which is not an adjectival phrase qualifying income tax. This is confirmed both by the
position of the phrase in the subsection and by the wording of paras 1 and 2 of the arrangements which I have mentioned above.
Section 343(1A) closely follows s 343(1) in its wording. The difference is that regulations are to take the place of
arrangements and that the regulations, once made, will require building societies to pay. But the difference ends there. The
regulations are to make provision with respect to (s 343(1) said as respects) a year of assessment, starting with 198687. The
building societies obligation will be to account for and pay an amount representing income tax (that is the investors income tax)
calculated in part at the basic rate (so far the words emphasised are the same as in s 343(1)) and in part at the reduced rate
determined for the year of assessment concerned under s 26(1)(a) of the 1984 Act. (The difference in wording here, which does
not alter the effect, is due to s 26 having been enacted before s 343(1A), whereas, apart from repealing the proviso, it was
unnecessary to amend s 343(1) when s 26 was introduced.)
And they were to pay that amount on such sums as may be determined under the regulations (instead of in accordance with
the arrangements).
113
Your Lordships do not know whether the responsible government department had the 1986 regulations in draft or even in
mind when s 343(1A) was enacted. We do know, however, that on 19 March 1985 the Chancellor of the Exchequer had indicated
that, since the banks were to change their system of payment of tax on bank interest on 6 April 1985, the building societies would
be put on a similar footing from 6 April 1986.
The scheme of taxation in s 343(1A), apart from the fact that it would no longer be an optional alternative to the
conventional way of taxing payments to investors, was just the same as that of s 343(1). It dealt with the investors tax liability in
respect of one fiscal year and obliged the building societies to pay an amount representing income tax, that is the investors
income tax for (in the first place) 198687. The duty of the Treasury under s 26(1) and (3) to determine a reduced rate and
achieve revenue neutrality is to be exactly the same as it was with respect to the year 198586. And on such sums still means
by reference to such sums. This rather wearisome analysis makes it easy to see why Mr Stamler QC, for the Crown, would not
admit, even with regard to s 343(1), that the word on in the phrase on such sums as may be determined meant by reference
to, because one can see that it already has the same meaning in s 343(1A). I scarcely need to point out that tax is charged on all
sums paid or credited to investors in the relevant year of assessment. Those sums are readily ascertainable; they do not need to
be determined either in accordance with the arrangements or in accordance with the regulations.
After the enactment of s 343(1A) three events occurred: (1) the 1986 regulations were made and laid and came into
operation on 6 April 1986; (2) Woolwich commenced proceedings for judicial review; and (3) s 47 of the 1986 Act was enacted.
I shall assume that the object of introducing the s 47 amendment was either to make it clear that s 343(1A) was a valid
statutory authority for the making of the impugned regulations or to convert that provision into a valid statutory authority. It
seems highly probable, in so far as it is relevant at all, that one of these explanations is the right one. The ambivalence of my
diagnosis is consistent with the Crowns presentation of their case. Before Nolan J they seem to have relied on s 343(1A) and to
have introduced the s 47 amendment as a make-weight, but in the Court of Appeal the emphasis seems to have been on the effect
of the amendment, while before your Lordships the Crown advanced both arguments with equal vigour. Mr Gardiner, while
conceding that it would be ex abundanti cautela, suggested that the purpose of the s 47 amendment was to make it clear that the
1986 regulations could require building societies to pay amounts by reference to sums which had been paid or credited before 6
April of the relevant year of assessment. It clearly has that effect, in my opinion, assuming that such an effect was ever needed,
and therefore I am inclined to infer that the amendment had a different purpose from that attributed to it by Mr Gardiner. For the
Crown, Mr Stamler when arguing that s 343(1A) as enacted already authorised the 1986 regulations in their entirety (except reg
11(4)), said that the s 47 amendment was on that basis unnecessary. I shall come back to this point, but I take leave of it for the
moment by saying that the purpose of legislation is not the same thing as the intention of Parliament, which may be gathered
only from the actual words of the statute.
Before examining the amendment I will briefly consider one or two things which the 1986 regulations could have done
consistently with s 343(1A) as drafted, and, indeed, with the arrangements under s 343(1). They could have continued the
existing scheme by requiring building societies to account for and pay an amount representing income tax by reference to the
societys accounting year (in 114 the case of Woolwich, 1 October 1985 to 30 September +1986). Or they could have designated
a year commencing on 1 March 1986 and ending on 28 February 1987. Or they could have made the basis period coterminous
with the year of assessment, in which case the sums by reference to which the amounts were to be paid would have precisely
coincided with the sums on which tax was chargeable. The 1986 regulations could have provided for an annual payment on 1
January, as before, or for a different system such as quarterly payment on specified days, as they actually did. The true cause of
complaint is not the Revenues choice of the gap period but the combination of the gap period with the relevant years of
assessment, which results in a basis period of excessive length.
Let me now consider what the s 47 amendment did. I shall set it out again:

(including sums paid or credited before the beginning of the year but not previously brought into account under
subsection (1) above or this subsection).

It is, of course, necessary to incorporate the new words into the syntax of the existing subsection and to keep in mind, as I have
already said, that s 343(1A), of which the amendment is now a part, is modelled on, and now refers to, s 343(1).
Accordingly, as the legislature now tells us, such sums as may be determined in accordance with the regulations include
sums paid or credited before the beginning of the year but not previously brought into account under subsection (1) above or this
subsection. So the s 47 amendment simply defines more specifically (I do not say it extends) the expression such sums as may
be determined in accordance with the regulations. It achieves absolutely nothing else. (I emphasise these words because I
believe they provide the key to the problem.) The consequence is that s 343(1A) as amended continues to authorise precisely the
same regulations as it authorised in its original form, namely regulations requiring building societies to account for and pay an
amount representing income tax (that is representing investors income tax in respect of the relevant year of assessment) and to
pay that amount by reference to such sums (now more exactly defined) as may be determined in accordance with the regulations.
The Treasurys duty to determine the reduced rate and to aim at revenue neutrality, as required by s 26, is unchanged. In fact
nothing has changed.
With all respect to those who may take a different view, I do not consider that s 343(2) as amended by s 47(2) of the 1986
Act places any difficulty in the way of construing the word on as by reference to in s 343(1A) or s 343(1A) as amended. The
original s 343(2), which is concerned with a building societys corporation tax, refers to dividends or interest payable in respect
of shares in, or deposits with or loans to, the society, and para (a) of the subsection speaks of the amount accounted for and paid
by the society in respect thereof as representing income tax, meaning in respect of any such dividends or interest. Dividends
and interest are paid in respect of shares etc and in para (a) the amount accounted for and paid by the society as representing
income tax is paid in respect of the actual dividends and interest paid to investors in the societys accounting period, but it is also
paid on (or by reference to) such sums as may be determined in accordance with the arrangements under s 343(1).
Section 343(2) was the subject of two amendments by s 40(4) of the Finance Act 1985 and s 47(2) of the 1986 Act to have
effect for 198687 and subsequent years and, as amended, provided:

For any year of assessment to which regulations under subsection (1A) above apply, dividends or interest payable in
respect of shares in, or deposits with or loans to, a building society shall be dealt with for the purposes of 115 corporation
tax as follows:(a) in computing for any accounting period ending in the year of assessment the income of the society
from the trade carried on by it there shall be allowed as a deduction the actual amount paid or credited in the accounting
period of any such dividends or interest, together with any amount accounted for and paid by the society in respect thereof
as representing income tax, (b) in computing the income of a company which is paid or credited in the year of assessment
with any such dividends or interest in respect of which the society is required to account for and pay an amount in
accordance with the regulations, the company shall be treated as having received an amount which, after deduction of
income tax, is equal to the amount paid or credited, and shall be entitled to a set-off or repayment of income tax
accordingly, (c) no part of any such dividends or interest paid or credited in the year of assessment shall be treated as a
distribution of the society or as franked investment income of any company resident in the United Kingdom.

Nothing arises before para (b). It is concerned with computing the income of a company which is paid or credited in the year of
assessment [for the present purposes not before 198687] with any such dividends or interest (that is such dividends or interest
as are mentioned in line 2 of sub-s (2). The words introduced by s 47(2) are in respect of which the society is required to
account for and pay an amount in accordance with the regulations. They describe further the dividends or interest referred to.
There is a close parallel with my analysis of sub-s (2)(a): the dividends and interest are paid to the company in the year of
assessment and in respect of those dividends and that interest the building society is required to account for and pay an amount in
accordance with the regulations; by looking again at s 343(1A) it can be seen that the amount is to be paid on such sums as may
be determined in accordance with the regulations, but I can see absolutely no indication that the dividends or interest in respect
of which that amount is to be paid under s 343(1A) are or can be dividends or interest paid to the company in 198586.
In my judgment the only possible means of escape from this conclusion is (1) to assume or pretend that on in the phrase
on such sums as may be determined in s 343(1) and s 343(1A) means and has always meant charged on (because the s 47
amendment did not change the meaning of on) and (2) to say, as the Crown did, that brought into account in the amendment
means brought into account for the purpose of paying tax thereon. As to the first point, I refer to my earlier observations. As to
the second, the words not previously brought into account under subsection (1) above are significant. From an income tax point
of view, the arrangements and s 343(3) have ensured that the sums paid or credited to investors in the whole of the year of
assessment 198586, including the sums paid or credited in the gap period, have already been brought into account in the
Crowns sense of the word, but the sums paid or credited in the gap period have not been brought into account in the way
envisaged by arrangements made under s 343(1). In this respect s 343(1A) has the same effect as s 343(1) and continues to have
that effect after amendment.
The Crowns case depends, in my view, on three fallacies. These are: (1) the theory that the deductions made by the
building societies during the gap period from the dividends and interest which they paid to their investors represent money for
which the building societies ought to account to the Revenue. This view explains the inclusion of the gap period by the 1986
regulations together with the relevant fiscal years and, when advanced in argument, is calculated to predispose a court to accept
the Crowns interpretation; (2) the confusion of the 116 probable purpose of introducing the amendment with the intention of
Parliament as it is to be gathered from the words used in the 1970 Act; (3) the acceptance of the proposition that, if the words of
the s 47 amendment clearly refer to the sums paid or credited in the gap period, they also have the effect contended for by the
Crown. I shall deal with these points in turn.
(1) As respects the year of assessment 198586, the Revenue and Woolwich entered into arrangements whereby the entire
liability of the investors for income tax (except for tax at the higher rate) was discharged, and Woolwich was also discharged
when on 1 January 1986 it paid to the Revenue an amount representing that income tax. Thereafter no income tax or money
representing income tax was due in respect of the fiscal year 198586. Woolwich does not pay income tax in its own right but
has a personal liability for corporation tax with which this case is not concerned. Under proper regulations the investors income
tax liability for the year 198687 and subsequent years of assessment ought to be disposed of on similar principles, using either
the year of assessment itself or some other 12month period as the basis period. If a cessation or merger occurs, special rules will
apply, as also happened under the former arrangements. The legitimate and declared object of the old arrangements and the new
regulations was and is to collect each year from the building societies an amount representing the investors income tax for that
year. When Woolwich and other building societies changed their basis period in 194041 from the accounting year which ended
before the year of assessment to the accounting year which ended during the year of assessment, there was a gap period, but this
did not give rise to legislation to fill the gap. Thus to disregard the 1940 gap was correct in principle. The 1986 regulations
introduced a current year basis of assessment in place of what had been in part a previous year basis. The Crowns proposition
amounts to a spurious charge of unjust enrichment against the building societies and overlooks the point that both s 343(1) and s
343(1A) are not directed to the tax liability of building societies in their own right but are concerned with the liability of building
societies (as an alternative to conventional tax accounting) to pay to the Revenue in respect of each single year of assessment an
amount representing the investors income tax for that year.
(2) Assuming (in all probability rightly) that the purpose of the s 47 amendment was to validate the 1986 regulations by
retrospectively enlarging the authority to make them, it does not follow that the amendment achieved that purpose. One fallacy is
to infer that purpose must be equated with legislative intention as expressed in the words used in the enactment. Another fallacy
is to conclude that, because no other sensible purpose of the amendment can be found, therefore the purpose contended for by the
Crown not only existed (which can be readily enough inferred) but has been achieved (which calls for an examination of the
enacting words in their context). If the purpose of an enactment, including an amending enactment, can be found and if the
words of the statute are on one possible construction apt to achieve the purpose, but not on another construction, then the court
should prefer the construction which achieves the purpose, but, if no reasonable construction of the words used can lead the court
to conclude that the purpose has been achieved, the intention of Parliament as elicited from the words of the statute prevails and
the purpose, however obvious, is defeated. There is no room for a purposive construction if the words to be construed will not
bear the interpretation sought to be put on them and it must always be borne in mind that the art of statutory interpretation can be
applied only when the provision to be interpreted is ambiguous. I refer to Maxwell The Interpretation of Statutes (12th edn,
1969) pp 12, 2829 and also to Bennion Statutory Interpretation (1984) p 237, where the matter is put succinctly:
117

The distinction between the purpose or object of an enactment and the legislative intention governing it is that the
former relates to the mischief to which the enactment is directed and its remedy, while the latter relates to the legal meaning
of the enactment.

(3) The unacceptability of this proposition is obvious.

I turn now to the judgments delivered in the courts below.
The judgment of Nolan J is worthy of careful study and, I suggest to your Lordships, of considerable respect as well. After
describing the effect produced by the 1986 regulations as a truly astonishing result, the judge added ([1987] STC 654 at 660):

Parliament is omnipotent, and if it enacted that income tax for any year should be paid on the income of two years or
the income of twenty years, then that would be the end of the matter; but in none of the Finance Acts of this or of the last
century has it ever sought to levy a years income tax upon the income of more than a year. If it wished to do so one would
expect the clearest terms to be employed. The suggestion that it has implicitly authorised the Revenue to achieve such a
result by way of delegated legislation is one which defies acceptance.

He then said (at 660661):

By claiming further tax (albeit from the taxpayer rather than directly from its members) upon the dividends and
interest received by the members during that period [ie the gap period] the Revenue are, as it seems to me, going back on
that arrangement. I can see nothing in s 343(1A) which authorises them to do so.

Having averted to the preceding year basis of assessment, he continued (at 661662):

The income thus taxed is none the less in law the income of the year of assessment, albeit artificially measured in this
way. As Lord Donovan said in Duckering (Inspector of Taxes) v Gollan [1965] 2 All ER 115 at 120, [1965] 1 WLR 680 at
689, My Lords, it is a truism which the [Crown] does not dispute that United Kingdom income tax for any year of
assessment for which the tax is granted by Parliament is a levy upon the income of that year. It is not a levy upon the
income of a preceding year, nor does it become so by virtue of the fact that this latter income may be used to measure the
amount of tax payable. Precisely the same principle applies, of course, when the income used as a measure is income of a
period ending in the current year of assessment rather than in a preceding year of assessment. That sometimes happens in
the case of income charged under Case VI of Sch D (see s 125 of the Income and Corporation Taxes Act 1970) which it
will be noted expressly incorporates the requirement that the period whose income is used as a measure must not exceed
twelve months. One result of the system of using as the unit of measurement the income of a period which has ended
before or during the year of assessment concerned is that when that system ceases to operate it leaves a gap. It leaves a
period running from the end of the last unit of measurement until the end of the last year of assessment for which the
system is in operation. The actual income of that gap will not be used as a measure of liability unless the legislation
contains special provisions avoiding that result. Various provisions to that effect are set out in the 1970 Act: see, for
example, s 118 dealing with trades and professions. It is not necessary for me to set out these provisions in detail. Their
general purpose 118 is to prevent artificial exploitation of the gap. In every case they do this by providing for the inclusion
in the measure of liability of income which would otherwise drop out. Equally in every caseand this is the pointfor
each fresh period whose income is brought into the measure another period of equal length is left out, so that in all cases
the assessment for the year remains an assessment upon not more than twelve months income. The inevitable corollary is
that a gap remains. It is just a different gap of the same length. The only way in which it could be avoided would be by
loading more than twelve months income into the measure of liability for a year of assessment, and that is anathema.

The judge reviewed the arguments and found himself unpersuaded by the arguments for the Crown. He then turned to s
47(1), saying (at 662):
 The reason why it figures late in my judgment (as it did in the argument of counsel for the Crown) is because of the
difficulty I find in seeing what effect it has, or was intended to have.

Having quoted the subsection he concluded his judgment as follows (at 662663):

If this was intended to mean that the Revenue were authorised to use dividends and interest paid before 6 April 1986
as a measure of liability in 198687 following the same pattern as in previous years it would be intelligible, though I would
have thought it unnecessary. Counsel for the Crown contends, however, although without basing his case upon s 47(1), that
it goes further than that and confirms the validity of the tax imposed by regs 3 and 11 on dividends and interest paid before
6 April 1986. This I cannot accept. Section 47(1) still leaves the power conferred by s 343(1A) as a power exercisable
only with respect to 198687 and subsequent years. It does not purport to legitimise the tax sought to be imposed by reg 11
at the 198586 rates. It does not purport to withdraw the protection of s 343(3)( b) from the taxpayers members for that
year. If s 47(1) has misfired, or has been based upon an erroneous view of the law, it would not be the first piece of fiscal
legislation to do so. The case for the taxpayer was also supported by a comparison with the treatment accorded to bank
interest by s 27 of the Finance Act 1985, and by helpful illustrations in figures of the effects which regs 3 and 11 would
produce. Upon these points too I accept the validity of the arguments put forward by counsel for the taxpayer; but it would
do nothing to improve an already over long judgment if I set them out in full. It is enough to say that for the reasons given
I consider the regulations to be ultra vires in so far as they purport to levy tax upon dividends and interest paid by building
societies in 198586.

My Lords, I derive comfort, if little satisfaction, from those words of a judge who is thoroughly experienced in tax matters:
If s 47(1) has misfired, or has been based upon an erroneous view of the law, it would not be the first piece of fiscal legislation to
do so. I think that that is what has happened here and I feel that what might otherwise be an improbable conclusion on my part is
fortified by the presence of the admittedly ultra vires reg 11(4), by the Crowns admission (or assertion) during the hearing of this
appeal that they were wrong to charge 198586 rates of reduced tax in relation to the period 1 March to 5 April 1986 and by the
fact that the Crowns primary case before Nolan J involved the contention that the original s 343(1A) was itself effective to
authorise the impugned portions of the regulations. Against that background, it would not be at all surprising if s 47(1) had
missed its mark.
119
My Lords, I now come to the judgment of Sir Nicolas Browne-Wilkinson V-C, with which the other members of the Court
of Appeal concurred (see [1989] STC 463). The Vice-Chancellors first observation was that the case for the Crown before
Nolan J was fundamentally different from that presented to the Court of Appeal because, having earlier relied to a very minor
extent on s 47, they now contended that Woolwich is not accountable for the tax payable by the investors and that the whole
case turns on the s 47 words which retrospectively validate the regulations (at 469; my emphasis). He then said that counsel
for the Crowns argument was very straightforward, to the effect that the omitted interest

falls fairly and squarely within the express terms of the s 47 words, ie the omitted interest consists of sums paid or
credited before the beginning of the year but not previously brought into account under [s 343(1) or (1A)] . It follows,
says counsel for the Crown, that the regulations cannot be ultra vires in requiring payments to be made in respect of the
omitted interest.

The Vice-Chancellor expresses a tentative conclusion (at 469470):

As a matter of ordinary construction, I find the conclusion contended for by counsel for the Crown inescapable. The s
47 words are clear and they cover the present case. Moreover the regulations had been made and their validity challenged
before Parliament had to consider the Finance Bill 1986. It was in those circumstances that Parliament enacted s 47 of the
Finance Act 1986 which introduced the s 47 words. In such circumstances, in the absence of any other reason for
Parliament to have enacted s 47 so as to deem s 343(1A) always to have included the s 47 words, the inference must be that
Parliament intended to put to rest the existing challenge to the validity of the regulations. What, then, is the contrary
argument? Counsel for Woolwich relied on the cumulative effect of three submissions to persuade us that the s 47 words
should not be given their apparent meaning: first, that s 47 was retrospective in its effect and should be narrowly
construed; second, that the effect of reg 11 was to charge to tax in one year the income of a period of more than one year
and this was an impossible concept under our tax lawit was anathema; third, that the Crowns argument, if right, involves
an element of double taxation against which the court should always lean. I will deal with these submissions in turn.

In fairness to Mr Gardiner, who has appeared for Woolwich at every stage of these proceedings, it should be acknowledged
that in your Lordships House he did not at all concede that the s 47 words, according to their apparent meaning, authorised the
regulations complained of. What he said here, rightly in my opinion, was that, although those words clearly referred to the sums
paid or credited in the gap period, they did not authorise the exaction of tax, or an amount representing tax on those sums as well
as on the sums paid or credited in the relevant years of assessment, namely 198687 and 198788.
The next passage in the Vice-Chancellors judgment is crucial (at 470):

It was principally the anathema argument that led the judge to the conclusion that reg 11 was ultra vires. But he was
proceeding on the basis, urged before him by the Revenue, that Woolwich was accounting for the tax payable by its
investors. In this court the Revenue changed its stance and submitted that the liability of Woolwich under s 343 is not a
liability to account for the income tax payable by its investors but a liability sui generis, ie a liability to make a composition
payment representing, and calculated by reference to, what would otherwise have been the net tax liabilities of the 120
investors as a body as opposed to accounting for each investors tax deducted by Woolwich. Therefore, argues the
Revenue, the anathema argument has little, if any, relevance to the present case. In my judgment the revised Revenue
stance is correct. Under s 343(3) interest is payable to investors without deduction of tax and the investor is not liable to
basic rate tax on such interest. Therefore the building society in making the lump sum payment is not accounting to the
Revenue for the tax liability of anybody. Nor is the lump sum payable by the society calculated by reference to what
would, apart from s 343(3), have been the tax liability of each individual investor. The lump sum is a sum calculated on a
statistical basis seeking to reflect the net take for the Revenue from all investors in all building societies. The nature of
the payment to be made by the building society is a composition payment calculated by reference to the aggregate net tax
liability of all investors but is not a payment of income tax as such.

Here the Court of Appeal accepted the Crowns contention that the liability under s 343 was not a liability to account for the
income tax payable by its investors but a liability sui generis. I need not repeat every word of the sentence which I have just
quoted above. The anathema, it will be recalled, is the idea of computing a years tax liability by reference to a period of more
than one year, and the court has accepted the Crowns submissionthat the anathema argument has no relevance because the
amount to be paid is not income tax but merely represents income tax. Therefore, said the Vice-Chancellor, the building society
in making the lump sum payment is not accounting to the Revenue for the tax liability of anybody. He then aptly summarised the
effect of s 26(3), but disregarded the fact that inextricable from the anathema argument is the point that the Treasury simply
cannot achieve revenue neutrality by determining a reduced rate of tax if the area of the net take measures two and a half years
when the periods with respect to which provision is made by the 1986 regulations add up to two years. Indeed, to put it this way
is a concession to the Revenue because under s 26(1) and (3) the Treasury must look to the year of assessment 198687 while tax
at the basic rate and the reduced rate is collected on the immediately preceding six months but payment thereof is spread over two
years. The fact that what has to be paid is an amount representing income tax and not the tax itself is quite irrelevant.
The Vice-Chancellor continues on the same tack (at 471):

For these reasons the arrangements affecting the lump sum liability of building societies are a unique form of statutory
impost to which ordinary principles of tax law do not necessarily apply. Since the composition payment is designed to put
the Revenue in the position it would have been in had interest been payable under deduction of tax, there is nothing
inherently contrary to principle in bringing into the computation of such composition payment sums which would normally
have suffered deduction of tax (if there had been no arrangement) and which, due to the change in the system introduced by
the 1985 Act, would otherwise have dropped out of account. Given the special nature of the lump sum payment, to my
mind the anathema argument has little force.

This statement, with great respect, completely disregards the wording of s 343(1) and (1A) and the arrangements made in
the past and even the general drift of the 1986 regulations, so far as they are not impugned. It would be strange if ordinary
principles of tax law did not apply, when one considers that the 121 purpose of s 343 was not to abandon those principles but,
with the help of s 26, to find a practical way of applying them.
After discussing the arguments on double taxation the Vice-Chancellor concluded the main part of his judgment (at 471):

For these reasons I do not find any compelling reason to depart from the plain meaning of the s 47 words. Even if the
factors relied on by Woolwich had more substance, it would still be necessary to give the s 47 words some effect: they
cannot have been specifically inserted for no reason at all. Counsel for Woolwich suggested that they were inserted ex
abundanti cautela to make it clear that there was no objection to the regulation providing that liability should be measured
by reference to interest paid before the commencement of the tax year 198687. But, in my judgment, this does not fully
explain the introduction of the s 47 words. Section 47 is directed to a case in which two requirements are satisfied, viz,
first, that the interest had been paid or credited before the beginning of the year and, second, that such interest had not
previously been brought into account. No suggestion has been put forward for the presence in s 47 of words referring to
monies not previously brought into account save that relied on by the Revenue, ie that the words were included to authorise
the taxing, in the years 198687 and thereafter, of monies not previously brought into account under the old arrangements.
I am therefore satisfied that the regulations are not ultra vires apart from reg 11(4) which the Revenue accepts is invalid.
(The Vice-Chancellors emphasis.)

I again have to make the point that it is not only the plain meaning of the s 47 words but their effect which has to be
considered. The rest of the passage quoted is, I hope, adequately covered by what I have said already.
And now, my Lords, before I finish, I wish to pull together some loose ends and then to comment on the way in which the
Crown put their case to your Lordships.
Like my noble and learned friend, I am impressed by the argument that an intention (using that word in its proper sense) to
produce what Nolan J described as a truly astonishing result should not be ascribed to Parliament without very clear words. As
Mr Gardiner put it, reg 3, shorn of its transitional feature, exhausts the power conferred by s 343(1A) by charging the entire
dividends and interest for the year of assessment 198687 and the s 47 amendment does not increase or expand the liability to
charge. He also submitted that an amount paid by Woolwich in respect of the gap period dividends and interest discharged no
liability of the investors and could not be called an amount representing their income tax of any year of assessment.
Another approach for Woolwich is to ask: does s 343(1A) in its original form or as amended authorise the Revenue to adopt
a different principle from that allowed by s 343(1)? On the analysis which I have made, I suggest that the answer must be No. It
would, moreover, be strange if the Revenue has been given the power to decide what sums should be charged to tax, as distinct
from being used as the measure of the investors tax. In this connection reg 11(2) is an interesting artificial provision:

Subject to the provisions of these Regulations, any such payment shall be treated in all respects as a payment to which
these Regulations apply and as made in the payment quarter to which the payment dates specified in paragraph (3) below
relate.
122

Against the background that no precedent exists for charging tax for a particular year on the income of a period of more than
a year, both s 343(1A) and s 26 are directed towards one year of assessment, in the present instance 198687. What has to be
paid is an amount representing income tax and that can only be the tax chargeable against the investors with respect to 198687.
Having come this length, I would adopt what my noble and learned friend Lord Oliver, has said about s 26(p 103, ante):

In exercising its powers the Treasury has to assume that the sums payable by the society are income taxwhich can
only mean income tax for the year of assessmentand to produce the net result that the total income tax becoming payable
to the Revenue (again in that year of assessment) is no more than it would have been if s 343(including sub-s (1A)) had not
been enacted.

Finally I come to the Crowns presentation of their case which, thanks to the ability of Mr Stamler, lacked nothing in
thoroughness, ingenuity or force. For the first time he will be unable to answer back. So I must be careful with my comments.
(1) Mr Stamler would not concede that on meant by reference to in s 343(1) or s 343(1A). I formed the view that the
position he took up was necessary to his case but untenable.
(2) He ruthlessly disregarded s 26 in the interpretation of s 343(1A). Again he had to do so.
(3) He described Woolwich as an accounting party in respect of its gap period deductions, but both the investors and
Woolwich have fully accounted for the investors 198586 income tax. The fact that Woolwich has made deductions from the
gap period payments does not oblige it to pay the deductions to the Revenue because, while Woolwich has to account for and pay
all deductions made in 198687, it cannot credibly be argued that the gap period deductions represent investors income tax of
either 198586 or 198687. The forbidden choice of 198586 rates by the Revenue in reg 11(4) illustrates by accident the
Revenues vulnerability.
(4) Mr Stamler said, Admittedly, you cannot tax the investors again in respect of the gap period, but you can tax Woolwich.
He made the point that Woolwich paid no tax in respect of the gap period (except, presumably, such corporation tax as was due).
With respect, that means nothing unless it can be correctly equated with failing to pay an amount representing income tax of the
depositors, a point I have covered already.
(5) It seems to me that the Crowns argument on these lines depends not on the meaning of s 343(1A) but on the supposed
absurdity of Woolwichs getting away with non-payment of tax (which was not lawfully due).
 (6) Mr Stamler argued that there was no reason for symmetry between the period in respect of which the investors liability
for income tax has been discharged and the period in respect of which the liability of Woolwich to account for an amount
representing income tax has to be discharged. He also said that the concept of measurement was irrelevant to the situation of
Woolwich and that for an amount representing income tax in s 343(1A) (and presumably also in s 343(1)) one might as well
substitute an amount instead of income tax. These propositions, with respect, are further examples of the complete
abandonment of s 343(1A) and s 26 in favour of saying, Woolwich made deductions in the gap period and must pay them to us.
The only authority I will mention is Partington v A-G (1869) LR 4 HL 100 at 122, in which Lord Cairns said:
123

If the person sought to be taxed comes within the letter of the law he must be taxed, however great the hardship
may appear to the judicial mind to be. On the other hand, if the Crown, seeking to recover the tax, cannot bring the subject
within the letter of the law, the subject is free, however apparently within the spirit of the law the case might otherwise
appear to be. In other words, if there be admissible, in any statute, what is called an equitable construction, certainly such a
construction is not admissible in a taxing statute, where you can simply adhere to the words of the statute.

My Lords, I have not seen in the Crowns printed case or heard in argument any reasoned statement which shows how s
343(1A) or s 47(1) achieves the result contended for by the Crown. Accordingly, I would allow this appeal.

Appeal allowed.

Solicitors: Clifford Chance; Solicitor of Inland Revenue.

Mary Rose Plummer Barrister.

[1991] 4 All ER 124

Re West Pennard Churchyard

ECCLESIASTICAL

BATH AND WELLS CONSISTORY COURT

CHANCELLOR GH, NEWSOM QC
8 FEBRUARY 1991

Ecclesiastical law Churchyard Right of burial in churchyard Parishioner Petition for faculty reserving grave space
Single woman with no close relatives, with father living in parish and with deceased mother buried in churchyard seeking
reservation of grave space for herself in churchyard Extent of incumbents power to oppose burial of person having right of
burial Extent of incumbents power to consent to burial of remains of persons having no legal right of burial in churchyard--
Courts discretion to grant faculty Whether parochial church council entitled to oppose all petitions for faculties reserving
grave spaces Whether churchwardens concerned in matter Church of England (Miscellaneous Provisions) Measure 1976, s
6(2)Ecclesiastical law Churchyard Closure When churchyard is ripe for closure.

The petitioner, who was a single woman aged 36, sought a faculty for the reservation of a grave space for herself in the
churchyard of the parish in which she lived. The remains of her late mother were already buried in the churchyard and her father
lived in the parish. The incumbent and the parochial church council, which had earlier agreed that it should not be possible to
buy burial plots in the churchyard and had resolved that burials in the churchyard should continue to be allowed at the discretion
of the vicar and the churchwardens, opposed the petition.

Held (1) The right at common law of every parishioner to be buried in the churchyard of the parish unless it was closed by due
legal process was a legal right in the exercise of which the parochial church council was not in any way concerned. Furthermore,
although the incumbent had power at common law to prescribe in what position in the churchyard any burial was to take place,
that was the extent of his power in respect of cases where the deceased had a right of burial. If a person with a legal right of
burial wished in his lifetime to assure his personal representatives of a right to bury his remains in a particular place in a 124
churchyard he was required to apply to the consistory court for a faculty to reserve that grave space, but whether such a faculty
would be granted rested wholly in the judicial discretion of the court; to that extent such a faculty deprived the incumbent of his
right to prescribe the position where a burial was to take place (see p 126 g j to p 127 b, post).
(2) A parochial church council was entitled, as a matter of its internal practice, to decide that it would always oppose
petitions for the reservation of grave spaces, but such a policy was in no way binding on the court and, like any other litigant, a
parochial church council litigated at its own risk as to court fees and costs (see page 127 j, post).
Since the parochial church councils policy appeared to have been framed on the illegitimate basis that no one had a legal
burial right, that burial plots could be bought, which was and had always been impossible, and that the churchwardens had some
concern in the matter, which they did not, and since the petitioner was alone in the world, her widowed father, who was her only
close relative, lived in the parish and her mothers remains were already buried in the churchyard, there were no grounds for
denying the petitioner her wish and the faculty she sought would accordingly be granted (see page 127 h and p 128 d to f, post).
Per curiam. (1) As freeholder of the churchyard the incumbent is entitled to grant consent to the burial in the churchyard of
the remains of a person who has no legal right of burial, but to the extent that he does so he ousts those who have existing
prospective rights, although he is required by s 6(2) a of the Church of England (Miscellaneous Provisions) Measure 1976 to have
regard to any general guidance given by the parochial church council with respect to the matter. Furthermore, a faculty for the
reservation of a grave space can, with the concurrence of the incumbent, be applied for by a person who does not have a legal
right of burial. Amongst the various grounds on which such a faculty will be granted are the association of the petitioner with the
church or parish, or the presence in the churchyard of the remains of relatives of the petitioner. However, no interment of a
person not having a legal right of burial can take place at all, and no faculty for such a burial ought to be granted, unless the
incumbent has signified his concurrence (see page 126 h j and p 127 c e, post); dictum of the Chancellor in The Perivale Faculty,
De Romana v Roberts [1906] P 332 at 336 explained.
________________________________________
a Section 6(2), so far as material, is set out at p 126 h j and p 127 c e, post)

 (2) The consistory court is usually disposed to grant a faculty reserving a grave space to a petitioner who has a legal right of
burial. Such a case may be strengthened if the remains of one or more of the petitioners relatives are buried nearby or may be
weakened if the churchyard is on the point of being full (see page 128 a, post).
(3) No churchyard is full and ripe for closure until all the parts of it in which reburial is possible have been buried over again
at least once (see page 128 b, post).

Notes
For the right of burial in a churchyard, see 10 Halsburys Laws (4th edn) paras 11181121 and 14 Halsburys Laws (4th edn) para
562, and for cases on the subject, see 7 Digest (Reissue) 546, 30873094.
For faculties for the reservation of grave spaces, see 10 Halsburys Laws (4th edn) paras 11221125, and for cases on the
subject, see 7 Digest (Reissue) 547548, 31033115.
For a closure of burial grounds, see 10 Halsburys Laws (4th edn) paras 12071208, and for a case on the subject, see 7
Digest (Reissue) 570, 3287.
125
For the Church of England (Miscellaneous Provisions) Measure 1976, s 6, see 14 Halsburys Statutes (4th edn) 444.

Cases referred to in judgment

Perivale Faculty, The, De Romana v Roberts [1906] P 332, Con Ct.
St Lukes, Holbeach Hurn, Re, Watson v Howard [1990] 2 All ER 749, [1991] 1 WLR 16, Con Ct.
St Nicholass, Baddesley Ensor, Re [1982] 2 All ER 351, [1983] Fam 1, [1982] 3 WLR 631, Con Ct.

Petition for faculty

By a petition dated 28 September 1989 Miss Mariea Barton sought a faculty for the reservation of a single depth grave space in
the churchyard of the church of St Nicholas, West Pennard in the diocese of Bath and Wells for the exclusive burial therein of the
petitioner in due course. The petition was opposed by the incumbent of the parish, the Rev Prebendary P Riley, and the secretary
to the parochial church council, Mrs P Creed. With the agreement of the parties the Chancellor ordered pursuant to r 6A of the
Faculty Jurisdiction Rules 1967, SI 1967/1002 (as amended by SI 1987/2266), that the proceedings be determined upon
consideration of written representations instead of by a hearing in court. The facts are set out in the judgment.

8 February 1991. The following judgments were delivered.

THE CHANCELLOR: The petitioner, Mariea Barton, is a parishioner of West Pennard. She asks for the reservation of a grave
space for herself in the churchyard. The remains of her late mother, Jocelyn Gladys Barton, are already interred in the
churchyard. Her father lives in the village. The incumbent and the parochial church council have entered appearance in
opposition. All parties have agreed that I shall determine this case on written representations under r 6A of the Faculty
Jurisdiction Rules 1967, SI 1967/1002 (as amended by SI 1987/2266).
At common law, every parishioner has a right of burial in the churchyard of the parish (unless it is closed by due legal
process). The common law right extends also to all persons dying in the parish, whether or not they are parishioners. By statute
a similar right is enjoyed by all persons whose names are on the electoral roll of the parish (see Church of England
(Miscellaneous Provisions) Measure 1976, s 6(1)). These are legal rights and the parochial church council is not concerned in
any way with their exercise. The incumbent has power at common law to prescribe in what position in the churchyard any burial
is to take place; but that is the extent of his power in respect of cases where the deceased had a legal right of burial. However, as
freeholder of the churchyard, the incumbent is also entitled to grant consent to the burial in the churchyard of the remains of a
person who has no legal right of burial; in doing so he is to that extent ousting those who have existing prospective rights. In
deciding whether to give consent in such a case, he is therefore required by statute to have regard to any general guidance given
by the parochial church council of the parish with respect to the matter: see s 6(2) of the 1976 Measure.
These common law and statutory rights crystallise only when the person in question dies. If a person with a legal right of
burial wishes in his lifetime to assure his personal representatives of a right to bury his remains in a particular place in the
churchyard, he must apply to this court for a faculty to reserve that grave space. Whether such a faculty shall be granted rests
wholly in the judicial 126 discretion of the court. If there is plenty of room in the churchyard it is freely granted to a petitioner
who has a legal right of burial. What such a faculty does is to protect the petitioner against the hazard of losing his legal right in
his lifetime (eg by ceasing to live in the parish), and to require whoever is the incumbent when the petitioner dies to allow his
remains to be buried in the position in the churchyard defined in the faculty. To this extent, therefore, the faculty deprives the
incumbent of his right to prescribe the position where a burial is to take place; and it deprives the parishioners generally of the
space becoming available if the petitioner moves away.
Such a faculty can also be applied for, with the concurrence of the incumbent, by a person who does not have a legal right of
burial. The grounds on which such a faculty is granted vary; among them are the association of the petitioner with the church or
with the parish, or the presence in the churchyard of the remains of relatives of the petitioner. In the past some incumbents added
substantially to their stipends by selling rights of this kind: thus in The Perivale Faculty, De Romana v Roberts [1906] P 332 at
337 the incumbent had charged for a grave space capable of burying two persons the sum of 22 guineas. In our present money
that was something like ___750. This practice was not then techically irregular, but the court discouraged it in that case and it has
since become obsolete. However, even then the grant was not binding on the successors of the incumbent unless confirmed by a
faculty; in the Perivale case the faculty was granted.
But, as I understand it, no interment of a person not having a legal right of burial can take place at all, and no faculty for
such a burial ought to be granted, unless the incumbent has signified his concurrence. In such a case he appears to me to have a
veto. I think that this conclusion is implicit in the remarks of the Chancellor, Dr Tristram KC, in the Perivale case (at 336). For a
recent discussion of the subject as a whole see also Re St Nicholass, Baddesley Ensor [1982] 2 All ER 351, [1983] Fam 1.
I have thought it right to set out the law thus fully because there is evidently considerable misunderstanding of it at West
Pennard. There is before me a copy of the resolution of the parochial church council dated 22 July 1987 in the following terms:

It was agreed that it should definitely not be possible to buy burial plots. What criteria should be met to allow people
to be buried in the churchyard was discussed. It was very difficult to lay down exact rules so it was proposed and seconded
that it should continue to be at the Vicars and Churchwardens discretion but that they should be a little stricter.

In this resolution, the first sentence deals with buying burial plots, which of course is and always has been impossible.
Further, the churchwardens are not concerned at all. However, the parochial church council cannot interfere with the powers of
the consistory court to grant reservations of grave spaces. Its only right is to enter appearance when the citation for the desired
faculty is published and seek to persuade the court by reasonable argument not to grant it. The rest of the resolution appears to
have been framed on the basis that no one has a legal burial right. As I have explained, a good many people do have such a right.
Further, the resolution falls short of giving the general guidance to the incumbent in allowing the burial of the remains of people
not having a legal right to burial as is permitted to the parochial church council by the statute which I have quoted. The parochial
church council is, of course, entitled, as a matter of its internal practice, to decide that it always will oppose petitions for the
reservation of grave spaces. But that is in no way binding on the court; and, like any other litigant, the parochial church council
will litigate at its own risk as to court fees and costs.
127
The court is usually disposed to grant the reservation petition of a person who has a legal right of burial. Such a case may
further be strengthened if the remains of one or more of the petitioners relatives are buried nearby, as is the case here. Or it may
be weakened if the churchyard is on the point of being full. Here there are said to be about 8 burials a year and some 24 spaces
left in the churchyard. This latter statement presumably refers to spaces which have never previously been used. But I should
point out that no churchyard is full and ripe for closure until all the parts of it in which reburial is possible have been buried over
again at least once. And, until closure, all legal burial rights continue. Over the centuries churchyards have been buried in
several times over and it cannot be said that a churchyard is nearly full by considering only the areas which have never been used
for burials. When there are no unused spaces, parishes sometimes seek to apply for closure in order to pass the expense of
running the churchyard to the local authority. It is the standard practice in this diocese, and has been so for at least the last ten
years, to advise parishes that the Department of the Environment will not allow the closure of a churchyard except after careful
inquiry as to how far areas already used for burial can be used again. Nothing has been said in this case about that matter, and on
the evidence before me I am not prepared to treat this churchyard as being full or anything like it.
It is said by the parties opponent that the application of the petitioner should not be granted, partly because of the alleged
policy that no grave spaces shall be reserved and partly because the petitioner is only 36 years of age. I have already dealt with
the illegitimacy of the alleged policy. As to the petitioners age, which is the only real point in this case, her submission is that
she is alone in the world, that her widowed father lives in West Pennard, that he is her only close relative and that in this
churchyard her mothers remains are already buried. She says, therefore, that it should be her natural resting place and that she
wishes to have the peace of mind which the assurance of the proposed reserved space will, she says, give to her. I see no ground
for denying her that wish. The petition therefore succeeds. The registrar will give directions as to marking the reserved space on
the ground so that there may be no such mistakes in future as occurred in Re St Lukes, Holbeach Hurn, Watson v Howard [1990]
2 All ER 749, [1991] 1 WLR 16.
Under the ordinary practice of the court, the petitioner, who sets the court in motion, is primarily responsible to the court for
the court fees. I therefore order the registrar to assess them and the petitioner to pay them (including a correspondence fee of
___25 for the registrar which I fix under the current fees order (the Ecclesiastical Judges and Legal Officers (Fees) Order 1989,
SI 1989/1242)). But since the court fees have been increased by the unsuccessful opposition to the petition, I give the petitioner
leave to apply in writing within 28 days from today for an order requiring the parties opponent to recoup to her all or some of the
court fees over and above the initial lodgment fees, which would have had to be paid on an unopposed petition. Further, I give to
all parties leave to apply in writing within 28 days for his or their costs of the proceedings to be taxed by the registrar and to be
paid by some other party than themselves.

Petition granted.

N P Metcalfe Esq Barrister.

128
[1991] 4 All ER 129

Baytur SA v Finagro Holding SA

ADMINISTRATION OF JUSTICE; Arbitration

COURT OF APPEAL, CIVIL DIVISION

LLOYD, FARQUHARSON AND NOLAN LJJ
20, 21, 22, 23 MAY, 13 JUNE 1991

Arbitration Claim Assignment of claim Effect of assignment Whether assignee becoming party to arbitration Whether
assignee must give notice to other side and submit to jurisdiction of arbitrator Whether award a nullity if assignee fails to give
notice to other side and submit to jurisdiction of arbitrator.

An equitable assignee of a claim under a pending arbitration does not automatically become a party to the arbitration on the
assignment taking effect in equity: the assignee must first give notice to the other side and submit to the jurisdiction of the
arbitrator. If he does not do so, and if the assignor, being a corporation, is dissolved in the meantime, the arbitration and any
award made in it lapses and becomes a nullity since an arbitration requires two or more parties and there cannot be a valid award
when one of the two parties has ceased to exist (see page 131 h to p 132 a j, p 133 e f and p 135 h, post).

Notes
For assignees being parties to an arbitration agreement, see 2 Halsburys Laws (4th edn reissue) para 610.

Cases referred to in judgments

Brandts (William) Sons & Co v Dunlop Rubber Co Ltd [1905] AC 454, [19047] All ER Rep 345, HL.
Foster Yates & Thom Ltd v HW Edgehill Equipment Ltd (1978) 122 SJ 860, CA.
Getreide-Import-Gesellschaft mbH v Contimar SA, Cia Industrial Commercial y-Maritima [1953] 2 All ER 223, [1953] 1 WLR
793, CA.
London Steamship Owners Mutual Insurance Association Ltd v Bombay Trading Co Ltd, The Felicie [1990] 2 Lloyds Rep 21.
Mercer Alloys Corp v Rolls Royce Ltd [1972] 1 All ER 211, [1971] 1 WLR 1520, CA.
Montedipe SpA v JTP-RO Jugotanker, The Jordan Nicolov [1990] 2 Lloyds Rep 11.
Morris v Harris [1927] AC 252, HL.
National Bank of Greece and Athens SA v Metliss [1957] 3 All ER 608, [1958] AC 509, [1957] 3 WLR 1056, HL.
Sardinia Sulcis, The, The Al Tawwab [1991] 1 Lloyds Rep 201, CA.
Shayler v Woolf [1946] 2 All ER 54, [1946] Ch 320, CA.
Tito v Waddell (No 2), Tito v A-G [1977] 3 All ER 129, [1977] Ch 106, [1977] 2 WLR 496.
Weddell v JA Pearce & Major (a firm) [1987] 3 All ER 624, [1988] Ch 26, [1987] 3 WLR 592.

Cases also cited

Bank of Boston Connecticut v European Grain and Shipping Ltd, The Dominique [1989] 1 All ER 545, [1989] AC 1056, HL.
Central Insurance Co Ltd v Seacalf Shipping Corp, The Aiolos [1983] 2 Lloyds Rep 25, CA.
Cia Colombiana de Seguros v Pacific Steam Navigation Co [1964] 1 All ER 216, [1965] 1 QB 101.
129
Damon Cia Naviera SA v Hapag-Lloyd International SA, The Blankenstein, The Bartenstein, The Birkenstein [1985] 1 All ER
475, [1985] 1 WLR 435, CA.
Fisher v Yardleys London and Provincial Stores Ltd [1953] 2 All ER 713, [1953] 2 QB 266, CA.
Provimi Hellas AE v Warinco AG [1978] 1 Lloyds Rep 373, CA.
Salgaoncar (VM) e Irmaos Ltda v Goulandris Bros Ltd [1954] 1 Lloyds Rep 56.
Tyerman v Smith (1856) 6 E & B 719, 119 ER 1033.

Interlocutory appeal
The defendants, Finagro Holding SA of Annoeullin, appealed from the judgment of Kenneth Rokison QC sitting as a deputy
judge of the High Court in the Queens Bench Division on 17 July 1990 whereby he declared that the award in the arbitration
dated 12 April 1989 between the plaintiffs, Baytur SA of Geneva, and defendants and the award of the board of appeal of the
Grain and Feed Trade Association dated 20 December 1989, directing the plaintiffs to pay damage of $US1,338,175 to the
defendants, were nullities. The facts are set out in the judgment of Lloyd LJ.

Nicholas Legh-Jones QC for the plaintiffs

Nicholas Merriman QC for the defendants.

Cur adv vult

13 June 1991. The following judgments were delivered.

LLOYD LJ. The principal question in the present case, as to which there is little if any authority, is whether the equitable
assignee of a cause of action can become party to a pending arbitration, and if so how. Mr Merriman QC for the defendants
submits that the assignee becomes a party to the arbitration automatically, at the moment the assignment becomes effective in
equity, without the need for any notice to the arbitrator, or to the other party to the arbitration. Mr Legh-Jones QC, for the
plaintiffs, submits that something more is required. At the very least the assignee must give notice, and submit to the jurisdiction
of the arbitrator. Mr Rokison QC, sitting as a deputy judge of the High Court, has decided the point, together with a number of
other points in favour of the plaintiffs. There is now an appeal to this court.
The facts are fully and clearly set out in the judgment below. In brief the plaintiffs, Baytur SA, of Geneva, Switzerland,
agreed to sell to a French company Ets Claeys Luck SA, a quantity of Turkish vetches c & f Sete for shipment from Mersin or
Samsun. The contract was dated 24 July 1985. The sellers failed to ship any goods of the contract description. By letter dated
14 April 1986 the buyers claimed damages based on the difference between contract price and market price. The dispute was
referred to arbitration pursuant to cl 37 of form 62 of the Grain and Feed Trade Association (GAFTA). Each side appointed an
arbitrator, and the two arbitrators appointed a third arbitrator. The parties presented their cases in writing over a period of 18
months, between April 1986 and October 1987. The arbitrators did not publish their award until 12 April 1989. They found in
favour of the buyers, and awarded damages of $US1,338,175.
Meanwhile, the buyers had ceased to exist. By an agreement known as a trait de scission dated 24 October 1986, the
shareholders of ETS Claeys Luck SA agreed that the company should be split into two, pursuant to art 371 of French Law No 66
537 of 24 July 1966, the equivalent of our Companies Act 1985. The effect of a scission in French law is that the assets and
liabilities of one company are 130 transferred to two or more other companies. As soon as the transfers are completed, the
transferor company is dissolved. In the present case the effect of the scission was to transfer all rights and obligations possessed
by the buyers under the contract of sale to Claeys Luck International SA, including rights and obligations in the pending
arbitration. The transfers under the trait de scission took effect on 15 December 1986. The buyers ceased to exist on that date,
long before the award in their favour. On 1 January 1989 Claeys Luck International changed its name to Finagro Holding SA. It
is said that, had Claeys Luck International not changed its name, the sellers might never have noticed. But obviously that cannot
affect our decision.
There was much discussion in the court below as to the system of law by which the principal question should be decided.
Mr Merriman submitted that the relevant law was French law. Mr Legh-Jones submitted that it was English law, and cited r 121
in Dicey and Morris The Conflict of Laws (11th edn, 1987) vol 2 p 957 in support of his submission. Before us Mr Merriman
conceded that English law is the relevant law for all purposes. His argument in this court proceeded as follows.
(1) By English law the benefit of the contract of sale, including the arbitration clause, could be and was validity assigned to
the defendants on 15 December 1986: see Shayler v Woolf [1946] 2 All ER 54, [1946] Ch 320, and Montedipe SpA v JTP-RO
Jugotanker, The Jordan Nicolov [1990] 2 Lloyds Rep 11.
(2) The defendants thereupon became equitable assignees of the benefit of the buyers claim against the plaintiffs. Notice to
the plaintiffs was not required to complete the defendants equitable title.
(3) As equitable assignees of a legal chose in action, the defendants were entitled to commence an arbitration against the
plaintiffs in their own name. Although, as matter of practice, an equitable assignee usually joins his assignor when bringing
proceedings, this is not strictly necessary: see William Brandts Sons & Co v Dunlop Rubber Co Ltd [1905] AC 454 and Weddell
v JA Pearce & Major (a firm) [1987] 3 All ER 624, [1988] Ch 26.
(4) There is no authority which precludes an assignee from joining in a pending arbitration. There is at least one case where
this has been allowed at first instance: see Montedipe SpA v JTP-RO Jugotanker, The Jordan Nicolov [1990] 2 Lloyds Rep 11.
(5) Since the defendants could have joined in the pending arbitration as soon as the equitable assignment took effect, that is
to say, on 15 December 1986, they should be treated as having been a party to the arbitration from that date. It matters not,
therefore, that the buyers ceased to exist on that date. The arbitration remained alive, and was still alive when the arbitrators
published their award in April 1989.
Mr Legh-Jones accepted every step in Mr Merrimans argument save the last. There is, he submits, a crucial distinction
between possessing a right in equity, and exercising that right. The fact that the defendants might have applied to become a party
to the arbitration does not mean that they were already a party. They had, in Mr Legh-Joness vivid phrase, bought a ticket. They
had not yet joined the train.
In my judgment, Mr Legh-Joness objection is well founded. It has never been suggested that the assignee of a cause of
action becomes a party to pending litigation simply by virtue of the assignment. There is nothing automatic about it. To become
a party to litigation, the assignee must first apply to the court for an order under RSC Ord 15, r 7.
I cannot see why a different rule should apply to arbitrations. Mr Merriman argues that the authority of an arbitrator is based
in contract, and that this makes a difference. I accept, of course, that arbitration is a consensual method of settling 131 disputes.
But that, if anything, should make it more difficult for the assignee to join in an existing arbitration, not less.
Mr Merriman argued that we should strive to adapt our arbitration procedure so as to enable a trait de scission to take effect
in English law without undue formality. This is a desirable objective. But there are difficulties, both conceptual and practical.
In London Steamship Owners Mutual Insurance Association Ltd v Bombay Trading Co Ltd, The Felicie [1990] 2 Lloyds
Rep 21 Phillips J found it a startling proposition that a third party could become party to an arbitration without giving notice to
anyone. In that case he was concerned with a transfer of rights under the Third Parties (Rights against Insurers) Act 1930. I
would find it equally startling in the case of an equitable assignment. In Montedipe SpA v JTP-RO Jugotanker, The Jordan
Nicolov [1990] 2 Lloyds Rep 11 Hobhouse J held that a legal assignee could succeed to the rights of an assignor in a pending
arbitration. But the learned judge made clear that two steps are necessary. First the assignee must give notice to the other side to
perfect the legal assignment. Secondly, he must intervene in the arbitration, by giving notice to the arbitrators. I quote from his
judgment, where, after referring to The Felicie, he said (at 18):

However, in the case of a legal assignment written notice has to be given. Notice must have been given to the party
liable (ex hypothesi the respondent in the arbitration). In order to affect the arbitrators, notice must also be given to the
arbitrators (as, in fact, happened in the present case). Once these steps have been taken both the practical and conceptual
difficulties are, or can be, resolved. The right to arbitrate is assignable; that assignment is completed and becomes legally
binding upon the other persons concerned by the service of the notice. The service of the notice and the intervention in the
arbitration provide as effective and satisfactory a method of carrying on the proceedings as that which is provided in
relation to litigation by O. 15, r. 7(2) of the Rules of the Supreme Court.

A little later on, when dealing with the liability of the assignee for costs, he said (at 19):

As regards the subsequent costs of the arbitration, the intervention of the assignee clearly is a submission to the
jurisdiction of the arbitrators and therefore, in addition to confirming the capacity of the arbitrators to make an award in
favour of or against the assignee on the substantive claim, includes the acceptance that the arbitrators shall have in relation
to the assignee the discretion to award costs conferred by s. 18 of the Arbitration Act 1950.

In the present case not only was there no submission to the jurisdiction of the arbitrators, there was not even any notice of the
assignment. So neither of the two steps regarded as necessary by Hobhouse J were taken.
The point was put well by the learned deputy judge when he said:

I should be inclined to conclude that as a matter of English arbitration procedural law an assignee cannot become party
to a pending arbitration unless and until he effectively submits to the jurisdiction of the arbitrators.

I agree with that conclusion, and find it unnecessary to deal with the other ground on which the judge was prepared to decide the
principal question in favour of the plaintiffs.
I would add only this note of warning. It was assumed by Hobhouse J, correctly, 132that the assignor would remain liable
for costs already incurred in the arbitration, and that the effect of the assignment, therefore, was only to add an additional party
potentially liable for those costs. Not surprisingly he held that there were no practical difficulties on the facts of that case. But in
the present case, the assignor has ceased to exist. So if the plaintiff sellers had been successful, they would have had to look to
the defendants alone for their costs. Nor is it clear to me what would have happened if the plaintiffs had had a counterclaim in
the arbitration. It is elementary that an assignment, whether legal or equitable, cannot transfer the burden of a contract. In his
reply, Mr Merriman sought to meet this difficulty by relying on the independent doctrine of pure benefit and burden as
described by Megarry V-C in Tito v Waddell (No 2), Tito v A-G [1977] 3 All ER 129, [1977] Ch 106. But assuming the soundness
of that doctrine, I find it difficult to apply to the facts of the present case. There would be scope for great injustice if an insolvent
assignor could assign away the benefit of a claim in arbitration to an associated company, while remaining solely liable for the
burden of the respondents counterclaim. This has led me to question whether mere submission is enough. Because of the nature
of arbitration, as a consensual method of settling disputes, it may be that the consent of the arbitrator, and the other party to the
arbitration, is required. If this is the correct analysis, then the only exception might be whether the foreign law creates a universal
successor, as in National Bank of Greece v Metliss and Athens SA [1957] 3 All ER 608, [1958] AC 509. But that argument was
not fully developed before us, and must therefore await another occasion.
I would decide the present case on this simple ground. An assignee does not automatically become a party to a pending
arbitration on the assignment taking effect in equity. Something more is required. He must at least give notice to the other side,
and submit to the jurisdiction of the arbitrator. Since this was never done, I would answer the first question in favour of the
plaintiffs.
What is the consequence? The immediate consequence was, undoubtedly, that the arbitration lapsed. An arbitration requires
two or more parties. There cannot be a valid arbitration when one of the two parties has ceased to exist. But Mr Merriman
argued on the strength of Mercer Alloys Corp v Rolls Royce Ltd [1972] 1 All ER 211, [1971] 1 WLR 1520 and The Sardinia
Sulcis, The Al Tawwab [1991] 1 Lloyds Rep 201 that the arbitration revived when the defendants gave notice in early August
1989. I cannot accept that argument. The point is directly covered by the decision of the House of Lords in Morris v Harris
[1927] AC 252, followed by the Court of Appeal in Foster Yates & Thom Ltd v HW Edgehill Equipment Ltd (1978) 122 SJ 860.
In the latter case Megaw LJ said (and I read from the transcript):

Apart from authority, I should have taken the view that when a corporate body is dissolved as a result of a voluntary
winding-up, any action which is pending at the date of dissolution ceases, not temporarily and provisionally, but absolutely
and for all time That is the view which I should have taken on this issue as a matter of principle. It is confirmed in my
judgment, inferentially, by reference to the Rules of the Supreme Court; and also, much more importantly, by reference to
the decision of the House of Lords in Morris v Harris [1927] AC 252.

Mr Merriman sought to distinguish Foster Yates & Thom Ltd v HW Edgehill Equipment Ltd (1978) 122 Sol Jo 860 on the
ground that that case was concerned with an action, not an arbitration. But that very distinction was rejected at first instance in
that case, and subsequently abandoned in the Court of Appeal:

Before Lloyd J it was argued by counsel then appearing for the plaintiff company and for the assignees that Morris v
Harris was distinguishable from 133 the present case because it was concerned with an arbitration, and not with an action,
and because in that case the company concerned was in the position of defendant, not, as here, plaintiff (and, be it added,
here also defendant to a counterclaim). Before us, those suggested distinctions were not pursued. It was accepted that, if
an action started before dissolution of the company survived and came to life again on an order being made under s. 352 of
the Companies Act 1948, so also would arbitration proceedings. Conversely, if the arbitration proceedings came to a final
and irrevocable end on the dissolution of the company, being one of the two parties to the arbitration, the same would apply
in respect of an action.

Before leaving Foster Yates & Thom Ltd case it is worth recalling what Megaw LJ had to say about the position of the
liquidator in Morris v Harris. He said:

I know of no way in which he could have been made a party to the pre-existing arbitration proceedings, other than by
the consent of the two parties to the reference to arbitration. (My emphasis.)
 Before dealing with the remaining points, I must first complete the narrative of events. The award, as I have said, was
published on 12 April 1989. That award was, for the reasons already given, a nullity. Nevertheless the plaintiffs did not know it
was a nullity, since they did not know that the buyers had ceased to exist. On 11 May 1989 they gave notice of appeal. On 8 July
GAFTA fixed 10 August for the hearing of the appeal before the board of appeal. The following day the plaintiffs asked to be
allowed legal representation. On 3 August the plaintiffs, having made their own inquiries, found out that the buyers had been
dissolved on 15 December 1986. On 7 August the plaintiffs took issue with the defendants title to sue. They asked the Board of
Appeal to

order the production of documents relevant to the deletion of the claimants [buyers] from the Companies Registry in
Lille in December 1986, the transfer of any claim to Claeys Luck S.A., and the subsequent change of name to Finagro
Holding S.A.

On 10 August a hearing took place. The request for legal representation was granted. The date for the substantive hearing was
fixed for 4 October. The plaintiffs were ordered to pay ___15,000 on account of the boards fees. On 4 October the substantive
hearing commenced. Mr Legh-Jones, on behalf of the plaintiffs, made clear at the outset that his appearance was without
prejudice to the plaintiffs contention that the board of appeal had no jurisdiction, since the award in favour of the defendants was
a nullity. Nevertheless the board of appeal went ahead, and after a four day hearing, made an award dated 20 December,
upholding the award of the arbitrators, but reducing the damages. On 17 January 1990 the plaintiffs issued the notice of motion
in these proceedings, in which they claim a declaration that the appeal award of 20 December 1989 was a nullity.
The first of the remaining points is that the board of appeal having decided as a preliminary issue that they had jurisdiction
to determine the appeal, the only remedy open to the plaintiffs is now to make an application for leave to appeal on a question of
law under s 1 of the Arbitration Act 1979. There is nothing in this point. If, as I have held, the award of the arbitrators was a
nullity, there was nothing to appeal about. The board of appeal could not confer on themselves original jurisdiction to decide the
issue. It was, as the deputy judge pointed out, an excellent example of the board seeking to pull itself up by its own bootstraps.
Mr Merriman accepted this, but nevertheless argued that the dispute whether the 134 award of the arbitrators was a nullity was
itself a dispute arising out of the contract of sale, and therefore the Board of Appeal had jurisdiction under cl 37 of the contract,
coupled with r 10:7 of the GAFTA Arbitration Rules. Rule 10:7 of the rules provides as follows:

Any dispute as to whether any of the conditions referred to in Rules 8 to 14 inclusive have been complied with shall be
heard and determined by the Board of Appeal. If the Board of Appeal shall determine that any of those conditions have not
been complied with, it may in its absolute discretion extend the time for compliance (notwithstanding that the time may
already have expired) or dispense with the necessity for compliance and may proceed to hear and determine the appeal as if
each and all of those conditions had been complied with. The determination by the Board of Appeal of any matters to
which this paragraph applies shall be final, conclusive and binding.

There are two answers to this argument. In the first place the dispute was not a dispute arising out of the contract, but a
dispute arising upon the award: see Getreide-Import-Gesellschaft mbH v Contimar SA Cia Industrial Commercial y-Maritima
[1953] 2 All ER 223 at 228, 230, [1953] 1 WLR 793 at 801802, 805806 per Singleton and Jenkins LJJ. Rule 10:7 does not
help the defendants in that connection, since the question whether there was a valid first-tier award is not one of the matters
covered by rr 8 to 14.
Secondly an arbitration clause, however widely drafted, does not itself confer jurisdiction on an arbitrator. There must first
be a reference of the particular dispute or disputes. There was no such reference to the board of appeal in the present case.
That leads me to the last question. It is said that the sellers are estopped from denying the jurisdiction of the board of
appeal. Mr Merriman concedes that Mr Legh-Jones reserved his position at the commencement of the hearing on 4 October. But
he submits that it was by then too late. The conduct of the sellers prior to the hearing was enough to create an estoppel. In
particular he relied on the application for legal representation, and the payment of the $15,000 on account of fees. It is sufficient
to say that I agree entirely with the judgment of the learned deputy judge in rejecting this argument. I can find nothing in what
the plaintiffs said or did which could amount to a clear or unequivocal representation on the part of the plaintiffs that they were
accepting the boards jurisdiction to determine the issue. On the contrary they made clear from as early as 7 August that they
were accepting no such thing.
It follows that the plaintiffs are entitled to the declaration which they seek. This court has, of course, been conscious
throughout that the point taken by the plaintiffs is highly technical, and against the merits. But nevertheless we must apply the
law as we find it. The result, however regrettable, is that the defendants must start the arbitration again, assuming they are in
time, or can get an extension.

FARQUHARSON LJ. I agree.

NOLAN LJ: I agree.

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

Solicitors: Clifford Chance; Taylor Joynson Garrett.

Raina Levy Barrister.

135
[1991] 4 All ER 136

Westminster City Council v Duke of Westminster and others

LANDLORD & TENANT; Other Landlord & Tenant

CHANCERY DIVISION
HARMAN J
21, 22, 23, 26 NOVEMBER 1990

Landlord and tenant Covenant User of premises Use as dwellings for the working classes Covenant requiring demised
premises to be used as dwellings for the working classes Working classes to be construed in terms of housing legislation for
time being in force Housing legislation no longer referring to working classes Whether covenant still effective or obsolete.
Lands Tribunal Jurisdiction Application for discharge or modification of restrictive covenants Covenant requiring demised
premises to be used as dwellings for the working classes Whether tribunal having jurisdiction to discharge or modify covenant
Whether covenant constituting negative restriction on user or positive obligation as to user Law of Property Act 1925, s
84(1).

In 1937, pursuant to the terms of an agreement made between the parties in 1928 and a private Act of Parliament passed in 1929,
W leased to the plaintiff council for 999 years land worth ___200,000 for the purpose of the development of a council housing
scheme to provide 604 dwellings which, under cl 2(IX)(a) of the lease, were not [to] be used for any art trade business or
profession but kept and used only for the purposes of the [councils] Housing Scheme as dwellings for the working
classes within the meaning of the Housing Act 1925 or any statutory modification or re-enactment for the time being in force and
for no other purpose. Under the terms of the lease the council was required to carry out certain building works and to pay a
nominal rent and repair and insure the houses when built. In 1989 the council, which wished to sell the houses, applied for
declarations (i) that the reference to the working classes in cl 2(IX)(a) was spent and no longer effective, contending that since
the term working classes no longer appeared in housing legislation it had no meaning in cl 2(IX)(a) and consequently the
purpose of the obligation as defined in cl 2(IX)(a) requiring the demised premises to be used as dwellings for the working classes
had become obsolete, and (ii) that the Lands Tribunal had jurisdiction under s 84(1) a of the Law of Property Act 1925 to
discharge or modify the cl 2(IX)(a) obligation as being a restrictive covenant affecting the land. The trustees of Ws will
counterclaimed for a declaration that the council was obliged to use the premises as dwellings for the working classes, that the
Lands Tribunal had no jurisdiction to discharge or modify the cl 2(IX)(a) 136obligation and that any sale by the council of
houses on the land would be in breach of the 1928 agreement and the 1929 Act, contending that although the term working
classes no longer appeared in housing legislation the notion of the working classes was not obsolete and that therefore the cl
2(IX)(a) obligation was a valid, enforceable and continuing covenant. The trustees further contended that the Lands Tribunal had
no jurisdiction to discharge or modify the cl 2(IX)(a) obligation to use the demised premises as dwellings for the working classes
since it was a positive covenant and not a negative restriction on user and, furthermore, the tribunals jurisdiction in relation to
the lease itself was excluded by s 84(7) since the lease was a disposition made gratuitously or for a nominal consideration for
public purposes.
________________________________________
a Section 84, so far as material, provides:
(1) The Lands Tribunal shall have power on the application of any person interested in any freehold land affected by any restriction
arising under covenant or otherwise as to the user thereof or the building thereon, by order wholly or partially to discharge or modify any
such restriction
(7) this section does not apply where the restriction was imposed on the occasion of a disposition made gratuitously or for a nominal
consideration for public purposes

Held (1) Although the term working classes no longer appeared in housing legislation, that fact did not determine the ordinary
meaning of those words or render them obsolete since the phrase itself was still capable of definition and application to a section
of the populace, namely persons in lower income groups. It followed that the covenant in cl 2(IX)( a) requiring the demised
premises to be used as dwellings for the working classes imposed a valid, enforceable and continuing obligation on the council
(see p 141 j to p 142 b, p 144 a to f j, p 145 a b d and p 149 b h, post); dicta of Romer J in Belcher v Reading Corp [1949] 2 All
ER 969 at 984 and of Megarry V-C in Re Niyazis Will Trusts [1978] 3 All ER 785 at 788 applied.
(2) Since the council had covenanted to repair and insure the demised premises for the 999year term, it followed that the
lease did not amount to a disposition made gratuitously or for a nominal consideration for public purposes within s 84(7) of the
1925 Act, and accordingly the Lands Tribunal had jurisdiction to discharge or modify the first part of cl 2(IX)( a), which
constituted an express negative covenant precluding the premises from being used for any art trade business or profession. The
tribunal did not, however, have jurisdiction to discharge or modify the second part of cl 2(IX)( a), which constituted a positive
covenant requiring the premises to be kept and used as dwellings for the working classes, notwithstanding the fact that a
negative implication might flow from the prescribed user, and accordingly that part of the covenant could not be the subject of an
application under s 84 to the Lands Tribunal. Furthermore, the court had no jurisdiction to declare a covenant in a continuing
lease to be unenforceable on the grounds that it was obsolete. Accordingly, the trustees were entitled to declarations that the
council was obliged to use the demised premises as dwellings for the working classes, that the Lands Tribunal had no jurisdiction
to discharge or modify the positive covenant in cl 2(IX)(a) and that any sale by the council of the houses would be in breach of
both the original agreement between W and the council and the 1929 Act except where a tenant was exercising his right to buy
under the Housing Act 1985(see p 141 j to p 142 b h j, p 143 a b, p 146 f to h, p 147 d to g and p 149 j to p 150 a, post); dictum of
Lord Wilberforce in Midland Bank Trust Co Ltd v Green [1981] 1 All ER 153 at 159 considered.

Notes
For restrictive covenants, see 16 Halsburys Laws (4th edn) paras 13451354, and for cases on the subject, see 31(1) Digest
(Reissue) 381418, 30533326.
For the discharge and modification of covenants, see 16 Halsburys Laws (4th edn) paras 13601367, and for cases on the
subject, see 40 Digest (Reissue) 501509, 42644290.
For the Law of Property Act 1925, s 84, see 37 Halsburys Statutes (4th edn) 188.
For the Housing Act 1985, Pt V (the right to buy), see 21 Halsburys Statutes (4th edn) (1990 reissue) 148.

Cases referred to in judgment

Belcher v Reading Corp [1949] 2 All ER 969, [1950] Ch 380.
Blyth Corps Application, Re (1963) 14 P & CR 56, Lands Tribunal.
137
Caledonian Rly Co v Greenock and Wemyss Bay Rly Co (1874) LR 2 Sc & Div 347, HL.
Green (HE) & Sons v Minister of Health [1947] 2 All ER 469, [1948] 1 KB 34.
Guinness Trust (London Fund) v Green, Guinness Trust (London Fund) v Cope [1955] 2 All ER 871, [1955] 1 WLR 872, CA.
Midland Bank Trust Co Ltd v Green [1981] 1 All ER 153, [1981] AC 513, [1981] 2 WLR 28, HL.
Montross Associated Investments SA v Moussaieff [1990] 2 EGLR 61.
Niyazis Will Trusts, Re [1978] 3 All ER 785, [1978] 1 WLR 910.
Prenn v Simmonds [1971] 3 All ER 237, [1971] 1 WLR 1381, HL.
Rodwell v Minister of Health [1947] 1 All ER 80, [1947] 1 KB 404.
Tea Trade Properties Ltd v CIN Properties Ltd [1990] 1 EGLR 155.
Wiltons (Earl) Settled Estates, Re [1907] 1 Ch 50.

Cases also cited or referred to in skeleton arguments

Bagettes Ltd v GP Estates Co Ltd [1956] 1 All ER 729, [1956] Ch 290, CA.
Calthorpe Estate Edgbaston Birmingham, Re, Anstruther-Gough-Calthorpe v Grey [1973] 26 P & CR 120.
Chorley BC v Barrett Developments (North West) Ltd [1979] 3 All ER 634.
Plumpton Parish Councils Application, Re (1962) 14 P & CR 234, Lands Tribunal.
Price v Jenkins (1877) 5 Ch D 619, CA.
Purkisss Application, Re [1962] 2 All ER 690, [1962] 1 WLR 902, CA.
Sanders Will Trusts, Re, Public Trustee v McLaren [1954] 1 All ER 667, [1954] Ch 265.
Shepherd Homes Ltd v Sandham (No 2) [1971] 2 All ER 1267, [1971] 1 WLR 1062.
Stevens v General Steam Navigation Co Ltd [1903] 1 KB 890, CA.
Sweet v Bishop of Ely [1902] 2 Ch 508.
Sydenham (J T) & Co Ltd v Enichem Elastomers Ltd [1989] 1 EGLR 257.
Johnsey Estates Ltd v Lewis & Manley (Engineering) Ltd (Chepstow Machine Tool Co Ltd, third party) [1987] 2 EGLR 69, CA.

Summonses
Westminster City Council, by an originating summons issued on 12 May 1989 against the trustees of the will of the second Duke
of Westminster, namely the sixth Duke of Westminster, John Nigel Courtney James and Sir Richard Baker Wilbraham Bt, applied
for declarations, inter alia, (i) that cl 2(IX)(a) of a lease dated 31 March 1937 made between the second Duke of Westminster (as
grantor of land for development to provide 604 dwellings for the Grosvenor Housing Scheme) and the then governing body of the
City of Westminster (as grantee) was to be construed as not restricting the use of the demised premises for dwellings for the
working classes and (ii) that the Lands Tribunal had jurisdiction to discharge or modify the cl 2(IX)(a) obligation as to user
pursuant to s 84(1) of the Law of Property Act 1925. The trustees, by a summons dated 21 July 1989, sought declarations that the
City of Westminster was obliged to use the premises as dwellings for the working classes, that the Lands Tribunal had no
jurisdiction to discharge or modify the cl 2(IX)(a) obligation and that any sale by the City of Westminster of dwellings on land
leased from the second Duke would be in breach of an agreement made in 1928 between the two parties and the provisions of the
Westminster City (Millbank) Improvement Act 1929(19 & 20 Geo 5 c l), except where a tenant was exercising his right to buy
under the Housing Act 1985. The facts are set out in the judgment.
138

John Stuart Colyer QC and Paul Morgan for the City of Westminster
Gavin Lightman QC and Frank Hinks for the trustees.

26 November 1990. The following judgment was delivered.

HARMAN J. On 12 May 1989 the Lord Mayor and citizens of Westminster (hereafter called the City of Westminster) issued
an originating summons against three defendants who are the trustees of the will of the second Duke of Westminster, whom I will
describe as the trustees. By that originating summons the City of Westminster claimed in para (1) declarations as to the true
construction of a lease dated 31 March 1937 made between the second Duke as grantor and the then governing body of the City
of Westminster as grantees and in particular cl 2(IX)(a) of the lease. The declarations put forward firstly the meaning of sub-cl
IX)(a) as restricting the use of the premises demised to use as dwellings (my emphasis) and additionally that
references in the sub-clause to the Grosvenor Housing Scheme and for the working classes as mentioned in the sub-clause
were spent and secondly that the sub-clause was to be read as restricting the use of the premises demised to use as dwellings
which when constructed were of a type suitable for use and occupation by persons of the working classes.
By para (2) of the originating summons the court was asked to determine under s 84(2) of the Law of Property Act 1925 the
nature and extent of the restrictions in the sub-clause and whether it was enforceable. I should say at once the formulation
whether the sub-clause was enforceable was not a happy one. Mr Colyer QC, appearing for the City of Westminster, never
sought to argue that enforcement of the sub-clause was itself in doubt. The parties are, of course, not the original grantor and
grantee of the lease since the second Duke is dead and the former corporation of the City of Westminster has been dissolved and
replaced by a new City of Westminster. Nevertheless privity of estate plainly exists and once the meaning of sub-cl (IX)(a) has
been settled it can easily be enforced. The true point of para (2) of the originating summons is the determination of the meaning
of the sub-clause if neither (a) nor (b) of para (1) turns out to be correct.
A further declaration was sought by para (3) of the originating summons that the Lands Tribunal would have jurisdiction
despite the provisions of s 84(7) of the 1925 Act to modify or discharge the restriction imposed by sub-cl (IX)(a) if an application
were made to that tribunal.
The originating summons was supported by an affidavit of Mr Gerard Matthew Ives, who is the solicitor to the City of
Westminster. That affidavit exhibits the lease already mentioned, states accurately that it was made pursuant to a private Act of
Parliament called the Westminster City (Millbank) Improvement Act 1929(19 & 20 Geo 5 c l) which was also, though
unnecessarily, exhibited, and summarises the provisions of the Act. By para 11 Mr Ives states that the buildings on the land
demised by the lease now contain 604 residential flats. He refers to the duty of the City of Westminster as a housing authority
under the Housing Act 1985 and to various other provisions of the Housing Acts. He states that the plaintiffs need to know the
extent of the restriction imposed by sub-cl (IX)(a). He states that the trustees, by their solicitors, have asserted that the flats
should be let to people of lower incomes but adds that the City of Westminster does not know what amounts to a lower income
or how it should be computed. He then refers, in a way unnecessary in an affidavit which should state only facts known to the
deponent, to a series of other Housing Acts running from 1925 to 1985. He asserts in para 16 that the City of Westminster may
wish to apply to the Lands Tribunal for an order modifying the restriction. The exhibits to the affidavit are substantial, running to
about 53 pages.
139
The affidavit in answer on behalf of the trustees was sworn by John Nigel Courtenay James, the second defendant, who is a
past President of the Royal Institution of Chartered Surveyors and was for some years the chief agent to the Grosvenor Estate.
His affidavit sets out facts about the passing of the private Act in 1929 and the grant of the lease in 1937. He asserts that Mr
Ivess statement that the City of Westminster does not know at what level a tenants income would be lower is spurious and no
real difficulty of management exists. By para 9 Mr James states that the trustees are anxious that the dwellings should continue
to be available for the less privileged members of society. By para 11 Mr James asserts that the City of Westminster presented the
private Bill to and promoted it through Parliament on the footing that the lease was to be a gift from the second Duke. He
therefore contends that the City cannot now be heard to assert that the lease was not a disposition made gratuitously or for a
nominal consideration for public purposes, thereby referring to the factual considerations needed to raise the application of s
84(7) of the 1925 Act.
He exhibits a Memorandum on the Westminster City (Millbank) Improvement Bill which he states was printed in
January 1929 at the joint expense of the second Duke and the City of Westminster. That memorandum commends the Bill to all
who may read it as being based on a gift by the second Duke of the land intended to be comprised in the lease to the City of
Westminster.
No attempt has been made, or should have been made, to cross-examine either deponent as to the matters in their respective
affidavits and the court will therefore proceed on the footing that the evidence is true. Various additional documents have been
produced from the archives of the City of Westminster and of the Grosvenor Estate, including some striking appendices to the
private Bill, some correspondence in 1928 and 1929, transcripts of speeches made at public meetings in 1929 and a memorandum
dated 11 June 1929 signed by the town clerk for the City of Westminster and Messrs Boodle Hatfield & Co for the second Duke.
Thus the evidence concerns almost entirely events of over 60 years ago. It will at once be apparent that I am not called upon to
examine who are today the working classes nor to decide what level of income amounts to a lower level nor to consider any issue
of fact. The court has to consider the precise terms of a lease granted in 1937 and also to consider whether that grant was made
for a gratuitous or nominal consideration. The question is a dry, bare legal issue.
I turn to the provisions of the lease itself. By cl 2 of the lease the lessee covenanted for itself and its assigns to duly observe
and perform the covenants following. Sub-clauses (I) to (VII) (apart from sub-cl (V)) all start with the words, The Lessee will
or will not Sub-clause (VIII) is the expected covenant affecting assignments which are prohibited as to the whole or
any part of the demised premises without the previous written licence of the landlord which licence shall not be unreasonably
withheld. Sub-clause (VIII) contains no prohibition at all against subletting. Sub-clauses (IX), (X) and (XI) are not in the form,
The lessee will or will not Sub-clause (X) prohibits activities on the premises by whomsoever may be occupying them.
Sub-clause (XI) prohibits alterations to the buildings by any person. I was told, though it was not in evidence, that the five blocks
of flats built on the demised premises were designed by Sir Edwin Lutyens so that care for their architectural appearance is
perhaps natural.
I now turn to the specific terms of cl 2(IX)(a). A property lawyer comes to this sub-clause expecting that some covenant
about the user of the demised premises will appear amongst the various obligations undertaken by the lessee. The terms of the
sub-clause fall as a matter of language into three parts but it is not subdivided as a matter of form. It runs (in the first three lines
of the typed version of the lease):
140

That save as hereinafter provided the demised premises shall not nor shall any part thereof be used for any art trade
business or profession whatsoever

That plainly imposes a restriction on user, and in a wide form. Had it stood alone the only activity which springs at once to mind
as permissible is residential user, since agricultural seems improbable.
Sub-clause (IX)(a) continues:

but that the said demised premises with the offices thereto shall be kept and used only for the purposes of the
Grosvenor Housing Scheme as dwellings for the working classes within the meaning of the Housing Act 1925 or any
statutory modification or re-enactment for the time being in force and for no other purpose

The draftsman was certainly not a man who delighted in brevity. The double emphasis of imposing first the apparently positive
obligation to use the premises only in a certain way and then adding the negative injunction that they shall be used for no other
purpose may be emphatic but is not elegant legal drafting. The essential words are that the premises shall be kept and used only
for the stated purposes.
I turn back to complete the reading of sub-cl (IX)(a). Following on and for no other purpose there appears: Provided that
the ground floor and basements of the said demised premises may be used for shops offices surgeries and storage in connection
therewith. This proviso is plainly a proviso to the whole of the preceding part of the sub-clause and not a proviso only to the
phrase for no other purpose. The reference to shops plainly amounts to a proviso on the prohibition against any trade in the
second line of the typed version of the lease. The reference to surgeries is a proviso to the prohibition against any profession,
since I cannot think of a surgery save in connection with the practice of a doctor, a dentist or a vet, all of which occupations are,
in my view, professions. The proviso is thus a true proviso to the whole of the foregoing sub-clauses and relaxes both the initial
prohibition against money-earning activities and the requirement that the premises shall be kept and used only for the purposes
as defined.
I therefore turn to consider the meaning of the phrases in sub-cl (IX)(a). It is, of course, trite law that the words are not to be
read as if they stood entirely alone. The English language gives different meanings to words according to their context.
Furthermore, as Lord Wilberforce reminded all lawyers in Prenn v Simmonds [1971] 3 All ER 237 at 239240, [1971] 1 WLR
1381 at 13831384, words are not to be read as if uttered without regard to the surrounding circumstances. It follows that the
phrases in sub-cl (IX)(a) are to be read against the background of facts when they were written. Nonetheless it is the words
themselves that must be considered and understood. It is important to remember what the City of Westminster agreed to do. By
the opening words of cl 2 the City of Westminster bound itself throughout the term of the lease, which was the lengthy period of
999 years from 1 August 1928, to observe and perform the covenants following. The covenant in sub-cl (IX)(a) is to keep
and use the demised premises in a particular way. As Mr Colyer for the City of Westminster made clear in his argument the City
accepted that that part of the sub-clause had a continuing effect. The covenant cannot, in my judgment, be read as a covenant to
do a single act, or to carry out a particular project, so that when the act is done or the project complete the covenant can be said to
be spent.
It is in my judgment obvious, and no one has argued the contrary, that the first three lines of sub-cl (IX)(a) impose a
continuing, enforceable, restrictive obligation preventing the City of Westminster, or any assignee, from using the premises for
141 any of the money-making activities set out except so far as the proviso relaxes that restriction. In my judgment it is also
clear that the second part of the sub-clause imposes a continuing obligation enforceable by the lessor, at present the trustees,
against the City of Westminster, requiring it to keep and use the premises for the particular purposes set out. Mr Colyer sought to
argue that the obligation was spent. In my judgment that is wrong as a matter of construction. The covenant is not spent but
continuing in both its parts.
In truth, in my judgment, Mr Colyers careful argument was not directed to a contention that the obligations of the sub-
clause were spent, but to a different and in my view novel point. His argument on a true analysis was not that the obligations had
been performed and once completed had no further existence but that the obligations had existed and were not completely
performed but were now incapable of performance because the purposes for which they were imposed had ceased to have a
meaning. Mr Colyer did not add that the terms of the purposes, which were the purposes of the Grosvenor Housing Scheme as
dwellings for the working classes within the meaning of the Housing Act 1925 or any such statutory modification or re-enactment
for the time being in force, are void for uncertainty. Such an argument would be unsound because, as I understand the law,
words used in a document must be read and understood as they were used and meant at the time they were written. Mr Colyer
expressly agreed in argument that in 1937 when this lease was granted the words were clear and well understood.
In my judgment Mr Colyer in arguing that the covenant, or more accurately the second part of sub-cl (IX)(a), was spent was
not using that word in its proper meaning. The proper sense of spent is that an obligation has been completely performed, and
that nothing remains to be done pursuant to that obligation. Mr Colyer never suggested that the obligation to keep and use the
demised premises as dwellings was spent. Nor did he argue that the concept of providing dwellings for the working classes
within the specified meaning was a concept which had been completely performed so as to be spent. Mr Colyer did not argue
that the relevant part of the covenant was void for uncertainty. In my judgment he sought to advance a novel obligation in law.
The true nature of the objection urged was that the purpose as defined had become obsolete. No case was cited to me on this type
of legal difficulty.
The concept of obsolescence is of course well known to Chancery lawyers in connection with charitable trusts which have
become impossible of performance due to changing social conditions. It is well known that in such circumstances the trustees
can obtain a scheme cy-prs so that the purposes of the charitable trust are modified to purposes which are similar in theme to the
original purposes but allow for modern conditions. The question of when the purposes of a charitable trust are sufficiently
obsolete to allow the making of a scheme cy-prs has been considered by the courts and working tests have evolved allowing the
application of consistent bases. No such question has ever been considered in the context of the law of landlord and tenant and
no jurisdiction exists in the court to modify covenants. The statutory provision of the jurisdiction of the Lands Tribunal to
modify obsolete covenants in leases under s 84 of the 1925 Act has obvious analogies with cy-prs schemes. But it is clear that
the covenant said to be obsolete remains binding and in theory enforceable, though no doubt difficult in practice to enforce, until
modification or discharge by the Lands Tribunal. I should add that the fact that Parliament considered it necessary in the 1925
Act to create a statutory power to discharge a restrictive covenant on the ground that it was obsolete carries an implication firstly
that until discharge the covenant remains binding, and secondly that the court has no inherent power to declare covenants
obsolete and unenforceable.
142
In pursuit of the argument that although the covenant was of continuing effect yet its effect was spent Mr Colyers first point
was that since the Grosvenor Housing Scheme was a term defined by the private Act as so much of the improvement scheme as
relates to the erection by the Council of buildings on the Millbank Estate for the purpose of rehousing it could be seen that that
was spent. Plainly the Grosvenor Housing Scheme involving the building project has been completed; the buildings are there.
But the covenant is not in my judgment capable of meaning simply that the council will cause the buildings to be built. The
covenant is to keep and use premises for purposes. I reject the first way Mr Colyer put his argument.
Secondly it was argued that if the whole statement of purposes has to be broken down into phrases for its proper
understanding it can be seen that the purposes included use as dwellings. That simply requires residential use. There followed
the phrase for the working classes within the special meaning. That, said Mr Colyer, was the key to the matter. The draftsman
had required the dwellings to be used for accommodating a particular section of the people. That section was defined as persons
who were working class within the meaning of the Housing Act 1925 or any statutory modification or re-enactment for the time
being in force. Such a section of the populace, said Mr Colyer, no longer existed because working classes had no meaning in the
Housing Acts.
Mr Colyer took me through the legislative history of the phrase working classes. He demonstrated clearly that it started in
the Housing of the Working Classes Act 1885, which contained no definition of the term. It was modified, very surprisingly, by
the Settled Land Act 1890. The phrase appeared in the Housing Act 1925 in many places. It had no general definition in that
Act. For the particular purposes of s 98 of the 1925 Act there is a meaning given by para 12(e) of Sch 5 to the Act. That
provision is not truly a definition since it states that the term working classes includes a list of occupations, including several
which would in modern times be described as self-employed such as costermongers. That is plainly an extension of the normal
meaning of the words working classes, which is set out in the Shorter Oxford English Dictionary as those who are employed to
work for wages in manual or industrial occupations. It is to be noted that the dictionary does not describe the words as
obsolete as it does in cases where in the editors opinion that is the true position. It is obvious that costermongers are not
employed by anyone and do not work for a wage.
The legislative history continues with the Housing Act 1936, which was in force at the time the lease was granted. That Act
repealed the Housing Act 1925 but used the phrase working classes widely and repeated for special purposes by Sch 11 the
widening of meaning in precisely the same words (with a slight difference of punctuation) as had appeared in Sch 5 to the
Housing Act 1925. Thus there had been a statutory re-enactment of the meaning but in terms which were to precisely the same
effect. Mr Colyer demonstrated that the Housing Act 1935 which introduced provisions concerning overcrowding was not a re-
enactment or modification of the Housing Act 1925 but a new source of statutory material which was later to run side by side
with statutory material derived from the earlier Act in Parliaments many modifications of the law. By the Housing Act 1949 the
phrase working classes is, as Mr Colyer put it, excised from the statutory material. All housing duties and powers were from
then on to be exercised for the benefit (one hopes it was a benefit) of the whole community. There followed other Housing Acts
and I accept Mr Colyers submission that by 1985 no trace of the phrase working classes is to be found in housing legislation
save for one curious, and for the purposes of this case irrelevant, remnant derived from the Housing Act 1935 concerned with the
control of overcrowding.
143
It follows, submits Mr Colyer, that since the term working classes now has no meaning within the Housing Act 1925 or
any statutory modification or re-enactment for the time being in force the term has no meaning in sub-cl (IX)(a). In my
judgment that is unsound. The obligation to keep and use the premises or dwellings for the working classes was an express and
enforceable covenant. The draftsman provided a guide to the meaning of the words working classes. He foresaw that during
the term of 999 years Parliament might make changes to housing law and he allowed those changes to have effect on the
obligations undertaken by the City of Westminster. Whatever Parliament chose to say the term working classes meant was to be
the meaning applied. What the draftsman did not make express provision for is the circumstance that Parliament has chosen not
to speak of the working classes at all. It is not that Parliament has passed a statute which declares that no one is to be considered
of the working class, nor that the term working class is to be prohibited from use. It is simply that Parliament has decided that
the concept is not useful in housing legislation and has, as Mr Colyer put it, excised the words.
Plainly the obligation of complying with the covenant is made more difficult when there is no longer available any
parliamentary reference to the words to explain their meaning. But that does not, in my judgment, make the covenant void for
uncertainty. The court is not, it has been said, to repose upon the easy pillow of uncertainty unless compelled to do so by the
total obscurity of language. In my view the covenant which was admittedly valid when imposed remains valid today. It has been
argued that the concept of the working classes is obsolete, with which I do not agree, but whether that is correct or not the court
has never, so far as the authorities referred to show, declared a covenant in a lease unenforceable because it is obsolete. Further,
none of the evidence before me is directed to showing or would enable me to decide that the concept is in fact obsolete. The fact
that Parliament has given up all use of the concept for the purposes of the Housing Acts does not determine the meaning of those
words in ordinary English speech.
I was referred to a series of cases in which distinguished judges have found the words difficult to define. In Rodwell v
Minister of Health [1947] 1 All ER 80 at 82, [1947] KB 404 at 411 Morris J said that the words were neither happy nor precise.
Nonetheless he decided that a particular occupation was not that of one of the working classes. In H E Green & Sons v Minister
of Health [1947] 2 All ER 469 at 471, [1948] 1 KB 34 at 38 Denning J (as he then was) said that the words working classes
used in the Acts are quite inappropriate to modern social conditions. Despite that the learned judge reached a conclusion. In
Belcher v Reading Corp [1949] 2 All ER 969 at 984, [1950] Ch 380 at 392 Romer J said: The phrase has a far wider and less
certain signification than it used to possess Nonetheless he decided that a certain section of the public were, on the evidence
before him, within the phrase. In Guinness Trust (London Fund) v Green [1955] 2 All ER 871 at 873, [1955] 1 WLR 872 at 875
Denning LJ (as he had then become) repeated his criticism of the words from Greens case, but held that the way to apply the test
was to ask whether the house is provided for people in the lower income range That seems to me a useful illustration of
how common sense can be applied to difficult circumstances where matters have become obscure by passage of time or changing
circumstances. Finally, in Re Niyazis Will Trusts [1978] 3 All ER 785 at 788, [1978] 1 WLR 910 at 915 Megarry V-C, a judge
noted for his extreme precision in the use of words, found himself able to express the phrase as having not lost [its] general
connotation of lower income. None of these cases shows any suggestion that the courts cannot comprehend or deal with
questions 144 arising on the meaning of the words working classes, although all of them agree that the words are much less
clear now than formerly. In my judgment those authorities contradict rather than support a suggestion that the words working
classes are incapable of any meaning today.
 I thus conclude on this part of the case that the obligation in sub-cl (IX)(a) is a continuing obligation to use and keep the
premises as dwellings for the working classes and that that classification has to be understood in the light of its meaning in 1937.
I accept Mr Lightman QCs submission for the trustees that since there is now in force no modification or re-enactment of the
meaning to be found in the Housing Act 1925 one is thrown back upon that meaning as a guide. The words are used in that Act
in their ordinary English meaning but also include the additional meaning attributed to the words by Sch 5 to the Act. On those
grounds I shall refuse to make the declarations sought by para (1)(a) and (b) of the originating summons. I have, I hope,
answered question (2) of the originating summons by expressing my view that the covenant is enforceable and that its nature and
extent are those mentioned above.
I turn to question (3), which seeks a declaration that the Lands Tribunal has jurisdiction to modify or discharge the
restriction contained in sub-cl (IX)(a). I find the form of the question embarrassing. As I have said above, sub-cl (IX)(a) plainly
includes in the first three lines an express negative covenant. It must be within the jurisdiction of the Lands Tribunal to discharge
or modify that restriction unless prevented by s 84(7) of the Law of Property Act 1925. That subsection excludes the Lands
Tribunals powers

where the restriction was imposed on the occasion of a disposition made gratuitously or for a nominal consideration
for public purposes.

The question therefore is whether the lease was made gratuitously or for a nominal consideration for public purposes. Mr
Colyer helpfully conceded that the lease was certainly made for public purposes and also that the rent reserved of one shilling a
year was a nominal consideration. However, he argued that the rent was not the sole consideration. He pointed to the reddendum
itself, which runs:

In consideration of the costs incurred by the Lessee in erecting and completing the buildings and of the yearly rent
and of the Lessees covenants hereinafter contained

It is clear from the figures in the exhibited documents that the second Duke gave ___113,650 out of capital moneys in one of
the Grosvenor settlements towards the capital cost of the housing scheme and that the council spent several hundreds of
thousands of pounds on the building works. Prima facie, however, that would seem to have been past consideration at the date of
grant of the lease which itself refers to the buildings by name as being thereon erected when referring to the demised premises.
However, I am reluctant to decide upon this point because I was told by counsel towards the end of this three-day hearing that
documents had been discovered by the City of Westminster which would probably throw light on the matter but which I did not
see. I was shown during the hearing a building agreement discovered at that stage by the City of Westminster affecting the
Vincent Street part of the demised premises. The further building agreement, which I was not shown, was said to affect the
whole of the rest of the demised premises. If the lease was, as would be usual, scheduled to the building agreement then the
consideration would not have been past. I cannot understand how in a case where the City of Westminster was under an
obligation to make discovery 145 two documents of such obvious relevance and importance were not disclosed. It seems to me a
woeful failure on the part of the solicitor to the City of Westminster to have so neglected to make proper discovery.
I turn to the other part of the alleged consideration. The decision of the House of Lords in Midland Bank Trust Co Ltd v
Green [1981] 1 All ER 153, [1981] AC 513 concerns the meaning of the words nominal consideration for the purposes of the
Land Charges Act 1925, an Act closely associated with the Law of Property Act 1925 since both flow from the great amending
Law of Property Acts 1922 and 1924. That decision instructs judges as to the words meaning. Lord Wilberforce deals with the
matter with that great judges usual precision (see [1981] 1 All ER 153 at 159, [1981] AC 513 at 531532). He refers to nominal
consideration as a sum which may be stated though not expected to be paid. For my part the use of the words nominal damages
as a term of art meaning the damages which can be recovered in an action for breach of contract where no actual pecuniary
damage is proved but the breach is made out, which was always 40 shillings, and the same phrase nominal damages as meaning
the 40 shillings damages recoverable on proof of trespass without proof of actual damage, also assist in considering the term
nominal consideration. In my judgment any substantial value that is a value more than, say, ___5 passing at the time of a
disposition will prevent that disposition being for a nominal consideration. The fact that the value of the property given far
exceeds the value of the consideration given for it does not make the consideration nominal.
In the present case I am wholly satisfied on the evidence that the Duke was, and was represented by the City of Westminster
as being, extremely generous. He made a grant to the City of Westminster of land then said to be worth 200,000. The value in
todays money and with modern land values would run, no doubt, into millions or even tens of millions. But he received from the
City of Westminster covenants that it would repair the buildings throughout the 999year term granted, and that it would insure
them against fire or other destruction with a named insurance office. I hope I am allowed to take judicial notice of the fact that it
is commonplace for insurance companies to pay commission to those who arrange for insurance to be effected with that
company. It may well be, there is no evidence one way or the other, that the Grosvenor Estate receives substantial commission
on the, no doubt today large, premiums payable to insure these buildings. Whether that be so or not, in my judgment the
covenants given by the City of Westminster were quite enough to make this lease not one granted for a nominal consideration. I
therefore hold that so far as there are restrictive covenants in this lease the Lands Tribunal has power to modify or discharge
them.
I cannot resist adding that it seems to me that it would lie very ill in the mouth of the City of Westminster to blow hot and
cold in the way it would be doing if it were to make an application to the Lands Tribunal. It received a great benefit from the
second Duke, and it seems to me extremely unattractive to take a gift, made upon conditions known and agreed to at the time of
the gift, and then to turn round and seek to discharge those very conditions fixed as part of the bargain, in this case a
parliamentary contract between the parties. That, however, would be a matter for the Lands Tribunal to consider in exercising its
own discretion.
However, that is not the whole answer to question (3) in the originating summons. As I have said, the covenant falls into
several parts. The first part is plainly restrictive. Mr Lightman argued that the second part is not restrictive but positive. He
pointed to the words shall be kept and used and said that those words amounted to a continuing obligation to carry out the
purposes. That 146 cannot, he submitted, be called a restrictive covenant. The law is familiar with positive covenants in leases,
perhaps especially in user covenants. A covenant to use a particular shop for some particular trade requires the tenant not to leave
the shop empty but to actively carry on the trade. Obviously a covenant to carry out some purpose, as here to provide dwellings
for the working classes, does not require that every part of the demised premises shall always be occupied by such persons.
Premises can legitimately stand vacant between tenancies. Premises may be required to be vacant for purposes of redecoration.
It is even possible that a whole block of flats might be required to be empty for a considerable period of time if that were
necessary for purposes of repair to the block, or for better equipping the block to provide adequate dwellings. Such intervals
would not mean that the City of Westminster was not keeping and using the blocks for the proper purpose. The City of
Westminster merely needed an interval while the purpose was pursued.
But in my judgment the obligation here undertaken is a positive obligation. The word used carries to my mind a
connotation of a duty to use. The whole phrase suggests to me, what in my view is shown by the heads of agreement and other
material in evidence to be the case, that the purpose of the grant was to provide buildings in which the City of Westminster would
keep tenants. It is not a covenant that could be performed by keeping the buildings empty with a view to reducing expenditure on
maintenance. In my judgment the contrast in wording between the negative prohibition in the first lines of the covenant followed
by the words but that shows a clear shift of meaning from restraint to activity. It is of course true that a duty to use land for
some purpose necessarily means that the land shall not be used for other purposes. Nevertheless the duty to use remains a
positive obligation although a negative implication may flow from it. I did not find the authorities cited Tea Trade Properties
Ltd v CIN Properties Ltd [1990] 1 EGLR 155 and Montross Associated Investments SA v Moussaieff [1990] 2 EGLR 61 or Re
Blyth Corps Application (1963) 14 P & CR 56 of assistance on this point. It is not in dispute that the Lands Tribunal can only
modify restrictive covenants. In my judgment this part of sub-cl (IX)(a) is a positive covenant and as such cannot be the subject
of an application to the Lands Tribunal.
I will consider with counsel the formulation of the answer to question (3) since, as I see it, the question as drawn is not
capable of a clear answer on the above reasoning. The first part of the covenant is within the jurisdiction of the Lands Tribunal
but the second part of that covenant is not.
I now turn to Mr Lightmans summons by way of counterclaim. That is based in particular upon the proposition that the
deal between the parties was not simply the grant of the lease. He says that the lease is also a part of a statutory purpose shown
by the heads of agreement and the Westminster City (Millbank) Improvement Act 1929. He refers specifically to cll 2 and 4 of
the heads of agreement set out in Sch 2 to the Act which provide, in the shorthand manner of heads of agreement which these
were, by cl 2: The Council to provide and erect on the housing site housing accommodation consisting of 604 dwellings [and
other phrases] to accommodate in the first place tenants and occupiers on the housing site and on the remainder of the
Millbank Estate and, going on, All such accommodation shall in the first place be offered to tenants and occupiers of
houses on the housing site of controlled houses and other tenements and so on. And by cl 4:

The Council to be entitled to charge and be paid for any accommodation provided under cl 2 such rents as the Council
shall think reasonable having 147 regard to the rents charged by the Council for similar accommodation in other dwellings
for the working classes belonging to the Council in the neighbourhood.

Section 5 of the 1929 Act itself provided:

The heads of agreement set forth in the Second Schedule to this Act between the Council and the Duke are hereby
confirmed and made binding on the Council and the owners of the Millbank Estate and shall be carried into effect
accordingly ,

with a proviso for inconsistency. That, said Mr Lightman, resulted in the heads of agreement being incorporated into the statute
and forming a statutory obligation of their own independent of and in addition to the obligation in the lease. He referred in
particular to the decision in Re Earl of Wiltons Settled Estates [1907] 1 Ch 50, where a private Act of Parliament had been
obtained providing that an agreement made by a tenant for life should be binding upon all parties. The phrase in the private Act
was that the agreement was confirmed and made binding on the parties thereto respectively and the same shall and may be
carried into effect Those words, observed Mr Lightman, are almost ipsissimma verbis the words of s 5 in this private Act,
which says:

The heads of agreement set forth and made are hereby confirmed and made binding on the Council and the
owners and shall be carried into effect accordingly.

The correlation of words in the two private Acts is extremely close if not almost precisely the same.
In the result, said Mr Lightman, it must follow, particularly bearing in mind also the more general observations in
Caledonian Rly Co v Greenock and Wemyss Bay Rly Co (1874) LR 2 Sc & Div 347, that the result of such language is that the
heads of agreement are in effect enacted as a statutory obligation. He thus argues that the result is that the lease and the scheme
contained in the heads of agreement and the whole of it are in effect statutory obligations as well as, in the case of the lease,
obligations running firstly by contract and secondly by privity of estate. They are, in effect, double-barrelled obligations or it
may even be treble-barrelled obligations; I am not sure that the number of barrels matters.
The result is, so Mr Lightman argues, that the first declaration that he submits should be made is that on the true
construction of the heads of agreement and the Act the City of Westminster may not lawfully require or accept the payment of
any premium by or on behalf of a tenant on that land save in a particular case. That he bases upon cl 4 of the heads of agreement
which, it will be remembered, provides expressly: The Council to be entitled to charge and be paid rents An obligation
statutorily imposed to entitle you to charge and be paid rents in connection with housing accommodation must, I think, carry a
prohibition against payments of capital sums. It seems to me an inevitable consequence of an obligation to receive rents that you
cannot agree to receive a capital sum and, for example, an entirely nominal rent for the term then granted.
Mr Lightmans declaration makes one specific exception: save, he says, where the payment of such agreement is part of a
sale in accordance with and pursuant to a tenants right to buy under the Housing Act 1985. That, he says, is because the public
general Act has overridden the 1929 private Act incorporated in the heads of agreement to that specific and limited extent. That
seems to me a 148 perfectly sound exception and it seems to me that the argument on this point does flow entirely Mr Lightmans
way. Mr Colyers argument that the document was not adequately incorporated into the statute by the terms of the section does
not seem to be sufficient.
Mr Lightman then goes on to argue under para (2) of his cross-summons, which seeks a declaration by way of counterclaim
upon the same evidence as in the originating summons, that the City of Westminster is under an obligation, which I have already
held runs as a continuing obligation, to use the dwellings for the purposes of dwellings for the working classes within the
meaning of the Housing Act 1925 so far as that can be understood, as being not only an obligation under the covenant of the lease
but also an obligation pursuant to the statute and the heads of agreement. He bases that upon the terms in particular of ss 4, 5 and
6 of the statute. Section 4 states that the improvement scheme which was a defined term meaning the Millbank Improvement
and Grosvenor Housing Scheme described in Sch 1, the Grosvenor Housing Scheme being a more limited part of the matter, so
the improvement scheme is a wider phrase

is hereby confirmed and made binding on the Council and the owners of the Millbank Estate and it shall be the
duty of the owners of the Millbank Estate and the Council to carry their respective parts of the said scheme into execution
as soon as practicable.

I have already read s 5, that the heads of agreement are made binding and shall be carried into effect accordingly.
Section 6 provides that the owners shall grant to the council a lease of the land and that it shall be for a term of 999 years at
the yearly rent of a shilling, subject to rights, with a covenant to use the land for the purposes of the Grosvenor Housing Scheme
and for no other purpose. Those phrases in s 6 are less close to the words used in the private Act considered in Re Earl of
Wiltons Settled Estates to which I have already referred.
It is clear that s 6 specifically requires the grant of the lease and specifically sets out in very broad and general terms the
principal obligations under it. But the lease itself is not scheduled to the Act nor to the heads of agreement and in all probability
was not in existence at that time. I find it difficult to believe that the lease itself is also the subject of statutory obligations and I
am not satisfied that Mr Lightman is correct in his argument that the lease is not only binding by its own powers and duties as a
normal lease but also as a statutory obligation. I shall not make a declaration in the form of para (2).
 The third of Mr Lightmans declarations was that the Lands Tribunal has no jurisdiction to discharge or modify the
obligation which he says is specified in para (2), which I have held is specified in the lease, by reason of the following facts.
(a) There are imposed positive obligations as to such user. I have already held that that is plainly correct.
(b) The lease was granted gratuitously or for a nominal consideration. I have already held that that is not correct.
(c) The obligation (in so far as it is comprised in the Act and the agreement) has statutory force and effect. So far as the
statute imposes obligations that is correct but in my judgment the lease covenant is something additional to the statute and the
heads of agreement and if and so far as there is desired to be any application to the Lands Tribunal in respect of the first negative
terms of 149 sub-cl (IX)(a) in my judgment such an application could be made, although no intention to make such an application
has yet been formed.

Declarations granted in favour of the trustees.

Solicitors: G Matthew Ives; Boodle Hatfield.

Evelyn M C Budd Barrister.

[1991] 4 All ER 150

Director General of Fair Trading v Smiths Concrete Ltd

ADMINISTRATION OF JUSTICE; Contempt of Court

COURT OF APPEAL, CIVIL DIVISION

LORD DONALDSON OF LYMINGTON MR, GLIDEWELL AND TAYLOR LJJ
24, 25, 26 JUNE, 11 JULY 1991

Contempt of court Company Breach of injunction Liability of company for employees breach Company restrained from
giving effect to or enforcing agreements restricting competition Company forbidding employees from entering into such
restrictive arrangements and taking reasonable steps to prevent them from doing so Employee entering into price-fixing and
job allocation agreements with representatives of other companies in breach of injunctions Employee acting within scope of his
employment but not within scope of his authority Whether company party to agreement Whether company liable for
employees breaches Whether company in contempt of court Restrictive Trade Practices Act 1976, s 35.

In March 1978 and 1979 the appellant company, which had been a party to agreements with other companies relating to the
supply of ready-mixed concrete to which the Restrictive Trade Practices Act 1976 applied, was restrained by order of the
Restrictive Practices Court from, inter alia, giving effect to or enforcing or purporting to enforce (whether by itself or by its
servants or agents or otherwise) any agreement in contravention of s 35(1) a of the 1976 Act, which rendered void certain
agreements restricting competition in the production or supply of goods or in the application to goods of any process of
manufacture unless they were registered and made it unlawful for any person party to such an agreement who carried on business
in the United Kingdom to give effect to or enforce or purport to enforce the agreement. The appellant had expressly forbidden its
employees to make or put into effect any such agreement and had put in place adequate measures to enforce compliance with the
requirements of the 1976 Act. However, during 1983 and 1984 a unit manager employed by the appellant met representatives of
three other companies without the appellants knowledge and entered into a job allocation and price-fixing agreement or
arrangement for a particular area in breach of the 1978 and 1979 injunctions. He had, as the other parties to the agreement knew,
neither express nor ostensible authority to enter into the agreement. The Director General of Fair Trading applied for orders of
sequestration against the appellant and the other three companies and also sought committal orders against the appellants
manager and an employee of one of the other companies for contempt of court, alleging that the four companies were in contempt
for breaching the 1978 and 1979 orders by making and implementing the allocation agreement and that the two employees had
aided and abetted the contempts. The appellant denied liability but the other 150 three companies accepted that they were in
contempt. The Restrictive Practices Court found the appellant vicariously liable for contempt of court on the basis that its
employee was acting within the scope of his employment when he entered into the agreement. The court fined the appellant
___25,000. The appellant appealed.
________________________________________
a Section 35, so far as material, is set out at p 154 g to p 155 b, post

Held A company was not liable for breach of an injunction directed to the company restraining it from entering into a
restrictive arrangement contrary to the 1976 Act if the breach was committed by an employee acting outside the scope of his
authority albeit within the scope of his employment, since, the courts contempt jurisdiction being punitive in character, it was an
essential prerequisite to a finding of contempt that the factual basis was proved beyond all reasonable doubt and that there was
mens rea on the part of the alleged contemnor. If the company was not a consensual party to any agreement or arrangement to
breach the injunction, had not authorised the breach by the employee and had not put the employee in a position to commit the
breach, it could not be said to have carried out the prohibited act through the instrumentality of the employee and in those
circumstances it lacked the necessary mens rea to be in contempt. Since the appellant had expressly forbidden its employees to
enter into any arrangement which breached the 1976 Act and had taken reasonable steps to prevent them from doing so, the
appellant was not a party to the agreement made by its unit manager. In any event, even assuming that the unit manager had been
acting within the scope of his employment when he entered into the agreement, he had entered into it personally as a means of
discharging his duties as an employee of the appellant having been forbidden by the appellant to do so and after making it
abundantly clear to the other parties that that was the case. In those circumstances he had had no authority to enter into the
agreement on behalf of the appellant and his action in entering into the arrangement was not a breach of the injunction by the
appellant under s 35(2) of the 1976 Act. The appeal would therefore be allowed and the finding of contempt of court quashed
(see p 160 b e to p 161 d, p 164 b to f h j, p 165 f to h, p 166 c, p 167 b c, p 167 b c, p 168 a g to p 169 b f, p 170 d to p 171 a e,
post).
Dicta of Lord Wilberforce in Heatons Transport (St Helens) Ltd v Transport and General Workers Union [1972] 3 All ER
101 at 109 and of Slade J in Hone v Page [1980] FSR 500 at 507 applied; Therm-A-Stor Ltd v Home Insulation Ltd [1982] Com
LR 244 overruled.
Per curiam. (1) Mens rea in the context of a finding of contempt of court is not limited to a wilful intention to disobey the
courts order but extends to an intention to do the act which constitutes the disobedience with knowledge of the terms of the
order, although not necessarily an understanding that the act is prohibited (see p 168 b c, p 169 f and p 171 e, post).
 (2) An order restraining X by itself, its servants or agents or otherwise is addressed to X only and directly binds only X.
Such an order not only restrains X from doing the acts personally or in the shape of its alter ego, if a juridical person, but also
restrains X from doing the acts by the instrumentality of its servants or agents. If its servants or agents are to be found guilty of
contempt, it can only be on the basis that they are aiders and abettors of Xs contempt or have so acted as to impede or interfere
with the administration of justice. Whether X is doing an act by the instrumentality of its servants or agents will depend on the
scope of their mandate judged in the light of reality rather than form. If X should have appreciated that the servant or agent
would be likely to do the prohibited act unless dissuaded by X, the act will be regarded as being within the scope of that mandate
if X has not taken all reasonable steps to prevent it. Such steps may in 151 appropriate cases involve more than express
prohibition and extend to elaborate monitoring and compliance machinery and procedures and the creation of positive incentives
designed to dissuade the servant or agent (see p 168 c to f, p 169 f and p 171 e, post).

Notes
For breach of injunction, see 9 Halsburys Laws (4th edn) para 66, and for cases on the subject, see 13 Digest (Reissue) 372,
31823189 and 28(4) Digest (2nd reissue) 425437, 71477254.
For the jurisdiction of the Restrictive Practices Court in relation to contempt of court, see 47 Halsburys Laws (4th edn) para
156.
For the Restrictive Trade Practices Act 1976, s 35, see 47 Halsburys Statutes (4th edn) 361.

Cases referred to in judgments

A-G Times Newspapers Ltd [1991] 2 All ER 398, [1991] 2 WLR 994, HL.
Barwick v English Joint Stock Bank (1867) LR 2 Exch 259, [186173] All ER Rep 194, Ex Ch.
Churchman v Joint Shop Stewards Committee of the Workers of the Port of London [1972] 3 All ER 603, [1972] 1 WLR 1094,
CA.
Heatons Transport (St Helens) Ltd v Transport and General Workers Union [1972] 3 All ER 101, [1973] AC 15, [1972] 3 WLR
431, HL.
Hone v Page [1980] FSR 500.
Hope v Carnegie (No 1) (1868) LR 7 Eq 254.
Kooragang Investments Pty Ltd v Richardson & Wrench Ltd [1981] 3 All ER 65, [1982] AC 462, [1981] 3 WLR 493, PC.
Stancomb v Trowbridge UDC [1910] 2 Ch 190.
Therm-A-Stor Ltd v Home Insulation Ltd [1982] Com LR 244.
Z Ltd v A [1982] 1 All ER 556, [1982] QB 558, [1982] 2 WLR 288, CA.

Cases also cited or referred to in skeleton arguments

A-G v Newspaper Publishing plc [1987] 3 All ER 276, [1988] Ch 333, Ch D and CA.
A-G for Tuvalu v Philatelic Distribution Corp Ltd [1990] 2 All ER 216, [1990] 1 WLR 926, CA.
Armagas Ltd v Mundogas SA [1985] 3 All ER 795, [1986] AC 717, CA and HL.
Bramblevale Ltd, Re [1969] 3 All ER 1062, [1970] Ch 128, CA.
British Basic Slag Ltds Agreements, Re [1963] 2 All ER 807, [1963] 1 WLR 727, CA.
Canadian Pacific Rly Co v Lockhart [1942] 2 All ER 464, [1942] AC 591, PC.
Comet Products UK Ltd v Hawtex Plastics Ltd [1971] 1 All ER 1141, [1971] 2 QB 67, CA.
Diazo Copying Materials Machines and Ancillary Equipment Agreements, Re [1984] ICR 429, RPC.
Dyer v Munday [1895] 1 QB 742, [18959] All ER Rep 1022, CA.
Essendon Engineering Co Ltd v Maile [1982] RTR 260, DC.
Express and Star Ltd v National Graphical Association (1982) [1986] ICR 589, CA.
Fairclough & Sons v Manchester Ship Canal Co (No 2) (1897) 41 SJ 225, CA.
Farquharson Bros & Co v C King & Co [1902] AC 325, [19003] All ER Rep 120, HL.
Freeman & Lockyer (a firm) v Buckhurst Park Properties (Mangal) Ltd [1964] 1 All ER 630, [1964] 2 QB 48, CA.
Galvanized Tank Manufacturers Associations Agreement, Re [1965] 2 All ER 1003, LR 5 RP 315, RPC.
Garage Equipment Associations Agreement, Re (1964) LR 4 RP 491, RPC.
Hely-Hutchinson v Brayhead Ltd [1967] 3 All ER 70, [1968] 1 QB 549, CA.
Hewitt v Bonvin [1940] 1 KB 188, CA.
152
Ilkiw v Samuels [1963] 2 All ER 879, [1963] 1 WLR 991, CA.
Iqbal v London Transport Executive (1973) 16 KIR 329, CA.
James & Son Ltd v Smee, Green v Burnett [1954] 3 All ER 273, [1955] 1 QB 78, DC.
Jennison v Baker [1972] 1 All ER 997, [1972] 1 QB 52, CA.
Knight v Clifton [1972] 2 All ER 378, [1971] Ch 700, CA.
Marengo v Daily Sketch and Sunday Graphic Ltd [1948] 1 All ER 406, HL.
Mileage Conference Group of Tyre Manufacturers Conference Ltds Agreement, Re [1966] 2 All ER 849, LR 6 RP 49, RPC.
Morgans v Launchbury [1972] 2 All ER 606, [1973] AC 127, HL.
National Daily and Sunday Newspaper Proprietors Agreement, Re [1986] ICR 44, RPC.
National Federated Electrical Associations Agreement, Re (1961) LR 2 RP 447, RPC.
Parker Manufacturing Co Ltd v Cooper (1901) 18 RPC 319.
Phonographic Performance Ltd v Amusement Caterers (Peckham) Ltd [1963] 3 All ER 493, [1964] 1 Ch 195.
Plumb v Cobden Flour Mills Co Ltd [1914] AC 62, HL.
Portsea Island Mutual Co-op Society Ltd v Leyland [1978] ICR 1195, DC.
R v Andrews Weatherfoil Ltd [1972] 1 All ER 65, [1972] 1 WLR 118, CA.
R v Cleminson (1985) 7 Cr App R (S) 128, CA.
R v Fairbairn (1980) 2 Cr App R (S) 315, CA.
R v Messana (1981) 3 Cr App R (S) 88, CA.
Rantzen v Rothschild (1865) 14 WR 96.
Richardson v Baker [1976] RTR 56, DC.
Rose v Plenty [1976] 1 All ER 97, [1976] 1 WLR 141, CA.
Royal Institution of Chartered Surveyors Application, Re, Royal Institution of Chartered Surveyors v Director General of Fair
Trading [1986] ICR 550, CA.
Russo-Chinese Bank v Li Yau Sam [1910] AC 174, PC.
Seaward v Paterson [1897] 1 Ch 545, [18959] All ER Rep 1127, CA.
Slingsby v District Bank Ltd [1932] 1 KB 544, [1931] All ER Rep 143, CA.
Tesco Supermarkets Ltd v Nattrass [1971] 2 All ER 127, [1972] AC 153, HL.
Thomas v National Union of Mineworkers (South Wales Area) [1985] 2 All ER 1,[1986] 1 Ch 20.
Topliss Showers Ltd v Gessy & Son Ltd [1982] ICR 501.
Walker v South Eastern Rly Co (1870) LR 5 CP 640.
Webster v Southwark London BC [1983] QB 698.

Appeal
Smiths Concrete Ltd (Smiths), being a respondent to a notice of motion dated 15 February 1989 issued by the Director General of
Fair Trading for writs of sequestration for contempt of court against Smiths and three other companies on the grounds of alleged
breaches of orders of the Restrictive Practices Court dated 14 March 1978 and 29 March 1979, appealed from the order of the
Restrictive Practices Court (Anthony Lincoln J, sitting with Professor Z A Silberston and Professor I G Stewart as assessors) (sub
nom Re Supply of Ready Mixed Concrete [1991] ICR 52) given on 24 September 1990 whereby Smiths was fined ___25,000 for
contempt of court by breaching those orders. The facts are set out in the judgment of Lord Donaldson MR.

Conrad Dehn QC and Timothy Howe for Smiths.

Stephen Richards and Matthew Collings for the Director General.

Cur adv vult

153

11 July 1991. The following judgments were delivered.

LORD DONALDSON OF LYMINGTON MR. Smiths Concrete Ltd (Smiths) appeal against an order of the Restrictive
Practices Court (Anthony Lincoln J and Professors Silberston and Stewart) (sub nom Re Supply of Ready Mixed Concrete [1991]
ICR 52) on 24 September 1990 finding them in contempt of court by breaching orders of the Restrictive Practices Court dated 14
March 1978 and 29 March 1979, fining them ___25,000 and ordering them to pay two-thirds of the trial costs (less ___1,000) and
one-quarter of the pre-trial costs (less ___1,000) of the Director General of Fair Trading to be taxed on an indemnity basis.
Section 13 of the Administration of Justice Act 1960 applies to such an appeal and the normal restrictions upon rights of appeal
from the Restrictive Practices Court (see s 10 of the Restrictive Practices Court Act 1976 and RSC Ord 60) do not apply.

THE BACKGROUND
Smiths are in the ready-mixed concrete business and were parties to certain agreements relating to its supply to which the
Restrictive Trade Practices Act 1976 applied. On 14 March 1978 and 29 March 1979 the Restrictive Practices Court made orders
restraining Smiths, amongst others, as being party to agreements specified in the respective orders:

(a) from giving effect to or enforcing or purporting to enforce (whether by itself or by its servants or agents or
otherwise) that agreement or those agreements in respect of the restrictions or information provisions accepted thereunder
respectively and (b) from giving effect to or enforcing or purporting to enforce (whether by itself or by its servants or
agents or otherwise) any other agreements in contravention of Section 35(1) of the Act of 1976.

In this appeal we have been solely concerned with para (b).

Hartigan Readymix Ltd (Hartigan), Ready Mixed Concrete (Thames Valley) Ltd (RMC Thames), Pioneer Concrete (UK)
Ltd (Pioneer) with others were similarly restrained by orders made on 14 March 1978, and RMC Thames by a further order made
on 29 March 1979 when Pioneer gave an undertaking to the like effect.
Section 35 of the 1976 Act is, so far as material, in the following terms:

(1) If particulars of an agreement which is subject to registration under this Act are not duly furnished within the time
required by section 24 above, or within such further time as the Director may, upon application made within that time,
allow (a) the agreement is void in respect of all restrictions accepted or information provisions made thereunder; and (b)
it is unlawful for any person party to the agreement who carries on business within the United Kingdom to give effect to, or
enforce or purport to enforce, the agreement in respect of any such restrictions or information provisions.
(2) No criminal proceedings lie against any person on account of a contravention subsection (1)(b) above; but the
obligation to comply with that paragraph is a duty owed to any person who may be affected by a contravention of it and
any breach of that duty is actionable accordingly subject to the defences and other incidents applying to actions for breach
of statutory duty.
(3) Without prejudice to any right which any person may have by virtue of subsection (2) above to bring civil
proceedings in respect of an agreement affected by subsection (1)(b), the court may, upon the Directors application,
154make such order as appears to the Court to be proper for restraining all or any of those mentioned in subsection (4)
below from giving effect to, or enforcing or purporting to enforce ( a) the agreement in respect of any restrictions or
information provisions; (b) other agreements in contravention of subsection (1) above; and nothing in subsection (2)
prevents the enforcement of any such order by appropriate proceedings.
(4) Those who may be restrained by an order of the Court under subsection (3) above are ( a) any person party to the
agreement who carries on business within the United Kingdom; (b) a trade association or a services supply association of
which any such person is a member; or (c) any person acting on behalf of any such association

Agreement is defined by s 43(1) as including:

any agreement or arrangement, whether or not it is or is intended to be enforceable (apart from any provision of this
Act) by legal proceedings, and references in this Act to restrictions accepted or information provisions made under an
agreement shall be construed accordingly.

The nature of the agreements which are subject to registration under the Act is set out in ss 1(1), 6, 7, 11 and 12 of the Act,
but for present purposes it suffices to say that they are restrictive of competition in one or more of various specified ways and are
concluded between two or more persons carrying on business within the United Kingdom in the production or supply of goods
or in the application to goods of any process of manufacture or, which is not this case, in the supply of certain services.

The notices of motion

On 15 February 1989 the Director General served notices of motion in the Restrictive Practices Court seeking sequestration
orders against Smiths, Hartigan, RMC Thames and Pioneer. He also served notices of motion seeking committal orders against a
Mr Hayter, who was employed by Smiths, and a Mr Hulett, who was employed by RMC Thames. The Director General alleged
that the corporate respondents to the notices were in contempt of court in that in breach of the undertaking and/or as the case
might be the injunctions of March 1978 and March 1979

In or about March 1983 the said Companies made an agreement for the future allocation between themselves of
opportunities to supply ready mixed concrete (the Product) in the Bicester, Kidlington and Thame area of Oxfordshire in
accordance with the following approximate percentages, namely: 43% to Smiths, 21% each to Pioneer and RMC Thames
 and 15% to Hartigan. (The said percentages were varied to 45% to Smiths, 15% each to Pioneer and RMC Thames and
25% to Hartigan in or about April 1984.) The representatives of the parties involved in the making and/or implementation
of the arrangement were as follows:

RMC Thames
Mr A. Hulett and Mr A. Lewis
Pioneer
Mr Stephen Gould, Mr James Tomkies and Mr K. Smythe
Hartigan
Mr Colin Johanson
Smiths
Mr Peter Hayter.
The notice of motion then alleged, with particulars, that this agreement was implemented over the period March 1983 to
March 1984. In the case of the 155 individual respondents the Director General alleged that they had aided and abetted these
contempts.

The hearing before the Restrictive Practices Court

The Director Generals contention was that representatives of the four companies, with Mr Hayter representing Smiths,
initially met in a public house in or about March 1983 and made the price-fixing and allocation agreement referred to in the
notice of motion. He conceded that the meeting together and the making of such an agreement did not of itself amount to a
breach of the orders or undertaking, which for simplicity I will hereafter refer to simply, if inaccurately, as the injunction,
because that was rightly limited, in relation to new restrictive agreements, to a prohibition on giving effect to or enforcing or
purporting to enforce such an agreement. However he alleged that there were further meetings in public houses during the
ensuing 12 months at which the agreement was given effect to, enforced or purportedly enforced.
Pioneer, RMC Thames and Hartigan accepted that they had been in contempt of court and were only concerned to minimise
any penalty. Mr Hulett admitted that his actions had placed his employers, RMC Thames, in contempt but argued that he did not
know that his actions were contrary to the orders of the court. The court rejected the factual basis of Mr Huletts argument. This
did not advance the case against Smiths or Mr Hayter because, as Mr Dehn QC appearing for Smiths rightly pointed out, Smiths
and Mr Hayter could only be found to be in contempt on evidence admissible against them. In fact there was considerable
affidavit evidence and six days of oral evidence. The whistle blower and principal witness in support of the Director Generals
case was a Mr Tomkies, who, at the material time, was employed by Pioneer and responsible for that companys operations in the
Bristol, Swindon, Chippenham and Oxford areas. He had attended some of the meetings in public houses during which, it was
said, effect was given to the new agreement and it was enforced or purported to be enforced.
Anthony Lincoln J said that the court accepted Mr Tomkies as a witness of truth and on the basis of his and other evidence
reached the following conclusions of fact ([1991] ICR 52 at 6062):

The meetings at public houses began in March 1983 as described in Mr. Tomkies affidavit. There were at least six of
these meetings. They were attended by employees of the four companies. These employees reached an arrangement which
represented a commitment to comply very broadly with the terms they were agreeing upon. If this were not the case it is
difficult to understand why they were wasting their time in meeting again and again or why at subsequent meetings there
was a review of information as to what had taken place since the last meeting. The broad aim and object of the
arrangement between the employees present at the meetings was to increase market prices and the profitability of the
companies by whom they were employed. This was achieved by allocating between the companies an approximate
percentage of concrete for jobs in delineated geographical zones, jobs for quantities of less than 50 cubic metres of
concrete generally being excluded. When Mr. Tomkies went to his first meeting he found that very rough boundaries were
already agreed upon. They were highlighted in blue on a map. The delineation was so roughly done that it was not at all
clear at any time whether, for example, Buckingham was within the agreed zones or not. To carry out this arrangement
what happened at these meetings both before and after Mr. Tomkies time was this. Each employee would state 156 what
opportunities for supplying concrete had become available since the last meeting. There was an exchange of details about
jobs and prices. Mr. Tomkies called this listing jobs. Each employee would argue his companys case for being allocated
a job on offer. In the end the jobs were allocated in such a way that the result would correspond very roughly with the
percentages in the relevant areas which had been agreed upon by all for each company. A not unimportant feature of these
meetings was the fixing of prices. Schedules of prices were drawn up and copies distributed. These were described as
reference prices. The purpose of these was that a company to whom a specific, available job was allocated was expected to
put in a tender below the figure fixed upon in the schedule and the companies not allocated that job were expected to tender
at a price at or above the reference price. These prices were higher for the northern part of the zoned territory where there
were no raw materials than for the southern part where raw materials were located. It is self-evident that the effect of these
price arrangements if implemented was to reduce if not eliminate competitive pricing. One of the many factors taken into
account when allocating work was the geographical location of each company plant. The nearer the plant to the contractor,
the cheaper the cost. This factor would be thrown into the mix along with various others, the percentages, credit facilities,
knowledge of the contractor and so on. However, under the arrangement there was a no-poaching provision: thus RMC
Thames was not actively to seek to expand its business in the Bicester area, Hartigan in Kidlington or Thame and Smiths in
Thame. A final feature of the arrangement was that whenever a company won a job allocated to another, the quantity of
concrete supplied by the first company was treated as part of the quantity allocated to that company. This then was the
overall arrangement. There is no doubt that it was a loose compact and was by no means rigidly applied. Its provisions
appear to have been regarded as markers rather than strict contractual obligations. But however loosely applied, the
employees participating in these meetings were committing themselves to some restrictions of their companies selling
operations. The fact that they met again, compared notes, fixed prices and so on points irresistibly to this conclusion. This
was no academic exercise. Indeed there were regular complaints that the arrangement was not working and that a company
had taken a job not allocated to it. Mr. Tomkies became angry at the lack of bite in the operation of the arrangement.
Prices were not rising as expected, percentages were not being achieved. Because of this lack of success in April 1984 the
areas for each company were changed by agreement between the employees of the four companies at a meeting. The size
of the areas was reduced and the percentages changed with a view to the more efficient organisation of the allocation
system. After that the position of the companies showed significant signs of improving their performance in relation to the
new arrangement. In reaching these conclusions as to the nature of the arrangement we have taken into account the
contents and existence of the allocations book. We accept the authenticity of that book as a record kept by a succession of
Pioneers employees taken to the meetings and used by them in the course of the discussions. Entries showed percentages,
jobs available and jobs taken up. Despite the small number of cumulative totals giving a running record of the companies
failures and successes in complying with the targets laid down, we consider that the book clearly supports the account of
the arrangements given by Mr. Tomkies and Mr. Hayter. It follows from these findings that an agreement or arrangement
157 existed being the arrangement identified in the notice of motion. It was subject to registration under the Act of 1976
 since it contained a number of restrictions set out in the notice of motion and it is common ground that particulars were not
furnished until 30 June 1987, well out of time under section 24 of the Act.

Anthony Lincoln J then answered a number of questions to which I must return in the context of the arguments addressed on the
appeal, but I can summarise them as follows.
(1) Was Mr Hayter a party to the agreement? The court held that he was. He attended five meetings and, when he was not
there, was informed of the outcome by telephone. He had a say in the determination of market percentages and he sought to give
the impression that he was going along with the arrangement reached between the representatives. Everyone else there thought
that he was participating.
(2) Were Mr Hayter and the other representatives giving effect to or enforcing or purporting to enforce the agreement in
respect of particular restrictions? Again the answer was Yes. Mr. Hayter was the unit manager responsible for the activities of
six plant managers. Smiths and Mr Hayter maintained that he did not and could not give effect to the arrangement in terms of
influencing Smiths trading operations. Mr Pell, his area manager, set minimum prime gross margins which Mr Hayter had to
pass on to the plant managers, who were the people who tendered for work and fixed the price. Mr Hayter could and did set
target gross margins, but he could not give effect to the pricing scheme, not least because one of the plant managers was related to
a director of Smiths and, if he did so, his activities would have become known to the board of Smiths and he would have been
dismissed.
The court did not wholly accept this. It said (at 64):

We find it difficult to believe that as a unit manager with four plant managers within his responsibility Mr. Hayter was
an impotent cipher and that his continued attendance at these meetings made no impact on Smiths trading operations
whatsoever. Thus although minimum prime gross margins were laid down for him he could intervene in pricing, he had a
discretion in setting the target gross margin, he was in charge of the performance of the unit as a whole and of the
individual plants within the unit and he generally had responsibility to achieve results. It is equally difficult to see what
purpose his repeated attendance at meetings served if Smiths case is to be taken at its face value that Mr. Hayters
participation had no influence over events in the field. We are prepared to accept that the arrangement made no substantial
difference to the way Smiths went about obtaining contracts and fixing prices. But even if it be true that these two
restrictions taken by way of example were not complied with by Smiths in the course of trading it remains the fact that Mr.
Hayter gave every appearance and impression to his fellow participants of agreeing to these restrictions and others with a
view to securing that they would be implemented and complied with. He behaved to outward appearances, even if he were
in reality impotent, as an employee of Smiths acting as if the arrangement were in operation and he thereby encouraged his
fellow participants to act restrictively. They accounted to each other, however inadequately, and to Mr. Hayter and he to
them in respect of these and other restrictions imposed by the arrangement. In doing these things at the meetings, in
assisting at the operation of the machinery set up by the arrangement, at the very least he 158 purported to give effect to the
arrangement, the very thing forbidden by the injunction. We go further. His outward actions at the meetings not only
purported to give effect, they in fact gave effect to the arrangement.

(3) Were Smiths liable for the acts of Mr Hayter? Once again the answer was Yes. The court accepted that Mr Hayter had
been expressly forbidden to enter into or give effect to or enforce or purport to enforce any such agreement or arrangement. It
further accepted that Smiths senior management were unaware of what was going on. It expressed itself (at 67) as satisfied that

on the whole Smiths took all reasonable steps to prevent breaches of the Act, and it is implicit in the numerous
instructions sent to Mr. Hayter by his superiors that the possibility of a breach was foreseen.

I add parenthetically that in context the expression on the whole was not intended to convey the meaning of more or less,
but of taking account of all the compliance measures instituted by Smiths. It held that there was no evidence that Smiths held
Mr Hayter out as being authorised to enter into the agreement or arrangement. Furthermore (at 66):

Mr. Tomkies knew that Mr. Hayter had difficulty in complying with the agreement and never thought his employers
had authorised him to enter into it. Everyone at the meetings knew that what was going on was wrong and not authorised
by their employers.

The court thus negatived any actual authority express or implied or any ostensible authority stemming from a holding out by
Smiths or from the nature of Mr Hayters duties as unit manager, the latter form of ostensible authority being negatived by the
knowledge of the others present at the meeting.
Nevertheless the court held Smiths vicariously liable for Mr Hayters acts on the footing that they were done within the
scope of his employment his participation was an unauthorised mode of doing that which he was employed to do, that is to
manage the unit.

THE APPEAL

The nature of contempt

At the heart of this appeal lies the nature of proceedings for contempt of court consisting of disobedience of its injunctive
orders. That it provides the beneficiary of such an order with an enforcement remedy is incidental. The fundamental purpose of
such proceedings is to uphold the supremacy of the rule of law and the courts authority to administer it. Accordingly, whilst the
court cannot monitor the extent to which its injunctive orders are obeyed, if evidence of a serious breach is brought to its notice it
can, in appropriate circumstances, proceed of its own motion. This was the usual course adopted by the National Industrial
Relations Court, because it was thought that to rely upon an employer himself seeking an order for the sequestration of the assets
of a trade union or for the committal of an employee who was taking industrial action in defiance of an injunctive order would
lead either to the employer taking no action and the courts authority being undermined or, if the employer did take such action,
to his long-term relationship with his workforce being unnecessarily damaged. The employer was therefore enjoined to report
breaches to the court and in complying could say with truth that he had no option, leaving the court to take action as it saw fit
(see Churchman v Joint Shop Stewards Committee of the Workers of the Port of London [1972] 3 All ER 603 at 608, [1972] 1
WLR 1094 at 1100). However, where such 159 special considerations do not apply, courts normally take no action in the absence
of a request to make a sequestration or committal order. It also follows from this fundamental purpose that, once proceedings for
such an order have been launched, they cannot be abandoned without the leave of the court, for the court itself has a major
interest in the proceedings.
Put in another way, proceedings for contempt of court are punitive rather than remedial and it follows from this that mens
reas, or an intention on the part of the person proceeded against to omit or commit the act, the omission or commission of which
constitutes disobedience of the injunctive order, must be established and the offence thereby proved beyond all reasonable doubt.

Scope and effect of injunctive orders

 Bearing in mind the punitive nature of proceedings for contempt, injunctive orders must always be construed precisely and
in case of doubt, which should not of course arise, restrictively. Such orders can take effect in three different ways. First, they
bind the person to whom they are addressed. Second, they give rise to a duty on the part of persons who have notice of them not
to aid, abet or assist the person to whom they are addressed in breaching them. The third effect has only recently been
appreciated. Every citizen is under a duty not to impede or interfere with the administration of justice. In some circumstances
notice of the terms of an injunction granted against another may put other citizens on notice that, if they do the prohibited act,
they will impede or interfere with the course of justice by, for example, destroying the subject matter of a dispute which is before
the courts (see A-G v Times Newspapers Ltd [1991] 2 All ER 398, [1991] 2 WLR 994).

The scope of the orders in question

First, they directly bind only Smiths, to whom they were addressed. They were not addressed to Smiths servants or agents.
Indeed they could not be so addressed in the light of s 35(4).
Second, they bind Smiths not to do the prohibited acts either personally or by the instrumentality of others. They do not
require Smiths to ensure that no one else, whether or not he is a servant or agent of Smiths, does the prohibited acts.
Third, they forbid Smiths to give effect to or enforce or purport to enforce any agreement in contravention of s 35(1) of the
Act. The reference to s 35(1) is of crucial importance, because it is restrictive. A contravention only arises if any person party to
the agreement gives effect to or enforces or purports to enforce it (see para (b) of the subsection).
Accordingly, it not being alleged that Smiths personally breached the injunction, the Director General must show beyond
reasonable doubt that Smiths by the instrumentality of its servant or agent gave effect to or enforced or purported to enforce an
agreement which was subject to registration under s 24 of the Act, to which they were a party.

Were Smiths party to the agreement?

Mr Richards, of counsel, appearing for the Director General rightly stresses that we must not lose sight of the fact that
agreement is defined in s 43(1) of the 1976 Act to include any arrangement, which is a much looser concept than a contractual
agreement. It would accordingly, he submits, be wrong to apply the rules which might be appropriate in the context of deciding
whether or not a contractual agreement had been reached which bound Smiths. So be it, but the concept of someone being a
party to an arrangement, however loose, must carry with it a consensual element on the part of Smiths.
160
When I look for consensuality, I can find no trace of it whatsoever on the findings of the Restrictive Practices Court and we
have been referred to no evidence from which it could be inferred. Smiths expressly forbade Mr Hayter to enter into any such
arrangement on their behalf. They did not know that he had purported to do so and cannot therefore be said to have stood by and
thereby ratified his actions. They had adopted reasonable compliance systems to monitor his activities with a view to ensuring
that he did not purport to do so. Nor are they estopped from denying his authority by virtue of the fact that they had appointed
him unit manager and that he might otherwise be considered to have ostensible authority to enter into the arrangement on their
behalf, because he had made it clear to the other parties and they knew that Smiths did not consent and that he had no authority to
signify consent on their behalf.
Why then did the court below conclude that Smiths were a party to the arrangement to which Mr Hayter was a party, if
indeed it did so? The answer is that it did not think that any element of consensuality was necessary. It thought that it sufficed if
Mr Hayter was acting within the scope of his employment and, in doing what he did do, was committing an actionable breach of
a statutory duty. This is to confuse vicarious liability in tort, in which consensuality plays no part, with vicarious liability
stemming from adherence, and thus being party to an agreement or arrangement where, as in the case of vicarious liability in
contract, consensuality on the part of the principal is of the essence.
In dealing with this aspect, the judgment of the court below contains a heading Was Smiths party to the agreement?,
followed by a brief passage in which it reviewed Mr Hayters activities and concluded ([1991] ICR 52 at 62) Mr Hayter was
very clearly a party to the agreement. The next heading was Were Mr Hayter and the others giving effect to or enforcing or
purporting to enforce the agreement in respect of particular restrictions? Under this heading the court concluded, in a passage
which I have already quoted, that Mr Hayter had purported to give effect to the arrangement and that his outward actions had in
fact given effect to it. I return to this aspect briefly hereafter, but for present purposes it is only necessary to say that this part of
the judgment concluded (at 64) with the words:

If Mr. Hayters acts at the meetings were the acts of his company, an issue with which we deal below, then Smiths by
his conduct at the meetings gave effect to the arrangement in accepting the two restrictions formulated above.

Nothing further was said about whether Smiths were party to the agreement and indeed the court never in terms found that
they were. It had found that Mr Hayter was a party and that Mr Hayter gave effect to it. The next section of the judgment was
headed The liability of Smiths for the acts of Mr. Hayter and was in these terms (at 6467):

The arguments deployed before us on this issue were elaborate and refined. It is salutary to remember that injunctions
in every area of litigation are conventionally phrased by their servants or agents. Extensive inquiry as to whether a given
act falls within the scope of the authority of an employee or in the course of his employment adds a new dimension to the
policing of injunctions. At the same time a principal or master should not be held to be in contempt unless vicariously
liable through his servants or agents. It matters not whether Mr. Hayter was a servant or agent of Smiths. The basic
principles applicable to the acts of either virtually converge. In each case the test to be applied is the same: was the
servant or agent acting on behalf of, and within the scope of the authority conferred by, the master or principal? 161per
Lord Wilberforce in Heatons Transport (St. Helens) Ltd. v. Transport and General Workers Union ([1972] 3 All ER 101 at
109, [1973] AC 15 at 99). His Lordship continued: Usually a servant, as compared with an agent, has a wider authority
because his employment is more permanent and he has a larger range of duties and he may have to exercise discretion in
dealing with a series of situations as they arise. If Mr. Hayter was the servant of Smiths and if acting in the course of his
employment he knowingly entered into the prohibited agreement the employing company or master will be responsible on
grounds of vicarious liability: Z Ltd. v. A-Z and AA-LL ([1982] 1 All ER 556 at 569, [1982] QB 558 at 581). It is true that
that was a case concerned with tort. However, Mr. Hayters entry into the agreement was an actionable breach of a
statutory duty and in our view the same considerations apply as to tortious activity for the protection of the public interest.
What are the facts about his employment? He was the servant of Smiths for whom he had worked for some 17 years
having been seconded to them by the company ARC with which Smiths is associated and by which it is managed. He was
the unit manager for Smiths. There were six plant managers below him as well as an area manager above him. He
attended board meetings and made reports to the board. Not all unit managers in this industry have the same job
specifications. But in his case the job included the efficient and profitable operation and control of all ready mixed
concrete operations in the unit. He had managerial responsibility for all of Smiths operations in the area covered by the
agreement. He was nominally responsible for pricing (though in fact he did not intervene in pricing contracts), and for
contracts and customer relations generally. He duties included meeting competitors. He was responsible for customer
contact. In all he was a manager and a duty of a manager is to manage, in this case the operations within his unit. It is
argued that these words mean that he had no responsibility for external relations. We do not accept this interpretation of his
role on the evidence. Now Mr. Hayter had not been authorised to enter into agreements of this sort. On the contrary he had
 been instructed in the clearest terms to comply with the requirements of the Act of 1976. An express prohibition on [price]
fixing and allocation agreements was incorporated by reference into his job description. He was also instructed to report
any meetings he attended where representatives of competing companies were present. He was instructed to confirm that
he had carried out these instructions. So his participation was forbidden, and it appears that during the material period
19831984 Smiths senior management were unaware of what was going on. His participation was, it would seem,
deliberately concealed from higher levels of management. There is no evidence that Smiths held out Mr. Hayter as being
authorised to enter into the agreement. Mr. Tomkies knew that Mr. Hayter had difficulty in complying with the agreement
and never thought his employers had authorised him to enter into it. Everyone at the meetings knew that what was going
on was wrong and not authorised by their employers. On the basis of these facts it is argued for Smiths that it had not
conferred either express or implied authority on Mr. Hayter. We do not accept this argument. It is based on too narrow a
view of Mr. Hayters job specification. He was actually authorised to be a unit manager in charge of operations. If they
were simply to be internal, it is strange that he was issued with such full instructions circumscribing his meetings with
competitors. In any event he was there as a unit manager of Smiths and he was regarded as such at the meetings. He was
not participating in his individual capacity. As each participant argued 162 his case for allocation to his employer, each was
seeking to benefit his master and believed the others were doing the same, however unsuccessfully. In Kooragang
Investments Pty. Ltd. v. Richardson & Wrench Ltd. ([1981] 3 All ER 65 at 68, [1982] AC 462 at 471472), Lord
Wilberforce said: The manner in which the common law has dealt with the liability of employers for acts of employees
(masters for servants, principals for agents) has been progressive: the tendency has been toward more liberal protection of
innocent third parties. Here the innocent parties are not the other participants who were also bent on wrongdoing but the
public interest as represented by the Director General of Fair Trading. He also cited the classic judgment of Willes J. in
Barwick v. English Joint Stock Bank ((1867) LR 2 Exch 259 at 266, [186173] All ER Rep 194 at 198), which stated the
principle thus: In all these cases it may be said that the master has not authorized the act. It is true, he has not
authorized the particular act, but he has put the agent in his place to do that class of acts, and he must be answerable for the
manner in which the agent has conducted himself in doing the business which it was the act of his master to place him in.
Here Smiths appointed Mr. Hayter unit manager to control the operations of his unit. What he did, he did for the supposed
benefit of his master. Lord Wilberforce said ([1981] 3 All ER 65 at 69, [1982] AC 462 at 473) that that was a valuable
indication that it was done in the course of employment. As to the instructions Mr. Hayter received, they related to the
mode of doing his job but did not alter the nature or scope of his employment. His participation was an unauthorised mode
of doing that which he was employed to do, that is to manage the unit. We conclude that his attendance at the meetings
was in the course of his employment. There is however a further point raised by counsel for Smiths. Relying on Hone v.
Page ([1980] FSR 500) he invokes the following principle, that for a master to be shown to be liable in contempt for the
acts of his servants or agents it must be shown that the master either authorised the acts or could reasonably have foreseen
the possibility of such acts and failed to take all reasonable steps to prevent them. We were satisfied in this case that on the
whole Smiths took all reasonable steps to prevent breaches of the Act, and it is implicit in the numerous instructions sent to
Mr. Hayter by his superiors that the possibility of a breach was foreseen. In Hone v. Page Slade J. said that he enunciated
this principle in the absence of authority. The reference to foreseeability and to the taking of preventive measures was
made because the court was concerned, as is this court, with the issue of wilfulness in contempt. Slade J. was prepared to
assume, without deciding, that the master is not absolutely liable for the acts of his servants. [Anthony Lincoln Js
emphasis.] Having made that hypothetical assumption in favour of the master, he went on to find the master guilty of wilful
disobedience of an order of the court. The decision did not determine and was not intended to determine whether a
servants acts in contempt of court committed in the course of employment render his master vicariously liable for that
contempt, where the acts of the servant but not the master constitute wilful disobedience. In Therm-A-Stor Ltd. v. Home
Insulation Ltd. ([1982] Com LR 244) the principal was found guilty of contempt on the basis of vicarious liability even
though the principal had taken all reasonable preventive measures. Hone v. Page was not followed, it being the view of the
court that such measures went to mitigation, not to liability. This approach appears to us more nearly to accord with the
general principles of vicarious liability. Wrongful acts by servants or agents are frequently prohibited or not authorised.
But as Lord Wilberforce 163 said in Kooragang ([1981] 3 All ER 65 at 69, [1982] AC 462 at 472) principle and logic
demand that the employer should [none the less] be held liable in that case to protect innocent third parties, in this, to
protect the public interest under the Act of 1976. We therefore consider that the Director has established the charge of
contempt against Smiths and we propose to take into account such preventive measures as Smiths took in assessing to what
extent Smiths mitigated their contempt.

Assuming that Mr Hayter was acting within the scope of his employment, which was strongly disputed by Mr Dehn, what
was he found to have been doing? He had personally entered into an arrangement relating to how he would discharge his duties
as Smiths unit manager and he had given effect to that arrangement. I say that he had personally entered into the arrangement, as
contrasted with entering into it on Smiths behalf, because he made it abundantly clear to the other parties that he was forbidden
by Smiths to do so and a fortiori that he had no authority to do so on its behalf. But such an arrangement is not registrable,
because Mr Hayter did not himself carry on business anywhere and, contrary to the courts assumption, Mr Hayters action in
entering into the arrangement was not an actionable breach of statutory duty under s 35(2). It was Smiths and not Mr Hayter who
carried on business and their purely vicarious liability for the acts of their servants acting within the scope of their employment,
albeit in a way not contemplated and indeed forbidden, could not extend beyond a liability for the consequences of Mr Hayter
personally entering into and giving effect to an arrangement which was not registrable. This would not on any view constitute a
breach of the injunctions. Nor would it constitute Smiths a party to the arrangement which, under the terms of the injunctions
with their reference to s 35(1), was an essential prerequisite to its being in breach of them and so in contempt.
That conclusion would be sufficient to lead to the appeal being allowed and the finding of contempt of court quashed, but I
appreciate that the Director General is concerned with wider issues and that it may be thought, mistakenly I hope, that I have
taken too narrow or legalistic a view of what the court below was deciding. Let me therefore look at the matter on a broader
basis and assume that the court was finding or intending to find that Smiths was a party to the arrangement through the
instrumentality of Mr Hayter.
Heatons Transport (St Helens) Ltd v Transport and General Workers Union [1972] 3 All ER 101, [1973] AC 15 was a case
in which the shop stewards, who were accredited officials of the union and, in law, its agents, had authority under the rules to
instigate the industrial action complained of (see [1972] 3 All ER 101 at 110112, [1973] AC 15 at 100103 per Lord
Wilberforce). The issue was whether this authority had been effectively curtailed or withdrawn (see [1972] 3 All ER 101 at 117
118, [1973] AC 15 at 110). The House of Lords held that it had not. When Lord Wilberforce in the passage of the report quoted
in the judgment said that In each case the test to be applied is the same: was the servant or agent acting on behalf of, and within
the scope of the authority conferred by, the master or principal? (see [1972] 3 All ER 101 at 109, [1973] AC 15 at 99; my
emphasis), he was disagreeing with a decision of the Court of Appeal that the test was different. For present purposes that is
immaterial. What matters is that the key issue is the authority of the servant or agent and quite clearly Mr Hayter was acting
outside the scope of his authority, albeit within the scope of his employment.
Z Ltd v A [1982] 1 All ER 556, [1982] QB 558 was a case in which the court was reviewing the scope of Mareva injunctions
almost in the abstract. It held that 164 banks which with notice of the injunction allowed assets held by them to be dissipated
were guilty of a contempt of court on the third basis which I have mentioned, namely interfering with the administration of
justice (see [1982] 1 All ER 556 at 566567, [1982] QB 558 at 578 per Eveleigh LJ). It was so understood and applied in A-G v
Times Newspapers Ltd [1991] 2 All ER 398 at 411, 415, 425, [1991] 2 WLR 994 at 1010, 1014, 1025. Given knowledge of the
terms of the injunction upon the part of the bank or other employer, the act of the servant acting within the scope of his
employment will normally be imputed to the employer because the servant will normally have been authorised to take that action.
Eveleigh LJ in Z Ltd v A [1982] 1 All ER 556 at 569, [1982] QB 558 at 581 in the passage cited in the judgment of the court
below was saying no more than this. He was not considering the case of a servant who within the scope of his employment acts
in breach of the terms of an injunction but in defiance of an instruction not so to act which limited the authority otherwise
stemming from the scope of that employment. The Heaton case [1972] 3 All ER 101 at 120, [1973] AC 15 at 113 indeed
suggests that, if this had been the issue, the answer would have been that the employer would not have been liable, since the
House of Lords held in para 5 of the summary:

As soon as [the injunction was granted] the union became responsible for taking all possible steps to stop the blacking,
including the unequivocal withdrawal of the shop stewards authority and if necessary disciplinary action. (My emphasis.)

Unless the position of a servant differs fundamentally from that of an agent, which Lord Wilberforce said that it did not (see
[1972] 3 All ER 101 at 109, [1973] AC 15 at 99), the union would have been in contempt anyway, the remedial steps being
relevant only to penalty.
The only case in which this precise point appears ever to have been considered is Hone v Page [1980] FSR 500 at 507,
where Slade J held:

I think that a man must be deemed to do a relevant act by his servants or agents, within the meaning of an
undertaking given in this form, if (a) the persons who did the acts were his servants or agents, (b) the acts were done in the
course of the service or agency, and (c) he either (i) authorised the acts or (ii) could reasonably have foreseen the possibility
of such acts and failed to take all reasonable steps to prevent them.

Since in this case Smiths did not authorise the acts, but on the contrary expressly forbade them and foresaw the possibility of
such acts but, as the court found, took reasonable steps to prevent them, Slade Js formulation cannot stand with the law as the
court below interpreted it. I have no doubt that Slade Js formulation is wholly correct.

Giving effect to, enforcing or purporting to enforce

Mr Dehn was forensically very exercised at the court finding that Mr Hayter gave effect to the arrangement in a situation in
which, as he submitted, the only proper finding was that Mr Hayter purported to give effect to the arrangement, which is not
prohibited by the injunctions.
The basis of this argument was a contention that a party to an arrangement enforces or purports to enforce it if, and only if,
he takes action to enforce it against one or more of his fellow parties. He gives effect to it only if his conduct in his business in
relation to third parties is actually influenced by the arrangement. Here, as Mr Dehn submitted, there was no enforcement or
purported 165 enforcement against the other parties to the arrangement and no change in Mr Hayters conduct of Smiths
business and so no giving effect to the arrangement. At most there was a purported giving effect.
I do not accept this dichotomy between enforcement and giving effect. Whether either or both are apt to describe
particular conduct in particular situations is better left for ad hoc decision. So far as this case is concerned, the court held that Mr
Hayters actions at the meetings were designed to lead his fellow participants to believe that he was giving effect to the
restrictions and so to lead them to give effect themselves to the arrangement. It also declined to accept that the arrangement had
no effect on Smiths trading operations.
Even if I was inclined to interfere with these conclusions of fact by a specialist court which saw the heard the witnesses,
which I certainly am not, I doubt whether it would be proper to do so. On these findings I have no doubt that Mr Hayter, but not
Smiths, gave effect to the arrangement and probably also enforced or purported to enforce it.

THE TEXTBOOKS
It so happens that the learned Director General, Sir Gordon Borrie QC, is co-author of a textbook on the law of contempt
Borrie and Lowe Law of Contempt (2nd edn, 1983). Happily it is very far from yet being authoritative in the technical sense,
since the Director General is alive and well. On the other hand it is in every other respect a work of authority and it must be rare
for a litigant to be able to rely upon his own writings in support of his case, particularly where the work was written before the
case arose. There is also another standard textbook, namely Miller Contempt of Court (2nd edn, 1989), which is relied upon by
Borrie and Lowe p 402 in the relevant passage, which reads as follows:

5 Responsibility for Breach In so far as an individual is enjoined by an order to do or refrain from doing a particular
act the responsibility for obeying that order is clearly thrown on that individual. (But where an injunction is granted
against a husband and wife and is broken by one spouse and the other spouse is neither implicated nor to blame no liability
will answer to the other: Hope v Carnegie (1868) LR 7 Eq 254.) More difficulty occurs where orders are made against a
corporate body or a trade union. With regard to corporate bodies it seems established that liability is dependent upon the
vicarious principle (See Heatons Transport (St Helens) Ltd v T and GWU ([1972] 3 All ER 101, [1973] AC 15); Z Ltd v A-
Z and AA-LL ([1982] 1 All ER 556 at 569, [1982] QB 558 at 581) per Eveleigh LJ and Miller Contempt of Court (2nd edn,
1989) p 251) so that where an order has been made against the corporation, that body is liable for acts of its servants (at any
rate where they are acting in the course of their employment (see Miller (at p 251))). Hence, it has been held that if,
contrary to an order made against the corporate body: the act is in fact done, it is no answer to say that, done, as it must
be, by an officer or servant of the council, the council is not liable for it, even though it may have been done by the servant
through carelessness, neglect, or even in dereliction of his duty. (Per Warrington J in Stancomb v Trowbridge UDC [1910]
2 Ch 190 at 194.)

I have to say that I think that this is not an exhaustive statement of the law. There is no necessary connection between the
vicarious liability of an employer or principal for the tortious actions of his servant or agent committed whilst acting within the
scope of his employment or agency and the commission of a contempt of court. Vicarious liability in tort arises because the
employer or principal
166

has put the [servant or] agent in his place to do that class of acts, and he must be answerable for the manner in which
the agent has conducted himself in doing the business which it was the act of his master to place him in.

(See Barwick v English Joint Stock Bank (1867) LR 2 Exch 259 at 266, [186173] All ER Rep 194 at 198.) Being answerable
for is not the same thing as intending and there can be no sufficient mens rea to support a finding of contempt unless the
employer or principal intended to do the prohibited act. This is not to say that he need personally have formed this intent. If he
left the servant or agent free to form the intent on his behalf, this will suffice and prima facie a servant or agent is free to form
such an intent within the scope of his employment or authority. This will not, however, be the case if the employer or principal
has expressly forbidden it and there are no circumstances casting doubt upon the reality of the prohibition. In so far as Therm-A-
Stor Ltd v Home Insulation Ltd [1982] Com LR 244 decides the contrary, I consider the decision to have been wrong.

THE DIRECTOR GENERALS FEARS

Mr Richards told us of the Director Generals fears that, if Smiths were not in contempt on the facts of this case, a gaping
hole exists in his power to enforce the 1976 Act. I have to say that I think that these fears are exaggerated.
All courts, and in particular the Restrictive Practices Court in its specialised field of endeavour, are concerned with realities
rather than appearances. It is idle for a company to protest that it did not wish its servants or agents to enter into and give effect
to restrictive agreements on its behalf and that it had prohibited such conduct, if its actions belie its protestations. Its liability to
be found to be in breach of an injunctive order does not depend upon identifying a nod or a wink to its servants and agents. It
depends upon a consideration of everything that it has done or has omitted to do in the situation which confronted it.
It appears from the evidence in this case, and I doubt whether this is unique, that, where an industry has a history of cosy
restrictive agreements, any meeting of executives who directly or indirectly are capable of influencing prices and the allocation of
contracts will be afflicted with an almost Pavlovian reaction to make and enforce a new restrictive agreement. It appears, and this
has surprised me, that it makes no difference that the executives concerned may not themselves enjoy profit related remuneration.
Account will have to be taken of what, in other circumstances, might be regarded as a wholly admirable desire to advance the
best interests of the company. This may not extend to full-blooded participation in mutual restrictive practices, but may be
limited, as in this case on one view of the facts, to joining the cartel with a view to making sure that the cartel did not damage
the companys interests. The greater the incentive to servants or agents to make and give effect to, enforce or purport to enforce
new restrictive agreements, the more draconian will the counter or compliance measures have to be if the court is not to find that
the reality is that the company authorised its servants or agents and that their actions were its actions.
This was indeed recognised by Smiths, which, after Mr Hayters activities became known and in the light of those activities,
strengthened their compliance measures. Measures which, as the court found, were reasonably sufficient before those activities
had been revealed would not have been sufficient thereafter.

CONCLUSIONS
The arguments advanced upon this appeal have been both subtle and complex. In seeking to do justice to them and to the
judgment of the court below, I am 167 conscious that my judgment has become more diffuse than I would have wished. It may
therefore be helpful if I summarise my conclusions.
(1) The fundamental purpose of the contempt jurisdiction of the court in the context of disobedience of court orders is to
uphold the supremacy of the rule of law and the courts authority to administer it. It is punitive in character. That it may provide
an enforcement remedy for third parties is incidental.
(2) It is an essential prerequisite to a finding of contempt that the factual basis shall have been proved beyond all reasonable
doubt and that there shall have been mens rea on the part of the alleged contemnor. Mens rea in this context does not mean a
wilful intention to disobey the courts order, but an intention to do the act which constitutes the disobedience with knowledge of
the terms of the order, although not necessarily an understanding that the act is prohibited.
(3) An order restraining X by itself, its servants or agents or otherwise is addressed only to X and directly binds only X. If
its servants or agents are to be found guilty of contempt, it can only be on the basis that they are aiders and abettors of Xs
contempt or have so acted as to impede or interfere with the administration of justice. Such an order is, however, not limited to
restraining X from doing the prohibited acts personally, if X is a natural person, or in the shape of its alter ego, if X is a juridical
person. It also restrains X from doing the acts by the instrumentality of its servants or agents.
(4) Whether X is doing an act by the instrumentality of its servants or agents will depend upon the scope of their mandate.
This will be judged in the light of reality rather than form. If X should have appreciated that the servant or agent would be likely
to do the prohibited act unless dissuaded by X, the act will be regarded as being within the scope of that mandate if X has not
taken all reasonable steps to prevent it. Such steps may in appropriate cases involve far more than express prohibition and extend
to elaborate monitoring and compliance machinery and procedures and the creation of positive incentives designed to dissuade
the servant or agent.
(5) If the mandate of the servant or agent has been effectively restricted, ie all reasonable steps have been taken to achieve
this objective, X may nevertheless be answerable to third parties for damage suffered in consequence of the acts of the servant or
agent, if it can be said that X put him in a position to do them. This is to be distinguished from answerability for acts done by X
personally through the instrumentality of his servants or agents and does not involve a disobedience by X of the courts orders or
any liability in contempt.
(6) No one can become a party to an agreement or arrangement until their adherence is consensual, whether the necessary
consensus stems from the mind of the alleged party or that of its servant or agent acting within the scope of his mandate.
(7) On the finding of the court that Smiths expressly forbade Mr Hayter to enter into the restrictive arrangement and put in
place adequate compliance measures, Mr Hayters adherence to the arrangement was not Smiths adherence, the necessary
consensuality on the part of Smiths was absent and Smiths were not a party to the arrangement. The injunction was concerned
solely with giving effect to or enforcing or purporting to enforce agreements or arrangements to which Smiths were a party and
accordingly there was no disobedience of the injunction.
(8) Independently of this consideration, on the finding of the court that Smiths expressly forbade Mr Hayter to give effect to
or enforce or purport to enforce any such arrangement and put in place adequate compliance measures, Smiths did not do the
prohibited act by the instrumentality of Mr Hayter or at all.
168
(9) The Director General has to prove both that Smiths were a party to the arrangement and that they gave effect to or
enforced or purported to enforce it, if he is to establish contempt of court by Smiths. He has done neither.
(10) Although it is immaterial to the motion which charged Mr Hayter only with aiding and abetting a contempt by Smiths,
Mr Hayter in entering into and giving effect to the arrangement was not within the scope of s 24 or s 35 of the 1976 Act, because
he did not himself carry on business within the United Kingdom or at all. His only business activities were carried on in
purported performance of his duties as a servant of Smiths.
(11) I would therefore allow the appeal and set aside the orders of the Restrictive Practices Court.

MR HAYTERS POSITION
Mr Hayter has not appealed against the orders of the Restrictive Practices Court in so far as they affected him. However, if
Smiths are not in contempt of court, it would appear that he cannot have been an aider and abettor of such a contempt as found by
the court below. Earlier in this judgment I pointed out that the court itself is involved in every allegation and finding of contempt
of court and can indeed take action to sequestrate or commit of its own motion. It must also follow that it can, and in appropriate
cases should, of its own motion set aside a finding of contempt of court and any consequential order. This aspect was not
considered during the hearing of the appeal and it is one upon which the Director General is entitled to be heard. However,
subject to any submissions on his behalf, I would set aside the orders of the Restrictive Practices Court against Mr Hayter
including those as to costs. In the absence of an appeal by Mr Hayter, which now would require an order extending the time for
appealing which would not necessarily be granted, I would not be disposed to make any order for the payment of his costs by the
Director General.
GLIDEWELL LJ. I have had the advantage of reading in draft the judgment of Lord Donaldson MR. I agree with him that the
appeal should be allowed and that the order of the Restrictive Practices Court made on 24 September 1990 (see [1991] ICR 52)
should be set aside so far as it relates to Smiths Concrete Ltd (Smiths). I add some observations of my own because we are
differing from the court below on an issue of some general importance. I do not repeat the facts, which Lord Donaldson MR has
set out in his judgment.
The notice of motion alleged that Smiths had committed breaches of orders of the court dated 14 March 1978 and 29 March
1979 by giving effect to or enforcing or purporting to enforce in contravention of s 35(1) of the Restrictive Trade Practices Act
1976 an agreement or agreements alleged to have been entered into between Smiths and the other ready-mixed concrete
producers named as respondents. The agreement in question was alleged to have been made in or about March 1983, and altered
in April 1984, by Mr Hayter in his capacity as Smiths unit manager.
Section 35(1)(b) of the 1976 Act can only be contravened by any person party to the agreement who carries on business
within the United Kingdom It follows in my view that Mr Dehn QC, for Smiths, is correct when he submits that the first
matter which the Director General was required to prove is that Smiths were parties to the agreement.
Section 43(1) of the 1976 Act defines agreement as including any agreement or arrangement, whether or not it is or is
intended to be enforceable (apart from any provision of this Act) by legal proceedings I accept the submission of Mr 169
Richards, for the Director General, that in this case the agreements alleged were not intended to be enforceable by legal
proceedings, and were in the nature of loosely worded arrangements. Nevertheless, however loose the wording, they were
agreements to which the representatives of the companies present at the meetings gave their consent.
Mr Richards argues that Mr Hayter was clearly a party to the agreements on the facts found by the court, that in making the
agreements he was acting within the scope of his employment by Smiths as unit manager and that that resulted in Smiths being
party to the agreement. Mr Richards submits that this result follows even though, as the court has found, during the material
period 19831984 Smiths senior management were unaware of what was going on. His participation was, it would seem,
deliberately concealed from higher levels of management (see [1991] ICR 52 at 66). The court also found that Mr Hayter had
been instructed in the clearest terms to comply with the requirements of the Act of 1976, which meant that he was expressly
forbidden either to make or to put into effect any such agreement.
Anthony Lincoln J, the president of the Restricive Practices Court, did not say expressly in his judgment that the court
adopted and applied the scope of employment test to determine whether Smiths were parties to the agreement. Nevertheless,
from the passages from Anthony Lincoln Js judgment cited in Lord Donaldson MRs judgment, I think it is clear that this was
the test adopted by the court below. In my view, the court was in error in adopting that test. The correct test was that which
determines whether a principal is a party to a contract entered into by his agent, namely did the agent have authority to make the
contract on the principals behalf? The same test applies to determine whether an employer is bound by a contract entered into by
his employee.
Surprisingly, there appears to be no direct authority on this question. When, in his speech in Heatons Transport (St Helens)
Ltd v Transport and General Workers Union [1972] 3 All ER 101 at 109, [1973] AC 15 at 99, Lord Wilberforce said:

In each case the test to be applied is the same: was the servant or agent acting on behalf of, and within the scope of the
authority conferred by, the master or principal?

he was speaking in a different context. Nevertheless, the passage seems to me to indicate that this would be the correct test to
decide whether an employer was party to an agreement made by his employee.
On the facts found by the Restrictive Practices Court, it is clear that Mr Hayter had neither express nor ostensible authority
from Smiths to enter into the agreements in question. If, however, an employer knew that there was a possibility that his manager
would be tempted to enter into such agreements, and failed to take all reasonable steps to prevent him doing so, the court would
be entitled to find that the employer had impliedly authorised the employee to act as he did.
Thus I agree with Lord Donaldson MR that Slade J formulated the correct test when he said in Hone v Page [1980] FSR 500
at 507:

I think that a man must be deemed to do a relevant act by his servants or agents, within the meaning of an
undertaking given in this form, if (a) the persons who did the acts were his servants or agents, (b) the acts were done in the
course of the service or agency, and (c) he either (i) authorised the acts or (ii) could reasonably have foreseen the possibility
of such acts and failed to take any reasonable steps to prevent them.

170
In the present case such authority is negatived by the courts finding that Smiths took all reasonable steps to prevent
breaches of the Act (see [1991] ICR 52 at 67).
It follows that, applying the test formulated by Slade J to the facts of this case, the Director General has failed to prove that
Smiths were parties to the agreements.
This is enough to determine the appeal. However, I should say that on other points which were argued I agree with Lord
Donaldson MR that the court was entitled on the evidence before it to find, as it did, that Mr Hayter gave effect to the agreement.
It follows, however, from what I have already said that, since Smiths were not proved to have been parties to the agreement, it
was also not proved that they gave effect to it.
Like Lord Donaldson MR, I do not believe that s 35 of the 1976 Act is rendered toothless by this decision, the unattractive
prospect which Mr Richards held out to us as the result of adopting the authority test. I am confident that, if an arrangement for
price-fixing and/or the allocation of contracts is put into effect, the facts will in most cases soon come to the attention of senior
management. If they do not, it will normally be because management has not taken all reasonable steps to prevent its employees
from entering into such an arrangement. In either case, a court would be entitled to find that if, after its management learnt of the
facts, an employing company had ratified the agreement and its putting into effect, s 35 would then have full application.
It is for these reasons, which do little more than restate what Lord Donaldson MR has said, that I agree that Smiths appeal
should be allowed. I also agree that the finding and order against Mr Hayter should be set aside, with no order as to his costs.

TAYLOR LJ. I agree.

Appeal allowed.

The court refused leave to appeal to the House of Lords but certified, under ss 1 and 13 of the Administration of Justice Act 1960,
that the following point of law of general public importance was involved in the decision: the basis of liability of an employer in
contempt and/or under the Restrictive Trade Practices Act 1976 for the acts of its employees.

Solicitors: Gouldens agents for Graham Dransfield; Treasury Solicitor.

Mary Rose Plummer Barrister.

171
 [1991] 4 All ER 172

Curtis v Wild
SHIPPING

QUEENS BENCH DIVISION, MANCHESTER

HENRY J
5 JUNE 1991

Water and watercourses Navigation Reservoir Reservoir used by sailing dinghies for pleasure purposes Personal injuries
Person on board one dinghy suffering personal injuries as result of fault of another dinghy Whether reservoir used for
navigation Whether dinghy used on reservoir for pleasure purposes a vessel used in navigation Whether time limit for
bringing personal injuries claim two years or three Merchant Shipping Act 1894, s 742 Maritime Conventions Act 1911, s 8.

The question whether an enclosed sheet of water, such as a reservoir, is water which can be used by vessels or ships for
navigation for the purposes of s 742a of the Merchant Shipping Act 1894 depends not on the size of the sheet of water but on
whether the vessels are proceeding from an originating place A to a terminus B for the purpose of discharging people or cargo at
the destination point, in which case there is navigation, or whether the water is simply used for pleasure purposes by people
messing about in boats, in which case there is no navigation. Accordingly, a sailing dinghy used on a reservoir for such
pleasure purposes is not a vessel used in navigation within s 742, and where a person on board such a dinghy suffers personal
injuries caused by the fault of another dinghy the time limit for bringing an action for damages for personal injuries is the
conventional three-year limit for personal injuries claims and not the two-year limit provided for by s 8 b of the Maritime
Conventions Act 1911 (see p 174 f to h, p 175 e f j to p 176 a e f h j, post);
________________________________________
a Section 742, so far as material, is set out at p 173 j to p 174 a, post
b Section 8, so far as material, is set out at p 173 f g, post

Southport Corp v Morriss [1893] 1 QB 359 and Weeks v Ross [1913] 2 KB 229 applied.
Quaere. Whether a person who has fallen overboard from a vessel and suffers personal injuries as a result of the fault of
another vessel is no longer a person on board the former vessel for the purposes of s 8 of the 1911 Act (see p 176 j to p 177 a,
post).

Notes
For limitation of time for actions for damages for personal injuries, see 28 Halsburys Laws (4th edn) para 691, and for cases on
the subject, see 32 Digest (Reissue) 486, 37343736.
For limitation of time for an action to enforce a claim for personal injuries against a vessel or her owners, see 43 Halsburys
Laws (4th edn) para 1005, and for cases on the subject, see 42 Digest (Reissue) 456459, 51335149.
For the Merchant Shipping Act 1894, s 742, see 39 Halsburys Statutes (4th edn) 606.
For the Maritime Conventions Act 1911, s 8, see ibid 641.

Cases referred to in judgment

Southport Corp v Morriss [1893] 1 QB 359, DC.
Weeks v Ross [1913] 2 KB 229, DC.
172

Summons
By a summons dated 11 June 1990 the defendant, Clifford Wild, taking a preliminary point, sought a declaration that the action
brought by a writ issued on 11 June 1990 by the plaintiff, Majorie Edith Curtis, against the defendant for damages for personal
injuries suffered and expenses incurred as a result of an accident which occurred on or about 2 August 1987 at Belmont reservoir,
Bolton arising out of the negligence of the defendant and/or the defendants failure to navigate or manage a sailing dinghy which
collided with the plaintiff was non-maintainable by reason of s 8 of the Maritime Conventions Act 1911, in that the action had not
been commenced within two years from the date the injury was caused. The summons was heard and judgment was given in
chambers. The case is reported by permission of Henry J. The facts are set out in the judgment.

Simon Hilton for the defendant.

Digby C Jess for the plaintiff.

5 June 1991. The following judgment was delivered.

HENRY J. On 2 August 1987 the plaintiff was in a Lark dinghy sailing on Belmont reservoir when it capsized near the first
marker buoy about 50 yards from the bank and the plaintiff was thrown into the water. The defendant was sailing another dinghy,
I am told 427 metres long, which according to the statement of claim upon which this application is based had been several
dinghies and some distance behind the plaintiffs dinghy. The allegation is that the defendants dinghy negligently caused or
permitted his dinghy to strike the plaintiff who was still in the water and close to her upturned dinghy. That accident happened on
2 August 1987 and the writ was issued on 11 June 1990, that is to say within the conventional three-year period. However, it is
contended on behalf of the defendant that the action is statute-barred because of the provision of s 8 of the Maritime Conventions
Act 1911. That section, so far as is relevant, reads thus:

No action shall be maintainable to enforce any claim against a vessel or her owners in respect of any damage or
loss to another vessel or damages for loss of life or personal injuries suffered by any person on board her [that is to say
on board that other vessel], caused by the fault of the former vessel unless such proceedings therein are commenced
within two years from the date when the damage or loss or injury was caused

So it is said that this action was not started within the two years and so is statute-barred. The court has what appears from
the statute to be an unfettered discretion to disapply that period of limitation. However, in view of the authorities construing the
exercise of that discretion to which I have not been referred the plaintiff in resisting this application does not ask me to exercise
my discretion. The point taken is as to whether these dinghies were vessels as described in s 8. By s 10 of the 1911 Act the Act
shall be construed as one with the Merchant Shipping Acts 1894 to 1907 and those Acts, as the name implies, deal with merchant
shipping and were passed to incorporate the international conventions in relation to merchant shipping into the laws of this
country. Section 742 of the Merchant Shipping Act 1894, is the definition section and reads as follows:

In this Act, unless the context otherwise requires, the following expressions have the meanings hereby assigned to
them; (that is to say,) VESSEL includes any ship or boat, or any other description of vessel used in navigation; SHIP
173includes every description of vessel used in navigation not propelled by oars

I have been referred as to the meaning of the words used in navigation to two decisions of the Divisional Court. The first is
Southport Corp v Morriss [1893] 1 QB 359, and there the appellants were the owners of an artificial lake, half a mile long by 180
yards wide situated on the foreshore in the borough of Southport. It was a lake which had been excavated from the sand to a
depth of three feet and was surrounded by a concrete wall and was not open to the sea except at high spring tides. The lake was
used for boating purposes and the appellants had placed on it for hire a vessel or launch of about three tons electrically driven and
capable of carrying between 30 or 40 passengers on trips around the lake. Each such passenger paid a fare for such a trip and the
question was whether the appellants had unlawfully allowed that vessel to ply with more than 12 passengers on board without
having a duplicate certificate issued by the Board of Trade and put up on some conspicuous part of the vessel. The question was
whether the then definition of ship under the Merchant Shipping Act 1854, which seems to have been in the same terms, applied.
Lord Coleridge CJ, in giving the leading judgment, with which Charles J agreed, said (at 361):

I am of opinion that this appeal must be allowed. The launch in question cannot be held to be within the provisions of
s. 318 [that is the requirement to put up the certificate] unless it can be said to be a ship And by s. 2 the term ship is
defined to include every description of vessel used in navigation not propelled by oars. We are therefore reduced to the
question whether this launch was a vessel used in navigation. I think that, having regard to the size of the sheet of water on
which it was used, it was not. Navigation is a term which, in common parlance, would never be used in connection with a
sheet of water half a mile long. The Attorney-General has asked where we are to draw the line. The answer is that it is not
necessary to draw it in any precise point. It is enough for us to say that the present case is on the right side of any
reasonable line that could be drawn.

The reservoir in this case was 07 of a nautical mile long and at its widest point 03 of a nautical mile wide. The first
question which the court will decide is whether having regard to the size of the sheet of water on which it was used vessels on it
were being used in navigation. The question is what is there meant by navigation. It is contended on behalf of the defendant that
navigation is simply a question of steering or adjusting a course, effectively sailing a course. If that were right then it would be
very difficult to see why the size of the sheet of water to which Lord Coleridge CJ draws attention is important. The distinction
that Lord Coleridge CJ there appears to me to be drawing is whether that sheet of water is used by vessels going from point A to
point B or whether it is used by people simply messing about in boats.
The second case to which my attention has been drawn distinguishes that case and that is Weeks v Ross [1913] 2 KB 229.
There a motor boat was used for carrying more than 12 passengers from Exeter along the river Exe for half a mile and for a
further mile along a canal to the first lock, returning thence to Exeter. Below that lock the canal continued for two miles through
other locks to the estuary of the river and it was used by sea-going ships for the purpose of going to and from Exeter. It was held
that the motor boat was a vessel used in navigation within the meaning of s 742 of the Merchant Shipping Act 1894 and so
accordingly was a passenger steamer within the meaning of s 271. In the judgment of Channell J he says (at 231):
174

The only other point is one of some difficulty and not easy to determine. It is raised by the case of Southport
Corporation v. Morris ([1893] 1 QB 359), which I think requires careful examination.

Channell J then sets out that case making a comment that the point of the lake was this (at 232):

This lake was made in order that children and other people might amuse themselves with a sort of quasi-sea when the
other sea had gone nearly out of sight. There was a small launch which was used for amusement and carried people, who
certainly were passengers and were more than twelve.

And he says that that was found not to be within the Act. He quotes Lord Coleridge CJs judgment and then says:

It is quite clear that the judgment proceeded entirely upon the view of the court as to the place where the alleged
navigation was, and the Lord Chief Justice says the term could never be used in connection with a sheet of water half a
mile long. He must be considered to have used those words with reference to the facts of the case before him. It was not
only a sheet of water half a mile long, but an enclosed sheet of water, so that a boat, or a vessel, could not be taken over
that half a mile of water and proceed further on. That being so, I absolutely agree with that decision. A pleasure pond
cannot be a place on which, in any reasonable sense of the word, anyone could say there was navigation, and that is the
ground upon which the Lord Chief Justices decision proceeded.

Breaking off there, it seems to me clear from that passage that as steering and adjusting of courses is necessary, even on a
pleasure pond which may well have marker buoys on it, the word navigation was there being used not in the sense contended
for by Mr Hilton for the defendant but in the larger going places sense. He then distinguishes that case in the following words
(at 233):

Here, although the length of water on which these launches ply is only about one-and-a-half miles from the Exe bridge
to the first lock on the canal, which in a sense is an enclosed piece of water and if really so that might prevent this being
navigation, yet it is not really so, because at the end of that mile and a half there is a lock which communicates with a
further cut (to use an ambiguous expression) which goes on to another lock, and then there is a sea lock, through which
vessels can go out to sea or can come in from the sea, and go up the dock which exists at Exeter, where vessels of
substantial size in fact do go. Vessels are passing up and down this canal constantly, but, of course, only at a time of high
water in the estuary, because outside the lock in the estuary there is no water at low tide, and they only go down to the lock
to get to the sea when the tide is high. There is navigation there, and it is a place for navigation, and being a place for
navigation it is not the less navigation by this launch than by any other craft; the launch is navigating. The grounds upon
which the judges decided the Southport Case do not in point of fact exist in the present case. No one could say that this
place is a place where there could not be navigation when in point of fact there is a very considerable amount of navigation.
On that ground, if the matter is open to us, there can be no doubt what our decision should be.

Breaking off there, it is quite clear from his judgment in that case that for a vessel to be used in navigation within the meaning of
the 1894 Act that use must be on navigable waters, navigable waters meaning waters that are used by vessels going 175 from
point A to point B and not simply used for pleasure purposes even if those pleasure purposes may involve steering a pre-set
course.
Bray J in his judgment agreed, saying (at 234):

The only real question is whether this vessel was used in navigation. Now the case finds that it proceeded for half a
mile along the river Exe and for a mile along the canal, and that the canal continues over two miles, going through certain
locks, and finally reaches tidal water. Those being the facts, whether the magistrates have found as a fact that it was used
for navigation or not, in my opinion there could be no other proper finding than that the vessel was used for navigation. A
river is a place for navigation and a canal is a place for navigation, and they are none the less places for navigation because
as it happens this vessel only used a portion of them.

So there again one has the navigable waters concept. Lord Coleridge J agrees (at 234):

I have had some difficulty in this case because the only point the magistrates had to decide was whether the vessels
were used in navigation and there is no express finding on that point I do not think the Southport Case, which the
magistrates thought bound them, is binding here, because in this case these vessels were proceeding over waters which
were used by ships coming from the sea to the docks and back again.

That is to say, breaking off, they were navigable waters in the sense that they were navigated by people going from point A to
point B. He continues (at 234235):

Clearly such ships would be held to be navigating these waters on the ground of the nature of the waters they were
traversing. If ships coming to and from the sea were clearly navigating these waters, the fact that these particular vessels in
question did not proceed to sea does not prevent these waters being navigated by them as they would be by ships going to
and from the sea.

Again, the concept is navigable waters, that is to say using that expression in the sense of waters that were navigated on by
vessels proceeding from point A to point B. He then finally concludes (at 235):

On those grounds I think there is conclusive evidence upon which conviction was a necessary result. I leave out of
consideration various alternatives that might be suggested, such as the use of large reservoirs or small lakes or tarns. When
those questions arise it will be time enough to decide whether those are waters which can be navigated.

There again the concept is made clear. I am quite satisfied in this case that the waters of Belmont reservoir are not waters which
can be navigated within the sense used by the authorities. There was no evidence before me that there was any navigation in the
sense of proceeding from an originating place A to a terminus B for the purpose of discharging people or cargo at the destination
point. It was simply used for pleasure purposes by people who were messing about in boats. In these circumstances it seems to
me that s 8 of the Maritime Conventions Act 1911 does not apply and accordingly there is the conventional limit in this case.
That being so this application before me fails. I do not think it necessary in these circumstances to express a concluding view as
to whether the defendants contention would fail for a second reason, namely the fact that the plaintiff having gone overboard was
not a person on board the victim vessel. Clearly there might 176 be cases where fine lines would have to be drawn where
someone who had gone overboard but was clinging to the wreckage was within the definition or alternatively if a few feet away
but overboard whether they were covered by the Act. I prefer to express no opinion on that point as it is not necessary to the
decision I give today.

Summons dismissed.

Solicitors: Hill Dickinson Davis Campbell, Liverpool agents for Donne Mileham & Haddock, Shoreham-by-Sea; Keogh Ritson,
Bolton.

Mydeen Esq Barrister.

[1991] 4 All ER 177

Re R (a minor) (wardship:medical treatment)

FAMILY; Children

COURT OF APPEAL, CIVIL DIVISION

LORD DONALDSON OF LYMINGTON MR, STAUGHTON AND FARQUHARSON LJJ
11, 24 JULY 1991

Ward of court Jurisdiction Medical treatment Medical treatment involving administration of medication for wards
psychotic mental condition Wards mental condition fluctuating between normal behaviour and psychosis Ward when rational
refusing to accept medication Whether ward having sufficient competence to give or refuse consent to treatment Whether
court having jurisdiction to override refusal by ward.

A 15year-old girl who had a history of family problems and who had been on the local authoritys at-risk register was received
into voluntary care after a fight with her father and was placed in a childrens home. While in care her mental health deteriorated
and she experienced visual and auditory hallucinations and her behaviour became increasingly disturbed. On one occasion she
left the childrens home and was found on a bridge threatening to commit suicide, while on another occasion she returned to her
parents home where she ran amok causing serious damage and attacked her father with a hammer. The local authority obtained
place of safety and interim care orders and placed her in an adolescent psychiatric unit where she was sedated from time to time
with her consent. The unit sought permission from the local authority to administer anti-psychotic drugs to her because she was
behaving in a paranoid, argumentative and hostile manner. Although she had clear intervals when her mental illness was in
recession the prognosis was that if the medication was not administered she would return to her psychotic state. However, in
rational and lucid periods, when she had sufficient understanding to make the decision, she objected to taking the drugs. In those
circumstances the local authority refused to authorise the administration of drugs against her will, while the unit was not prepared
to continue to care for her unless it had authority to administer appropriate medication to control her. The local authority
commenced wardship proceedings and applied for leave for the unit to administer medication, including anti-psychotic drugs,
whether or not the ward consented. The questions arose (i) whether the judge had power to override the decision of a ward who
was a minor to refuse medication and treatment irrespective of whether the minor was competent to give her consent and (ii)
whether the ward had the requisite capacity to accept or refuse such medication or treatment. The judge granted the application,
holding that 177 although a wardship judge could not override the decision of a ward who had the requisite capacity on the facts
the ward did not have that capacity. The Official Solicitor as guardian ad litem of the ward appealed, contending that if a child
had the right to give consent to medical treatment the parents, and a fortiori the wardship courts, right to give or refuse consent
terminated.

Held In exercising its wardship jurisdiction the High Court had power to consent to medical treatment of a minor ward who
was competent to consent to treatment but who had refused consent or was not asked, and conversely the wardship court had an
overriding power, which natural parents did not have, to refuse consent or forbid treatment even if the ward consented, if the
consent or refusal of consent by the court was deemed to be in the childs welfare. Since, given the background of the wards
fluctuating mental state, it was clear that if medication was not given to the ward she would lapse into a psychotic state the judge
had been right to grant the application for the administration of medication with or without the wards consent. Moreover, the
fact of the wards fluctuating mental state meant that she was not competent to decide whether to consent to medication being
administered to her since it would be dangerous for the ward if her competence were to be judged purely on her state of mind
during a period when her mental illness was in recession. Accordingly, the judge had been right to grant the application for the
unit to administer medication irrespective of whether the ward consented and the appeal would therefore be dismissed (see p 187
b to g j to p 188 b d e, p 189 a h to p 190 a, p 191 j to p 192 b f to j, post).
Gillick v West Norfolk and Wisbech Area Health Authority [1985] 3 All ER 402 distinguished.
Per Lord Donaldson MR. A doctor may lawfully administer treatment to a child who is not a ward of court and who is
competent to, and does, refuse consent if the parent nevertheless consents notwithstanding that in the converse case of a
competent child consenting to treatment the parents have no right of veto (see p 185 d to g and p 186 e f, post); dictum of Lord
Scarman in Gillick v West Norfolk and Wisbech Area Health Authority [1985] 3 All ER 402 at 423424 considered.

Notes
For the courts jurisdiction over wards of court, see 24 Halsburys Laws (4th edn) para 576, and for cases on the subject, see 28(3)
Digest (2nd reissue) 305328, 28812969.

Cases referred to in judgments

B (a minor), Re (1991) Independent, 22 May, Fam D.
BRB v JB [1968] 2 All ER 1023, [1968] P 466, [1968] 3 WLR 566, CA.
C (a minor) (wardship: medical treatment), Re (No 2) [1989] 2 All ER 791, [1990] Fam 39, [1989] 3 WLR 252, CA.
E (a minor), Re (21 September 1990, unreported) Fam D.
G-U (a minor) (wardship), Re [1984] FLR 811.
Gillick v West Norfolk and Wisbech Area Health Authority [1985] 3 All ER 402, [1986] AC 112, [1985] 3 WLR 830, HL; rvsg
[1985] 1 All ER 533, [1986] AC 112, [1985] 2 WLR 413, CA.
Hewer v Bryant [1969] 3 All ER 578, [1970] 1 QB 357, [1969] 3 WLR 425, CA.
J v C [1969] 1 All ER 788, [1970] AC 668, [1969] 2 WLR 540, HL.
P (a minor), Re [1986] 1 FLR 272.

Cases also cited or referred to in skeleton arguments

Allcard v Skinner (1870) 36 Ch D 145, [188690] All ER Rep 90, CA.
178
B (a minor) (wardship: medical treatment), Re (1981) [1990] 3 All ER 927, [1981] 1 WLR 1421, CA.
B (a minor) (wardship: sterilisation) [1987] 2 All ER 206, CA; affd [1987] 2 All ER 206, [1988] AC 199, HL.
B v W (wardship: appeal) [1979] 3 All ER 83, [1979] 1 WLR 1041, HL.
Beaney (decd), Re [1978] 2 All ER 595, [1978] 1 WLR 770.
Boughton v Knight (1873) LR 3 P & D 64, [186173] All ER Rep 40.
D (a minor) (wardship: sterilisation), Re [1976] 1 All ER 326, [1976] Fam 185.
F (a minor) (wardship: appeal), Re [1976] 1 All ER 417, [1976] Fam 238, CA.
F (mental patient: sterilisation), Re [1990] 2 AC 1, CA; affd sub nom F v West Berkshire Health Authority (Mental Health Act
Commission intervening) [1989] 2 All ER 545, [1990] 2 AC 1, HL.
G v G [1985] 2 All ER 225, [1985] 1 WLR 647, HL.
L, Re [1968] 1 All ER 20, [1968] P 119, CA; affg [1967] 2 All ER 1110, [1968] P 119.
Manches v Trimborn (1846) 115 LJKB 305.
Marshall, Re, Marshall v Whateley [1920] 1 Ch 284.
Natanson v Kline (1960) 186 Kan 393, Kan SC.
Prince v Massachusetts (1944) 321 US 158, US SC.
R (minors) (wardship: criminal proceedings), Re [1991] 2 All ER 193, [1991] Fam 56, CA.
R v Blaue [1975] 3 All ER 446, [1975] 1 WLR 1411, CA.
Schloendorff v Society of New York Hospital (1914) 211 NY 125, NY Ct of Apps.
Sidaway v Bethlem Royal Hospital Governors [1985] 1 All ER 643, [1985] AC 871, HL.
W, Re [1970] 2 All ER 502, [1971] Ch 123, CP.
Walker, Re [1905] 1 Ch 160, CA.
X (a minor) (wardship: restriction on publication), Re [1975] 1 All ER 697, [1975] Fam 47, Fam D and CA.

Appeal
The Official Solicitor, as guardian ad litem to a girl aged 15 years 10 months, appealed from so much of the order made on 9 July
1991 by Waite J, in wardship proceedings begun by the local authority, as granted leave to the local authority to place the minor
at an adolescent psychiatric unit and there to administer to her such medication, including anti-psychotic drugs, as the units
doctors regarded as necessary whether or not the minor consented to such medication or treatment. The facts are set out in the
judgment of Lord Donaldson MR.
At the conclusion of the argument Lord Donaldson MR announced that the appeal would be dismissed for reasons to be given
later.

James Munby QC for the Official Solicitor as guardian ad litem of the minor.
Shirley Ritchie QC and Charles Geekie for the local authority.
Jeremy Rosenblatt for the father.

24 July 1991. The following judgments were delivered.

LORD DONALDSON OF LYMINGTON MR. This appeal from an order of Waite J on 9 July 1991 involves a consideration
of the power of the court to override a refusal by its ward, a 15year-old girl, to undergo medical treatment 179 involving the
taking of medication. So far as is known such a question has arisen on only one previous occasion, namely in Re E (a minor) (21
September 1990, unreported), decided by Ward J, a 15year-old boy who had religious objections, supported by his parents, to
being given a life-saving blood transfusion. Possibly in that case, and certainly in this, the judge accepted that the effect of
Gillick v West Norfolk and Wisbech Area Health Authority [1985] 3 All ER 402, [1986] AC 112 was that, if a child had achieved a
sufficient understanding and intelligence to enable him or her to understand fully what was proposed and to be capable of making
up his own mind on the matter, the parental right (and the courts right) to give or refuse consent yielded to the childs right to
make his own decisions (see [1985] 3 All ER 402 at 422, 424, [1986] AC 112 at 186 and 189 per Lord Scarman) and that this
applied as much to a situation in which the child was refusing consent (this case and Re E) as to the case in which the child was
consenting (the assumed position in Gillicks case). However, in Re E, as in this case, the judge held that the child had not
achieved the required degree of understanding.
There was some urgency and at the conclusion of the hearing we announced that the appeal would be dismissed. We could
at the same time have given reasons for agreeing with the judges decision on the facts as to the childs degree of understanding,
which would have been determinative of this appeal on any view of the law. However, the Official Solicitor had asked us to give
guidance on the extent of the courts powers in such situations and we therefore took time to put our reasons into writing. In
dismissing the appeal we made an order that in reporting these proceedings there be no publication of the identity or whereabouts
of the child, her parents, her carers or any institution in which the child was resident or being treated or educated.

The facts
I am indebted to Waite J for a very full statement of the basic facts which I can summarise, largely in his words, as follows.
R was born on 15 September 1975 and is therefore 15 years 10 months old. Her family had been known to the social
services for over 12 years and at an earlier stage she had been on the local authoritys at-risk register as one who was thought to
be a possible victim of emotional abuse. She was a child who gave rise to anxiety because of poor and sometimes violent
parental relationships and difficulties generally in establishing boundaries in her life.
Those worries became more acute this year when, on 8 March 1991, she was received into voluntary care after a fight with
her father. She claimed she felt it was unsafe to stay in the house with him. She was placed first with emergency foster parents
and then at a childrens home maintained by the local authority.
While in care she asked not to see her father and showed some ambivalence about her wish to return to live in the care of
either parent. Anxiety developed about her mental health. She seemed often flat and expressionless and resistant to being
touched by anyone. She appeared to experience visual and auditory hallucinations and sometimes suicidal thoughts. She was
accordingly referred to a consultant child psychiatrist, Dr R.
Early in May 1991 her mother went to the childrens home and cancelled the voluntary care order under which she had been
admitted. R went back home but stayed only a few minutes and then ran off. She was found and returned to the childrens home
but then ran off again and was found by the police on a bridge over the River Thames threatening suicide. In these circumstances
the local authority sought and was granted a five-day place of safety order. R was then 180 placed in a small childrens home
from which she absconded that night, being found by the police the following day at her parents home.
An interim care order was granted on 24 May and R was persuaded to return to the general childrens home to which she
had originally been admitted. Her behaviour however was increasingly disturbed. On the same night she had to be the subject of
an emergency psychiatric assessment due to her increasingly paranoid and disturbed behaviour. The psychiatrist who saw her on
that occasion was of opinion that she was ill enough to be the subject of an application under ss 2 or 3 of the Mental Health Act
1983. This view was confirmed by Rs subsequent behaviour. She absconded from the childrens home and went back to her
own house where she ran amok doing serious damage to the building and furniture. She made a most savage attack on her father
and also assaulted her mother. Thereafter she calmed down but her behaviour remained highly variable with substantial swings
of mood. The downward swings became serious enough for an application to be made on 2 June 1991 for her admission under s
2 of the Mental Health Act 1983. She at once again absconded and attacked her parents, but this time in the presence of an
emergency social worker and two psychiatrists.
She was placed in the psychiatric ward of a general hospital and remained there for one week. On 7 June 1991 she was
discharged to a more suitable centre for the treatment of someone of her age, namely an adolescent psychiatric unit (the unit)
which specialises in disturbance problems in young people of her age.
When the social worker principally concerned with R attended a case review at the unit she was given a disturbing account
of Rs progress there. The senior registrar and director of child psychiatry stated that concern was growing over Rs mental
health to the extent that serious thought was being given to the use of compulsory medication because she was becoming
increasingly defiant. Furthermore she was denying her past experience of hallucinations and voices, alleging that she had made it
all up. The social worker was advised by the staff of the unit that they had been using sedation from time to time whenever they
felt the situation warranted it, but that had always been done with Rs consent. When the social worker asked R about this, she
replied that she had given her consent because she felt she had no choice, since if she had refused they would have injected her
with drugs anyway.
Eventually matters came to a head in events which gave rise to R becoming a ward of court and to the application granted by
Waite J. On 28 June 1991 the social worker received a telephone call from a senior consultant at the unit stating that he believed
R to be in a psychotic state and that he wanted the permission of the local authority, as the body exercising legal responsibility for
R under the care order, to administer anti-psychotic medication to her. The consultant assured the social worker that this was not
a decision taken out of the blue, advising her that R was acting extremely paranoid, becoming extremely argumentative, hostile
and accusative.
After consulting higher authority within the social services, the social worker telephoned back to the unit giving the local
authoritys consent to the administration of such medication as the medical authorities of the unit might think necessary.
Later that evening R herself telephoned the social services night duty department. She advised the duty social worker (who
happened to be experienced in problems of this kind, being an approved social worker under the Mental Health Act) that the unit
were trying to give her drugs. She said she did not need them and she did not want to take them. It was a very long conversation
indeed lasting some three hours. The social worker decided that R sounded lucid and 181 rational and he did not regard her as
sectionable, ie liable to be made the subject of an application under s 2 or s 3 of the Mental Health Act 1983. Urgent
consultation took place within the social services department and as a result a decision was taken that, on reflection, the local
authority could not give the necessary permission for R to have the drugs administered to her against her will.
On 3 July 1991 R was again seen by Dr R, the consultant child psychiatrist. R admitted to him that she had been suffering
from labile mood swings, fewer suicidal ideas than previously and visual and auditory hallucinations, although not so frequent or
persecuting as before. She behaved calmly and was rational.
Dr R reported that:

I believe that she still requires treatment as an in-patient but that she has improved sufficiently for the Mental Health
Act not to be relevant. (She also needs to be involved in later, planned assessment for care proceedings.) She is of
sufficient maturity and understanding to comprehend the treatment being recommended and is currently rational. Should
she not continue with the [unit] treatment, her more florid psychotic behaviour is likely to return, and she might become a
 serious suicidal risk again. I do not believe that out-patient treatment is adequate for her at this time. I also believe that her
family situation is too chaotic for her to be able to return home at this time.

The unit had by then made it clear that it was essential, if R was to remain a patient in its care, that it should have an entirely
free hand in regard to the administration of medication to her, whether she was willing or not. Accordingly on 5 July the local
authority decided to have recourse to wardship proceedings.
Dr R gave evidence both in the form of a report and orally. He explained the nature and functions of the unit. It operated,
he said, a very carefully thought out procedure. If an adolescent patient behaved disturbingly, there was first a meeting of the
whole community. Then that may have to be followed by exclusion of the adolescent to his or her bedroom and, finally, and only
as a last resort, tranquillising medication is administered which is, or often may be, medication of the same nature and effects as
drugs prescribed for anti-psychotic purposes. That step was only taken if it was absolutely necessary to enable the staff to cope.
He confirmed that the unit could only continue to accept responsibility for R if their whole regime was acceptable to
whoever had parental responsibility for her. The message from the local authority that they could not give consent to medication
administered against her will had the result that, unless that could be changed, the unit would be unable to continue to care for
her.
Dr R stated that, if R were to lapse into a fully psychotic state, she would be a serious suicidal risk. She would be
potentially very violent and unpredictable in her behaviour and liable to hear persecuting voices. It would be likely, he said, that
she would return within some days or weeks to a state of mind in which ss 2 or 3 of the Mental Health Act would have to be
invoked. He was asked whether he was familiar with the decision in Gillicks case and said that he was and that he had applied
the principles there considered to the circumstances of Rs case. He expressed his conclusions in the following answers to
questions during his oral examination:

Q. I think there are two elements we should perhaps look at, and the first of them is whether the proposed treatment is
for the benefit and protection of a minor. Could you just comment on that limb for us? A. Yes, I think, as I have described,
that if [R] were to receive the treatment that has been recommended I think it is highly likely that her condition would
improve significantly.
182
Q. The second matter we must consider is whether, having regard to her development and maturity, she understands the
nature and the implications of the treatment proposed. Can you comment on that? A. Yes, I felt that she is mature enough
to understand the nature of the proposal. When I saw her on [4 July] she was rational and, I thought, of sufficient
understanding to be able to make a decision in her own right.
Q. Have you actually seen her yourself when she has been in a condition displaying mental illness? A. No, not a florid
state where, for example, at the time she needed to be admitted under a section, but I have seen her when I was extremely
concerned about her killing herself and experiencing hallucinations and feeling persecuted, but her behaviour was not as
floridly excitable or unpredictable at that time.
Q. When was that that you saw her in that condition, just approximately? A. This was the beginning of May.
Q. Would your comments about her understanding and consent be any different when applied to [R] in that condition?
A. Yes. I also recall that I saw her at the [meeting to assess her suitability for admission to the unit] while she was [in the
adult psychiatric ward at the general hospital] when she was behaving very aggressively and, yes, I felt in those
circumstances her rationality and capacity to understand recommendations was severely impaired.
Q. When she is in that condition would your assessment of her be one when she is or is not capable of giving an
important consent about treatment? A. In the florid psychotic stage I think she is unable to give informed consent and
therefore I agreed with my colleagues, who decided to section her under the Mental Health Act, even though that is
extremely rare in our practice.

Gillicks case
The guidance afforded by the speeches in Gillicks case [1985] 3 All ER 402, [1986] AC 112 needs, as always, to be
considered in context. The Gillick children were not wards of court and the wardship jurisdiction of the court was not in issue.
None of Mrs Gillicks daughters aged 13, 12, 10 and 5 contemplated engaging in sexual intercourse in the immediate future or
had sought or were likely independently to seek contraceptive advice or treatment (see [1985] 1 All ER 533 or 538, [1986] AC
112 at 121 per Parker LJ). Mrs Gillicks concern was not the immediate protection of her daughters or of any specific children,
but to challenge the legality of a memorandum of guidance issued by the Department of Health and Social Security (see Health
Service circular (interim series) (HS(IS)32)) which advised that (1) there was a clear need for contraceptive services to be
available for and accessible to young people at risk of pregnancy irrespective of age, (2) that it was for the doctor to decide
whether to provide contraceptive advice and treatment and (3) that the Medical Defence Union had advised that the parents of a
child, of whatever age, independently seeking advice and treatment should not be contacted by any staff without the permission
of that child.
With this objective in mind, Mrs Gillick served notice on her local area health authority formally forbidding any medical
staff employed by it from giving contraceptive or abortion advice to her four daughters, whilst they were under the age of 16,
without her consent and invited the authority to advise the doctors employed by it accordingly. The health authority declined so
to do and Mrs Gillick sought declarations against the department that the guidance given by it was unlawful and against the
authority that no doctor or other professional person employed by it was entitled as a matter of law to give contraceptive advice
and/or 183 abortion advice and/or treatment to any of her children under the age of 16 without her consent. In a word she was
asserting an absolute right of veto on the part of parents generally, and herself in particular, on medical advice and treatment of
the nature specified in relation to their children under the age of 16 (see [1985] 3 All ER 402 at 412, [1986] AC 112 at 173 per
Lord Fraser). She was not challenging the right of a wardship court to exercise its parens patriae jurisdiction. Indeed she
accepted it in her printed case (see [1985] 3 All ER 402 at 406, [1986] AC 112 at 165 per Lord Fraser). Nor was she concerned
with how that jurisdiction should be exercised.
It is trite law that in general a doctor is not entitled to treat a patient without the consent of someone who is authorised to
give that consent. If he does so, he will be liable in damages for trespass to the person and may be guilty of a criminal assault.
This is subject to the necessary exception that in cases of emergency a doctor may treat the patient notwithstanding the absence of
consent, if the patient is unconscious or otherwise incapable of giving or refusing consent and there is no one else sufficiently
immediately available with authority to consent on behalf of the patient. However consent by itself creates no obligation to treat.
It is merely a key which unlocks a door. Furthermore, whilst in the case of an adult of full capacity there will usually only be one
keyholder, namely the patient, in the ordinary family unit where a young child is the patient there will be two keyholders, namely
the parents, with a several as well as a joint right to turn the key and unlock the door. If the parents disagree, one consenting and
the other refusing, the doctor will be presented with a professional and ethical, but not with a legal, problem because, if he has the
consent of one authorised person, treatment will not without more constitute a trespass or a criminal assault.
If Mrs Gillick was to succeed in her claim to a declaration that the memorandum of guidance issued by the department was
unlawful, she had to show that no child under the age of 16 could be a keyholder in respect of contraception advice and treatment
or that the parents key overrode the childs. As Lord Fraser put it ([1985] 3 All ER 402 at 412, [1986] AC 112 at 173): She has
to justify the absolute right of veto in a parent. If she was to succeed in her claim against the area health authority, she had also
to show that it was under a duty to inform all medical staff employed by it that Mrs Gillick was exercising that right of veto, but
in the light of the Houses finding that there was no such right, this additional factor can be ignored.
In the instant appeal Mr James Munby QC, appearing for the Official Solicitor, submits that (a) if the child has the right to
give consent to medical treatment, the parents right to give or refuse consent is terminated and (b) the court in the exercise of its
wardship jurisdiction is only entitled to step into the shoes of the parents and thus itself has no right to give or refuse consent.
Whilst it is true that he seeks to modify the effect of this rather startling submission by suggesting that, if the childs consent or
refusal of consent is irrational or misguided, the court will readily infer that in the particular context that individual child is not
competent to give or withhold consent, it is necessary to look very carefully at the Gillick decision to see whether it supports his
argument and, if it does, whether it is binding upon this court.
The key passage upon which Mr Munby relies are to be found in the speech of Lord Scarman ([1985] 3 All ER 402 at 423
424, [1986] AC 112 at 188189):

as a matter of law the parental right to determine whether or not their minor child below the age of 16 will have
medical treatment terminates if and when the child achieves a sufficient understanding and intelligence to 184 enable him
or her to understand fully what is proposed. It will be a question of fact whether a child seeking advice has sufficient
understanding of what is involved to give a consent valid in law. Until the child achieves the capacity to consent, the
parental right to make the decision continues save only in exceptional circumstances. Emergency, parental neglect,
abandonment of the child or inability to find the parent are examples of exceptional situations justifying the doctor
proceeding to treat the child without parental knowledge and consent; but there will arise, no doubt, other exceptional
situations in which it will be reasonable for the doctor to proceed without the parents consent.

And ([1985] 3 All ER 402 at 421422, [1986] AC 112 at 186):

The underlying principle of the law was exposed by Blackstone [Blackstones Commentaries (1 Bl Com (17th edn,
1830) vol 1, chs 16 and 17)] and can be seen to have been acknowledged in the case law. It is that parental right yields to
the childs right to make his own decisions when he reaches a sufficient understanding and intelligence to be capable of
making up his own mind on the matter requiring decision.

What Mr Munbys argument overlooks is that Lord Scarman was discussing the parents right to determine whether or not
their minor child below the age of 16 will have medical treatment (my emphasis) and this is the parental right to which he was
referring in the latter passage. A right of determination is wider than a right to consent. The parents can only have a right of
determination if either the child has no right to consent, ie is not a keyholder, or the parents hold a master key which could nullify
the childs consent. I do not understand Lord Scarman to be saying that, if a child was Gillick competent, to adopt the
convenient phrase used in argument, the parents ceased to have an independent right of consent as contrasted with ceasing to
have a right of determination, ie a veto. In a case in which the Gillick competent child refuses treatment, but the parents
consent, that consent enables treatment to be undertaken lawfully, but in no way determines that the child shall be so treated. In a
case in which the positions are reversed, it is the childs consent which is the enabling factor and again the parents refusal of
consent is not determinative. If Lord Scarman intended to go further than this and to say that in the case of a Gillick competent
child, a parent has no right either to consent or to refuse consent, his remarks were obiter, because the only question in issue was
Mrs Gillicks alleged right of veto. Furthermore I consider that they would have been wrong.
One glance at the consequences suffices to show that Lord Scarman cannot have been intending to say that the parental right
to consent terminates with the achievement by the child of Gillick competence. It is fundamental to the speeches of the
majority that the capacity to consent will vary from child to child and according to the treatment under consideration, depending
upon the sufficiency of his or her intelligence and understanding of that treatment. If the position in law is that upon the
achievement of Gillick competence there is a transfer of the right of consent from parents to child and there can never be a
concurrent right in both, doctors would be faced with an intolerable dilemma, particularly when the child was nearing the age of
16, if the parents consented, but the child did not. On pain, if they got it wrong, of being sued for trespass to the person or
possibly being charged with a criminal assault, they would have to determine as a matter of law in whom the right of consent
resided at the particular time in relation to the particular treatment. I do not believe that that is the law.
185
I referred to a child who is nearing the age of 16, because at that age a new dimension is added by s 8 of the Family Law
Reform Act 1969 to which Lord Fraser referred (see [1985] 3 All ER 402 at 407408, [1986] AC 112 at 167). This is in the
following terms:

(1) The consent of a minor who has attained the age of sixteen years to any surgical, medical or dental treatment
which, in the absence of consent, would constitute a trespass to his person, shall be as effective as it would be if he were of
full age; and where a minor has by virtue of this section given an effective consent to any treatment it shall not be
necessary to obtain any consent for it from his parent or guardian
(3) Nothing in this section shall be construed as making ineffective any consent which would have been effective if this
section had not been enacted.

Mr Munby submits, rightly as I think, that consent by a child between the ages of 16 and 18 is no more effective than that of
an adult if, due to mental disability, the child is incapable of consenting. That is, however, immaterial for present purposes. What
is material is that the section is inconsistent with Mr Munbys argument. If Mr Munbys interpretation of Lord Scarmans speech
was correct, where a child over the age of 16 gave effective consent to treatment, not only would it not be necessary to obtain
the consent of the parent or guardian, it would be legally impossible because the parent or guardian would have no power to give
consent and the section would, or at least should, have so provided. Furthermore sub-s (3) would create problems since, if the
section had not been enacted, a parents consent would undoubtedly have been effective as a consent.
Both in this case and in Re E the judges treated Gillicks case as deciding that a Gillick competent child has a right to
refuse treatment. In this I consider that they were in error. Such a child can consent, but if he or she declines to do so or refuses,
consent can be given by someone else who has parental rights or responsibilities. The failure or refusal of the Gillick competent
child is a very important factor in the doctors decision whether or not to treat, but does not prevent the necessary consent being
obtained from another competent source.

The wardship jurisdiction

In considering the wardship jurisdiction of the court, no assistance is to be derived from Gillicks case, where this simply
was not in issue. Nor, I think, is any assistance to be derived from considering whether it is theoretically limitless if the exercise
of such a jurisdiction in a particular way and in particular circumstances would be contrary to established practice. It is, however,
clear that the practical jurisdiction of the court is wider than that of parents. The court can, for example, forbid the publication of
information about the ward or the wards family circumstances. It is also clear that this jurisdiction is not derivative from the
parents rights and responsibilities, but derives from, or is, the delegated performance of the duties of the Crown to protect its
subjects and particularly children who are the generations of the future (see Re C (a minor) (wardship: medical treatment) (No 2)
[1989] 2 All ER 791 at 793, [1990] Fam 39 at 46).
 Whilst it is no doubt true to say, as Lord Upjohn did say in J v C [1969] 1 All ER 788 at 831, [1970] AC 668 at 723, that the
function of the court is to act as the judicial reasonable parent, all that, in context, he was saying was that the court should
exercise its jurisdiction in the interests of the children reflecting and adopting the changing views, as the years go by, of
reasonable men and women, the parents of children, on the proper treatment and methods of bringing up children. This is very
far from saying that the wardship jurisdiction is derived from, or in any way limited by, that of the parents. In many cases of
wardship 186 the parents or other guardians will be left to make decisions for the child, subject only to standing instructions to
refer reserved matters to the court, eg the taking of a serious step in the upbringing of medical treatment of a child, and to the
courts right and, in appropriate cases, duty to override the decision of the parents or other guardians. If it can override such
consents, as it undoubtedly can, I see no reason whatsoever why it should not be able, and in an appropriate case willing, to
override decisions by Gillick competent children who are its wards or in respect of whom applications are made for, for
example, s 8 orders under the Children Act 1989.

Gillick competence
The test of Gillick competence, although not decisive in this case, is nevertheless of general importance and the evidence
of Dr R suggests that it is capable of being misunderstood. The House of Lords in that case was quite clearly considering the
staged development of a normal child. For example, at one age it will be quite incapable of deciding whether or not to consent to
a dental examination, let alone treatment. At a later stage it will be quite capable of both, but incapable of deciding whether to
consent to more serious treatment. But there is no suggestion that the extent of this competence can fluctuate upon a day-to-day
or week-to-week basis. What is really being looked at is an assessment of mental and emotional age, as contrasted with
chronological age, but even this test needs to be modified in the case of fluctuating mental disability to take account of that
misfortune. It should be added that in any event what is involved is not merely an ability to understand the nature of the
proposed treatment in this case compulsory medication but a full understanding and appreciation of the consequences both
of the treatment in terms of intended and possible side effects and, equally important, the anticipated consequences of a failure to
treat.
On the evidence in the present case it is far from certain that Dr R was saying that R understood the implications of
treatment being withheld, as distinct from understanding what was proposed to be done by way of treatment the nature of the
proposal which I take to have been intended as a paraphrase of Lord Scarmans to understand fully what is proposed. But,
even if she was capable on a good day of a sufficient degree of understanding to meet the Gillick criteria, her mental disability, to
the cure or amelioration of which the proposed treatment was directed, was such that on other days she was not only Gillick
incompetent, but actually sectionable. No child in that situation can be regarded as Gillick competent and the judge was
wholly right in so finding in relation to R.

Conclusion
(1) No doctor can be required to treat a child, whether by the court in the exercise of its wardship jurisdiction, by the parents,
by the child or anyone else. The decision whether to treat is dependent upon an exercise of his own professional judgment,
subject only to the threshold requirement that, save in exceptional cases usually of emergency, he has the consent of someone
who has authority to give that consent. In forming that judgment the views and wishes of the child are a factor whose importance
increases with the increase in the childs intelligence and understanding.
(2) There can be concurrent powers to consent. If more than one body or person has a power to consent, only a failure to, or
refusal of, consent by all having that power will create a veto.
(3) A Gillick competent child or one over the age of 16 will have a power to consent, but this will be concurrent with that
of a parent or guardian.
(4) Gillick competence is a developmental concept and will not be lost or 187 acquired on a day-to-day or week-to-week
basis. In the case of mental disability, that disability must also be taken into account, particularly where it is fluctuating in its
effect.
(5) The court in the exercise of its wardship or statutory jurisdiction has power to override the decisions of a Gillick
competent child as much as those of parents or guardians.
(6) Waite J was right to hold that R was not Gillick competent and, even if R had been, was right to consent to her
undergoing treatment which might involve compulsory medication.

STAUGHTON LJ. The treatment centre which is most suitable to accommodate and care for the ward will not accept her unless
either (i) she consents to such medication as may be necessary, or (ii) the court authorises that medication. The is not a one-off
case, such as an abortion, sterilisation or some other surgical procedure. It is concerned with recurrent medication, which may or
may not be desirable in the future but on the evidence probably will be.
The evidence shows that at times the ward has the capacity to make a rational and informed decision. But at other times she
does not have that capacity, and those are the times when medication is desirable. The treatment centre wishes to have an
assurance that the medication may then be lawfully administered; otherwise she will not be accepted as a patient.
I agree with the conclusion of Waite J that, on those facts, the court can authorise medication, consistently with the decision
of the House of Lords in Gillick v West Norfolk and Wisbech Area Health Authority [1985] 3 All ER 402, [1986] AC 112, even if
it has no greater powers than a parent.
The alternative solution to this appeal, which gave rise to the bulk of the argument and perhaps to the appeal itself, depends
on two questions of law. (1) Does the parent of a competent minor have power to override the minors decision, either by
granting consent when the minor has refused it or vice versa? (2) Does the court have power to override the decision of a
competent minor who is a ward? In both questions I use the word competent in the Gillick sense.
As to the first question, we were referred to the speech of Lord Scarman in Gillicks case [1985] 3 All ER 402 at 423, [1986]
AC 112 at 188:

I would hold that as a matter of law the parental right to determine whether or not their minor child below the age
of 16 will have medical treatment terminates if and when the child achieves a sufficient understanding and intelligence to
enable him or her to understand fully what is proposed.

The hypothetical situation under consideration in Gillicks case was where a competent child did consent to medical treatment,
but the parent either was not asked or expressly did not consent. The House of Lords decided, as it seems to me, that a doctor
could lawfully administer treatment in such a case, although he would naturally take into account that the parent had not been
asked or had expressly not consented.
Whether the doctor could lawfully administer treatment when the parent did consent but the competent child either did not
consent or had not been asked save in the case of emergency was not a question for decision in Gillicks case. As Lord
Donaldson MR points out, it may be putting a heavy burden on doctors if, having obtained the consent of the parent of a child
under 16, they still have to consider whether the child is competent to give or refuse consent. Nevertheless the passage that I
have quoted from Lord Scarmans speech, and particularly the words whether or not, suggests that the parents consent is not
sufficient in such 188 a case. This is an important question. But it is not essential to the decision in this case, in my opinion,
because I consider (as will shortly appear) that a wardship judge can validly consent to medical treatment even if the ward refuses
her consent. In those circumstances I do not suppose that any opinion of mine as to the effect of consent by a natural parent
would be of much assistance in resolving the difference between what appears to have been Lord Scarmans view and that of
Lord Donaldson MR; so I express none.
The second question is whether the court has power to override the decision of a competent minor who is a ward. Again it
can arise in two forms: the court may be minded to consent when the ward does not (which would be the situation here, if I had
found on the evidence that the ward is competent to take the decision); or the court may be minded not to consent when the ward
does (as in the Gillick hypothetical case). I say at once that in my judgment Gillicks case did not touch on this question.
It can be argued that a wardship judge, exercising the authority of the Crown as national parent, should have no greater
powers than a natural parent. I have a good deal of sympathy with that argument, for I accept as a general principle that good
reason must be shown before the state exercises any power to control the decisions of a competent person, whether adult or
minor, which only concern his own well-being.
There is, however, a group of decisions mainly of Family Division judges, which supports the opposite conclusion. Thus in
BRB v JB [1968] 2 All ER 1023 at 1025, [1968] P 466 at 473 Lord Denning MR said the childs views are never decisive.
That, of course, was before Gillicks case. In Re P (a minor) [1986] 1 FLR 272 at 279 Butler-Sloss J said that the childs wishes
should not be given such paramount importance as to be conclusive. In Re G-U (a minor) (wardship) [1984] FLR 811 at 812
Balcombe J said that an abortion required the leave of the court although presumably the ward consented, as it had already
happened. In Re B (a minor) (1991) Independent, 22 May Hollis J said in an abortion case that the wards wishes were not
decisive. And in Re E (a minor) (21 September 1990, unreported), which concerned a blood transfusion for a boy of 15, Ward J
directly addressed the issue. He said:

whether or not he is of sufficient understanding to have given consent or to withhold consent is not the issue for
me.

For my part, I do not read the judge as deciding that in wardship there is no power to override the decision of a competent minor.
It seems to me that, while accepting that a competent minor can override the parents choice, he held that the situation was
different in wardship. Against that, there is the ruling of Waite J in the present case that the wardship judge could not override the
decision of a competent minor.
Faced with such a substantial consensus of opinion among judges who have to deal with this problem from day to day, I
conclude that the powers of a wardship judge to indeed include power to consent to medical treatment when the ward has not
been asked or has declined. If that means that the wardship judge has wider powers than a natural parent (on the extent of which
I have declined to express an opinion), it seems to me to be warranted by the authorities to which I have referred.
Then there is the converse case in wardship, where the ward consents but the court is minded either not to consent or
positively to forbid treatment. Does the judge in such a case have an overriding power, which the natural parent of a competent
child under the age of 16 does not have by reason of the Gillick 189decision? If so, there would again be a problem for doctors,
who may have to ask if the child is a ward. But the trend of the cases seem to show that, if the treatment would constitute an
important step in the childs life, the court does have that power.

FARQUHARSON LJ. R is 15 years of age, having been born on 15 September 1975. There is a history of disturbances in the
home where until recently she lived with her parents.
Following a fight with her father on 8 March 1991 R was received into care by the local authority. She was placed initially
with foster parents and then in a childrens home.
There followed a deterioration in her mental health. She began to suffer visual and auditory hallucinations and to express
suicidal thoughts. On one occasion R left the childrens home and was found by the police on a bridge threatening suicide.
During the month of May 1991 Rs behaviour became increasingly disturbed. On 24 May she returned to her parents home
where in addition to seriously damaging the contents, she attacked her father with a hammer. Thereafter her mood swings
became so marked that on 2 June 1991 a direction was given for her compulsory admission to hospital under s 2 of the Mental
Health Act 1983. She remained in a hospital for adults for one week and on 7 June 1991 she was transferred to the centre for the
treatment of adolescents at an adolescent psychiatric unit.
Unhappily, Rs condition deteriorated still further and by 28 June 1991 a senior consultant diagnosed a psychotic state and
sought permission from the local authority to administer psychotic medication. In the consultants view R was becoming
paranoid. The authority was given but that same evening R had a long telephone conversation with her social worker lasting
some three hours. The latter considered that throughout R was lucid and rational. R said that the unit were trying to give her
drugs but she did not need them and did not want them. Following that conversation the local authority withdrew its consent to
the treatment being given. On 3 July R was seen by a consultant child psychiatrist, Dr R. When he had seen her some time
earlier Dr R believed her to be a serious suicidal risk and was showing florid psychotic symptoms. However, on 3 July R,
although still entertaining suicidal ideas and suffering from visual and auditory hallucinations, behaved calmly and was rational.
Dr R concluded his report on the interview with these words:

She is of sufficient maturity and understanding to comprehend the treatment being recommended and is currently
rational. Should she not continue with the treatment, her more florid psychotic behaviour is likely to return, and she might
become a serious suicidal risk again.

The unit was not prepared to retain R as a patient unless it was given authority to use appropriate medication to control her.
In those circumstances, the local authority took wardship proceedings, making her parents, as well R, defendants in the
proceedings. R was represented by the Official Solicitor as her guardian ad litem. An application was made in the wardship
proceedings for the court to give leave for the unit to administer such medication as was medically necessary, including anti-
psychotic drugs without Rs consent. The application came before Waite J on 9 July 1991, when Dr R gave oral testimony about
Rs condition. The general thrust of his evidence was that unless R was given in-patient treatment, which might include
medication, she was likely to be a suicidal risk and to be violent and unpredictable. With such treatment her condition would
improve 190 significantly. Of his interview with R on 3 July Dr R said that she was mature enough to understand the nature of
the proposal, ie the medication, that she was rational and of sufficient understanding to be able to make a decision in her own
right. Dr R commented that when he had earlier seen R she was behaving aggressively and that her rationality and capacity to
understand recommendations were severely impaired. When R was in what the doctor described as the florid psychotic stage,
she was unable to give informed consent. The doctor summarised the position in these terms:

I think we could predict a sort of revolving door, really, a cycle in which the unfortunately requires compulsory
admission to a mental hospital, improves sufficiently to decide she no longer wishes to accept the treatment, is discharged
with no treatment and the same problem recurs.

Finally, Dr R said that if she could not remain at the unit she would have to be admitted to a ward at an adult hospital where
the doctors would have a statutory authority to administer medication.
Counsel for the Official Solicitor, Mr Munby QC, submitted that the court should determine the application on the Gillick
principle (see Gillick v West Norfolk and Wisbech Area Health Authority [1985] 3 All ER 402, [1986] AC 112). Counsel argued
on that authority that the parental right to determine whether a child should have medical treatment terminates if and when the
child achieves a sufficient understanding and intelligence to enable him or her to understand fully what is proposed. If the child
has the capacity to give a consent valid in law it is not for the court to substitute its own different view. On the other hand, if the
child is shown not to have that capacity, then the court has the power and duty to substitute its own decision if it is different from
that of the child.
The learned judge accepted this analysis of the position in law, but came to the conclusion on the evidence available to him
that R had not the necessary capacity to make this decision. She was in his judgment a deeply disturbed and unhappy child, who
in making her decision had been the victim of her own immaturity. He accordingly granted the application.
The Official Solicitor then brought the present appeal because as counsel informs us it involves important questions of
principle. So far as R is concerned however, it seems that the decision of this court will have little impact, as she is likely to be
subjected to the medication whether the appeal succeeds or not. If Waite Js decision is upheld, as I think it should be, she will be
treated at the unit, otherwise she will receive the medication, at any rate in Dr Rs opinion, at an adult hospital.
Mr Munby of course supports the learned judges statement of the law but complains that there was no evidence upon which
he could find that R lacked the capacity to make a decision about her treatment. Counsel relied on the evidence of Dr R about
Rs state of mind on 3 July, which was the most recent account of her condition. Dr R had found on 3 July, just a few days before
the judge heard the application, that R was rational and of sufficient understanding to be able to make a decision in her own right.
In the face of that evidence counsel submits there was no room for the judge to come to what in effect was the opposite
conclusion.
In my judgment, this submission cannot be sustained. It involves assessing the mental state and capacity of the patient at a
particular moment in time, isolated from the medical history and background. It is clear from Dr Rs evidence and indeed from
the evidence of the three-hour telephone conversation that from time to time R had clear intervals when her mental illness was in
recession. It is equally clear from Dr Rs evidence that this state was neither permanent nor even 191 long term. The prognosis
was that if the medication was not given to R she would return to her earlier florid psychotic state. It would be dangerous indeed
if the learned judge, or for that matter this court, refused to authorise the medication because on a particular day R passed the
Gillick test when the likely consequences were so serious. In deciding whether the courts decision is to be substituted for that of
the patient it is the task of the court to consider the whole of the medical background of the case as well as the doctors opinion of
the effect of its decision upon the patients mental state. On the facts of this case, I am clearly of the opinion that the judges
decision was correct.
I arrive at that conclusion on the basis that the Gillick test is the correct one to apply in a case of this kind. For my part I am
far from convinced that in wardship proceedings the judges task is so limited. Gillicks case was concerned with the developing
maturity of normal children under the age of 16.
Mrs Gillick had objected to a circular published by the local health authority which contemplated medical advice about the
use of contraceptives being given to children under the age of 16 without their parents being informed. Mrs Gillick sought a
declaration that her own children she was the mother of five girls, all under the age of 16 should not be given advice of this
nature without her consent. As already indicated, the House of Lords held that a girl under the age of 16 had the legal capacity to
consent to medical examination and treatment including contraceptive treatment if she had sufficient maturity and intelligence to
understand the nature and implications of the proposed treatment. Plainly the capacity to consent will vary with the treatment
proposed but the House contemplated that as the child became equipped to make a decision of that nature the responsibility of the
parent became less.
As Lord Denning MR put it in Hewer v Bryant [1969] 3 All ER 578 at 582, [1970] 1 QB 357 at 369: it is a dwindling
right [to custody] which the courts will hesitate to enforce against the wishes of the child, the older he is.
It is to be emphasised that Gillicks case was not a wardship case and was concerned with mentally normal children. For my
part I would find it difficult to import the criteria applied in Gillicks case to the facts of the present case. We are not here solely
concerned with the developing maturity of a 15year-old child but with the impact of a mental illness upon her. The Gillick test
is not apt to a situation where the understanding and capacity of the child varies from day to day according to the effect of her
illness. I would reject the application of the Gillick test to an on/off situation of that kind. The authority of a High Court judge
exercising his jurisdiction in wardship is not constrained in this way. The judges well-established task in deciding any question
concerning the upbringing of the ward is to have regard to the welfare of the ward as the first and paramount consideration. In
some cases the decision might well be different if the Gillick test were applied. That the two approaches are distinct is vividly
illustrated in the dramatic case of Re E (a minor) (21 September 1990, unreported) by the decision of Ward J.
It is clear in the present appeal that, whether Rs capacity to withhold consent to medication was tested on the Gillick criteria
or whether the court approached the issue on the basis of her welfare being paramount, the result would have been the same.
I would dismiss the appeal.

Appeal dismissed. No order for costs. Leave to appeal to the House of Lords refused.

Solicitors: Official Solicitor; Director of Legal Services; Farrell Matthews & Weir.

Mary Rose Plummer Barrister.

192
[1991] 4 All ER 193

W H Smith Do It All Ltd v Peterborough City Council

Payless DIY Ltd v Peterborough City Council
EUROPEAN COMMUNITY; Free Movement of Goods

QUEENS BENCH DIVISION

MUSTILL LJ AND SCHIEMANN J
28, 29, 30 MARCH, 2, 3 APRIL, 4 JUNE 1990

European Economic Community Imports Reduction in volume of imports Quantitative restriction on imports from other
member states Measures having equivalent effect Prohibition on Sunday trading Opening of store on Sundays Substantial
percentage of goods sold in store imported from other member states Prohibition on Sunday trading having effect of reducing
imports from other member states Whether prohibition constituting trading rule having equivalent effect to quantitative
restriction on imports Whether prohibition contravening Community law Shops Act 1950, s 47 EEC Treaty, art 30.

The plaintiff council brought proceedings in the magistrates court against the defendant companies, which traded at their do-it-
yourself stores on Sundays in the councils area offering for sale goods which were not exempted from the prohibition on Sunday
trading contained in s 47a of and Sch 5 to the Shops Act 1950. The council alleged that the defendants had caused their retail
shops to be open for the serving of customers on Sundays other than for exempt transactions, contrary to ss 47 and 59 b of the
1950 Act. The defendants were convicted. They appealed to the Crown Court, contending that they were not guilty of the
offences charged, on the ground that s 47 was incompatible with art 30 c of the EEC Treaty, which had direct effect, because the
prohibition on Sunday trading was a measure having an effect equivalent to a quantitative restriction on imports within the
meaning of art 30 in that it was capable of hindering, directly or indirectly and actually or potentially, intra-Community trade.
The defendants submitted that the prohibition on Sunday trading significantly reduced the weekly turnover of sales in their stores
and that since a substantial proportion of their stock was imported from other member states there was a corresponding reduction
of imports from those states. The Crown Court upheld the convictions on the grounds (i) that s 47 was a national rule governing
the opening hours of retail premises which was not designed to regulate intra-Community trade but to meet national or regional
socio-cultural needs and, as such, it could not be described as a trading rule or measure having an effect equivalent to a
quantitative restriction on imports within the meaning of art 30 of the Treaty and (ii) that since the purpose of art 30 was to
promote unfettered free trade within the European Community it was not intended to override national regulatory provisions of
member states which were not enacted to regulate trade or specifically aimed at imports from member states, and therefore the
restrictive effects of s 47 were not 193 subject to art 30. The defendants appealed, contending that the s 47 prohibition was in fact
a measure equivalent to a quantitative restriction on imports and was therefore capable of contravening art 30 and that the council
had not attempted to discharge its burden of proving that the case fell outside the scope of art 30 by showing that the s 47
prohibition, which applied equally to imported and domestic products, pursued an aim which was justified with regard to
Community law and that its effects did not exceed that which was necessary to achieve that aim.
________________________________________
a Section 47 provides: Every shop shall, save as otherwise provided by this Part of this Act, be closed for the serving of customers on
Sunday: Provided that a shop may be open for the serving of customers on Sunday for the purposes of any transaction mentioned in the
Fifth Schedule to this Act.
b Section 59 provides: In the case of any contravention of any of the foregoing provisions of this Part of this Act, the occupier of the shop
shall be liable to a fine not exceeding level 4 on the standard scale.
c Article 30 is set out at p 198 g, post.

Held The prohibition on Sunday trading contained in s 47 of the 1950 Act was a measure equivalent to a quantitative restriction
on imports and, as a trading rule, it was capable of contravening art 30 of the EEC Treaty. Nevertheless, since the s 47
prohibition applied equally to domestic and imported goods and pursued an objective which was justified in relation to
Community law on the ground that national rules governing the opening hours of retail premises reflected political and economic
choices which were a matter for individual member states, it was clear that s 47 did not contravene art 30 provided that the party
seeking to rely on s 47 was able to show that the restrictive effects on intra-Community trade which might result from the
prohibition on Sunday trading did not exceed that which was necessary to achieve the objective of the prohibition. However,
given that the question whether the s 47 prohibition fulfilled the requirement of proportionality was a question of fact to be
determined by the English courts, the councils failure to adduce any evidence to establish proportionality and hence the validity
of the s 47 prohibition meant that the court had not considered the question and therefore the convictions under ss 47 and 59
could not stand. It followed that the defendants appeals would be allowed and their convictions would be quashed accordingly
(see p 203 j, p 204 j, p 212 f g, p 213 d e, p 217 h j, p 218 d e g h, p 220 b and p 221 b, post).
Summary proceedings against Oebel Case 155/80 [1981] ECR 1993 and Torfaen BC v B & Q plc Case 145/88 [1990] 1 All
ER 129 applied.
Per Schiemann J. Since the Court of Justice of the European Communities has itself decided that s 47 of the 1950 Act
applies equally to domestic and imported goods and that legislation on Sunday trading falls within the permissible sphere of
activity of the United Kingdom as a member state, the answer to the question whether the proportionality criterion is satisfied is
obvious and does not require evidence (see p 219 j to p 220 b and p 221 b, post).

Notes
For general restrictions on Sunday trading, see 47 Halsburys Laws (4th edn) paras 632644, and for cases on the subject, see
47(1) Digest (Reissue) 564568, 29943017.
For the free movement of goods in the European Economic Community and justifications for restrictions on trade between
member states, see 52 Halsburys Laws (4th edn) paras 125512111.
For the Shops Act 1950, ss 47, 59, Sch 5, see 19 Halsburys Statutes (4th edn) (1990 reissue) 424, 435, 447.
For the EEC Treaty, art 30, see 50 Halsburys Statutes (4th edn) 276.

Cases referred to in judgments

Blesgen v Belgium Case 75/81 [1982] ECR 1211.
Buet v Ministre Public Case 382/87 [1989] ECR 1235.
BV Industrie Diensten Groep v Beele Case 6/81 [1982] ECR 707.
Cinthque SA v Fdration nationale des cinmas franais Joined Cases 60 and 61/84 [1985] ECR 2605.
194
Direction gnrale des impts and Procureur de la Rpublique v Forest Case 148/85 [1986] ECR 3449.
Firma Denkavit Futtermittel GmbH v Minister fr Ernhrung-Landwirtschaft und Forsten des Landes Nordrhein-Westfalen Case
251/78 [1979] ECR 3369.
GB-INNO-BM v Confdration du Commerce Luxembourgeois Case C-362/88 [1990] ECR I-667.
Gilli v Andres Case 788/79 [1980] ECR 2071.
Krantz (H) GmbH & Co v Ontvanger der Directe Belastingen and Netherlands Case C-69/88 [1990] ECR I-583.
Oebel, Summary proceedings against Case 155/80 [1981] ECR 1993.
Procureur du Roi v Dassonville Case 8/74 [1974] ECR 837.
R v Royal Pharmaceutical Society of GB, ex p Association of Pharmaceutical Importers Joined Cases 266 and 267/87 [1989] 2
All ER 758, [1990] 1 QB 534, [1990] 2 WLR 445, CJEC.
Rewe-Zentral AG v Bundesmonopolverwaltung fr Branntwein Case 120/78 [1979] ECR 649.
SA Magnavision NV v General Optical Council (No 1) [1987] 1 CMLR 887, DC.
Torfaen BC v B & Q plc Case 145/88 [1990] 1 All ER 129, [1990] 2 QB 19, [1990] 2 WLR 1330, CJEC.
van de Haar and Kaveka de Meern BV, Criminal proceedings against Joined Cases 177 and 178/82 [1984] ECR 1797.

Cases also cited

EC Commission v Germany Case 12/74 [1975] ECR 181.
EC Commission v Germany Case 179/85 [1986] ECR 3879.
EC Commission v Ireland Case 45/87 [1987] ECR 783.
Hoffmann-La Roche v Centrafarm Vertriebsgesellschaft Pharmazeutischer Erzeugnisse mbH [1977] ECR 957.
Maydew v Flint (1984) 80 Cr App R 49, DC.
Oosthoeks Uitgeversmaatschappij BV, Criminal proceedings against Case 286/81 [1982] ECR 4575.
Portsmouth City Council v Richards [1989] 1 CMLR 673, CA.
Rau (Walter) Lebensmittelwerke v De Smedt PvbA Case 261/81 [1982] ECR 3961.
Rigby v Woodward [1957] 1 All ER 391, [1957] 1 WLR 250, DC.
Robertson, Criminal proceedings against Case 220/81 [1982] ECR 2349.
Schloh v Auto Contrle Technique SPRL Case 50/85 [1986] ECR 1855.
Smanor SA, Proceedings for compulsory reconstruction against Case 298/87 [1988] ECR 4489.
Waltham Forest London Borough v Scott Markets Ltd [1988] 3 CMLR 773.
Warner Bros Inc v Christiansen Case 158/86 [1988] ECR 2605.
Wychavon DC v Midland Enterprises (Special Events) Ltd (1987) 86 LGR 83.

Cases stated

W H Smith Do It All Ltd v Peterborough City Council

W H Smith Do It All Ltd appealed by way of case stated by the Crown Court at Peterborough (Judge Astill and justices) in
respect of its decision on 30 November 1988 whereby it dismissed their appeal against conviction by the Peterborough
Magistrates Court on 15 July 1988 of the charge set out in the information preferred by Peterborough City Council that on 6
March 1988, being occupiers of a shop at W H Smith Do It All, Lincoln Road, Walton, Peterborough, the appellants contravened
s 47 of the Shops Act 1950, in that the shop was unlawfully open for the serving of customers on a Sunday, for the purpose of
selling goods, 195contrary to s 59 of that Act. The question for the opinion of the High Court is set out at p 198 c, post. The
facts are set out in the judgment of Mustill LJ.

Payless DIY Ltd v Peterborough City Council

Payless DIY Ltd appealed by way of case stated by the Crown Court at Peterborough (Judge Astill and justices) in respect of
its decision on 30 November 1988 whereby it dismissed their appeal against conviction by the Peterborough Magistrates Court
on 15 July 1988 of the charge set out in the information preferred by Peterborough City Council that on 29 November 1987,
being occupiers of a shop at 9 Bushfields, Orton Centre, Peterborough, the appellants contravened s 47 of the Shops Act 1950, in
that the shop was unlawfully open for the serving of customers on a Sunday, for the purpose of selling goods, contrary to s 59 of
the 1950 Act and sold an item to a Mr Kenneth Morris Hill, a Shops Act officer of the council, which was not on the list of
exemptions set out in Sch 5 to that Act. The question for the opinion of the High Court is set out at p 198 c, post. The facts are
set out in the judgment of Mustill LJ.
The appeals were heard together.

Eldred Tabachnik QC and Paul Lasok for the appellants.

Stuart Isaacs and Neil Calver for the respondents.

Cur adv vult

4 June 1990. The following judgments were delivered.

MUSTILL LJ.

Introduction
For many years, it has been forbidden in England and Wales to open shops on Sunday, except for the sale of a strange
miscellany of goods now ossified in Sch 5 to the Shops Act 1950. On 13 July 1988 and 11 April 1988, Payless DIY Ltd and W H
Smith Do It All Ltd respectively infringed this prohibition. Taking the Payless case as an example of both, we find that in due
course an information was laid against the proprietors alleging that their shop was unlawfully open for the serving of customers
on a Sunday for the purpose of selling a wallpapering tool set to one Kenneth Morris Hill contrary to Section 59 of the said Act.
In reality, this was the very last purpose for which Payless (hereafter the appellants) would have opened their shop, since Mr
Hill was a Shops Act assistant of the respondent local authority. Nevertheless, the sense of the charge was plain enough. The
respondents sold Mr Hill an article which was not on the list of exemptions set out in Sch 5. On the assumption that s 47 of the
1950 Act was valid, there was no defence to the charge, and it is no surprise to learn that on 15 July 1988 the appellants were
convicted by justices of the petty sessional division of Peterborough.
What makes this appeal unusual is the need to make this assumption explicit. Forty years ago, when the Shops Act 1950
was enacted, any such statement by a court in the United Kingdom would have seemed quite inexplicable. According to the
doctrine of the separation of powers, as understood in the United Kingdom, the legislative acts of the Queen in Parliament are
impregnable. The United Kingdom has no constitutional courts in the same sense as in other countries. True, the exercise of the
royal prerogative and of delegated legislation is now theoretically capable of being called in question. But it is axiomatic that the
courts 196 have no supervisory or revising powers in relation to primary legislation. If Parliament speaks, the courts must obey.
This is still the fundamental principle of our constitutional law, but it has more recently been overlaid with qualifications of
increasing importance to daily life stemming from the accession of the United Kingdom to the European Communities. Since
then the courts have been obliged to read statutes of the United Kingdom in the light of the general principles laid down in the
EEC Treaty, as developed in instruments of the Council and the Commission, and as expounded by the Court of Justice of the
European Communities. The interaction between these community instruments and the public and private rights of organisations
and individuals in member states is complex, but one thing may be taken as clear for the purposes of the present case: that, if
there is a collision, in the context of a particular set of facts, between s 47 of the 1950 Act and art 30 of the EEC Treaty, the
former must yield. What precisely this means in practical terms is something to which we must later return. For the moment, it
is sufficient to state that the dimension added by Community law has given the commonplace facts of these two appeals their
particular importance and difficulty.

The case
We have already referred to the conviction of the appellants before the justices. They appealed to the Crown Court at
Peterborough (Judge Astill and justices). We shall later summarise the arguments there advanced, but for the moment it is
sufficient to set out the facts which were proved without dispute and found in the special case stated by the Crown Court:

(a) As alleged in the information, the Appellants shop was open for the serving of customers on Sunday 29th
November 1987; and Mr Kenneth Morris Hill, a Shops Act Assistant employed by the Respondents bought a wallpapering
tool set at the shop on that date.
(b) The Appellants sell a substantial quantity of goods imported from Member States of the European Economic
Community (hereafter the EEC) other than the United Kingdom in their 90 stores, including the shop at 9 Bushfields,
Orton Centre, Peterborough.
 (c) A substantial percentage of the weekly turnover of sales by the Appellants is achieved on Sundays in places where
the Appellants stores are open on Sundays
(d) Where no Sunday trading takes place at a store the overall retail turnover will be adversely affected. Only about
30% of the trade lost as a result of closing on Sundays is recovered over the rest of the week. This means that 70% of the
Sunday turnover is lost entirely.
(e) The reason for the loss of the Sunday turnover and the inability to recover it on other days of the week is that much
of the trade generally at the Appellants stores, especially at weekends, consists of opportunist buying and distress
purchases. Such buying will therefore not take place if the store is closed. The Sunday pound will, therefore, be spent
upon other commodities altogether, such as petrol for longer journeys, hotel accommodation, holidays or in public houses.
(f) If the Appellants Sunday turnover is reduced across the range of its products, overall, a proportionate reduction in
the sales of EEC-sourced products will similarly occur. Many products which are sold on Sundays and imported from EEC
countries are the Appellants own-brand products, for example, garden furniture, which cannot be purchased elsewhere than
from the Appellants own stores.

197
On these facts, and on the arguments addressed, the court arrived at the following decision:

We therefore concluded that the Shops Act and, in particular, Section 47, is a regulatory provision passed by a Member
State which does not fall within the definition trading rule and its effect cannot bring it within Article 30. We were sure
of our conclusion and had no doubt that Section 47 remains current English law so that no reference should be made to the
European Court.

The court therefore dismissed the appeal from the justices, and upheld the conviction, but stated the following question for
the opinion of the High Court:

Whether we were correct in law in interpreting Article 30 of the EEC Treaty as not applying to Section 47 of the Shops
Act, 1950, because it is not a trading rule?

This question is now before us for decision in a radically different context, for since the stating of the case there has
intervened the decision of the Court of Justice of the European Communities in Torfaen BC v B & Q plc Case 145/88 [1990] 1 All
ER 129, [1990] 2 QB 19.
Since the true meaning of this decision, and its relationship with the previously existing jurisprudence of the court, are
crucial to the question posed by the Crown Court and are hotly in dispute, we intend to approach if by the following stages. First,
we shall state our own understanding of the relevant European law as it stood when the case was before the Crown Court; second,
we shall summarise the course of argument in the Crown Court and the reasoning which led to the dismissal of the appeal; third,
we shall discuss the Torfaen decision and certain even more recent pronouncements in the Court of Justice which are said to
illuminate its true meaning.

European law before Torfaen

The starting point for the whole of this branch of Community law is art 30 of the EEC Treaty, which in its English version
reads as follows:

Quantitative restrictions on imports and all measures having equivalent effect shall, without prejudice to the following
provisions, be prohibited between Member States.

Also of importance in the present context are art 36 of the EEC Treaty and art 3 of Commission Directive (EEC) 70/50.
Article 36 is to the following effect:

The provisions of Articles 30 to 34 shall not preclude prohibitions or restrictions on imports, exports or goods in transit
justified on grounds of public morality, public policy or public security; the protection of health and life of humans,
animals or plants; the protection of national treasures possessing artistic, historic or archaeological value; or the protection
of industrial and commercial property. Such prohibitions or restrictions shall not, however, constitute a means of arbitrary
discrimination or a disguised restriction on trade between Member States.

Directive 70/50, the title of which states that it is

based on the provisions of Article 33(7), on the abolition of measures which have an effect equivalent to quantitative
restrictions on imports and are not covered by other provisions adopted in pursuance of the EEC Treaty,

includes the following:

198

Whereas effects on the free movement of goods of measures which relate to the marketing of products and which
apply equally to domestic and imported products are not as a general rule equivalent to those of quantitative restrictions,
since such effects are normally inherent in the disparities between rules applied by Member States in this respect; Whereas,
however, such measures may have a restrictive effect on the free movement of goods over and above that which is intrinsic
to such rules

Article 2
1. This Directive covers measures, other than those applicable equally to domestic or imported products, which hinder
imports which could otherwise take place, including measures which make importation more difficult or costly than the
disposal of domestic production.
2. In particular, it covers measures which make imports or the disposal, at any marketing stage, of imported products
subject to a conditionother than a formalitywhich is required in respect of imported products only, or a condition
differing from that required for domestic products and more difficulty to satisfy

Article 3
This Directive also covers measures governing the marketing of products which deal, in particular, with shape, size,
weight, composition, presentation, identification or putting up and which are equally applicable to domestic and imported
products, where the restrictive effect of such measures on the free movement of goods exceeds the effects intrinsic to trade
 rules. This is the case, in particular, where:the restrictive effects on the free movement of goods are out of proportion to
their purpose;the same objective can be attained by other means which are less of a hindrance to trade
It might perhaps have been thought that art 30 was aimed at those national measures whose purpose was discriminatory, or
perhaps at those whose effect was in practice discriminatory. It is, however, clear from firmly established jurisprudence,
beginning with Procureur du Roi v Dassonville Case 8/74 [1974] ECR 837, that this is too narrow an interpretation. Amongst the
cases cited to us we may mention also BV Industrie Diensten Groep v Beele Case 6/81 [1982] ECR 707, Cinthque SA v
Fdration nationale des cinmas franais Joined Cases 60 and 61/84 [1985] 1 ECR 2605 and R v Royal Pharmaceutical Society
of GB, ex p Association of Pharmaceutical Importers Joined Cases 266 and 267/87 [1989] 2 All ER 758, [1990] 1 QB 534. In
reality, however, there are many other judgments of the Court of Justice where this proposition is either explicit or implicit. (It
may also be noted that in both the Cinthque and Pharmaceutical cases the respective Advocates General proposed a narrower
reading of art 30, in opinions which were not in this respect adopted by the court.) Thus, it is now undoubted Community law
that, in the words of the Court of Justice in the Dassonville case Case 8/78 [1974] ECR 837 at 852 (para 5):

All trading rules enacted by Member States which are capable of hindering, directly or indirectly, actually or
potentially, intra-Community trade are to be considered as measures having an effect equivalent to quantitative
restrictions.

Furthermore, the use of the expression are capable of in the passage just cited can be seen to have signalled another
development of the law concerning art 30. The court rejected a submission made by the United Kingdom that measures having
equivalent effect does not cover measures which are only potentially liable to have such an effect. It is not necessary to cite the
subsequent decisions which 199 reinforce the rule that the party attacking the measures has to show that they have an actual
effect on intra-Community trade. Furthermore, it is sufficient for there to be some degree of actual or potential effect, since the
de minimis rule does not apply in this context: see Criminal proceedings against van de Haar and Kaveka de Meern BV Joined
Cases 177 and 178/82 [1984] ECR 1797.
Article 30 is subject to three exceptions. Whether these are exceptions stricti sensu operating to take outside the prohibition
of art 30 a measure which prima facie falls within it, or whether they prevent a measure from falling within art 30 at all, is a
matter of controversy. I do not understand this controversy to have any practical bearing on our present problem, so I will not
pursue it.
The first exception to art 30 is specifically created by art 36. Since it is not relied upon here, we need note only that the
burden of proving that the measure falls within the exception is on the party which seeks to justify the measure: see eg Firma
Denkavit Futtermittel GmbH v Minister fr Ernahrung-Landwirtschaft und Forsten des Landes Nordrhein-Westfalen Case 251/78
[1979] ECR 3369.
The second exception to art 30 exists where it is possible for the court to tell, simply by inspecting the measure, that it
cannot have an adverse effect on intra-Community trade. I entertain no doubt that this exception was recognised by the decisions
in Direction gnrale des impts and Procureur de la Rpublique v Forest Case 148/85 [1986] ECR 3449, Blesgen v Belgium
Case 75/81 [1982] ECR 1211 and Summary proceedings against Oebel Case 155/80 [1981] ECR 1993. Some commentators
have suggested that these cases were either wrongly decided, or were correctly decided but on the wrong grounds. We cannot
enter into this, for the decisions are binding upon us. It is, however, necessary to draw attention in passing to two features of
these cases.
First, as regards Blesgen, the court referred to art 3 of Directive 70/50 as well as art 30, plainly regarding this as at least
potentially relevant to a non-discriminatory measure restricting the sale of all alcoholic spirits in excess of a particular strength,
although it went on to hold that the measure had in fact no connection with importation and was thus not of a nature to impede
trade. Reference was made to the requirement of a restriction on free movement which (in the language of art 3 of Directive
70/50) exceeds the effects intrinsic to trade rules.
Secondly, as regards Oebel, two restrictions were in issue. The first related to permissible working hours in bakeries. This
was held to lie outside the restrictions on export barriers contained in art 34, because that article (unlike art 30) concerns only
national measures which have as their specific object or effect the restriction of patterns of exports, and the measure in question
did not. The measure was a reflection of a national economic and social policy and applied to all undertakings in a particular
industry without any difference in treatment. The second restriction, relating to the hours at which goods could be delivered, was
ancillary to the first. The court held that provided it was confined to transport for delivery to individual consumers, this
restriction could not have the effect of restricting imports or exports between member states.
The third and final exception to art 30 is the consequence of a judicial initiative. The mainspring, as I understand it, is that
there are many features of social, moral and cultural life which have not yet been regulated throughout the member states by
Community legislation. Pending the achievement of a homogeneous society by force of law, the European institutions recognise
that there are fields in which national legislation and courts can legitimately apply their own norms, notwithstanding that this may
lead to disparities of treatment within individual territories and hence to inequalities and restrictions of trade between member
states.
200
This recognition of the current realities of Community life has led to the development of a doctrine, operating in the interim
of the realisation of the community ideal, which recognises that national measures, prima facie within the interdiction of art 30,
are nevertheless to be acknowledged a validity subject to strict conditions. A full exposition of the intellectual basis of this
exception may be found in the opinion of Mr Advocate General Capotorti in Oebel. We need not quote from it here, since the
general principles have not been disputed in argument before us, and it is sufficient to record that the conditions for its application
are as follows.
First, the measure must have an objective which is recognised for community purposes as falling within a justifiable field
of national legislative or judicial activity pending a harmonisation by European laws. Unlike the categories of exception under
art 36, the list of potentially justifiable fields of law-making for the purpose of this exception is not closed, and indeed may be
incapable of description even in general terms at the present time. As we shall see, it is unnecessary for a decision in this case
now to attempt such a description.
Secondly, the exception applies only where the measure applies to domestic and imported products without discrimination.
Finally, the measure must have an effect proportional to the national needs which give the measure its justification. Various
expressions have been employed to describe this requirement. For example, it has been said that the obstacles to free movement
must be necessary to achieve the objectives of the local law. Or that the measure shall not exceed what is required for this
purpose. Or that where the member state has a choice between various measures to attain the same objective it should choose the
means which least restricts free trade. Whether these differing formulations embody different tests which must be applied
concurrently, or whether they all express a single concept of proportionality, is something which we are not called upon to decide.
This judge-made exception to art 30 is given various names by those familiar with the field: the rule of reason; the
principle of mandatory requirements; the Cassis de Dijon exception. We shall for convenience adopt the latter title, and will
pause to describe the case from which it takes its name. (The official title is Rewe-Zentral AG v Bundesmonopolverwaltung fr
Branntwein Case 120/78 [1979] ECR 649.) This concerned the importation into the Federal Republic of Germany of a liqueur
Cassis de Dijon containing 15% to 20% by volume of alcohol. This fell foul of a regulation then in force in Germany prohibiting
the sale of potable spirits having a wine-spirit content less than 32%. Holding that the regulation was prohibited by art 30, the
Court of Justice reasoned by the following stages. The regulation had an effect equivalent to a quantitative restriction on trade
between member states and hence prima facie fell within art 30. However, the court said (at 662(para 8)):

In the absence of common rules relating to the production and marketing of alcohola proposal for a regulation
submitted to the Council by the Commission on 7 December 1976(Official Journal C 309, p. 2) not yet having received the
Councils approvalit is for the Member States to regulate all matters relating to the production and marketing of alcohol
and alcoholic beverages in their own territory. Obstacles to movement within the Community resulting from disparities
between the national laws relating to the marketing of the products in question must be accepted in so far as those
provisions may be recognised as being necessary in order to satisfy mandatory requirements relating in particular to the
effectiveness of fiscal 201 supervision, the protection of public health, the fairness of commercial transactions and the
defence of the consumer.

Nevertheless, in this particular case the two suggested justifications for the regulation did not serve to validate it since

the requirements relating to the minimum alcohol content of alcoholic beverages do not serve a purpose which is in the
general interest and such as to take precedence over the requirements of the free movement of goods, which constitutes one
of the fundamental rules of the Community.

(See [1979] ECR 649 at 664 (para 14).)

The Cassis de Dijon case therefore provides a clear illustration of its eponymous principle. Several other examples were
cited to us, including BV Industrie Diensten Groep v Beele Case 6/81 [1982] ECR 707, Buet v Ministre Public Case 382/87
[1989] ECR 1235, Gilli v Andres Case 778/79 [1980] ECR 2071 and Cinthque SA v Fdration nationale des cinmas franais
Joined cases 60 and 61/84 [1985] ECR 2605. Of these, we need describe only the latter.
A French decree prohibited the exploitation for sale or hire of video cassettes of cinematographic films within one year of
the certification of the film for public display. The justification advanced was that a culturally important industry could be
preserved only if the public display of the films was protected for long enough to yield an adequate recovery of costs. When the
legitimacy of the decree was put in issue before the Court of Justice, Advocate General Sir Gordon Slynn was of the opinion that
it did not fall within art 30, because it did not discriminate against imports. The Advocate General went on to state that even if he
had not been of this opinion, he would still have considered that the measure was capable of being taken out of art 30 by the
Cassis de Dijon principle, although a decision on whether the actual provisions adopted were in fact justified as being necessary
was for the national courts to decide.
In the event, the Court of Justice differed from the first of these conclusions but agreed with the second. The relevant
passage from the judgment reads as follows ([1985] ECR 2605 at 26252626):

20. It must be stated first that, in the light of that information, the national legislation at issue in the main proceedings
of these cases forms part of a body of provisions applied in the majority of Member States, whether in the form of
contractual, administrative or legislative provisions and of variable scope, but the purpose of which, in all cases, is to delay
the distribution of films by means of video-cassettes during the first months following their release in the cinema in order
to protect their exploitation in the cinema, which protection is considered necessary in the interests of profitability of
cinematographic production, as against exploitation through video-cassettes. It must also be observed that, in principle, the
Treaty leaves it to the Member States to determine the need for such a system, the form of such a system and any temporal
restrictions which ought to be laid down.
21. In that connection, it must be observed that such a system, if it applies without distinction to both video-cassettes
manufactured in the national territory and to imported video-cassettes, does not have the purpose of regulating trade
patterns; its effect is not to favour national production as against the production of other Member States, but to encourage
cinematographic production as such.
22. Nevertheless, the application of such a system may create barriers to intra-community trade in video-cassettes
because of the disparities between 202 the systems operated in the different Member States and between the conditions for
the release of cinematographic works in the cinemas of those States. In those circumstances, a prohibition of exploitation
laid down by such a system is not compatible with the principle of the free movement of goods provided for in the Treaty
unless any obstacle to intra-Community trade thereby created does not exceed that which is necessary in order to ensure the
attainment of the objective in view and unless that objective is justified with regard to Community law.
23. It must be conceded that a national system which, in order to encourage the creation of cinematographic works
irrespective of their origin, gives priority, for a limited initial period, to the distribution of such works through the cinema,
is so justified.
24. The reply to the questions referred to the Court is therefore that Article 30 of the EEC Treaty must be interpreted as
meaning that it does not apply to national legislation which regulates the distribution of cinematographic works by
imposing an interval between one mode of distributing such works and another by prohibiting their simultaneous
exploitation in cinemas and in video-cassette form for a limited period, provided that the prohibition applies to
domestically produced and imported cassettes alike and any barriers to intra-Community trade to which its implementation
may give rise do not exceed what is necessary for ensuring that the exploitation in cinemas of cinematographic works of all
origins retains priority over other means of distribution.

There appears to be no case which explicitly decides the location of the burden of proof in the Cassis de Dijon situation, but
it was common ground during argument that, once it has been demonstrated by the objecting party that the measure falls prima
facie within the purview of art 30, it is for the justifying party to establish the necessary elements of the exception, and this
whether in strict theory the exception is correctly described as such or whether it is more properly regarded as an integral part of
determining the scope of art 30 itself. In my view, the parties were right to proceed on this common basis, given the manner in
which the principle is invariably expounded in the cases brought to our attention.

The reasoning of the Crown Court

I have already quoted the facts found in the case stated. These have one significant omission, namely that there is nothing
which could be relied upon to bring s 47 within the Cassis de Dijon exception. The reason is that no evidence of this kind was
adduced by either side, and indeed we are told that the respondents expressly disclaimed any reliance on the exception. Thus,
since art 36 was not prayed in aid the dispute in the Crown Court turned entirely upon the question whether s 47 in its entirety, or
at least that aspect of it which founded the charge against the appellants, falls within the purview of art 30.
Since this question is now dominated by the subsequent judgment of the Court of Justice in Torfaen BC v B & Q plc Case
145/88 [1990] 1 All ER 129, [1990] 2 QB 19, I will not rehearse in detail the contentions of the parties, which are very clearly set
out in the case stated. It is sufficient to say that the present appellants contended for a view of the European cases very much on
the lines of the summary which I have already set out, and drew the conclusion that since the burden of proving that the case fell
within the exceptions of art 36 or Cassis de Dijon was on the respondents, a burden which the respondents had not attempted to
discharge, s 47 could not form a valid basis for a criminal charge. For their 203 part, the respondents put forward arguments
which in their essential features were adopted by the Crown Court when it stated its opinion as follows:
 (c) The question that we had to ask ourselves was whether Section 47 is incompatible with Article 30. In
considering that, we had to question whether Section 47 is a so-called trading rule as defined in the Dassonville case. We
were not shown any authority of the European Court which, in our opinion, rejects the definition trading rule and we
considered that the Dassonville case is current authority in the European Court (e) The Shops Act, 1950, was a
consolidating Act. Its provisions were enacted to regulate a number of matters. It did not have as its object the regulation
of trade. It is a national enactment, having as its purpose, in a number of ways, the regulation of the lives of people and not
the regulation of trade. The licensing laws of this country have a similar purpose. These Acts of Parliament arose out of
social and/or religious considerations and not trading considerations. Their effect on trading, if there is any, is incidental.
(f) We were told that the term trading rule seems never to have been defined in any decision of the European Court after
the Dassonville case; but it has never been rejected as a term in any subsequent decision of the European Court. We
concluded that a trading rule is a measure or enactment passed by a Member State for the specific purpose of regulating
trade. If that piece of legislation is then capable of hindering, directly or indirectly, actually or potentially, intra-
Community trade, then it is deemed to be a measure having an effect equivalent to quantitative restrictions and
contravenes Article 30 which renders it impotent. (g) Since Section 47 is a Section of an Act of Parliament enacted to
regulate matters other than trade, for example, the working times and practices of employees and the lives of purchasers
and we had in mind there specifically Section 47we concluded that it cannot be said to be a trading rule. (h) We
concluded that it was not intended that the effect of Article 30 should be so wide as to overtake national regulatory
provisions of Member States which are not passed specifically to regulate trade and which are not specifically aimed at
imports from Member States. We concluded that the purpose of Article 30 is to protect free trade within the common
market, to destroy prejudice against imports from Member States, to promote unfettered free trade within the EEC: that is,
to make the European market as free as any internal market of a Member State. Free trade means, in our judgment, more
than non-discriminatory domestic restrictions on trade. It means freedom of trade between Member States on a broader
basis. (i) We therefore concluded that the Shops Act and, in particular, Section 47, is a regulatory provision passed by a
Member State which does not fall within the definition trading rule and its effect cannot bring it within Article 30. We
were sure of our conclusion and had no doubt that Section 47 remains current English law so that no reference should be
made to the European Court.

If the matter had been entirely free from authority, I would have seen much force in the Crown Courts view that art 30 is not
aimed at a measure such as the Shops Act 1950. On the other hand, the reported cases are very strong and I would for my part
have concluded, if the matter had rested there, that the respondents contentions were right, and that absent any reliance on art 36
and Cassis de Dijon, and indeed absent any factual foundation for such reliance, the appeal ought to be allowed. Further
discussion of this is, however, unnecessary, for the dispute has been overtaken by the judgment of the Court of Justice in Torfaen
BC v B & Q plc Case 145/88 [1990] 1 All ER 129, [1990] 2 QB 19. Since this was concerned 204 with precisely the same
legislation as is now in suit it might seem that we need look no further. On this at least the parties are agreed, but on nothing else,
for the appellants contend that Torfaen was a straightforward application of the law as already firmly established, whereas for the
respondents it marked a sharp change in direction, the start of a new and more complex doctrine.
Before considering which analysis of Torfaen is to be preferred, I must first summarise the proceedings before the Court of
Justice.

The proceedings in the Torfaen case

The defendant company in Torfaen operated do-it-yourself stores and garden centres in the United Kingdom and elsewhere
in Europe. Its premises in Cwmbran were open one Sunday for the sale of goods which did not fall within Sch 5 to the 1950 Act.
The local borough council prosecuted the defendant for offences under ss 47 and 59. The magistrates court submitted the
following questions under art 177:

1. Where a Member State prohibits retail premises from being open on Sunday for the sale of goods to customers, save
in respect of certain specified items, sales of which are permitted, and where the effect of the prohibition is to reduce in
absolute terms the sales of goods in those premises, including goods manufactured in other Member States, and
correspondingly to reduce the volume of imports of goods from other Member States, is such a prohibition a measure
having equivalent effect to a quantitative restriction on imports within the meaning of Article 30 of the Treaty?
2. If the answer to Question 1 is in the affirmative, does such a measure benefit from any of the exceptions to Article
30 contained in Article 36, or from any other exception recognised by Community law?
3. Is the answer to Question 1 or Question 2 above affected by any factor so as to render the measure in question a
means of arbitrary discrimination or a disguised restriction on trade between Member States or a measure lacking in
proportionality or otherwise unjustified?

I will first summarise the contentions of the parties, as they appear from the report of the Judge Rapporteur. The prosecuting
authority contended that the provisions of the 1950 Act did not infringe art 30. No evidence was presented to the magistrates
court as to the effect which a reduction in B & Qs imports might have on the pattern of imports into the United Kingdom.
Legislative provisions such as the Shops Act are not properly to be regarded as trading rules: they are more in the nature of a
police power. Its provisions apply without distinction to both domestic and imported products. They do not make importation
more costly and difficult. Thus the Cassis de Dijon principle does not come into play. But, if it does, the requirements are
satisfied. If this too is wrong, the prohibition is justified on the grounds of the protection of health and life, public policy and
public morality. Many members of the general public wish for Sunday to be kept as a day of rest and there is a strong feeling that
it would be immoral to have full trading on Sunday. Also there is no infringement of proportionality.
The defendant maintained that s 47 is incompatible with art 30 and is not capable of being justified by reference either to art
36 or the principle of Cassis de Dijon. The 1950 Act is a measure having an effect equivalent to a quantitative restriction on
imports from other member states: see Dassonville. There is nothing in the definition in Dassonville of a measure equivalent to
suggest that discrimination between imports and domestic products or a protective effect for the latter is a necessary element of
such a measure. In the present case, the Act is 205 not to be characterised as a mandatory requirement, nor does it fall within art
36.
The submissions for the United Kingdom entered into various issues of fact and went on to develop an argument on the case
law of the Court of Justice to the effect that case law has drawn a distinction between measures which affect particular imported
products. The Judge Rapporteur stated ([1990] 1 All ER 129 at 137, [1990] 2 QB 19 at 28):

The United Kingdom also observes that the defendants argument misinterprets the courts case law on art 30 of the
EEC Treaty. That case law has drawn a distinction between measures which affect particular imported products on the one
hand and measures which do not on the other. Measures falling within the first category, where the obstacle to imports
necessarily derives from a disparity between the corresponding rules in different member states, are subject to the
requirement of justification laid down by the court in its judgment in the Rewe-Zentral case [the Cassis de Dijon case],
cited above. Measures in the second category are not regarded by the court as hindering imports within the meaning of its
judgment in the Dassonville case, cited above, unless they are discriminatory or put imports at a disadvantage in
 comparison with domestic goods As regards the contention that the rules are a means of arbitrary discrimination or a
disguised restriction on trade, the United Kingdom points out in the first place that no discriminatory effects of the rules
have been referred to and submits that there are none. Nor is it clear in what sense the rules could be considered to be a
disguised restriction of trade.

The United Kingdom concluded by proposing the following replies to the questions raised in the order for reference ([1990]
1 All ER 129 at 137138, [1990] 2 QB 19 at 29):

(1) Article 30 of the EEC Treaty is not to be interpreted as meaning that a rule which prohibits retail premises from
being open on Sunday save for the sale of certain items is a measure having equivalent effect to a quantitative restriction on
imports. (2) Question 2 does not require a reply. (3) The order for reference discloses no factor such as to render the
measure in question a means of arbitrary discrimination or a disguised restriction of trade between member states or a
measure lacking in proportionality or otherwise unjustified.

The Commission advanced contentions to the effect that the restrictions imposed by the 1950 Act, although difficult to
justify if justification were considered necessary, do not fall within art 30 since they do not prevent the importation or marketing
of goods from other member states: see the Oebel case Case 155/80 [1981] ECR 1443, the Blesgen case Case 75/81 [1982] ECR
1211 and the Forest case Case 148/85 [1986] ECR 3449.
In the light of these arguments, Mr Advocate General Van Gerven advanced propositions which we believe may fairly be
summarised as follows (omitting those which are not material to the narrow issue now before us).
(1) The opposing party need not demonstrate that the measure actually restricts intra-community trade or restricts it overall.
(2) The only cases in which the court has accepted that a measure is to be regarded as falling outside the scope of art 30 on
account of its effect in practice are those in which the court has concluded that the rules in question could not lead to a restriction
on imports and exports: see the Oebel, Blesgen and Forest cases. This is not such a situation. The form of the questions assumes
a causal link between the contested legislation and a reduction in imports.
206
(3) The decisions in the Pharmaceutical case Joined Cases 266 and 267/87 [1989] 2 All ER 758, [1990] 1 QB 534 and the
Buet case Case 382/87 [1989] ECR 1235

provide an appropriate reminder that an analysis of a national measure with reference to art 30 of the EEC Treaty
should focus on its effects (with regard to the restriction of trade) rather than on its nature (general or concerning specific
products) (The Advocate Generals emphasis.)

See [1990] 1 All ER 129 at 144, [1990] 2 QB 19 at 37(para 12).)

(4) The Advocate General proceeded to develop a thesis the essence of which was that the Cinthque case was not an
isolated decision but introduced a new dimension in the application of art 30 (see [1990] 1 All ER 129 at 147, [1990] 2 QB
19 at 41(para 18)). This was to the effect that the approach of the court had been to examine not whether imported products
were put at a disadvantage but whether the Community market was partitioned into separate national markets (see [1990] 1 All
ER 129 at 148, [1990] 2 QB 19 at 42(para 21)). On this ground, the Advocate General concluded that the application of the
Shops Act 1950, even if it had an appreciable adverse effect on imports of the goods concerned, was not such as to restrict intra-
Community trade so as to warrant the application of art 30(see [1990] 1 All ER 129 at 150151, [1990] 2 QB 19 at 46(para 25)).
(5) The Advocate General then proceeded to consider what the answers to the second and third questions should be, if his
opinion on the first question were not to prevail. This part of his opinion drew attention to a number of practical problems. We
would respectfully acknowledge the points made by the Advocate General, but feel it inappropriate to develop them here, partly
because they will have to be addressed by national courts, and perhaps by the Court of Justice itself, in proceedings which are not
now before us, and partly because the difficulties which the Advocate General expressed in the following passage were not
regarded as decisive by the court itself:

To conclude the foregoing inquiry into possible grounds justifying the measure, I would once again stress the
following point: this inquiry in my view strikingly illustrates the fact that a measure which is regarded as necessary by a
member state may often only be appraised if the court is prepared to concern itself with areas of policy for which
Community law provides no, or at any rate few, criteria of assessment. This is the reason why I suggest that such a difficult
inquiry relating to national measures such as those at issue here should be avoided as far as possible by interpreting art 30
in accordance with the intendment of the Treaty.

(See [1990] 1 All ER 129 at 154, [1990] 2 QB 19 at 50(para 33).)

Turning to the decision of the Court of Justice itself, this was expressed in terms whose true meaning is at the heart of the
dispute in the present case. It is therefore necessary to set out the relevant passages verbatim ([1990] 1 All ER 129 at 156157,
[1990] 2 QB 19 at 5253):

The first question

10. By its first question the national court seeks to establish whether the concept of measures having an effect
equivalent to quantitative restrictions within the meaning of art 30 of the Treaty also covers provisions prohibiting retailers
from opening their premises on Sunday if the effect of the prohibition is to reduce in absolute terms the sales of goods in
those premises, including goods imported from other member states.
11. The first point which must be made is that national rules prohibiting retailers from opening their premises on
Sunday apply to imported and 207 domestic products alike. In principle, the marketing of products imported from other
member states is not therefore made more difficult than the marketing of domestic products.
12. Next, it must be recalled that in Cinthque SA v Fdration nationale des cinmas franais Joined cases 60 and
61/84 [1985] ECR 2605, the court held, with regard to a prohibition on the hiring of video-cassettes applicable to domestic
and imported products alike, that such a prohibition was not compatible with the principle of the free movement of goods
provided for in the Treaty unless any obstacle to Community trade thereby created did not exceed what was necessary in
order to ensure the attainment of the objective in view and unless that objective was justified with regard to Community
law.
13. In those circumstances, it is therefore necessary in a case such as this to consider first of all whether rules such as
those at issue pursue an aim which is justified with regard to Community law. As far as that question is concerned, the
court has already stated on Oebel, Summary proceedings against Case 155/80 [1981] ECR 1993, that national rules
governing the hours of work, delivery and sale in the bread and confectionery industry constitute a legitimate part of
economic and social policy, consistent with the objectives of public interest pursued by the Treaty.
14. The same consideration must apply as regards national rules governing the opening hours of retail premises. Such
rules reflect certain political and economic choices in so far as their purpose is to ensure that working and non-working
 hours are so arranged as to accord with national or regional socio-cultural characteristics, and that, in the present state of
Community law, is a matter for the member states. Furthermore, such rules are not designed to govern the patterns of trade
between member states.
15. Second, it is necessary to ascertain whether the effects of such national rules exceed what is necessary to achieve
the aim in view. As is indicated in art 3 of Commission Directive (EEC) 70/50 of 22 December 1969, the prohibition laid
down in art 30 covers national measures governing the marketing of products where the restrictive effects of such measures
on the free movement of goods exceeds the effects intrinsic to trade rules.
16. The question whether the effects of specific national rules do in fact remain within that limit is a question of fact to
be determined by the national court.
17. The reply to the first question must therefore be that art 30 of the Treaty must be interpreted as meaning that the
prohibition which it lays down does not apply to national rules prohibiting retailers from opening their premises on Sunday
where the restrictive effects on community trade which may result therefrom do not exceed the effects intrinsic to rules of
that kind.

The second and third questions

18. In the light of the reply given to the first question, it is unnecessary to answer the second and third questions.

The effect of the Torfaen decision

Preliminary observations Before examining the rival interpretations of this judgment, it is convenient to make certain
general observations on art 3 of Directive 50/70, and on the practical implications of applying the Cassis de Dijon principle to a
measure such as s 47.
208
One of the striking features of art 3 is that it concerns only the marketing of goods, a word which, especially in conjunction
with the list of examples which immediately follows, seems more concerned with the way in which particular products are put on
sale than with the more general aspects of trade. However this may be, we see only occasional references to art 3 in the pre-
Torfaen jurisprudence (the opinion of the Advocate General in Cassis de Dijon is a conspicuous example) and no reliance upon it
as a direct ground for decision in any of the cases cited to us, apart from Torfaen.
We may also note that art 3 appears to recognise a threefold gradation, so far as concerns the effect of the measure in
question: (1) where the measure has no effect on the free movement of goods; (2) where the measure does have an effect, but the
effect does not exceed that which is intrinsic to trade rules (sc to the differing trade rules of the types in question as applied by
member states); and (3) where the measure has a greater effect than is intrinsic to such rules.
It is only to the third situation that the directive has any application. In particular, the existence of the second category, to
which the directive does not apply, shows that a degree of interference with the free movement of goods is regarded as
acceptable.
Furthermore, the third category is itself subdivided since it recognises two distinct situations in which those measures which
have more than the intrinsically acceptable effect are nullified by art 3, namely where (i) their restrictive effects on the free
movement of goods are out of proportion to their purpose and (ii) the same objective can be attained by other means which are
less of a hindrance to trade.
Although these instances both appear to be concerned with proportionality, I believe that it is correct to regard them as
distinct. In the first, the intended purpose cannot be achieved by any measure which does not have a disproportionate effect on
the free movement of goods, and the enacting member state is deemed to have erred in seeking to achieve that purpose at all. In
the second situation, the achievement of the intended purpose and the safeguarding of the free movement of trade are capable of
living together, but the member state has chosen too drastic a means to achieve the end.
As will now be clear, no question of applying the Cassis de Dijon exception will arise in the present case. Nevertheless, we
must advert to certain practical problems which rightly received much attention in argument, partly because they are likely to
arise in the proceedings which we are told are pending in some number before various courts, partly because the questions of
proportionality (using the word in a loose sense), which arise under Cassis de Dijon, must also be addressed in a rather different
form if the respondents analysis of Torfaen is correct and partly because the very existence of the difficulties said to be inherent
in applying Cassis de Dijon to a general measure such as s 47 is relied upon by Mr Isaacs to support his contention that the Court
of Justice in Torfaen has devised a novel approach to such measures.
These practical problems may be arranged under three headings: (i) the problems of balancing; (ii) the problems of
consistency in adjudication; and (iii) the problems of general measures.
The problems of balancing It is readily assumed that the exercise required by the Cassis de Dijon exception in a case such as
the present would involve a kind of cost-benefit analysis. Weights would be attributed to the interests respectively of free
movement and the socio-cultural object of the particular measure, and the court would then decide whether the latter outweighed
the former. Something of this kind is often involved in the legislative process, where political premises 209 lead to a decision
that one desirable aim must be subordinated to another. But to perform this task in a judicial context would in all but the most
obvious case be a difficult matter. The effect of a measure on the movement of goods between member states may be hard to
quantify, the more so since it is clear from the jurisprudence that even a potential effect, not demonstrable actually to exist in fact,
is sufficient to bring the measure within art 30. It is even more difficult to assess the weight to be given to the socio-cultural
forces which impelled the legislation when first enacted, the more so in a case such as the present, where more than one such
force has been in operation at the same time. And once the evaluations have been made, how is the balance to be struck, given
that the conflicting interests are so totally different in kind? How could (say) a desire to keep the sabbath holy be measured
against the free-trade economic premises of the common market?
If this is what the Cassis de Dijon exception requires, it seems to me that the task would be difficult to the point of
impossibility in any but the simplest case, where the balance is to be struck, not between two conflicting trade interests, but
between the community free trade interest on the one hand, and an intangible and elusive national moral, social or cultural norm
on the other. I believe, however, that this is not what the European jurisprudence requires even if it is understood in the sense for
which the appellants contend. There is not to be a single adjudication, with interests and the effects on interests weighed against
another, but a series of adjudications in which the interests and the effects upon them of the legislation fall to be examined
successively. First, there is a scrutiny of the actual or potential effect of the measure on intra-Community trade to see whether it
is a measure equivalent to a quantitative restriction. If the answer is affirmative, the court proceeds to decide whether the socio-
cultural purpose of the measure is one which community law recognises as justified in principle. If the answer is affirmative
again the court passes to the third stage which requires it to address the two questions posed by art 3, often compressed into a
single test of proportionality. This stage does not require the court to measure the worthiness of the legislative purpose, as a
preliminary to a comparison with the worthiness of maintaining intra-Community trade free from the inhibitions created by the
national measure. At this point in the process the legislative purpose is already legitimated in full, and is to be taken at its face
value. All that is required is to see whether the national measure goes further than the purpose demands.
If this is a correct analysis, the problem of applying Cassis de Dijon in a case such as the present will not be as intractable as
it might appear at first sight.
 Problems of consistency in adjudication The understanding of the Cassis de Dijon exception just proposed also serves to
diminish, if not entirely eliminate, a problem which has been a real cause for concern. Just as the diversity of opinions on moral,
social and cultural issues between member states is not only acknowledged by the Court of Justice but forms the starting point of
this entire topic, so also must we acknowledge that opinions within the individual member states may not be homogeneous, and
that in particular they may vary from one part of a state to another. So far as Sabbatarian ideals form part of the motive power for
the Sunday trading legislation, it is undeniable that adherence to, and indeed comprehension of, these ideals varies profoundly
from one part of the United Kingdom to another. Although the Cassis de Dijon principle is remitted for decision to the national
court, in reality there is not a national court, but hundreds of courts, often comprised of lay people immersed in the values of the
local societies from which they are drawn. Even allowing for the unifying effect of possible appeals to the Crown Court, it would
seem inevitable that, if the 210 application of the Cassis de Dijon exception involved a weighing of the purposes underlying the
Sunday trading legislation, different courts in different parts of the country would reach different conclusions as to the interaction
between s 47 and art 30, and hence as to the criminality of precisely the same acts, surely an intolerable situation. If, however, no
such evaluation is involved, this problem largely disappears.
The same is also the case with the other element in the process, namely the assessment of proportionality. So long as this
was regarded as a balancing of the objectives against detriments, a measurement of the latter was just as much necessary as with
the former. This would open up the possibility that different courts faced with different evidenceand perhaps as in the present
instance with nonewould reach differing conclusions on the potential effect of s 47 on the free movement of goods, hence
again creating a risk that the same acts would be deemed criminal in one court and not in another. If, however, such a balancing
is not called for, a much less exact and more qualitative assessment of the effect on free movement will suffice, and the need to
rely on evidence in the individual case will be much reduced, and with it the risk of conflicting decisions based on different
marshalling of evidence.
The problems of a general measure As Mr Isaacs has been at pains to emphasise, almost all the European jurisprudence on
this topic has been concerned with measures aimed at specific targets: hours of work in bakeries, labelling of yoghurts and so on.
Here, the target of the Shops Act 1950 is a general mode of trading, albeit certain particular categories of goods are exempt from
the restraint. This entails that the relationship between the legislative object and the price paid for it in terms of intra-Community
trade will vary across the spectrum of saleable products. Thus, for example, it is not hard to imagine goods whose production and
market is so peculiarly British that no restriction on its sale could have any perceptible effect on trade between member states. In
other instances, a prohibition relating to goods for a specialised market largely dominated by imports from member states might
have an effect which would be large in relation to that market, although very small when compared with the volume of intra-
Community trade as a whole. Again, if one looks at the purpose rather than the effect of the legislation, it is easy enough to see
that the sale of some types of articles on Sunday would conflict more with at least some of its aims than in the case of other types.
This being so, the question is whether the compatability of the means employed with the means necessary to secure the
legislative aim should be addressed in terms of s 47 in its entirety, judging the aims and the effects on trade as a whole, or
whether it should be approached in terms of categories of goods, and, if so, how the categories should be chosen. This question is
linked with another, which concerns the status of the first decision on the matter in a national court. If the general measure is to
be regarded as a whole, then it must either be consistent with art 30 or not; its validity can hardly be allowed to oscillate with
successive decisions of national courts, based on different bodies of evidence. One would therefore expect that either the first
decision of a national court, or at the least the first decision of a court with power to bind others, would determine the matter once
and for all. This is disturbing, the more so since as the present case demonstrates, that decision may be based on inadequate
evidence or none at all.
As at present advised, I believe that Mr Tabachnik QC is right in his criticism of this approach, for art 30 does not operate to
strike down measures but rather to preclude reliance upon them to the detriment of individual rights protected by Community
law. It seems, therefore, that the problem should be approached on 211 a case-by-case basis. But how far should the
fragmentation be carried? Does the national court consider the measure in relation to intra-Community trade in wallpapering
tools, or in do-it-yourself articles (whatever exactly that may comprise)? Or should one have regard to the full range of goods
sold by these appellants on Sundays? (Surely not, for this would mean that the sale of the same articles in the same towns by
different shops might be criminal in one case and not in the other, according to the breadth of the range on offer.) As with the
problems discussed above, this difficulty may be reduced if the notion of a balancing exercise is set aside, and replaced by a more
qualitative test at the stage where the sufficiency or over-sufficiency of the measure for the valid legislative purpose is being
considered. I confess, however, that in this case, as in the others, some practical problems seem inevitably to flow from the
application of any aspect of proportionality to a general measure.

What does Torfaen decide?

In the present appeal, we find the parties deeply divided not only on what precisely the Torfaen case Case 145/88 [1990] 1
All ER 129, [1990] 2 QB 19 decided, but also on the extent to which the court thereby departed from its previous jurisprudence.
The appellants represent the judgment as an entirely orthodox application of well-established principles, conforming precisely
with the submissions which they themselves had made to the Crown Court. The respondents by contrast submit that Torfaen
represents a radical reformulation of the entire topic, rendering obsolete the arguments in the Crown Court on both sides, and
calling for a new approach from this court, an approach which will nevertheless yield the same answer as before, namely that the
prosecutions were validly founded.
Notwithstanding this controversy, certain aspects of the judgment seem quite plain. In the first place, it has established that
the understanding of the Dassonville case Case 8/74 [1974] ECR 837, and the reliance on the concept of trading rules, which
the respondents had pressed on the Crown Court, and which the latter adopted, were unsound. Moreover, the court has
established this by reference to the very statute with which we are concerned, so we may take as our starting point the proposition
that, whatever its purpose or purposes, s 47 of the 1950 Act is capable of contravening art 30.
Furthermore, it is to my mind plain that in the view of the court s 47 was not only capable of being, but actually was, a
measure equivalent to a quantitative restriction, and hence invalid unless saved by art 36 or the Cassis de Dijon exceptionor,
Mr Isaacs would add, by another qualification to art 30 for which he contends. It is true that the Court of Justice does not
explicitly state this conclusion, but any other reading would render paras 12 to 16 of its judgment otiose (see [1990] 1 All ER 129
at 156157, [1990] 2 QB 19 at 5253); and the Oebel case Case 155/80 [1981] ECR 1993 is called upon in para 13, not as an
illustration of the way that the court can decide for itself that the measure cannot have an effect on free movement, but for a
different reason to which I will refer in a moment. Since the facts found by the Crown Court in the present case do not differ
essentially from those found by the Cwmbran Magistrates Court in the Torfaen case (as quoted by the Advocate General in para
3 of his opinion), we are bound to treat s 47 as a measure equivalent to a quantitative restriction.
The Torfaen judgment enables us to take one step further. It had been argued by the appellants in the present case that the
ban on Sunday trading does not fall within any of the established categories to which the Cassis de Dijon exception applies, and
is in any event so anomalous and lacking in discernible purpose that it could not fall within the exception. The court in Torfaen
has already explicitly 212 rejected this contention, citing the analogy of the rules governing hours of work considered in Oebel,
and holding that rules governing the opening hours of retail premises reflected political and economic choices which were a
matter for member states: see para 14. The reference to member states is important. The court is not here remitting to the
national court that part of the Cassis de Dijon test which relates to the justification of the measure, but is itself deciding that
legislation on Sunday trading falls within the permissible sphere of activity of the United Kingdom as a member state. It must I
think also follow that the court tacitly rejected the attack on the intelligibility of the supposed legislative purposes of s 47, for
otherwise it would not have gone on to discuss the question of proportionality in para 15, or to reply to the first question as it did
in para 17(see [1990] 1 All ER 129 at 156, [1990] 2 QB 19 at 53).
These aspects of the Torfaen case have transformed the present dispute since it was before the Crown Court. So much so,
the appellants contend, that no dispute remains. In Torfaen the Cwmbran court is required to take up the reins again, upon receipt
of the Court of Justices consultative opinion, and to decide on the facts whether the Cassis de Dijon exception applies. Not so
here. There is no evidence upon which this court, or the Crown Court on remission, could find that the exception applies.
Furthermore, reliance on the Cassis de Dijon exception was disclaimed in the Crown Court, and disclaimed again in this court, so
that it lies outside the question of law stated for our consideration.
This argument is undeniably correct, unless the judgment of the Court of Justice has opened up new reasons for saying that s
47 lies entirely outside the scope of art 30. The respondents contend that this is just what has happened. The two contentions
which they now advance were not relied upon in the Crown Court. Nevertheless, we must admit them here, for if, as the
respondents say, the judgment of the Court of Justice has shed an entirely new light on the question posed by the Crown Court it
is our duty to apply the law as it has now been declared.
The first of the respondents arguments may be stated briefly, and in my opinion, equally briefly rebutted. It runs as follows.
The court has added a new element by introducing into this field the test imposed by art 3 of Directive 50/70. We must now ask
whether the effect of the measure exceeds the effects intrinsic to measures designed to achieve the aim in view. Here the aim in
view is to prohibit Sunday trading, and the effect of s 47 is to achieve this aim, and no more. I would reject this argument for the
following reasons.
(1) As a simple matter of language, the objective in view and the aim in view, rendered as lobjective vis in the French
language versions of paras 12 and 15, must surely refer to the result which the legislation is designed to achieve rather than the
method used to attain it.
(2) In para 15 of the judgment, the comparison is established between such national rules and the aim in view. The
former expression is plainly a reference to the national rules governing the opening hours of retail premises, identified in the
first sentence of para 14 and called such rules in the second sentence thereof. If the respondents were right, the court would be
remitting to the Cwmbran justices a comparison between the consequences for community trade of the shutting of shops on
Sundays and the consequences of legislation designed to make shops shut on Sundays. I cannot believe that this is what the court
intended.
(3) On the contrary, it seems plain to me that the aim in view to which the court referred was the ordering of working and
non-working hours so as to accord with national or regional socio-cultural characteristics: see para 14.
(4) If the respondents analysis of the judgment were correct, the answer to the 213 case before the Court of Justice would
have followed just as inexorably from the premises as the respondents say it does in the present case. The court has shown itself
both empowered and willing to decide cases outright in this field, if the answer appears obvious: see eg the Oebel case Case
155/80 [1981] ECR 1993, the Blesgen case Case 75/81 [1982] ECR 1211, the Cassis de Dijon case Case 120/78 [1979] ECR 649
and the Beele case Case 6/81 [1982] ECR 707. The court did not take this step in Torfaen, but plainly took the view that there
were issues still left for the national court to decide: see para 16 and the abstention from answering the second and third
questions ([1990] 1 All ER 129 at 156157, [1990] 2 QB 19 at 53).
The argument which I have just considered and rejected would, if valid, have terminated the inquiry before the point at
which any Cassis de Dijon issue could arise. No evidence would be needed, and burden of proof would not enter into the matter.
The respondents second, and quite different, proposition does admit a burden of proof, but introduces it at a different stage and in
the opposite direction from the classical Cassis de Dijon analysis. The argument is subtle, and I am not confident of doing justice
to the skill with which it was developed. The following are its general lines.
According to the doctrine developed by the pre-Torfaen jurisprudence, the inquiry proceeds first by inquiring whether the
purpose of the measure is discriminatory or its effect is to impede the free marketing of goods within the Community. If the
answer is Yes, on either score, the measure falls foul of art 30, unless those who seek to uphold it can establish that it is saved by
the exceptions of art 36 or Cassis de Dijon. The judgments of the Court of Justice which establish this framework for decision
have, however, all concerned rules relating to specific products. In Torfaen the court was faced for the first time with a measure
of general application designed to fulfil general socio-economic purposes, and having only an incidental effect on intra-
Community trade. For this new situation, the court designed an entirely new approach. The threshold question whether the
measure is even prima facie in contravention of art 30 is no longer to be approached in the way just mentioned. Ex hypothesi, the
possibility of an intent to discriminate is ruled out. Nor is it enough to show a possibility, or even an actuality, of an incidental
effect on trade between member states. There must now be shown by the party attacking the measure an effect on trade out of
proportion to their legislative aims.
The respondents thus interpret Torfaen as creating a wholly new tripartite classification, bearing no relation to the threefold
analysis suggested by the Commission and mentioned in para 4 of the Advocate Generals opinion (see [1990] 1 All ER 129 at
140, [1990] 2 QB 19 at 33): (1) national rules having no effect on intra-Community trade; whether these are not to be described
as trading rules at all or whether they are trading rules outside the scope of art 30 makes no difference; (2) national rules relating
to specific products which do have an effect on intra-Community trade, which are within art 30, subject to the art 36 and Cassis
de Dijon exceptions; (3) national rules of general application, designed not to govern intra-Community trade but to meet national
or regional socio-cultural needs. Even if such rules have an incidental effect on such trade, they lie outside art 30 unless shown to
have an effect greater than is intrinsic to rules with such aims. Absent such excessive effect, the rules are valid, and the stage of
investigating the art 36 and Cassis de Dijon exceptions will never arise.
The respondents go on to place s 47 of the Shops Act 1950 in the third category, and conclude that, in the absence of any
evidence in the Crown Court on which the appellants could argue that the effect extends beyond what is intrinsic, the case falls
outside art 30 and no other questions need be considered.
214
The principal argument in favour of the respondents reading of Torfaen is that the court for the first time calls up art 3 of
Directive 50/70 and draws from it the test of intrinsic effect. The preamble and other parts of the directive, quoted above, make it
clear that its purpose was to expound the scope of art 30. Thus, in the second sentence of para 15 of its judgment, the court does
seem to be discussing whether the measure falls within art 30 at all, rather than whether it is prima facie within art 30, but is
taken out by the Cassis de Dijon exception, the test for which is stated in the earlier cases in somewhat different terms.
The appellants may also claim that their reading of Torfaen envisages at least at the first stage an examination of the measure
as a whole, which will serve to reduce the practical difficulties of applying the Cassis de Dijon test to a general measure.
These arguments have force and were skilfully developed, but I cannot accept them. The judgment of the court is said to
have broken new ground, fundamentally altering the law on equivalent measures, yet there is no trace in the judgment that
anything so radical is afoot. When the Advocate General suggested a new departure in the shape of an analogy with art 85, he
developed the reasoning in detail. There is nothing similar in the judgment itself, which to my eyes at least appears simply as a
compressed restatement of principles already taken as well established, coupled with an application of that to the instant case. It
is perhaps also legitimate to note, as the appellants have pointed out, that it was a chamber, rather than the full court, which is
said to have initiated this radical change in doctrine; a change which was not foreshadowed by anything in the submissions made
to the court, or in the opinion of the Advocate General.
Furthermore, the language of paras 12 to 14 echoes that of the established Cassis de Dijon jurisprudence. If the thrust of the
judgment was to recognise a new (third) general category of measures to which the rule aimed at specific products is henceforth
to be irrelevant, there seems no reason why the summary of the law contained in these paragraphs should have been reinforced by
the citation of the Cinthque case Joined Cases 60 and 61/84 [1985] ECR 2605. Mr Isaacs was, I believe, constrained to accept
that, even on the respondents argument, room must be left for the application of the Cassis de Dijon exception and he proposed
to accommodate it, together with art 36, by positing a judicial process carried out in two stages. The national court would first
consider whether the measure is justified in the sense used in the Torfaen judgment and, if satisfied that it is, would then pass to
proportionality, with the party opposing the measure having the burden of proving that the effect exceeds its intrinsic effects.
Then, if the measure had run the gauntlet of the first stage, the court would, as a second stage, consider justifiability and
proportionality again, in the context of art 36, Cassis de Dijon and other exceptions, this time with the burden on the party
supporting the measure. This does not appear to me a likely structure for the court to have set out to create, and one which would
have been expected to be spelt out on the lines just summarised if it had been intended. Yet there is nothing of this kind in the
judgment.
Nor does the proposed new scheme offer any net practical advantage, for, as the Advocate General pointed out in relation to
a rather different argument based on a distinction between general and special measures, the placing of individual measures into
one category or the other would certainly not be straightforward (see [1990] 1 All ER 129 at 156, [1990] 2 QB 19 at 52(para 12)).
For my part, I cannot see any reason why the treatment of a national measure should depend upon whether it takes the shape of
(say) a ban on Sunday trading expressed to apply to all products except those set out in a schedule or whether it applies only to
products set out in a schedule, nor how in a case where many products are 215 specifically banned it is possible to tell when the
line is passed dividing the particular from the general.
It is true that we do find brought together in the Torfaen judgment the test of effects beyond those intrinsic (from art 3) and
the test of excess beyond what is necessary to achieve the justified object (from the earlier jurisprudence), and that the two are not
identically expressed. But, in my view, to impute an intention to create a whole new doctrine from this linguistic difference is to
over-analyse the judgment. The question on which the Cwmbran court sought the opinion of the Court of Justice was whether s
47 fell within or without the scope of art 30. The essence of the response was that, in principle, s 47 was the kind of measure
which, being of a nature whose objective was justified in terms of Community law, did not contravene art 30, subject always to
fulfilling the requirement of proportionality. Having given this much guidance, and having reminded itself that proportionality
was a question of fact for the national court, the Court of Justice had no need to go further, by restating the familiar idea of
proportionality with complete precision, or entering into questions of burden of proof.
In my judgment, the importance of Torfaen lies in the illustration which it provides of the kind of national measure that the
court will regard as potentially consistent with Community law. Aside from that, I would regard it as being in the direct line of
jurisprudence, of which Cassis de Dijon and Cinthque are prominent examples.
This is not the end of the matter, for we must review our conclusions in the light of two very recent European cases. The
first is H Krantz GmbH & Co v Ontvanger der Directe Belastingen and Netherlands Case C-69/88 [1990] ECR I-583, which
concerned a Dutch measure permitting execution for fiscal debts over goods in the hands of the debtor, even where the goods
were the property of third parties. It was argued that this was a measure equivalent, within art 30, because it might have the
effect of deterring vendors in other member states from delivering goods under credit sales to buyers in the Netherlands. This
proposition was rejected, because the risk was too problematical to create a perceptible effect on intra-Community trade. The
case was thus in the line of the Oebel, Blesgen and Forest cases, as demonstrated by the citation of the two latter cases in the
opinion of the Advocate General. Its interest for present purposes lies only in certain observations of the Advocate General on
the judgment, then very recently delivered, in Torfaen. The Advocate General undoubtedly does state, in para 7 of his opinion,
that the judgment seemed to suggest that somewhat different legal considerations applied to laws forming part of the general
legislative framework governing economic activity, from those which aim directly and exclusively at the production or marketing
conditions for certain products or categories of products (see [1990] 1 All ER 129 at 141142, [1990] 2 QB 19 at 3435). With
this statement, of high authority, I would not venture to disagree, at least so far as one must acknowledge that general and specific
laws do by their nature call for a rather different formal analysis. Whether the Advocate General intended to go further, I do not
know, since the conclusion which he went on to express on the question of perceptible effect made him abstain from exploring
the practical consequences of this difference. There is, however, nothing in the opinion to suggest that any such radical new
distinction as proposed by Mr Isaacs is to be derived from Torfaen, and with particular reference to burden of proof, the language
employed in para 10 of the opinion to describe the exercise which the national judge is called upon to perform would tend to
suggest (if in truth it touches the question at all), that it remains as in Cassis de Dijon with the party seeking to uphold the
measure.
216
Secondly, there is GB-INNO-BM v Confdration du commerce luxembourgeois Case C-362/88 [1990] ECR I-667. This
was cited only for a very brief passage from the opinion of the Advocate General, which may be read as suggesting that Torfaen
was, like Oebel, a case where the measure had no perceptible effect on the external trade of the member state. Undoubtedly,
Torfaen resembled Oebel in that it related to a national measure within the area of domestic socio-economic policy, as the citation
of Oebel in Torfaen is sufficient to show. But I must with due respect say that, for the reasons already developed, I cannot
understand Torfaen as being a case where the court proceeded directly to the conclusion that the measure had no perceptible
effect and, indeed, neither counsel in the present case suggested that this was so.
Finally, we must refer to SA Magnavision NV v General Optical Council (No 1) [1987] 1 CMLR 887, a decision of the
Divisional Court on a general measure prohibiting the sale of spectacles without prescription. The judgment of Macpherson J,
with which Watkins LJ agreed, contains a discussion of art 30 which would have been most germane to our present problems, and
might well have led to a conclusion favourable to the respondents, if it had been a presently binding authority. It is, however,
clear that the reasoning cannot survive the judgment of the Court of Justice, which we must of course prefer, and, accordingly,
without any disrespect, we say no more about it.

Conclusions
It is undeniable that, whether or not our opinions on this very contentious subject are correct, there will remain serious
problems whenever a national court is required in practice to apply the appropriate qualification, in terms of proportionality, to
the right of the member state to enact legislation of general effect within the field reserved to it by the present state of Community
law. I have indicated some of them, and there are others. I do not, however, have to solve them here. Sufficient to say that they
bear just as much on the interpretations of one side as on the other. What matters for present purposes is that the respondents
took their stand on the blunt proposition that this kind of legislation could not infringe art 30. It is quite plain that the Court of
Justice did not go so far. Such legislation may be valid, and may not, according to circumstances. If the existence of these
circumstances had been in issue, both the detailed analysis of the law, the appreciation of the facts and the burden of proof would
have required close consideration. Such considerations however, were never raised by the respondents in the Crown Court. They
addressed no arguments and called no evidence upon them. Whether the test for validity is the same as in Cassis de Dijon or
something a little different is of no account. The respondents argued for a proposition which, however plausible it may have
seemed at the time, cannot now be maintained. We are asked a clear-cut question of lawWhether we [the Crown Court] were
correct in law in interpreting Article 30 of the EEC Treaty as not applying to Section 47 of the Shops Act, 1950, because it is not
a trading rule?
I would answer this question in the negative, and quash the convictions in each case.
In conclusion, I should mention two further matters. First, we invited and received submissions on the powers of the High
Court to remit to the Crown Court (as distinct from magistrates) a case stated where the facts set out in the case are insufficient to
enable the High Court to answer all the questions of law which appear to arise. If it had happened that the present dispute could
not properly be decided without an application of the Cassis de Dijon exception, we should have had to decide whether such
powers exist and, if so, whether to exercise them. In 217 this particular instance, however, the case has been fought on a narrow
front, and the exception has not been relied upon. The case can be decided, and the question answered, without any further
findings of fact, and there is accordingly no need to explore the procedural issue.
Secondly, I have had the advantage of reading in draft the judgment which Schiemann J is about to deliver. In the latter part
of this judgment, Schiemann J expresses tentative conclusions on the legislative purposes of the 1950 Act, and on the likely
outcome of any application of the principles of Torfaen when the full range of issues is put in suit. For my part, I prefer to
abstain from stating any opinion on these questions. As to the former, because the legislative purpose of the Act was, for good
reason, barely explored in argument, and, at first sight, I am not sure that I wholly agree with Schiemann Js analysis. As to the
latter, we have not heard argument on a point which was specifically disclaimed in the Crown Court.
In my judgment, this appeal should be allowed.

SCHIEMANN J. I agree that the questions posed by the Crown Court ought to be answered in the negative, that these appeals
ought to be allowed and that there should be no remission to the Crown Court. Mr Isaacs disclaimed reliance on the Cassis de
Dijon exception (see Rewe-Zentral AG v Bundesmonopolverwaltung fr Branntwein Case 120/78 [1979] ECR 649). I
respectfully agree with Mustill LJ that it is implicit in Torfaen BC v B & Q plc Case 145/88 [1990] 1 All ER 129, [1990] 2 QB 19
that Sunday trading legislation is only valid if it satisfies the Cassis de Dijon criteria. These cases were argued before the Crown
Court prior to the decision in Torfaen and it can now be seen that, wholly understandably, the wrong questions were addressed by
the Crown Court. In particular the question, What is a trading rule?, is not the decisive question in the present case.
The underlying problems are not unique to this case and since the argument lasted several days it may be useful if I indicate
how, as at present advised. I see the general position post-Torfaen. I say as at present advised deliberately since some of what
follows was advanced by neither side and has not been tested by argument.
On facts similar to those found in the present case, the magistrates court is bound to convict unless of the view that the
application of s 47 of the Shops Act 1950 to the facts of the present case is incompatible with art 30 of the EEC Treaty.
Such an application would, according to the Court of Justice in Torfaen, only be incompatible with art 30 if both (i) s 47 is a
measure having equivalent effect to quantitative restrictions on imports and (ii) s 47 does not exemplify one of the permissible
exceptions to the application of art 30.
It is clear from Torfaen and the facts found in the present case that s 47 is a measure having equivalent effect to quantitative
restrictions on imports.
It is clear from the Court of Justices case law, and the parties accept, that, once it is established that s 47 is a measure having
equivalent effect to quantitative restrictions on imports, it is for the justifying party to persuade the court that s 47 does not
exemplify one of the permissible exceptions.
One of the permissible exceptions of present relevance is the Cassis de Dijon exception. In order to fall within that
exception, s 47 would need to fulfil three broad criteria (the Cassis de Dijon criteria). Those criteria are: (i) it must apply to
imported and domestic products alike (the non-discrimination criterion); (ii) it must pursue an aim which is justified with regard
to Community law (the justifiability criterion); and (iii) its effects must not exceed what is necessary to achieve the aim in view
(the proportionality criterion).
218
The Court of Justice reaffirmed these three criteria in Torfaen as providing limitations to the application of art 30. The Court
of Justice, when acting under art 177

has no jurisdiction to rule on the compatibility of national legislation with Community law. It may however provide
the national court with an interpretation of Community law which will enable that court to resolve the issue of law with
which it is faced.

(See Direction gnrale des impts and Procureur de la Rpublique v Forest Case 148/85 [1986] ECR 3449 at 3472(para 6).)
Sometimes in the course of its judgment, the Court of Justice will note a finding of fact or record that which is not disputed.
Nevertheless, the formal position is as indicated in Forest.

The non-discrimination criterion

Thus in Torfaen it was obvious given the facts of the case that the non-discrimination criterion was satisfied and the court so
noted.

The justifiability criterion

Turning to the justifiability criterion, its application requires, as a matter of logic, two steps: (i) the ascertainment of the aim
which the legislation under attack is pursuing; and (ii) a decision as to whether that aim is justified with regard to Community
law.
Reaching a decision as to what is the aim in view, when one is considering primary legislation is, given English styles of
statutory drafting, a difficult task since the aim is frequently not stated and indeed different components of the legislature may
have had differing aims in view. The problem of establishing the aim in view of secondary legislation or decisions taken pursuant
to legislation will frequently be easier-but we are not concerned with this.
Many decisions in life, including legislative decisions, are taken with many aims in view. Further, one may have an
intermediate aim because one judges that the achievement of the intermediate aim will in due course facilitate the achievement of
an ultimate aim. Further, different people will agree on the desirability of achieving a particular intermediate aim although each
uses this as a method of achieving a different ultimate aim peculiar to him. In the context of Sunday trading, it is pretty clear that
there is a majority legislative opinion in favour of keeping Sunday a (by and large) non-working day but that the ultimate aims
are varying. What is clear is that no one wishes to keep Sunday a non-working day as an end in itself; each is pursuing some
other ultimate goal which a non-working Sunday is regarded as serving.
In Torfaen there was no finding by the magistrates court which referred the matter to the Court of Justice as to what the aim
in view of the Sunday trading legislation was. It seems to me clear, from paras 13 and 14 of the decision and from the answer
which the Court of Justice gave to the magistrates court as recorded at the end of the decision, that the Court of Justice accepted
that the aim pursued by the Sunday trading legislation was justified in regard to Community law (see [1990] 1 All ER 129 at 156,
[1990] 2 QB 19 at 5253). In order to reach this conclusion, the Court of Justice must, as a matter of logic, first have identified
that aim.
The only identifiable aim seems to be the intermediate aim-namely to keep Sunday a non-working day. It seems to me that
the court accepted what the Advocate General in his opinion at paras 30 and 31 with great hesitation suggested, 219namely that
a ban on Sunday trading meets the desire to encourage all manner of (non-working) activities and social contacts on one and the
same day (see [1990] 1 All ER 129 at 153, [1990] 2 QB 19 at 4849). The Court of Justices decision gives no indication that
the court had any other aim in mind. It seems to me that the Court of Justice concluded that such an aim was an aim which
fulfilled the justifiability criterion. If I am right in this analysis then in future cases the magistrates courts and the Crown Court
can proceed on the basis that the aim in view of the legislation is to keep Sunday a non-working day. No evidence needs to be
called as to what the aim in view of the legislation is. I respectfully agree with Mustill LJ that the Court of Justice itself decided
that legislation on Sunday trading falls within the permissible sphere of activity of the United Kingdom as a member state.

The proportionality criterion

When considering whether the proportionality criterion has been satisfied, it is not necessary to balance the value of a work-
free Sunday against the effect of Community trade of legislation designed to achieve this aim. I respectfully agree with Mustill
LJ that the case law envisages a series of adjudicationsIs the measure equivalent to a quantitative restriction? Does the
measure pursue a justifiable aim? Does the measure go further than its purpose demands?and that the proportionality criterion
is only concerned with the last of these adjudications.
In the field of administrative decisions or subordinate legislation, it is easy to envisage situations where a measure under
attack, which is non-discriminatory, and which pursues an aim which is compatible with Community law, nevertheless goes
beyond what is necessary to achieve the aim in view. In such cases the measure may be unlawful as being incompatible with
Community law. It is more difficult to envisage such a situation where the measure in question is a piece of general legislation.
It is, however, not impossible. In the context of Sunday trading, an example would be legislation passed with the aim of having
one non-working day per week but which forbade the opening of shops on either day of the weekend. This would satisfy the
non-discrimination criterion and the justifiability criterion but would not satisfy the proportionality criterion.
Returning to Torfaen and Sunday trading, if one accepts (as the Advocate General suggests) that the aim in view is the
desire to encourage all manner of (non-working) activities and social contacts on one and the same day then (as the Advocate
General also accepts)

the imposition of a general closing or non-trading day on a day already devoted to such activities and contacts by a
large part of the population is indeed necessary and proportionate to the aim pursued.

(See [1990] 1 All ER 129 at 153, [1990] 2 QB 19 at 49(para 31).)

If I am right in the foregoing, then it seems to me that the answer to the application of the proportionality criterion is obvious
in these cases and does not require any evidence. Sunday trading is one of those fields in which, to use Mustill LJs words,
national legislatures and courts

can legitimately apply their own norms, notwithstanding that this may lead to disparities of treatment within individual
territories and hence to inequalities and restrictions of trade between member states.

In my judgment, the answer to the question If the answer to the proportionality question is obvious in this case, why did not
the Court of Justice say so? is that the Court of Justice was exercising its jurisdiction under art 177 to give a 220 preliminary
ruling on the interpretation of the EEC Treaty. It ruled that it was for the national court to decide whether or not the
proportionality criterion was satisfied. It had no jurisdiction to decide that matter itself. The Court of Justice, no doubt out of a
respect for national courts, is not I think accustomed to decide more than it has to, although it is certainly true that, where there
has been no dispute in the argument before it as to a particular matter, that fact is often noted as being beyond argument. The fact
that the Court of Justice did not in Torfaen opine that when the national court came to apply the proportionality criterion it would
find the answer obvious does not lead me to the conclusion that the answer cannot be obvious. Indeed, I think that it is.
However, bearing in mind the course that the argument took before the Crown Court and before us, I agree with the order
proposed by Mustill LJ.

Appeals allowed.

Solicitors: Metcalfe Copeman & Pettefar, Peterborough; Jeffreys Orrell & Co, Peterborough.

Dilys Tausz Barrister.

[1991] 4 All ER 221

Stoke-on-Trent City Council v B & Q plc

Norwich City Council v B & Q plc
EUROPEAN COMMUNITY; Free Movement of Goods

CHANCERY DIVISION
HOFFMANN J
9, 10, 11, 12, 13, 18 JULY 1990

European Economic Community Imports Reduction in volume of imports Quantitative restrictions on imports from other
member states Measures having equivalent effect Prohibition on Sunday trading Opening of do-it-yourself store on Sundays
Substantial proportion of goods sold in store imported from other member states Prohibition on Sunday trading having effect
of reducing imports from other member states Whether prohibition proportionate to objective of statute Whether prohibition
contravening Community law Shops Act 1950, s 47 EEC Treaty, art 30.

The defendant operated do-it-yourself shops in which a proportion of the goods sold were imported from member states of the
European Economic Community. The defendant regularly opened its shops in the plaintiff councils areas for trade on Sundays in
breach of s 47a of the Shops Act 1950, which provided that except for the serving of exempted goods, which the goods sold by
the defendant in its shops were not, every shop was to remain closed for the serving of customers on Sunday. Sunday trading in
contravention of s 47 of the 1950 Act was a summary criminal offence punishable by a fine. The plaintiff councils sought
injunctions to restrain the defendant from opening its shops on Sundays in contravention of s 47. The defendant contended that s
47 was unenforceable because by preventing the defendant from selling on Sunday goods imported from other member states it
infringed art 30b of the EEC Treaty, which prohibited quantitative restrictions on imports between member states and all
measures having equivalent effect, and that the restriction on Sunday trading contained in s 47 was contrary to Community law
because it was disproportionate to the object of ensuring that working and non-working hours were so arranged as to accord with
national or regional socio-cultural characteristics.
221
________________________________________
a Section 47 is set out at p 224 f, post
b Article 30 is set out at p 224g, post

Held Section 47 of the 1950 Act pursued the legitimate objective of ensuring that shop workers did not have to work on
Sundays and, on the basis of facts of which the court was entitled to take judicial notice, it was a measure which, so far as it
affected Community trade, was a reasonable means of achieving that objective and therefore it satisfied the requirement of
proportionality. It was not the courts function to decide whether the objective could be achieved by other means having less
effect on Community trade. Accordingly, s 47 did not infringe art 30 of the EEC Treaty. Furthermore, if criminal prosecutions
punishable by fine would not secure effective compliance with the 1950 Act, the court would exercise its civil jurisdiction to
grant an injunction restraining a shopkeeper from trading on Sundays. It followed that the plaintiff councils were entitled to the
injunctions sought (see p 230 e f, p 232 b to e, p 233 b, p 235 b c, p 236 f to j, p 237 b c f h j and p 238 f to h, post).
Torfaen BC v B & Q plc Case 145/88 [1990] 1 All ER 129 applied.

Notes
For general restrictions on Sunday trading, see 47 Halsburys Laws (4th edn) paras 632644, and for cases on the subject, see
47(1) Digest (Reissue) 564568, 29943017.
For the free movement of goods in the European Economic Community and justifications for restrictions on trade between
member states, see 52 Halsburys Laws (4th edn) paras 125512111.
For the Shops Act 1950, s 47, see 19 Halsburys Statutes (4th edn) (1990 reissue) 424.
For the EEC Treaty, art 30, see 50 Halsburys Statutes (4th edn) 276.

Cases referred to in judgment

Ackroyd v McKechnie (1986) 161 CLR 60, Aust HC.
Anti-Inflation Act, Re (1976) 68 DLR (3d) 452, Can SC.
Cinthque SA v Fdration nationale des cinemas franais Joined Cases 60 and 61/84 [1985] ECR 2605.
Conerney v Jacklin (1985) 129 SJ 285, CA.
Edwards Books and Art Ltd v R (1986) 35 DLR (4th) 1, Can SC.
London City Corp v Bovis Construction Ltd (1988) 86 LGR 660, CA.
McGowan v Maryland (1961) 366 US 420, US SC.
Oebel, Summary proceedings against Case 155/80 [1981] ECR 1993.
Pickstone v Freemans plc [1988] 2 All ER 803, [1989] AC 66, [1988] 3 WLR 365, HL.
Procureur du Roi v Dassonville Case 8/74 [1974] ECR 837.
R v Goldstein [1983] 1 All ER 434, [1983] 1 WLR 151, HL.
R v Simpson [1983] 3 All ER 789, [1983] 1 WLR 1494, CA.
Rewe-Zentral AG v Bundesmonopolverwaltung fr Branntwein Case 120/78 [1979] ECR 649.
Smith (W H) Do It All Ltd v Peterborough City Council [1991] 4 All ER 193, [1991] 1 QB 304, [1990] 3 WLR 1131, DC.
Stoke-on-Trent City Council v B & Q (Retail) Ltd [1984] 2 All ER 332, [1984] AC 754, [1984] 2 WLR 929, HL.
Torfaen BC v B & Q plc Case 145/88 [1990] 1 All ER 129, [1990] 2 QB 19, [1990] 2 WLR 1330, CJEC.
Uebergang v Australian Wheat Board (1980) 145 CLR 266, Aust HC.
Waterman v Wallasey Corp [1954] 2 All ER 187, [1954] 1 WLR 771, DC.

Cases also cited

Imperial Tobacco Ltd v A-G [1980] 1 All ER 866, [1981] AC 718, HL.
222
North Eastern Dairy Co Ltd v Dairy Industry Authority of NSW (1975) 134 CLR 559, Aust HC.
North West Leicestershire DC v Gramlo Ltd [1988] CA Transcript 410.
Post Office v Estuary Radio Ltd [1967] 3 All ER 663, [1968] 2 QB 740, CA.
Stafford BC v Elkenford Ltd [1977] 2 All ER 519, [1977] 1 WLR 324, CA.
Willesden UDC v Morgan [1915] 1 KB 349, [191415] All ER Rep 422, DC.
Wychavon DC v Midland Enterprises (Special Events) Ltd [1987] 86 LGR 83.

Actions

Stoke-on-Trent City Council v B & Q plc

By writ dated 7 December 1989 and a statement of claim dated 9 January 1990 Stoke-on-Trent City Council sought an injunction
to restrain the defendant, B & Q plc, from opening or causing to be opened on Sundays its do-it-yourself shop at Festival Park,
Hanley, Stoke-on-Trent, for the serving of customers in contravention of s 47 of the Shops Act 1950. The facts are set out in the
judgment.

Norwich City Council v B & Q plc

By writ dated 23 January 1990 and a statement of claim indorsed thereon Norwich City Council sought an injunction to restrain
the defendant, B & Q plc, from opening or causing to be opened on Sundays its do-it-yourself shop at Westwick Street, Norwich,
for the serving of customers in contravention of s 47 of the Shops Act 1950. The facts are set out in the judgment.

Stuart Isaacs and Neil Calver for the local authorities.

David Vaughan QC, Gerald Barling, Nicholas Davidson and David Anderson for B & Q.

Cur adv vult

18 July 1990. The following judgment was delivered.

HOFFMANN J.

The issues
Who is to decide whether shops should be allowed to open on Sundays? Is it to be Parliament or this court? That is an
incomplete, somewhat tendentious but not entirely inaccurate way of stating the question before me. The plaintiffs in these two
actions are local authorities which seek injunctions to restrain B & Q plc from contravening s 47 of the Shops Act 1950 by
opening do-it-yourself shops in Hanley and Norwich on Sundays. Section 47 makes Sunday trading a summary criminal offence
punishable by fine. But the local authorities take the view that fines would be ineffective to stop B & Q from breaking the law
and that nothing short of an injunction will do. They have therefore brought these civil proceedings under the powers conferred
by s 222 of the Local Government Act 1972. B & Q say that s 47 is unenforceable because it infringes art 30 of the EEC Treaty.
It also says this is not a case in which a court can or should exercise the civil jurisdiction to grant an injunction. But I shall first
deal with the substantive point on the Treaty.

(2) The EEC Treaty

The EEC Treaty is the supreme law of this country, taking precedence over Acts of Parliament. Our entry into the
Community meant that (subject to our undoubted but probably theoretical right to withdraw from the Community 223 altogether)
Parliament surrendered its sovereign right to legislate contrary to the provisions of the Treaty on the matters of social and
economic policy which it regulated. The entry into the Community was in itself a high act of social and economic policy, by
which the partial surrender of sovereignty was seen as more than compensated by the advantages of membership.
The member states of the Community differ widely in their histories, customs and social and cultural values. It was
certainly not the object of the Community to introduce uniformity in all these matters. The purpose of the Treaty was to bring
about a European common market but not to interfere with national law and customs which did not constitute obstacles to the
establishment of such a market. But there are many provisions in the Treaty expressed in language capable of being given a
wider or narrower interpretation. According to the way they are interpreted, they may have more or less of an impact on
questions of social policy which in member states are strongly felt to be matters for national decision. It is the function of the
Court of Justice of the European Communities in Luxembourg to interpret the Treaty and for the national court to apply it. In its
interpretation of the Treaty the European Court has tried to tread a careful line which permits both boldness in advancing the
objects of the Community and sensitivity to the domestic interests of member states. In applying the Treaty as interpreted by the
court, the national court has to be aware of another division of powers: not between European and national jurisdiction, but
between legislature and judiciary. The fact that the European Court has said that a particular question is one for decision by the
national court does not endow that court with quasi-legislative powers. It must confine itself within the area of judicial
intervention required by the Treaty and not trespass on questions which are for democratic decision in Parliament.

(3) The Shops Act 1950 and art 30

Section 47 of the Shops Act 1950 says:

Every shop shall, save as otherwise provided by this Part of this Act, be closed for the serving of customers on
Sunday: Provided that a shop may be open for the serving of customers on Sunday for the purposes of any transaction
mentioned in the Fifth Schedule to this Act.

Schedule 5 permits the sales on Sunday of a miscellaneous list of goods such as newspapers, flowers and confectionery.
Article 30 of the Treaty reads as follows:

Quantitative restrictions on imports and all measures having equivalent effect shall, without prejudice to the following
provisions, be prohibited between Member States.

Article 36 contains an exception for prohibitions or restrictions justified on grounds of public morality, public policy or
public security and various other grounds but adds that Such prohibitions or restrictions shall not, however, constitute a
means of arbitrary discrimination or a disguised restriction on trade between Member States.
B & Q say that a prohibition on Sunday trading is a measure having equivalent effect to a quantitative restriction on imports
because they have demonstrated through a persistent course of illegal Sunday trading over the past few years that in DIY stores
and garden centres, Sunday is the best trading day of the week. Furthermore, trade which is lost through having to close on
Sundays is not recovered during the rest of the week. Enforcing the law therefore causes a net fall in turnover, including sales of
goods imported from other member states. Mr 224 Fred Molenaar of Leiden, director of a large Dutch bulb exporter, says that
Sunday is by far the best day for selling bulbs. If people could not buy bulbs on Sundays, they would not necessarily buy them
on weekdays. They might just not plant bulbs that year and spend the money on something else instead. Mr Molenaar says that
his experience of Sunday closing by shops which were previously open is that there has been a substantial drop in total sales.
There is no suggestion that this affects bulbs grown in Holland differently from bulbs grown in Spalding. The effect is to reduce
bulb sales, including imports.
In 1988 B & Q raised the art 30 defence in a prosecution by Torfaen Borough Council before the Cwmbran magistrates. The
magistrates made a reference under art 177 requesting a preliminary ruling on the interpretation of the Treaty. On 23 November
1989 the European Court delivered its judgment: see Torfaen BC v B & Q plc Case 145/88 [1990] 1 All ER 129, [1990] 2 QB 19.
To put the judgment into context I must give a brief account of the jurisprudence on art 30. Its interpretation has been developed
in a very large number of rulings but I need not do more than mention a few landmarks.

(4) The jurisprudence on art 30

Quantitative restrictions on imports are relatively easy to identify but the problem has been to say what amounts to a
measure having equivalent effect. The Commission stated its view in Directive (EEC) 70/50 of 22 December 1969, which was
issued pursuant to its duty under art 33(7) to give directives for the abolition of restrictions existing at the time when the Treaty
came into force. As this directive is mentioned in the Torfaen judgment and this has given rise to some argument, I shall
summarise its effect. It is prefaced by 18 recitals. Recitals (4) to (7) deal with measures which discriminate between domestic
and imported products and either preclude importation or make it more difficult or costly than the disposal of domestic
production. These are regarded as ipso facto having an effect equivalent to quantitative restrictions. Recital (8) says that
measures which

relate to the marketing of products and which apply equally to domestic and imported products are not as a general
rule equivalent to those of quantitative restrictions, since such effects are normally inherent in the disparities between rules
applied by Member States in this respect.

Non-discriminatory marketing measures are thus prima facie lawful. But recital (9) says that

such measures may have a restrictive effect on the free movement of goods over and above that which is intrinsic to
such rules.

In such case, the measure is equivalent to a quantitative restriction. Recital (10) gives illustrations of measures having effect
over and above that which is intrinsic:

such is the case where imports are either precluded or made more difficult or costly than the disposal of domestic
production and where such effect is not necessary for the attainment of an objective within the scope of the powers for the
regulation of trade left to Member States by the Treaty; whereas such is in particular the case where the said objective can
be attained just as effectively by other means which are less of a hindrance to trade; whereas such is also the case where the
restrictive effect of these provisions on the free movement of goods is out of proportion to their purpose.
Recitals (9) and (10) embody the requirement of proportionality, which under Community law applies to all trade restrictions
imposed for legitimate purposes. 225As recital (10) shows, the concept can be stated in various ways. In R v Goldstein [1983] 1
All ER 434 at 436, [1983] 1 WLR 151 at 155 Lord Diplock said it meant You must not use a steam hammer to crack a nut, if a
nutcracker would do.
Article 2 then specifies the kinds of discriminatory measures which member states are required to abolish and art 3 deals
with the non-discriminatory measures where the restrictive effect of such measures on the free movement of goods exceeds the
effects intrinsic to such trade rules. It goes on to say:

This is the case, in particular, wherethe restrictive effects on the free movement of goods are out of proportion to
their purposethe same objective can be attained by other means which are less of a hindrance to trade.

Commission Directive (EEC) 50/70 is not directly applicable to the question in this case. It did not have direct effect as law
in the national courts and as an interpretation of art 30, it merely expressed the view of the Commission. Authoritative
interpretation was a matter for the court, which soon put the directive behind it.
The first landmark in the courts jurisprudence was Procureur du Roi v Dassonville Case 8/74 [1974] ECR 837. This
concerned a Belgian law which provided that goods bearing a designation of origin (such as champagne or Scotch whisky)
could not be imported unless accompanied by a certificate of origin from the exporting country. The object of the law was to
prevent the sale in Belgium of counterfeit products. The Dassonvilles had bought genuine Scotch whisky in France but could not
in practice obtain an official certificate of origin because this was issued only to the French importer from whom they had
purchased. They were prosecuted for bringing the whisky into Belgium without the appropriate certificate and the question for
the court was whether the certification requirement infringed art 30. The court formulated what has become known as the
Dassonville test:

All trading rules enacted by Member States which are capable of hindering, directly or indirectly, actually or
potentially, intra-Community trade are to be considered as measures having an effect equivalent to quantitative
restrictions.

(See [1974] ECR 837 at 852(para 5).)

By this test the certification requirement was a quantitative restriction. The court did not express a view on whether, as a
measure intended to prevent counterfeiting, it fell within the exceptions in art 36 because in any event the fact that only direct
importers could obtain certificates without difficulty meant that it was a means of arbitrary discrimination or a disguised
restriction.
Dassonville was concerned with a measure applicable only to imports. In the next landmark case the court was concerned
with a measure expressed in terms applicable equally to imports and domestic products but which had the effect of preventing
certain commodities from being imported. This was Rewe-Zentral AG v Bundesmonopolverwaltung fr Branntwein Case 120/78
[1979] ECR 649, better known as the Cassis de Dijon case. The measure in question was a German law which prohibited the sale
of fruit liqueurs having an alcoholic content of less than 25%. This ruled out the French blackcurrant liqueur known as Cassis de
Dijon, which had an alcoholic content of less than 20%.
The court was pressed with the Commissions view in recital (8) of Commission Directive (EEC) 70/50 that measures which
apply equally to domestic and imported products are as a general rule not within art 30. In a seminal opinion Mr Advocate
General Capotorti rejected this approach as too narrow. It was 226 understandable that the Commission should have adopted a
prudent approach to enforcement of art 30 in the transitional period of the Community but such restraint was no longer justified.
The difficulty for the court, however, was that in framing the exceptions in art 36, the draftsman of the Treaty principally
had in mind the kind of justifications which might legitimately be put forward for measures which overtly prohibited or restricted
imports. Once the court interpreted art 30 to cover all measures, whether discriminatory or not, which might affect intra-
Community trade, the range of legitimate justifications also had to be widened. In Cassis de Dijon [1979] ECR 649 at 662(para
8) the court took this step:

Obstacles to movement within the Community resulting from disparities between the national laws relating to the
marketing of the products in question must be accepted in so far as those provisions may be recognized as being necessary
in order to satisfy mandatory requirements relating in particular to the effectiveness of fiscal supervision, the protection of
public health, the fairness of commercial transactions and the defence of the consumer.

Based on this passage, the term mandatory requirements has come to be used as shorthand for measures relating to the
marketing of products which have the object of securing legitimate social or economic objectives consistent with the common
market in its present state. It is sometimes treated as a new judge-made exception to art 30, additional to the categories in art 36,
or sometimes as a qualification to the extension of art 30 to non-discriminatory measures. Since it is accepted that in any case the
burden is on the party who seeks to justify the measure, the question of whether it is an exception or a qualification is probably
academic. In Cassis de Dijon itself, the court accepted that in general the Federal Republic was entitled to regulate the marketing
of alcohol in its territory but was unable to identify any legitimate purpose which the law might serve. It therefore infringed art
30.
The final landmark before Torfaen was Cinthque SA v Fdration nationale des cinmas franais Joined Cases 60 and
61/84 [1985] ECR 2605. Whereas in Cassis de Dijon the measure in question was expressed in general terms but had the effect
of altogether preventing the import of certain foreign products, the French measure in Cinthque applied to a single item, video
cassettes, and did not either distinguish between or differ in its effect upon domestic products and imports. It was a measure
designed for the protection of the film industry and prohibited the sale of video cassettes of any film within a period of a year
from the date on which the film was authorised to be shown in cinemas. Advocate General Sir Gordon Slynn advised caution.
Cassis de Dijon, he said, was a case in which although the measure covered domestic and foreign goods, it required a distributor
to take steps additional to those which he would normally and lawfully take in the marketing of his goods (ie put more alcohol
in his blackcurrant liqueur) so that imports may be restricted and national producers be given protection in practice (see [1985]
ECR 2605 at 2611). But the French law in no way discriminated against importers. It put them on exactly the same footing as
domestic traders. He therefore advised that the law did not come within art 30 at all.
The court did not accept this approach. It held that in principle the law came within art 30 because it had the effect of
preventing video cassettes which were freely circulating in one member state from being sold or hired in another ([1985] ECR
2605 at 2626(para 22)):

the application of such a system may create barriers to intra-Community trade in video-cassettes because of the
disparities between the 227 systems operated in the different Member States and between the conditions for the release of
cinematographic works in the cinemas of those States. In those circumstances a prohibition of exploitation laid down by
such a system is not compatible with the principle of the free movement of goods provided for in the Treaty unless any
obstacle to intra-Community trade thereby created does not exceed that which is necessary in order to ensure the attainment
of the objective in view and unless that objective is justified with regard to Community law.
 The court went on to say that the protection of the cinema industry by a non-discriminatory measure designed to give
priority for a limited period to film distribution through cinemas was a legitimate objective. It expressed no view on the question
of proportionality, which was presumably left for decision by the Paris court which had made the reference. I consider later how
the Paris court might have dealt with the question (see p 235, post).

(5) The Torfaen case

The Cwmbran magistrates referred the following three questions to the European Court:

1. Where a Member State prohibits retail premises from being open on Sunday for the sale of goods to customers, save
in respect of certain specified items, sales of which are permitted, and where the effect of the prohibition is to reduce in
absolute terms the sales of goods in those premises, including goods manufactured in other Member States, and
correspondingly to reduce the volume of imports of goods from other Member States, is such a prohibition a measure
having equivalent effect to a quantitative restriction on imports within the meaning of Article 30 of the Treaty?
2. If the answer to Question 1 is in the affirmative, does such a measure benefit from any of the exceptions to Article
30 contained in Article 36, or from any other exception recognised by Community law?
3. Is the answer to Question 1 or Question 2 above affected by any factor so as to render the measure in question a
means of arbitrary discrimination or a disguised restriction on trade between Member States or a measure lacking in
proportionality or otherwise unjustified?

(See [1990] 1 All ER 129 at 155156, [1990] 2 QB 19 at 52.)

As in Cinthque, Mr Advocate General Van Gerven urged caution in the interpretation of art 30. The measure was, as in
that case, entirely non-discriminatory. Furthermore, it did not relate to any particular product, nor did it prohibit the sale of any
products, except on one day a week. It was therefore much harder to say, as in Cinthque, that the law partitioned the common
market by creating a situation in which a given product could be sold in one place but not another. Mr Advocate General Van
Gerven was particularly concerned that the ever-widening scope of art 30 would result in a corresponding increase in the kind of
objectives which, under the Cassis de Dijon doctrine, the court had to classify as legitimate or not for the purposes of Community
law. The court would have to

decide in an increasing number of cases on the reasonableness of policy decisions of member states taken in the
innumerable spheres where there is no question of direct or indirect, factual or legal discrimination against, or detriment to,
imported products.

(See [1990] 1 All ER 129 at 151, [1990] 2 QB 19 at 46.)

228
Mr Advocate General Van Gerven clearly felt doubts as to the justiciability of these questions as well as the burden which
they would impose upon the court. He therefore recommended that the Cinthque principle should be confined to cases in
which the measures in question can lead to a national market being screened off, or access to that market being made
unacceptably difficult, less profitable or less attractive for economic operators from other member states (see [1990] 1 All ER
129 at 146, [1990] 2 QB 19 at 40(para 17)). By this criterion, the Sunday trading laws did not in his opinion infringe art 30.
But once again the court refused to accept the proposed limitation. I shall set out in full its answer to the first question
([1990] 1 All ER 129 at 156, [1990] 2 QB 19 at 5253):

10. By its first question the national court seeks to establish whether the concept of measures having an effect
equivalent to quantitative restrictions within the meaning of art 30 of the Treaty also covers provisions prohibiting retailers
from opening their premises on Sunday if the effect of the prohibition is to reduce in absolute terms the sales of goods in
those premises, including goods imported from other member states.
11. The first point which must be made is that national rules prohibiting retailers from opening their premises on
Sunday apply to imported and domestic products alike. In principle, the marketing of products imported from other
member states is not therefore made more difficult than the marketing of domestic products.
12. Next, it must be recalled that in Cinthque SA v Fdration nationale des cinmas franais Joined cases 60 and
61/84 [1985] ECR 2605 the court held, with regard to a prohibition on the hiring of video-cassettes applicable to domestic
and imported products alike, that such a prohibition was not compatible with the principle of the free movement of goods
provided for in the Treaty unless any obstacle to Community trade thereby created did not exceed what was necessary in
order to ensure the attainment of the objective in view and unless that objective was justified with regard to Community
law.
13. In those circumstances it is therefore necessary in a case such as this to consider first of all whether rules such as
those at issue pursue an aim which is justified with regard to Community law. As far as that question is concerned, the
court has already stated in Oebel, Summary proceedings against Case 155/80 [1981] ECR 1993 that national rules
governing the hours of work, delivery and sale in the bread and confectionery industry constitute a legitimate part of
economic and social policy, consistent with the objectives of public interest pursued by the Treaty.
14. The same consideration must apply as regards national rules governing the opening hours of retail premises. Such
rules reflect certain political and economic choices in so far as their purpose is to ensure that working and non-working
hours are so arranged as to accord with national or regional socio-cultural characteristics, and that, in the present state of
Community law, is a matter for the member states. Furthermore, such rules are not designed to govern the patterns of trade
between member states.
15. Second, it is necessary to ascertain whether the effects of such national rules exceed what is necessary to achieve
the aim in view. As is indicated in art 3 of Commission Directive (EEC) 70/50 of 22 December 1969, the prohibition laid
down in art 30 covers national measures governing the marketing of products where the restrictive effect of such measures
on the free movement of goods exceeds the effects intrinsic to trade rules.
229
16. The question whether the effects of specific national rules do in fact remain within that limit is a question of fact to
be determined by the national court.
17. The reply to the first question must therefore be that art 30 of the Treaty must be interpreted as meaning that the
prohibition which it lays down does not apply to national rules prohibiting retailers from opening their premises on Sunday
where the restrictive effects on Community trade which may result therefrom do not exceed the effects intrinsic to rules of
that kind.

Having given this answer, the court said that it was unnecessary to answer the second and third questions.

(6) Interpretation of the Torfaen ruling

 The judgment of the European Court was intended to be an authoritative interpretation of the Treaty sufficient to enable the
domestic court to decide the case. But every decoding is another encoding and there have been arguments over what the
judgment means. It was even suggested that in the last resort I might have to make another reference to find out. In my
judgment however its effect, in the light of the developing jurisprudence to which I have referred, is tolerably plain.
The court has decided that the validity of the English Sunday trading law depends on the answers to two questions. (1) Does
the law pursue an aim which is justified with regard to Community law? (2) Does the effect of the law exceed what is necessary
to achieve the end in view? In my judgment the court has itself answered the first question. It is true that in para 14 it said that
rules governing the opening hours of retail premises were a matter for the member states in so far as their purpose is to ensure
that working and non-working hours are so arranged as to accord with national or regional socio-cultural characteristics (see
[1990] 1 All ER 129 at 156, [1990] 2 QB 19 at 53(my emphasis)). If one reads in so far as meaning if it is the case that, it
could be said that the national court was being left to decide whether this condition was met. In my judgment, however, in so
far was intended to mean because and the court was deciding that the purpose of s 47 of the Shops Act 1950 satisfied the
description. This was the view of Mustill LJ and Schiemann J in a recent decision of the Divisional Court, W H Smith Do It All
Ltd v Peterborough City Council [1991] 4 All ER 193, [1991] 1 QB 304, and I respectfully agree. Both judgments also contain
illuminating obiter dicta on the questions addressed in this case. In any case, it seems to me plain and obvious that the purpose of
s 47 was to arrange working and non-working hours in shops in England and Wales so as to accord with the regional socio-
cultural characteristic by which people generally do not work on Sundays.
The principal argument before me has been directed to the second question which the European Court specifically said was a
question of fact to be determined by the national court. Mr Isaacs, for the local authorities, put forward an argument that on a
proper reading of the judgment, no question of fact arose. This was based on the reference in para 15 to Commission Directive
(EEC) 70/50. Mr Isaacs said this must be taken to mean that the court was incorporating into its judgment (a) the presumption of
legality for non-discriminatory measures in recital (8) of the directive, which the European Court had abandoned in Cassis de
Dijon and (b) the criteria for lack of proportionality in recital (10), which Mr Isaacs said included a requirement that imports are
either precluded [impossible, unmglich] or made more difficult or costly than the disposal of domestic production As the
law plainly did not have this effect, nothing remained to be said.
230
I rather doubt whether recital (10) intended a discriminatory effect to be an element of each of the examples it gives of lack
of proportionality, but in any case I reject Mr Isaacss submission on the straightforward ground that it would make nonsense of
the rest of the European Courts judgment. I also reject the submission that it signalled a return to the presumption of legality for
a new class of case which included Torfaen but excluded Cassis de Dijon and its progeny. It is in my judgment plain that the
court regarded the case as governed by Cinthque and therefore in the direct line of descent from Cassis de Dijon. The point is
fully discussed in the judgments in the W H Smith Do It All case, with which again I respectfully agree. I agree with Mr Isaacs
that there is a slight puzzle about why, with so many recent statements of the proportionality rule available, the court chose to
revert to that in Commission Directive (EEC) 70/50 but I do not think that too much should be read into this citation. It may have
thought that in the context of Sunday trading rules, the formulation where the restrictive effect of such measures on the free
movement of goods exceeds the effects intrinsic to trade rules was more helpful than most. It does not follow that the whole
directive must be treated as incorporated by reference.

(7) The question of fact

In R v Goldstein [1983] 1 All ER 434 at 436, [1983] 1 WLR 151 at 155 Lord Diplock said that to satisfy the requirement of
proportionality in a prosecution brought under a measure falling with an art 36 exception, it was necessary for the Crown

to adduce factual evidence (1) to identify the various mischiefs which the challenged restrictive measures were
intended to prevent, (2) to show that these mischiefs could not have equally effectively been cured by other measures less
restrictive of trade and (3) to show that the measures were not disproportionately severe having regard to the gravity of the
mischiefs against which they were directed.

This accords with the European Courts view that proportionality was a question of fact. But I do not think, when Lord
Diplock spoke of factual evidence, that he intended to require the prosecution to prove matters of which the court could properly
take judicial notice. It follows that if the court is satisfied on the basis of judicial notice that the requirements of proportionality
have been met, there is no need for the prosecution to adduce oral or documentary evidence. Judicial notice is not confined to
questions which everyone would be able to answer of his own knowledge. It includes matters of a public nature such as history,
social customs and public opinion, which may have to be culled from works of reference. As the late Professor Sir Rupert Cross
said, judicial notice is important for two reasons:

In the first place, it expedites the hearing of many cases. Much time would be wasted if every fact which was not
admitted had to be the subject of evidence which would, in many instances, be costly and difficult to obtain. Secondly, the
doctrine tends to produce uniformity of decision on matters of fact where a diversity of findings might sometimes be
distinctly embarrassing.

(See Cross on Evidence (5th edn, 1979) p 160. This was the last edition prepared by Sir Rupert. It appears in the sixth edition
(1985) at p 70.)
The second point is particularly important here. Since Torfaen there have been numerous prosecutions for Sunday trading in
magistrates courts and the Crown Court. In many of these, evidence has been led on the question of proportionality. A troupe of
experts has toured the country giving their views over periods of several days and as a result some courts have convicted and
others have acquitted. 231If the question depends simply on the oral evidence led at the trial, even a decision of the House of
Lords on appeal from one of these cases need not settle the matter. The prosecution will fail if the local authoritys travelling
expert fails to turn up, or if his evidence is different. We shall have the absurd state of affairs that the Sunday trading laws will be
valid on one day and invalid on another, enforceable in Wellingborough but not in Pendle. The summary prosecution of offences
under s 47 will in practice become impossible because local authorities will have excessive demands made upon their resources.
On the other hand if, as I believe to be the case, all the relevant facts are properly matters of judicial notice, the question can be
settled authoritatively by the normal rules of judicial precedent: cf R v Simpson [1983] 3 All ER 789 at 793, [1983] 1 WLR 1494
at 1499, citing the above passage from Cross. The importance of judicial notice in constitutional cases appears from
Commonwealth authorities such as Uebergang v Australian Wheat Board (1980) 145 CLR 266 at 302 and Re Anti-Inflation Act
(1976) 68 DLR (3d) 452 at 495496.

(8) The objectives of the Shops Act

In order to decide whether the effects of s 47 exceed what is necessary to achieve the aim in view, I must first decide what
the aim was. There was a good deal of argument about it but the dispute seemed to me largely semantic. The aim is in my view
clear enough from the terms of the 1950 Act itself, namely to ensure that, so far as possible, shopkeepers and shop assistants did
not have to work on Sunday. The fact that the promoters of the 1950 Act embraced this aim suggests that they must have thought
in general terms that it was undesirable to have to work on Sundaythere could be no rational basis for confining this view to
shop workers. In that sense they were seeking to maintain what they regarded as the traditional English Sunday. But the
immediate aim of the legislature was not universal. They may have thought that other trades were not subject to the same
pressures or that they had sufficient protection from trade unions or other legislation or simply that other trades were not their
concern. No doubt some would have supported the measure for other or wider reasons or because they hoped to gain from its
incidental effects. Sabbatarians, for example, may have approved on the general ground that work on Sunday profaned the
Lords Day and bus drivers who disliked working on Sundays might have liked the idea that fewer buses would be needed if
people could not go shopping. People who lived in shopping districts might like the quiet Sunday atmosphere. But these wider
or incidental effects were not the aims of the legislation.
This view is supported by the parliamentary history and subsequent judicial comment. The Shops Act 1950 was a
consolidation Act. Section 47 was derived from the Shops (Sunday Trading Restrictions) Act 1936, which originated in a private
members Bill. B & Q invited me to read the speech in Hansard of the sponsor, Mr Loftus, when introducing the second reading
debate (see 308 HC Official Report (5th series) cols 21582170). The debate is summarised by Frankfurter J in his opinion
upholding the constitutionality of American Sunday trading laws in McGowan v Maryland (1961) 366 US 420 at 480482. The
learned justice says in particular (at 481): Speakers asserted the necessity for maintaining the traditional quality of the Sunday
in this country. To which he then added in a footnote: Throughout the debates it is emphasized that the bill was a Sunday
Trading Restriction Bill and not a Bill to have one days rest in seven. I had some doubt about whether this was permissible
but Mr Vaughan QC for B & Q said that in the exceptional case in which the court is concerned with the purpose of the
legislation rather than its construction, consultation of Hansard is permitted: 232see Pickstone v Freemans plc [1988] 2 All ER
803, [1989] AC 66 and Conerney v Jacklin (1985) 129 SJ 285. Mr Isaacs did not strenuously object and in the event Hansard
added little to what could be deduced from the terms of the 1950 Act. Mr Loftus painted a picture of other workers spending
their summer Sundays going into the country on bicycles or by bus, returning with fruit and flowers and of shop workers denied
these delights because owners felt that they could not shut on Sundays for fear of losing trade to rivals who stayed open.
As for judicial comment, I need cite only Donovan J in Waterman v Wallasey Corp [1954] 2 All ER 187 at 188, [1954] 1
WLR 771 at 773 where he said: The purpose of the Act is to protect shop assistants If I might be allowed to enlarge this
remark in a brief unreserved judgment to include shopkeepers, it is entirely consistent with what I have said so far.
It is equally clear that the 1950 Act did not contemplate that its aim could be fully achieved. Certain concessions were in
practice unavoidable. For one thing, someone had to sell the fruit and flowers which the workers carried back from their country
expeditions. No one contemplated that public houses should have to shut on Sunday and this meant that cafs selling light
refreshments had to be able to stay open: it would have been strange if the only refreshment available on Sundays was alcoholic.
In 1936 many people had to buy fresh food on Sunday because they had no refrigerators and so newly cooked provisions and
fresh fruit and vegetables were allowed, but not tinned fruit, which could perfectly well be bought on Saturday. This kind of
reasoning, based on necessity and tradition, produced the list of excepted items now reproduced in Sch 5 to the 1950 Act. It was
also thought unnecessary to have the shop closed except for the serving of customers: if the shopkeeper wanted to spend the
day cleaning up or stocktaking he was at liberty to do so because that would not threaten his rivals with loss of custom. Then
there was a special provision for Jews, who closed on Saturday. It was thought unfair that the observance of their religion should
reduce them to a five-day week and so they were allowed to open until 2 pm on Sunday, a compromise which ensured them and
their employees at least Sunday afternoon at leisure. There were statutory compensations for any employee who, by reason of
one or other of these exceptions, worked on Sunday. If he worked more than four hours he had to get a whole day off in lieu and
if less than four hours, a half day off.
B & Q argue that these exceptions, some of which have turned out to give rise to very arbitrary distinctions, show that the
object of the legislation was not to relieve shop workers from having to work on Sunday but to produce a situation in which some
worked and some did not. This submission is used to support the argument that various alternative systems, such as exempting
DIY shops and garden centres, would produce a situation which did not give shop workers materially less protection than the
present law but would be much less restrictive of Community trade. I think that it is fallacious. So far as the Shops Act 1950
allows goods to be sold on Sundays, this is not in furtherance of its objectives but by way of recognition that its objectives could
not be fully achieved.
Since 1936 the Sunday trading laws have withstood many attempts by private members Bills and in one case even by the
government to secure their abolition or amendment. Public opinion polls during the last decade have shown a remarkably
consistent division of opinion, one third of the population in England and Wales favouring retention of the existing law and two-
thirds favouring abolition or amendment, though without any agreement among the majority about the form which such
amendment should take. The issue is plainly one about which feelings run very high.
233

(9) The proportionality tests

B & Q submit that the concept of proportionality requires the measure to pass two tests, which they identify as the
balancing test and the necessity test. This division is based upon the two illustrations of lack of proportionality in art 3 of
Commission Directive (EEC) 70/50: (1) the restrictive effects on the free movement of goods are out of proportion to their
purpose and (2) the same objective can be attained by other means which are less of a hindrance to trade. The same distinction
can be found in various judgments of the European Court, although it is not developed and there is no discussion of the difference
between them. There is a similar dual test in Lord Diplocks speech in R v Goldstein [1983] 1 All ER 434 at 436, [1983] 1 WLR
151 at 155, to which I have already referred.
To assist the court in applying these tests B & Q have provided the court with a vast mass of factual and expert evidence, full
of useful and curious learning. Apart from calling one economic expert in rebuttal of some of the theories advanced on behalf of
B & Q, the local authorities have been content to rely on matters of common knowledge or of which the court can otherwise take
judicial notice. I can briefly summarise the effect of the economic evidence. There are respectable grounds for thinking that
complete abolition of restrictions on Sunday trading would lead to a once and for all increase of about 1% to 2% in the retail
sector. This would be at the expense of savings or spending on other things like mortgage payments, insurance or holidays. In
the DIY and garden goods sectors, there are stronger grounds for thinking that sales would be greater if Sunday trading were
allowed than if the prohibition were uniformly enforced. B & Q estimate that the difference is of the order of 10%, from which
figure they deduce that lost Community imports would be of the order of 670m a year. The local authorities expert points out
that these calculations are not entirely secure because they depend upon the experience of B & Q at a time when their shops open
on Sundays and many competitors are closed. It does however seem reasonable to suppose that in these sectors there is Sunday
spending which would not be recovered in the rest of the week. How much of the money not spent in that way would then be
spent during the week on the other Community imports is impossible to establish and probably not relevant.
There is also evidence that many employees value the opportunity to work on Sundays to earn extra money and in the case
of mothers working part-time, to leave the children with their husbands and escape from the home into different company and
surroundings. B & Q report little difficulty in finding volunteers to staff their shops. Many people enjoy being able to shop on
Sundays, particularly for items which need lengthy appraisal and family debate. DIY shops and garden centres are particularly
popular and profitable. The fact that many shops now open illegally on Sunday has had no detectable effect on whether or not
people go to church. Very likely other evidence could be adduced of adverse effects of Sunday trading but the local authorities
did not elect to call any.

(10) The division of powers

 By far the most important question in this case concerns the function of the court in applying the proportionality tests. This
is a case of a sovereign legislature acting to further what the European Court has held to be legitimate objectives. It is subject
only to a requirement that the measure should not be disproportionate to the importance of its objective. The question is one on
which strong and differing views may be held and which has been the subject of frequent parliamentary debate. Is the court to
apply its own opinion of the importance of ensuring that shop workers do not have to work on Sundays and weigh that against its
opinion of the importance of selling more Dutch bulbs or Italian 234 furniture? If the legislature has declined to adopt any
modification of the existing exceptions, is the court to say that modifications should nevertheless be introduced because in its
opinion they would not detract from the legislative object and would mean that the 1950 Act was less of a hindrance to
Community trade?
In my judgment it is not my function to carry out the balancing exercise or to form my own view on whether the legislative
objective could be achieved by other means. These questions involve compromises between competing interests, which in a
democratic society must be resolved by the legislature. The duty of the court is only to inquire whether the compromise adopted
by the United Kingdom Parliament, so far as it affects Community trade, is one which a reasonable legislature could have
reached. The function of the court is to review the acts of the legislature but not to substitute its own policies or values.
This is not an abdication of judicial responsibility. The primacy of the democratic process is far more important than the
question of whether our Sunday trading laws could or could not be improved. I cannot imagine that in Cinthque SA v
Fdration nationale des cinmas franais Joined Cases 60 and 61/84 [1985] ECR 2605 the French court in applying the ruling
of the European Court considered that it was under a duty to form an independent view of the importance of the cinema industry
to France or whether that industry could be better protected by other means. These are also essentially legislative questions
involving a balancing of interests and the judiciary cannot do more than decide whether the view of the legislature is one which
could reasonably be held. It seems to me that unless both the European Court and the national courts exercise this kind of
restraint, it will be impossible to avoid the concerns expressed by Mr Advocate General Van Gerven in Torfaen [1990] 1 All ER
129, [1990] 2 QB 19 about the justiciability of some of the questions raised by the wide construction given to art 30.
The power to review Acts of Parliament is new to the courts of this country but familiar in any country, like the United
States, Canada and Australia, which has a constitution containing limitations on the powers of an otherwise sovereign legislature.
In some cases it will be apparent to the court that the legislative power has been used for an ulterior and impermissible purpose.
In others exercise of the power will be clearly invalidated by some basic error of reasoning: see eg Ackroyd v McKechnie (1986)
161 CLR 60. But in cases in which different views were reasonably tenable, the courts have not attempted to usurp the functions
of the legislature. Thus in Re Anti-Inflation Act (1976) 68 DLR (3d) 452 the Supreme Court of Canada had to consider the
exercise by the Dominion legislature of a power to regulate the Canadian economy on the grounds of economic emergency.
Laskin CJCs conclusion was expressed in the following terms (at 498):

In my opinion, this Court would be unjustified in concluding that the Parliament of Canada did not have a rational
basis for regarding the Anti-Inflation Act as a measure which, in its judgment, was temporarily necessary to meet a
situation of economic crisis
(My emphasis.)
In McGowan v Maryland (1961) 366 US 420 at 507, the American Supreme Court case on Sunday observance legislation,
Frankfurter J said:

to many who do not regard it sacramentally, Sunday is nevertheless a day of special, long-established associations,
whose particular temper makes it a haven that no other day could provide. The will of a majority of the community,
reflected in the legislative process during scores of years, presumably prefers to take its leisure on Sunday. The spirit of
any people expresses in goodly measure the heritage which links it to its past. Disruption 235 of this heritage by a
regulation which, like the unnatural labors of Claudius shipwrights, does not divide the Sunday from the week, might
prove a measure ill-designed to secure the desirable community repose for which Sunday legislation is designed. At all
events, Maryland, Massachusetts and Pennsylvania, like thirty-one other States with similar regulations, could reasonably
so find. (My emphasis.)

Similarly in Edwards Books and Art Ltd v R (1986) 35 DLR (4th) 1 the question was whether a prohibition on Sunday
trading in Ontario which contained only a limited exemption for Jews who closed on Saturday infringed their constitutional
guarantee of freedom of religion. The legislation was held to be for a legitimate objective within the powers of the provincial
legislature, namely to regulate working practices. The question was whether it involved a disproportionate burden on Jews. La
Forest J said (at 6668):

The atmosphere of community repose and relaxation traditionally associated with Sunday and its resultant recuperative
effects is a goal the Legislature may reasonably believe is necessary for the public welfare. A similar view has been
adopted in the United States; see McGowan v. Maryland ((1961) 366 US 420) in describing the criteria comprising the
proportionality requirement, the court has been careful to avoid rigid and inflexible standards. That seems to me to be
essential. Given that the objective is of pressing and substantial concern, the Legislature must be allowed adequate scope
to achieve that objective. It must be remembered that the business of government is a practical one That is especially
so in a field of so many competing pressures as the one here in question In seeking to achieve a goal that is
demonstrably justified in a free and democratic society, therefore, a Legislature must be given reasonable room to
manoeuvre to meet these conflicting pressures That being so, it seems to me that the choice of having or not having an
exemption for those who observe a day other than Sunday must remain, in essence, a legislative choice.
(My emphasis.)
These extracts, in which I have emphasised the significant passages, confirm my opinion that in this case the courts duty
goes no further than to decide whether it is a reasonably tenable view that preventing shop workers from having to work on
Sundays is a sufficiently important objective to justify the consequent reduction in Community trade and that no means other than
requiring shops to shut would achieve the same objective with less hindrance to trade.

(11) Applying the proportionality tests

In passing the Shops (Sunday Trading Restrictions) Act 1936 and in refusing to accept any modifications since that date,
Parliament must be taken to have decided that the objective of preventing shop workers from being or feeling under any
economic pressure to work on Sunday was sufficient to outweigh the inconvenience which would thereby be caused to people
who wanted to shop or work or any loss of trade for the economy as a whole. This view continues to be strongly held by a large
number of people. Whether I personally agree with it or not, it would be presumptuous of me to characterise it as untenable. On
the contrary, I accept that it is capable of forming a rational basis for legislation. And if Parliament was willing to accept the
detriments I have mentioned, it must I think follow that (if the question had arisen) it would have been equally willing to accept
the reduction in Community trade as a part of the wider effect on trade as a whole.
These considerations are sufficient to resolve the balancing test in favour of the validity of the 1950 Act. A similar approach
produces the same result when the 236 necessity test is applied. B & Q submitted that in considering alternative measures which
might have a lesser effect on Community trade, it was wrong to compare the effect they would have with an Arcadian idyll in
which no one worked on Sundays. The comparison must be with the current reality in which anyone can work in any shop as
long as it is not open for the serving of customers, in which shops (including DIY shops and garden centres) can open lawfully
for the sale of Sch 5 goods and in which the law is in any case widely disobeyed.
This argument is in my judgment mistaken. The object of the legislation was to secure that as few shop workers as possible
worked on Sundays. The need for exceptions was recognised but the exceptions were not part of the legislative purpose; they
were considered to be unavoidable concessions. Any enlargement of the exceptions must result in more shop workers falling
outside the protection of the 1950 Act. It cannot therefore be argued that because exceptions already exist, a few more would do
no harm. The irrelevance of the exceptions is confirmed by the opinion of Mr Advocate General Van Gerven in the Torfaen case
[1990] 1 All ER 129 at 153154, [1990] 2 QB 19 at 49(para 32):

B & Qs line of argument, however, concerns primarily the effectiveness and consistency of the rule. Community law
lays down a different type of requirement: the obstacle which in practice results from the rule must be proportionate to the
aim pursued, that is to say no more restrictive for intra-Community trade than is necessary for the intended purpose;
whether the rule achieves its purpose in this respect is irrelevant.
(The Advocate Generals emphasis.)
It seems to me that the history of the Sunday trading law shows that the existing exceptions are regarded by Parliament as
the limits of what is necessary to achieve the legislative object. Of course there are illogicalities in Sch 5 and opinions may differ
about whether it draws the line in the right place. On the other hand, illogical compromise tends to be a British socio-cultural
characteristic, to adopt the language of the European Court. That may also explain why Sunday trading is permitted in Scotland
but not in England and Wales. In my judgment Parliament was entitled to decide that the present restrictions were necessary to
attain the objects of the 1950 Act and that different restrictions would be inadequate, even though they might have less effect on
Community trade.
I should mention that some reliance was placed on a decision by a stipendiary magistrate at Pendle that the object of s 47
was intended to protect Sunday leisure activities and that since many people regarded Sunday shopping in DIY and garden centre
shopping as a leisure activity, a ban on such shopping was disproportionate. That seems to me based on a misconception. It was
never the purpose of s 47 to protect shoppers from the pain of having to buy things on Sunday and the fact that certain kinds of
shopping may be a pleasure is irrelevant. The 1950 Act was to protect shop workers and there is no evidence that anyone regards
Sunday work, even in a DIY shop, as a leisure activity.
The result is that although I accept that the burden is upon the prosecution to justify the proportionality of the measure, that
burden is in my judgment fully discharged on the basis of facts of which the court is entitled to take judicial notice. The factual
and expert evidence adduced by B & Q does not disturb that conclusion.

(12) The injunction

B & Q submit that whatever my view on the validity of s 47 of the Shops Acts 1950, I should not grant an injunction. It
argues that the proper place in which to determine the criminality of its actions is a criminal court and that unless a 237 civil court
can see at once that an act is indisputably criminal, the jurisdiction to grant an injunction should not be exercised. In this case it
is said that the law since Torfaen is doubtful and that consequently no injunction should be granted at least until the matter has
been settled by a criminal appellate court of high authority.
A somewhat similar submission was made by B & Q at an earlier stage in these actions when it moved to strike out the
proceedings as an abuse of process. I said on that occasion that the correct stage at which to decide whether the local authorities
satisfied the criteria laid down by the courts for the grant of an injunction was at the trial. It was clear from the decision of the
House of Lords in Stoke-on-Trent City Council v B & Q (Retail) Ltd [1984] 2 All ER 332 at 342, [1984] AC 754 at 776777 that
a previous conviction in a criminal court is not a necessary condition for the exercise of the civil jurisdiction. In any case, B & Q
have in fact been convicted by magistrates on more than one occasion since Torfaen.
The criteria for the grant of an injunction were summarised as follows by Bingham LJ in London City Corp v Bovis
Construction Ltd (1988) 86 LGR 660 at 682:

(1) the jurisdiction is to be invoked and exercised exceptionally and with great caution (2) there must
certainly be something more than mere infringement of the criminal law before the assistance of civil proceedings can be
invoked and accorded for the protection or promotion of the interests of the inhabitants of the area (3) the essential
foundation for the exercise of the courts discretion to grant an injunction is not that the offender is deliberately and
flagrantly flouting the law but the need to draw the inference that the defendants unlawful operations will continue unless
and until effectively restrained by the law and that nothing short of an injunction will be effective to restrain them

Of course I accept that the whole of this is predicated upon the assumption that the court is satisfied that the conduct in
question is criminal. But I am. Because the issues raised in this case are to some extent unfamiliar, I have taken some time to
explain my reasons. That does not mean that the answer is not plain. The remaining criteria also seem to me satisfied. We are
not dealing with casual offences but with a profitable business which, as B & Qs own evidence amply demonstrates, owes a
great deal of its success to systematic breaches of the law. That makes the case an exceptional one and shows that continued
criminal prosecution is not likely to be effective to secure compliance. Since Torfaen, B & Q have been convicted by the
Cwmbran and other magistrates. That has not had the slightest effect on their conduct. Mr Vaughan said that despite these
convictions, there had been acquittals (as in Pendle) and that B & Q was entitled to take the view that the law was unsettled. But
having regard to the conclusion I have reached, I can only proceed on the footing that the law is clear. It may be that B & Q will
(subject to any appeal) accept this decision and give an undertaking or assurance that it will not in future trade on Sundays in
Norwich or Stoke-on-Trent. Like Lord Diplock in Stoke-on-Trent City Council v B & Q (Retail) Ltd [1984] 2 All ER 332 at 342,
[1984] AC 754 at 777, I shall ask. But in the absence of such an assurance or undertaking, the local authorities are in my
judgment entitled to injunctions.

No order. Undertaking given by B & Q not in future to trade on Sundays in Norwich or Stoke-on-Trent. The court certified
under s 12 of the Administration of Justice Act 1969 that a question of general public importance relating to the construction of
an enactment was involved in the decision and that a sufficient case for an appeal direct to the House of Lords had been made
out.
238

15 November. The Appeal Committee of the House of Lords gave leave to appeal.

14 January 1991. The appeals were ordered to be consolidated.20 May. The Appeal Committee of the House of Lords referred
to the Court of Justice of the European Communities under art 177 of the EEC Treaty the following questions and adjourned
further consideration of the appeal pending conclusion of the reference: (1) whether the effect of the Court of Justices rulings in
Union Dpartementale des Syndicats CGT de lAisne v Socit Internationale de Distribution dEquipements Familiaux (SIDEF
CONFORAMA) (Case C-312/89) and Criminal proceedings against Marchandise (Case C-332/89) OJ 1991 C78, pp 8, 9 was to
determine that the prohibition contained in art 30 of the EEC Treaty did not apply to national rules, such as those in issue in
Torfaen BC v B & Q plc (Case 145/88) [1990] 1 All ER 129, [1990] 2 QB 19, which prohibited retailers from opening their
premises on Sunday for the serving of customers with certain goods; (2) if not, whether it was nevertheless immediately apparent,
whether or not evidence was adduced, that the restrictive effects on intra-Community trade which might result from national
rules such as those in question (1) did not exceed the effects intrinsic to rules of that kind, as that phrase was used in the ruling
of the Court of Justice in Torfaen BC v B & Q plc; (3) if not, on what criteria and by reference to what, if any, factual or other
evidence the national court should determine the question whether or not the restrictive effects on intra-Community trade which
might result from national rules such as those in question (1) exceeded the effects intrinsic to rules of that kind within the
meaning of that phrase as used in the ruling of the Court of Justice in Torfaen BC v B & Q plc.

Solicitors: Sharpe Pritchard agents for S W Titchener, Stoke-on-Trent and R M Auton, Norwich; Hepherd Winstanley & Pugh,
Southampton.

Evelyn M C Budd Barrister.

239
[1991] 4 All ER 240

Kirklees Borough Council v Wickes Building Supplies Ltd

Mendip District Council v B & Q plc
LOCAL GOVERNMENT

COURT OF APPEAL, CIVIL DIVISION

DILLON, MANN AND BELDAM LJJ
15, 16, 17, 30 APRIL 1991

Injunction Interlocutory Undertaking as to damages Undertaking by local authority Proceedings to enforce compliance
with statute Local authority having power to enforce statute by prosecution or action for injunction Local authority seeking
to restrain Sunday trading Respondent contending national legislation relating to Sunday trading incompatible with European
Community Law Whether local authority required to give cross-undertaking in damages in proceedings for injunction
Whether Crown immunity from giving cross-undertaking in damages extending to local authority acting in law enforcement
capacity Whether cross-undertaking in damages required under European law to protect retroactive effect of Community law
rights Shops Act 1950, s 47 Local Government Act 1972, s 222 EEC Treaty, art 30.

Two local authorities sought interlocutory injunctions pursuant to s 222 a of the Local Government Act 1972 to restrain two
retailers from trading on Sundays, contrary to s 47 b of the Shops Act 1950. Both local authorities declined to give a cross-
undertaking in damages but were nevertheless granted the relief sought without any requirement to do so, on the ground that
where a local authority was seeking to enforce the law in its area under its statutory powers it was entitled to the same exemption
from giving a cross-undertaking in damages as the Crown had when seeking an interlocutory injunction. Both retailers indicated
that they would have submitted to injunctions had such undertakings been given. The retailers appealed against the grant of the
interlocutory injunctions when the local authorities had refused to offer a cross-undertaking in damages. The retailers contended
in any event that they were entitled to trade on Sundays because s 47 of the 1950 Act was contrary to art 30 c of the EEC Treaty
and was therefore void and unenforceable.
________________________________________
a Section 222, so far as material, is set out at p 247 e, post
b Section 47 provides: Every shop shall, save as otherwise provided by this Part of this Act, be closed for the serving of customers on
Sunday: Provided that a shop may be open for the serving of customers on Sunday for the purposes of any transaction mentioned in the
Fifth Schedule to this Act.
c Article 30, so far as material, is set out at p 244 a, post

Held The appeals would be allowed and the injunctions discharged for the following reasons
(1) Since national courts were required to protect rights conferred by Community law and since a person would, were he to
succeed in establishing a right under art 30 of the EEC Treaty by showing that a national law was incompatible with Community
law, be entitled to have the national law set aside with unrestricted retroactive effect so as to prevent his rights being in any way
adversely affected, it followed that in the absence of the protection of a cross-undertaking in damages the retailers would,
pending the trial of the issue whether s 47 of the 1950 Act was incompatible with Community law, be precluded from any
possibility of recompense for any period during which any 240 injunction restraining them from trading on Sundays was in force.
In each case therefore the judge had been bound as a matter of Community law to require the retailer to be given the protection
afforded by a cross-undertaking in damages before the local authority was granted the interim relief it sought; Amministrazione
delle Finanze dello Stato v Simmenthal SpA Case 106/77 [1978] ECR 629 and Factortame Ltd v Secretary of State for Transport
(No 2) Case C-213/89 [1991] 1 All ER 70 considered.
(2) A local authority exercising the power conferred upon it by s 222 of the 1972 Act to bring civil proceedings in its own
name to enforce within its area the provisions of a statute such as the 1950 Act, or other public law, by an action for an injunction
was required to give a cross-undertaking as to damages before an interlocutory injunction would be granted, since the special
privilege afforded to the Crown not to give such undertakings did not extend to local authorities. Furthermore (per Beldam LJ) it
would not be just and convenient to grant injunctions in favour of the local authorities in the absence of a cross-undertaking in
damages. Since the local authorities were not prepared to give such undertakings and it was not the function of the court to
anticipate the outcome of the trial the judges had erred in dispensing with the requirement and the injunctions would accordingly
be discharged (see p 247 d, p 248 a b, p 251 c d f j to p 252 b and p 256 j to p 257 a c d, post); dictum of Lord Diplock in F
Hoffmann-La Roche & Co AG v Secretary of State for Trade and Industry [1974] 2 All ER 1128 at 11491150, 1152 followed.

Notes
For an undertaking in damages as a condition of being granted an interlocutory injunction, see 24 Halsburys Laws (4th edn)
paras 10721076, and for cases on the subject, see 28(4) Digest (2nd reissue) 397402, 68626919.
For the Shops Act 1950, s 47, see 19 Halsburys Statutes (4th edn) (1990 reissue) 424.
For the Local Government Act 1972, s 222, see 25 Halsburys Statutes (4th edn) (1990 reissue) 340.

Cases referred to in judgments

A-G v Logan [1891] 2 QB 100, DC.
A-G Wright [1987] 3 All ER 579, [1988] 1 WLR 164.
Allen v Jambo Holdings Ltd [1980] 2 All ER 502, [1980] 1 WLR 1252, CA.
American Cyanamid Co v Ethicon Ltd [1975] 1 All ER 504, [1975] AC 396, [1975] 2 WLR 316, HL.
Amministrazione delle Finanze dello Stato v Simmenthal SpA Case 106/77 [1978] ECR 629.
Bourgoin SA v Ministry of Agriculture Fisheries and Food [1985] 3 All ER 585, [1986] QB 716, [1985] 3 WLR 1027, QBD and
CA.
Director General of Fair Trading v Tobyward Ltd [1989] 2 All ER 266, [1989] 1 WLR 517.
Factortame Ltd v Secretary of State for Transport (No 1) [1989] 2 All ER 692, [1990] 2 AC 85, [1989] 2 WLR 997, HL.
Factortame Ltd v Secretary of State for Transport (No 2) Case C-213/89 [1991] 1 All ER 70, [1991] 1 AC 603, [1990] 3 WLR
818, CJEC and HL.
Gateshead Metropolitan BC v Texas Homecare Ltd and Great Mills (North) Ltd (1 November 1988, unreported), Ch D at
Newcastle.
Hammersmith London Borough v Magnum Automated Forecourts Ltd [1978] 1 All ER 401, [1978] 1 WLR 50, CA.
Hoffmann-La Roche (F) & Co AG v Secretary of State for Trade and Industry [1974] 2 All ER 1128, [1975] AC 295, [1974] 3
WLR 104, HL.
241
London City Corp v Bovis Construction Ltd (1988) 86 LGR 660, CA.
R v Goldstein [1983] 1 All ER 434, [1983] 1 WLR 151, HL.
R v Licensing Authority, ex p Smith Kline & French Laboratories Ltd (Generics (UK) Ltd intervening) (No 2) [1989] 2 All ER
113, [1990] 1 QB 574, [1989] 2 WLR 378, CA.
Rochdale BC v Anders [1988] 3 All ER 490.
Sierbien v Westminster City Council (1987) 86 LGR 431, CA.
Smith (WH) Do It All Ltd v Peterborough City Council, Payless DIY Ltd v Peterborough City Council [1991] 4 All ER 193,
[1991] 1 QB 304, [1990] 3 WLR 1131, DC,.
Smith v Inner London Education Authority [1978] 1 All ER 411, CA.
Stoke-on-Trent City Council v B & Q (Retail) Ltd [1984] 2 All ER 332, [1984] AC 754, [1984] 2 WLR 929, HL.
Stoke-on-Trent City Council v B & Q plc, Norwich City Council v B & Q plc [1991] 4 All ER 221, [1991] Ch 48, [1991] 2 WLR
42.
Stoke-on-Trent City Council v Toys R Us Ltd (18 October 1990, unreported), Ch D.
Torfaen BC v B & Q plc Case 145/88 [1990] 1 All ER 129, [1990] 2 QB 19, [1990] 2 WLR 1330, CJEC.
Union Dpartmentale des Syndicats CGT de lAisne v Sidef Conforama Case C-312/89, Criminal proceedings against A
Marchandise Case C-332/89(1991) Times, 6 March, CJEC.

Cases also cited or referred to in skeleton arguments

B & Q Ltd v Shrewsbury and Atcham BC [1990] 3 CMLR 535, Crown Ct at Shrewsbury.
Bosch (Robert) GmbH v Hauptzollamt Hildesheim Case 135/77 [1978] ECR 855.
Gouriet v Union of Post Office Workers [1977] 3 All ER 70, [1978] AC 435, HL.
Imperial Tobacco Ltd v A-G [1980] 1 All ER 866, [1981] AC 718, HL.
Newberry v Cohens (Smoked Salmon) Ltd, Newberry v Adelson (1956) 54 LGR 343, DC.
North Western Leicestershire DC v Gramlo Ltd [1988] CA Transcript 410.
Portsmouth City Council v Richards (1988) 87 LGR 757, CA.
Stoke-on-Trent City Council v B & Q (Retail) Ltd [1983] 2 All ER 787, [1984] Ch 1, CA; affd [1984] 2 All ER 332, [1984] AC
754, HL.
Thomas v Chief Adjudication Officer [1991] 3 All ER 315, [1991] 2 WLR 886, CA.
Wardale v Binns [1946] 2 All ER 100, [1946] KB 451, DC.

Interlocutory appeals

Kirklees BC v Wickes Building Supplies Ltd

Wickes Building Supplies Ltd (Wickes) appealed from the decision of Mervyn Davies J given on 14 May 1990([1990] 1 WLR
1237) whereby, without requiring a cross-undertaking in damages, the plaintiff, Kirklees Borough Council, he granted an
injunction restraining Wickes until after judgment or until further order from using or causing or permitting to be used any
premises within the Kirklees area as a retail do-it-yourself centre or for the purpose of any other retail trade or business on
Sundays except for the purpose of carrying out transactions exempted from the operation of s 47 of and Sch 5 to the Shops Act
1950. The facts are set out in the judgment of Dillon LJ.

Mendip DC v B & Q plc

B & Q plc (B & Q), appealed from a decision of Mummery J given on 1 August 1990([1991] 1 CMLR 113) whereby, without
requiring a cross-undertaking in damages, the plaintiff, Mendip District Council, he granted an injunction restraining B & Q until
trial or further order in the meantime whether by its 242 directors or officers or servants or agents or any of them or otherwise
howsoever from opening or causing or permitting to be opened on Sundays its premises at Wirral Park, Glastonbury for the
serving of customers in breach of s 47 of the Shops Act 1950. The facts are set out in the judgment of Dillon LJ.
The cases were heard together.

Andrew Collins QC and Paul Lasok for Wickes.

Stuart Isaacs QC and Timothy Straker for the Kirklees council.
John EA Samuels QC, Gerald Barling and Nicholas Davidson for B & Q.
Stuart Isaacs QC and Neil Calver for the Mendip council.

Cur adv vult

30 April 1991. The following judgments were delivered.

DILLON LJ. The court has before it two interlocutory appeals which raise the same issue.
One is an appeal by the defendant in the first above-mentioned action, Wickes Building Supplies Ltd (Wickes), against an
order of Mervyn Davies J of 14 May 1990 whereby he granted the plaintiffs in that action, the Kirklees Borough Council, an
injunction restraining Wickes until judgment or further order from using or causing or permitting to be used any premises within
the Kirklees area as a retail do-it-yourself centre or for the purpose of any other retail trade or business on Sundays except for the
purpose of carrying out transactions exempted from the operation of s 47 of the Shops Act 1950 by Sch 5 to that Act (see [1990]
1 WLR 1237). That injunction applies in particular to premises of Wickes at Huddersfield and Dewsbury.
 The other appeal is an appeal by the defendant in the second above-mentioned action, B & Q plc (B & Q), against an order
of Mummery J of 1 August 1990 whereby he granted the plaintiffs in that action, the Mendip District Council, an injunction
restraining B & Q until judgment or further order from opening or causing or permitting to be opened on Sundays B & Qs
premises at Wirrall Park, Glastonbury for the serving of customers in breach of s 47 of the Shops Act 1950(see [1991] CMLR
113).
The special factor in these two appeals which distinguishes them from the numerous other Sunday trading cases which have
previously come before this court is that Mervyn Davies J decided that it was appropriate to grant the injunction without
requiring the usual cross-undertaking in damages from the plaintiff council. Mummery J in the Mendip case followed the
decision of Mervyn Davies J. We were told by counsel that since the decision of Mervyn Davies J the judges of the Chancery
Division have granted as many as 100 interlocutory injunctions to local authorities to restrain Sunday trading without requiring
those authorities to give cross-undertakings in damages.
The criminal and civil courts in this country have had to deal for quite a few years past with the enforcement of s 47 at the
suit of local authorities in England or Wales against retailers, and in particular retailers owning chains of DIY shops, which object
to keeping their shops closed on Sundays. The Scottish courts have not been troubled by the problem since there is no
comparable legislation in force in Scotland.
Latterly the retailers have asserted, as a defence to claims to enforce s 47 243whether in the criminal or civil courts, that s
47 is contrary to art 30 of the EEC Treaty and is thus void and unenforceable. Article 30 provides, in now familiar wording, that:

Quantitative restrictions on imports and all measures having equivalent effect shall be prohibited between Member
States.

It is common ground that art 30 creates rights in those injured by its infringement which are directly enforceable in the
national courts of the member states of the Community.
There has already been one decision of the Court of Justice of the European Communities in relation to s 47. That was
Torfaen BC v B & Q plc Case 145/88 [1990] 1 All ER 129, [1990] 2 QB 19 on a reference by the Cwmbran Magistrates Court in
the course of criminal proceedings against B & Q in that court. The decision of the European Court in the Torfaen case has also
been considered by the European Court in two further cases, both heard and decided together: Union Dpartmentale des
Syndicats CGT de lAisne v Sidef Conforama Case C-312/89 and Criminal proceedings against A Marchandise Case C-
332/89(1991) Times, 6 March in which the European Court upheld the validity of the Sunday trading restrictions of France and
Belgium.
The actual ruling of the European Court in the Torfaen case [1990] 1 All ER 129 at 157, [1990] 2 QB 19 at 53 was:

art 30 of the Treaty must be interpreted as meaning that the prohibition which it lays down does not apply to
national rules prohibiting retailers from opening their premises on Sunday where the restrictive effects on Community trade
which may result therefrom do not exceed the effects intrinsic to rules of that kind.

In para 16 of the judgment it is stated that the question whether the effects of specific national rules do in fact remain within
the limits permissible in relation to art 30 is a question of fact to be determined by the national court (see [1990] 1 All ER 129 at
156, [1990] 2 QB 19 at 53).
That ruling in the Torfaen case has been interpreted by the European Court in para 10 of its judgment in the Conforama case
and in the corresponding paragraph of its judgment in the Marchandise case as follows:

In the Torfaen judgment the Court ruled, in relation to similar national legislation prohibiting the opening of retail
shops on Sundays, that such a prohibition was not compatible with the principle of the free movement of goods provided
for in the Treaty unless any obstacle to Community trade thereby created did not exceed what was necessary in order to
ensure the attainment of the objective in view and unless that objective was justified with regard to Community law.

By way of apparent contrast to the ruling in the Torfaen case, however, the actual ruling of the European Court in the
Conforama and Marchandise cases was:

The prohibition contained in art 30 of the Treaty, properly construed, does not apply to national legislation prohibiting
the employment of staff on Sundays.

Mr Isaacs QC has, consequently, submitted that by its decisions in the Conforama and Marchandise cases the European
Court has tacitly rejected the view expressed in para 16 of the judgment in the Torfaen case. It follows therefore, he says, that the
application of art 30 is a matter of Community law for the European Court and that the decision in the Conforama and
Marchandise cases upholding the 244 French and Belgian Sunday trading laws necessarily involve that art 30 does not apply to s
47. He submits therefore that this court should deal with these appeals on the footing that Wickes and B & Q have no European
law defence to the claims against them.
I do not regard it as at all clear that the European Court has resiled, as Mr Isaacs suggests, from the view expressed in para
16 in its judgment in the Torfaen case. There is nothing on the face of the judgments in the Conforama and Marchandise cases to
explain why the actual decisions in those cases are worded differently from the wording of the decision in the Torfaen case. If
therefore it was necessary to reach a conclusion on these submissions of Mr Isaacs in order to dispose of the present appeals, I
should feel bound to direct a fresh reference to the European Court.
Mr Isaacs takes the further point that the issues of European law as to the application of the Torfaen case on which Wickes
and B & Q seek to rely have been decided in favour of local authorities by Hoffmann J in a final, as opposed to interlocutory,
judgment in Stoke-on-Trent Council v B & Q plc, Norwich City Council v B & Q plc [1991] 4 All ER 221, [1991] Ch 48. He
points out that that judgment was referred to by Sir Nicolas Browne-Wilkinson V-C in Stoke-on-Trent City Council v Toys R Us
Ltd (18 October 1990, unreported) as a definitive judgment so far as courts at first instance are concerned. That judgment of
Hoffmann J is however the subject of a leap-frog appeal to the House of Lords which is due to be heard next month, and it is not
for this court to attempt to predict the decision of the House of Lords.
We must therefore approach these interlocutory appeals on the footing that it is possible that the House of Lords may take a
different view of the law to that of Hoffman J and/or that the European Court may give a further ruling which is contrary, in its
application to s 47, to the submissions of Mr Isaacs as to the effect of the decisions in the Conforama and Marchandise cases. In
saying this, I am comforted by the well-known observations of Sir Robert Megarry V-C as to the open-and-shut case which
turned out not to be so etc.
It was submitted for Wickes and B & Q that so long as EEC law has not been finally determined against them they have an
arguable defence to any prosecution for Sunday trading which might be brought against them under the Shops Act 1950, and that
therefore it is wrong and inappropriate for the plaintiff councils to invoke the civil law and relief by way of injunction in civil
proceedings against them. On the view I take on the issues as to the cross-undertaking in damages it is unnecessary to consider
that submission.
The issues as to the cross-undertaking are fundamental because the two councils made it plain in the courts below and again
in argument in this court that they are not prepared to give any cross-undertaking in damages. If therefore this court is of the
view that the judges below were wrong to dispense with the cross-undertaking, these appeals must be allowed and the injunctions
granted at first instance must be discharged.
The history of the cross-undertaking in damages is conveniently set out by Lord Diplock in his speech in F Hoffmann-La
Roche & Co AG v Secretary of State for Trade and Industry [1974] 2 All ER 1128 at 11491151, [1975] AC 295 at 360361. Its
importance is further underlined in Lord Diplocks speech in American Cyanamid Co v Ethicon Ltd [1975] 1 All ER 504 at 509
511, [1975] AC 396 at 407409. As Lord Diplock stated in the Hoffmann-La Roche case [1974] 2 All ER 1128 at 1150, [1975]
AC 295 at 360:

By the end of the [nineteenth] century the insertion of such an undertaking in all orders for interim injunctions granted
in litigation between subject and subject had become a matter of course.

245
Even in Allen v Jambo Holdings Ltd [1980] 2 All ER 502, [1980] 1 WLR 1252, where an interlocutory injunction had been
obtained by a legally aided plaintiff who had very few assets to support the cross-undertaking and the defendant applied, albeit
unsuccessfully, for the injunction to be discharged on the ground of the plaintiffs impecuniosity, the cross-undertaking was given
for what it was worth. So far as my own experience goes, it was the universal practice, as between subjects, to require the cross-
undertaking however overwhelmingly strong the plaintiffs case might appear to be, since it was not the function of the court,
hearing an application for an interlocutory injunction, to anticipate the outcome of the trial. A plaintiff who was not willing to
give the cross-undertaking could not obtain an interlocutory injunction; he would have to press for a speedy trial without interim
relief, or, if circumstances permitted, obtain a judgment under RSC Ord 14(or a default judgment or judgment on admissions).
There was however an exception in favour of the Crown. It was the practice, before the Crown Proceedings Act 1947, not to
require the cross-undertaking as to damages from the Crown when the Crown obtained an interlocutory injunction. The reasons
for that practice are examined by the House of Lords in the Hoffmann-La Roche case. In that case their Lordships, affirming the
decision of this court, held, according to the summary in the headnote, that in a case where the Crown sought by injunction to
enforce what was prima facie the law of the land, the person against whom it sought the injunction was required to show very
good reason why the Crown should be required to give the cross-undertaking as a condition on being granted the injunction.
In the first of the appeals before us, Mervyn Davies J extended the Crowns exemption recognised in the Hoffmann-La
Roche case to cases where a local authority as plaintiff is seeking under statutory powers to enforce within its area what is
claimed to be the law. That course was followed by Mummery J in the second appeal and by other judges in numerous other
cases as already mentioned. Mervyn Davies J may have thought that he was merely exercising his discretion in the particular
case before him, but what he has in fact done is to lay down a new principle of law. This court is therefore fully entitled to
consider whether that new principle is justified, as a matter of domestic law or in the context of European law.
I consider European law first.
It is now clear, and accepted by both sides from the decisions of the European Court in Amministrazione delle Finanze dello
Stato v Simmenthal SpA Case 106/77 [1978] ECR 629 and Factortame Ltd v Secretary of State for Transport (No 2) Case C-
213/89 [1991] 1 All ER 70, [1991] 1 AC 603 that where a provision of national legislation is in conflict with a requirement of
Community law, the national court, having a duty to give effect to that requirement of Community law, has immediate power to
override the national legislative provision, and does not have to await the setting aside of that provision by legislative or other
constitutional means or by specific decision of the European Court (see the Simmenthal decision [1978] ECR 629 at 643
644(paras 1326).
The examination by the European Court in the Simmenthal decision was to ascertain what consequences flowed from the
direct applicability of a provision of Community law in the event of incompatibility with a legislative provision of a member state
(para 13). The conclusion in para 25 was that the setting aside of the incompatible legislative provision of the member state
must in every case have unrestricted retroactive effect so as to prevent the rights in question from being in any way adversely
affected.
It is the duty of the national court to ensure the legal protection which persons 246 derive from the direct effect of provisions
of Community law (see the Factortame decision [1991] 1 All ER 70 at 105, [1991] 1 AC 603 at 643644(para 19)).
If therefore Wickes and B & Q are right that s 47 of the Shops Act 1950 is incompatible with art 30 of the EEC Treaty and is
thereby overriden, they have a current right to open their stores for Sunday trading, and it is the duty of the national courts to
protect that right.
If there is no cross-undertaking, the right to trade on Sunday will, assumedly, be established at the trial, but without the
unrestricted retroactive effect required by the Simmenthal case. In that event, Wickes and B & Q will have been adversely
affected by having been restrained by injunctions from Sunday trading pending the trial, without any compensation. On the facts
that is clearly proved.
Consequently, in my judgment, the court is under European law bound to require cross-undertakings in damages from the
plaintiff authorities if interlocutory injunctions to restrain Sunday trading until judgment or further order are to be granted.
That in itself leads to the conclusion that these appeals must be allowed, since the cross-undertakings are not forthcoming.
On this aspect the courts below had, and this court has, no discretion.
I am however further of the view that, even as a matter of domestic law, Mervyn Davies J was wrong to extend to local
authorities the Crown immunity from giving a cross-undertaking in damages which was upheld in the Hoffmann-La Roche case.
The present, and similar, proceedings are brought by local authorities under s 222 of the Local Government Act 1972, which
provides:

(1) Where a local authority consider it expedient for the promotion or protection of the interests of the inhabitants of
their area(a) they may prosecute or defend or appear in any legal proceedings and, in the case of civil proceedings, may
institute them in their own name

Before the enactment of that section, a local authority could not bring civil proceedings for an injunction in its own name. It
could only come to court for such relief as the relator in a relator action brought by the Attorney General.
But though a relator action was always brought to enforce public rights or public law, it was accepted practice, never
challenged, that if an interlocutory injunction was sought the relator, although not the Attorney General, must give the usual
cross-undertaking in damages. So equally after s 222 was enacted, local authorities which instituted proceedings in their own
names for injunctions habitually gave the cross-undertakings if they obtained interlocutory injunctions.
If a contrary rule is now to apply, it is only to apply when a local authority is seeking to enforce the law as declared in a
public and general Act of Parliament, or in a statutory instrument made under a public and general Act of Parliament? Or is it to
extend to the enforcement of provisions in a local Act of Parliament, of which there are many promoted by local authorities, or
provisions in the local authoritys own byelaws? If the dispensation extends so far, does it also extend to statutory corporations,
such as those established to run the nationalised industries? These have a duty to provide services in the public interest, and some
such as British Rail may need to obtain injunctions to protect those services in the public interest. Moreover some statutory
corporations have statutory powers to make and enforce byelaws which are binding on the public. Privately owned companies
such as water companies which acquired formerly nationalised undertakings on privatisation may have similar powers.
247
 The position of the Crown has, in my judgment, always been regarded as exceptional, and is still to be so regarded. See
Factortame Ltd v Secretary of State for Transport (No 1) [1989] 2 All ER 692, [1990] 2 AC 85 in so far as the House of Lords
there overruled the majority decision of this court in R v Licensing Authority, ex p Smith Kline & French Laboratories Ltd
(Generics (UK) Ltd intervening) (No 2) [1989] 2 All ER 113, [1990] 1 QB 574. I see no need to extend, and no sufficient
justification for extending, to local authorities the special privilege of the Crown not to give a cross-undertaking as to damages
when it obtains an interlocutory injunction. That privilege, as upheld in the Hoffmann-La Roche case [1974] 2 All ER 1128,
[1975] AC 295, was a privilege of the Crown alone.
In my judgment, Mervyn Davies J misdirected himself on this point, and on this ground also I would allow these appeals.
The cross-undertaking is exacted as a matter of elementary fairness when an interlocutory injunction is granted in advance
of the determination of the parties rights at a trial. No doubt local authorities would the more readily start proceedings to enforce
this that or the other law and apply for interlocutory injunctions to that end if they knew that if they failed at the trial to establish
infringement, and so the injunctions should never have been granted, they would still be free from all liability to compensate the
other party for loss occasioned by the injunction wrongly granted. They would be similarly encouraged if they knew that if they
failed they would not have to pay the costs of the other party, but that has never been the law. Moreover it is for the legislature,
and not the courts, to yield, if so minded, to the threat of the local authorities that unless they are accorded the privileged position
of the Crown in relation to the cross-undertaking they will not perform their duty under s 71 of the Shops Act 1950 to enforce s
47, if it is valid under Community law, by the only means of enforcement which have proved effective, sc by injunction.

MANN LJ. I gratefully adopt the description of the circumstances giving rise to these two interlocutory appeals which has been
given by Dillon LJ. The appeals raise only one question. It is this. Were the judges in the courts below correct in principle when
they exercised their discretion so as to grant interim injunctions to the respondent plaintiffs without those plaintiffs having first
given an undertaking in damages? The question is so confined because each appellant defendant would have submitted to an
injunction until trial or order had the undertaking been given. The question raises issues of some general importance.
The practice of refusing an interim injunction where a plaintiff refuses to give an undertaking in damages is of long
standing. To require an undertaking is the usual course where it would afford protection to the defendant against loss sustained
by him in refraining from doing what he may (however improbably) establish he was entitled to do. There is no dispute but that
an undertaking would protect the defendants against loss caused by the closure of their shops on Sundays. Had that not been so,
then other matters would have arisen for consideration in that there would have had to be struck a balance of convenience having
regard to all the circumstances of the case. Examples of such a process are Allen v Jambo Holdings Ltd [1980] 2 All ER 502,
[1980] 1 WLR 1252, where an undertaking had been given by a plaintiff who was impecunious, and Factortame Ltd v Secretary
of State for Transport (No 2) Case C-213/89 [1991] 1 All ER 70, [1991] 1 AC 603, where an undertaking would have had no
effective meaning.
Mervyn Davies J departed from the usual course in the Kirklees case and gave his reasons for departure as follows ([1990] 1
WLR 1237 at 12461247):

In my view I do have a discretion [to dispense with an undertaking]. I say that because if the practice of exacting
an undertaking is not applied as of 248 course against the Crown as a condition of the grant of an interlocutory injunction
in a law enforcement action then the practice ought not to be applied as of course against a local authority when the local
authority engages in its law enforcement duties.

Mummery J in the Mendip case understandably thought it appropriate that he should follow Mervyn Davies J in what was an
indistinguishable situation (see [1991] 1 CMLR 113 at 118(para 16)). We were told that over 100 interim injunctions in restraint
of Sunday trade have now been granted in the Chancery Division on a similar basis.
Section 222(1) of the Local Government Act 1972 enables a local authority to institute legal proceedings in their own name
where they consider it expedient for the promotion or protection of the interests of the inhabitants of their area This
provision enables a local authority to seek an injunction to restrain breaches of an enactment, and in particular of s 47 of the
Shops Act 1950(see Stoke-on-Trent City Council v B & Q (Retail) Ltd [1984] 2 All ER 332, [1984] AC 754). I need not pause
upon the criteria which they must satisfy before final relief can be granted (see as to these, London City Corp v Bovis
Construction Ltd (1988) 86 LGR 660 at 682 per Bingham LJ). Until the enactment of s 222(1) a local authority could not
(special provision apart) enforce for the public good in their own name a statutory or other provision, but had to secure the
authority of the Attorney General to institute proceedings in his name at their relation. Relator actions at the instance of local
authorities were not uncommon. In proceedings at the relation of a local authority in order to enforce the law, the Attorney
General was exercising his right to act on behalf of the Crown as parens patriae in order to restrain wrongful conduct which
injuriously affected the public. If an interim injunction was sought in a relator action then an undertaking in damages was
required from the relator (see F Hoffmann-La Roche & Co AG v Secretary of State for Trade and Industry [1974] 2 All ER 1128
at 1152, [1975] AC 295 at 363 per Lord Diplock). There are many reported instances of local authorities giving such
undertakings, and that this was the price of interim relief in a relator action was never questioned even although the relator was
not a party to the proceedings (see A-G v Logan [1891] 2 QB 100 at 106).
Once it had become established that the 1972 Act enabled local authorities to apply for the restraint of unlawful conduct,
they turned to consider whether applications for interim relief in actions to enforce s 47 need be supported by an undertaking in
damages. The first reported case is Rochdale BC v Anders [1988] 3 All ER 490, where Caulfield J refused an injunction in the
absence of an undertaking. In Gateshead Metropolitan BC v Texas Homecare Ltd and Great Mills (North) Ltd (1 November
1988, unreported), his Honour AJ Blackett-Ord sitting as a deputy judge of the High Court at Newcastle, said that the practice of
the court varied. He granted an injunction without an undertaking on substantially the same ground as that subsequently relied on
by Mervyn Davies J in the Kirklees case. The ground equates the local authoritys position with that of the Crown when bringing
a law enforcement action.
The position of the Crown in regard to an undertaking was considered by the House of Lords in the Hoffmann-La Roche
case [1974] 2 All ER 1128, [1975] AC 295. The House decided that since the Crown Proceedings Act 1947 allowed the recovery
of damages by action against the Crown, the former practice of never requiring a cross-undertaking from the Crown was one
which could be examined. The result of this examination was that there is no longer any reason in an action to enforce a private
law right why the Crown should not have to pay the price for interim relief which is ordinarily paid by the subject. However, the
action before the House was not an action to enforce a private law right. The interim relief was 249 claimed in an action for an
injunction to enforce a statutory order with which compliance was by statute enforceable by civil proceedings by the Crown for
an injunction (Monopolies and Restrictive Practices (Inquiry and Control) Act 1948, s 11(2)). The House of Lords held that
in such an action an undertaking ought not ordinarily to be required. Lord Reid said ([1974] 2 All ER 1128 at 1134, [1975] AC
295 at 341):

this is a case in a different and novel field. No doubt it was thought that criminal penalties were inappropriate as a
means of enforcing orders of this kind, and the only method of enforcement is by injunction. Dealing with alleged
breaches of the law is a function of the Crown (or of a department of the executive) entirely different in character from its
function in protecting its proprietary right. It has more resemblance to the function of prosecuting those who are alleged to
have committed an offence. A person who is prosecuted and found not guilty may have suffered serious loss by reason of
the prosecution, but in general he has no legal claim against the prosecutor. In the absence of special circumstances I see
 no reason why the Crown, in seeking to enforce orders of this kind, should have to incur legal liability to the person alleged
to be in breach of the order.

Lord Morris of Borth-y-Gest drew attention to the character of the proceedings as being that of law enforcement (see [1974]
2 All ER 1128 at 1142, [1975] AC 295 at 351). Lord Diplock said ([1974] 2 All ER 1128 at 11521153, [1975] AC 295 at 364):

even before the passing of the Crown Proceedings Act 1947 the fact that the suit was brought to enforce jus
publicum was not of itself sufficient to displace the ordinary rule that a defendant was entitled to the usual undertaking in
damages as a condition of the grant of any interlocutory injunction against him; though the undertaking was exacted from
the relator and not from the Crown on whose behalf the Attorney-General was the nominal plaintiff in the suit. I see no
reason since the passing of the 1947 Act why a rigid rule that the Crown itself should never be required to give the usual
undertaking in damages should be retained in those law enforcement actions where the Crown now sues without a relator.
Nevertheless, the converse does not follow that in this type of action the court, in granting an interim injunction, ought
always to require an undertaking as to damages from the Crown. A relator owes no duty to the public to initiate any law
enforcement action. He does not usually do so unless he or a section of the public that he represents has some special
interest to protect in enforcing that particular law, that is not shared by the public at large. Even if he has no special interest
and it is not essential that he shouldhis action nevertheless is that of an officious, though well-meaning, bystander who
is content merely to stand by. When, however, a statute provides that compliance with its provisions shall be enforceable
by civil proceedings by the Crown for an injunction, and particularly if this is the only method of enforcement for which it
provides, the Crown does owe a duty to the public at large to initiate proceedings to secure that the law is not flouted, and
not simply to leave it to the chance that some relator may be willing to incur the expense and trouble of doing so. I agree,
therefore, with all your Lordships that the practice of exacting an undertaking in damages from the Crown as a condition of
the grant of an interlocutory injunction in this type of law enforcement action ought not to be applied as a matter of course,
as it should in actions between subject and subject, in relator actions, and in actions by the Crown to enforce or to protect
its proprietary or contractual rights. On the contrary, the 250 propriety of requiring such an undertaking from the Crown
should be considered in the light of the particular circumstances of the case.

In the light of the speeches in the Hoffmann-La Roche case there is no doubt that in an action by the Crown to enforce by the
prescribed method the terms of a statute or other provision, the court can depart from ordinary practice and not require a cross-
undertaking unless the circumstances are such that one ought to be required. A real doubt as to the validity of the statute or other
provision might be such a circumstance. On the basis that a local authority is in the same position as the Crown, Mervyn Davies
and Mummery JJ thought there were no circumstances requiring an undertaking in the cases before them. Whether or not there
were, was extensively discussed before us, but there was no occasion for the discussion if the basis is unsound.
If a local authority seeking to enforce the law by civil action is to be regarded as being in the same position as the Crown,
then the effect of s 222(1) of the 1972 Act will have been to open the possibility of the authority securing interim relief without
giving the undertaking which would have been required of them as a matter of course in a relator action. This change will have
altered the position of those against whom the provisions of, for example, the 1950 Act, are sought to be enforced by civil action,
and will have altered it to their detriment by depriving them of a customary protection (as to the general value of which see
Hammersmith London Borough v Magnum Automated Forecourts Ltd [1978] 1 All ER 401 at 405, [1978] 1 WLR 50 at 55 per
Lord Denning MR). I see no reason for such a surprising change. It was pressed upon us that local authorities were now
performing law enforcement functions of their own. As a general proposition that is unexceptionable, but it by no means follows
that the Crown and a local authority should be equated in regard to the requirement of an undertaking. The decision in the
Hoffmann-La Roche case is not about law enforcement actions in general. It is specifically about actions by the Crown under a
statute providing a prescribed means of law enforcement. The decision may extend to proceedings to enforce a public right
brought by the Attorney General ex officio, and in A-G v Wright [1987] 3 All ER 579 at 581, [1988] 1 WLR 164 at 166 Hoffmann
J held that it did. Nevertheless in my judgment and granted the consequences to which I have referred, there is no reason to
extend the decision in regard to the Crown to some or all actions by a local authority under s 222(1) of the 1972 Act. I say some
or all for there is no perceptible limitation. I express no opinion upon the case where a local or other public authority brings a
civil action under a statute which prescribes that action as being the only method of enforcing a law which they are obliged to
enforce. Suffice to say such a case might be closer to the reasoning of Lord Diplock in the Hoffmann-La Roche case and would
require a consideration of Director General of Fair Trading v Tobyward Ltd [1989] 2 All ER 266, [1989] 1 WLR 517.
It was suggested that unless a local authority is ordinarily not to be required to give an undertaking, the authority might be
deterred from exercising its power to take civil proceedings in aid of its duty to enforce the criminal law under s 71 of the 1950
Act for fear of the consequences of ultimately being proved wrong. An argument based upon an apprehended pusillanimity is not
in my view sufficient to displace the ordinary practice. The root of any problem there may be is the notorious inadequacy of the
fines impossible in the prescribed enforcement process. I believe that before 1972 most actions at the relation of a local authority,
and after 1972 most s 222 actions to enforce a public right, have been actions where the process of prosecution has had, or may
have, no deterrent effect. Adequacy of penalty in any context is a consideration for the legislature.
The two cases under appeal are cases where, for the reasons which I have given, 251the ordinary practice should have been
followed and an undertaking required. The plaintiffs refused (and still refuse) to give an undertaking, and accordingly in my
judgment the injunctions should not have been granted.
There is a second reason in my judgment why the injunctions must be discharged. The defendants claim that art 30 of the
EEC Treaty confers upon them the right to open their shops for the serving of customers on Sunday notwithstanding s 47 of the
1950 Act. Article 30 is an article which has direct effect, and is one to which a national court must give effect notwithstanding
any conflicting provisions of national legislation (see Amministrazione delle Finanze dello Stato v Simmenthal SpA Case 106/77
[1978] ECR 629). Whether the art 30 claim is well founded is in dispute. Similar claims have been, and are to be, considered by
the courts here and by the Court of Justice of the European Communities. In Torfaen BC v B & Q plc Case 145/88 [1990] 1 All
ER 129 at 157, [1990] 2 QB 19 at 53 the Court of Justice (Sixth Chamber) ruled as follows:

art 30 of the Treaty must be interpreted as meaning that the prohibition which it lays down does not apply to
national rules prohibiting retailers from opening their premises on Sunday where the restrictive effects on Community trade
which may result therefrom do not exceed the effects intrinsic to rules of that kind.

The determination of whether effects on trade exceed the effects which are intrinsic was said to be a matter for the national
courts (see [1990] 1 All ER 129 at 156, [1990] 2 QB 19 at 53). In Stoke-on-Trent City Council v B & Q plc, Norwich City
Council v B & Q plc [1991] 4 All ER 221, [1991] Ch 48, Hoffmann J applied the Torfaen case and decided that s 47 was not
disproportionate. Accordingly it did not conflict with art 30 which therefore did not confer a right upon the trader. The learned
judge gave a certificate under s 12(1) of the Administration of Justice Act 1960, and the Appeal Committee subsequently allowed
a petition by the trader for leave to appeal. The appeal is shortly to be heard.
National courts are obliged to protect rights conferred by European law which have direct effect (see the Simmenthal case).
There is here an asserted right under the EEC Treaty. It is not a groundless assertion, as is adequately demonstrated by the
willingness of the House of Lords to entertain it. The existence of the right now awaits the decision of the House or of the Court
of Justice upon any reference made by the House or upon a reference which has already been made by a stipendary magistrate
sitting at Reading. If the right is established, then it must be established with unrestricted retrospective effect (see the
Simmenthal case [1978] ECR 629 at 644645(para 25)). To grant an interim injunction without the protection (which here would
be adequate) of an undertaking in damages would preclude effective retrospective effect if the right is ultimately established for
there would be no recompense for the period of inhibition. Mr Stuart Isaacs QC sought to avoid the conclusion which must
inevitably follow from this proposition by arguing that the full European Court has recently developed the ruling by its Sixth
Chamber in the Torfaen case by ruling that provisions similar to s 47 of the 1950 Act are not in conflict with art 30, and that
accordingly it is now conclusively determined that Sunday traders have no right derived from art 30( Union Dpartmentale des
Syndicats CGT de lAisne v Sidef Conforama Case C-312/89 and Criminal proceedings against A Marchandise Case C-
332/89(1991) Times, 6 March). It is by no means clear to me whether and to what extent the Torfaen case has been developed.
The answer can be given only in the future by the Court of Justice. As matters are, it follows from my proposition that if interim
relief is to be granted the court must (not may) require that there be the protection afford by an undertaking. The protection was
(and is) not offered. It cannot be imposed, 252and accordingly here is a second ground (not argued below) why the injunction
should not have been granted.
I would allow both appeals.

BELDAM LJ. I, too, am grateful to Dillon LJ for his description of the origin and history of these two appeals which I
gratefully adopt. I also agree that the result of the appeals turns upon the question whether in the circumstances of the two cases
under appeal it was just and convenient to grant the respondents an interlocutory injunction, notwithstanding that they were
unwilling or unable to ive an undertaking to pay any damages occasioned by the making of the order should the appellants
succeed at trial.
There is no doubt in my mind that the respondents satisfied the criteria for showing that the grant of an injunction was
necessary if they were to fulfil their duty of enforcing s 47 of the Shops Act 1950. I am satisfied that, in the words of Bingham
LJ in London City Corp v Bovis Construction Ltd (1988) 86 LGR 660 at 682, the respondents laid the essential foundation for the
grant of such an injunction in showing that the appellants would continue to open their stores for trade on Sundays unless and
until they were effectively restrained from doing so and that nothing short of an injunction would be effective for this purpose.
There remains the question whether, since the ruling of the Court of Justice of the European Communities in Torfaen BC v B
& Q plc Case 145/88 [1990] 1 All ER 129, [1990] 2 QB 19, the appellants conduct was unlawful. Since that ruling, the
appellants have argued that to prove a breach of s 47 an enforcing local authority must satisfy the requirement of proportionality
by adducing evidence directed to the three issues identified by Lord Diplock in R v Goldstein [1983] 1 All ER 434 at 435, [1983]
1 WLR 151 at 154. The appellants say that evidence is available to them which, if accepted, would lead at least to the conclusion
that the respondents had not satisfied the burden of proving that any obstacle to Community trade created by s 47 did not exceed
what was necessary to ensure the attainment of the objective of s 47. Upon the assumption that the objective was that identified
by the Advocate General in the Torfaen case, the requirement of proportionality remained to be satisfied.
The respondents raised two answers to the appellants arguments. The first was that no issue of fact to which evidence
needed to be directed remained for the court. It was not for the Court of Justice to rule on the compatibility of a national
provision with the EEC Treaty; the courts function was to provide the national court with all the criteria for the interpretation of
Community law which would enable the national court to assess that compatibility for the purpose of giving judgment in the case
before it. Either on the basis relied upon by Schiemann J in WH Smith Do It All Ltd v Peterborough City Council, Payless DIY
Ltd v Peterborough City Council [1991] 4 All ER 193, [1991] 1 QB 304 that no evidence was required because the answer was
obvious or upon the basis of the reasoning of Hoffmann J in Stoke-on-Trent City Council v B & Q plc, Norwich City Council v B
& Q plc [1991] 4 All ER 221, [1991] Ch 48, the court could be satisfied that s 47 was not incompatible with art 30.
It is necessary to consider whether the difficulties raised by the terms of the European Courts judgment in the Torfaen case
can be resolved in either of these ways for the decision in Stoke-on-Trent City Council v B & Q plc is shortly to be reviewed by
the House of Lords.
The second answer given by the respondent is that those difficulties have disappeared as a result of the rulings of the Court
of Justice in Union Dpartmentale des Syndicats CGT de lAisne v Sidef Conforma Case C-312/89 and Criminal proceedings
against A Marchandise Case C-332/89(1991) Times, 6 March. In those cases the 253 court was asked to rule on French and
Belgian legislation prohibiting the employment of workers in retail shops on Sunday which had comparable effect to s 47 of the
Shops Act 1950. The court, after referring to its judgment in the Torfaen case, stated (at para 12):

It must further be stated that the restrictive effects on trade which may stem from such rules do not seem
disproportionate to the aim pursued.

It then stated (at para 13):

In answer to the first question submitted it must therefore be held that the prohibition contained in Article 30 of the
Treaty properly construed does not apply to national legislation prohibiting the employment of staff on Sundays

I do not think it is open to this court to use the answer given by the Court of Justice to a question referred to it under art 177
on different legislation and in different cases to modify the criteria for interpretation of Community law as it applies to s 47 of the
1950 Act. Nor is it appropriate to do so on an application for interlocutory relief. There is, on the basis of the ruling in the
Torfaen case, a serious question to be tried whether in the cases of the appellants the respondents can satisfy the test that the
restrictive effects on trade stemming from s 47 are not disproportionate to the aim pursued.
In Amministrazione delle Finanze dello Stato v Simmenthal SpA Case 106/77 [1978] ECR 629 at 644(para 21) the Court of
Justice held that every national court must in a case within its jurisdiction apply Community law in its entirety and protect rights
which the latter confers on individuals. It is not disputed that the provisions of art 30 have direct effect. In Factortame Ltd v
Secretary of State for Transport (No 2) Case C-213/89 [1991] 1 All ER 70, [1991] 1 AC 603, it was made clear that national
courts are expected to ensure the full effectiveness of rights claimed under Community law by granting interim relief and that
prima facie it is the duty of the national court to do everything necessary to preserve the existence of rights so claimed. In the
course of his opinion in that case the Advocate General said the purpose of interim protection was-

to achieve that fundamental objective of every legal system, the effectiveness of judicial protection. Interim protection
is intended to prevent so far as possible the damage occasioned by the fact that the establishment and the existence of the
right are not fully contemporaneous from prejudicing the effectiveness and the very purpose of establishing the right, which
was also specifically affirmed by the court when it linked interim protection to a requirement that, when delivered, the
judgment will be fully effective

(See [1991] 1 All ER 70 at 93, [1991] 1 AC 603 at 630; the Advocate Generals emphasis.)
Later he referred to such protection as being a fundamental and an indispensable instrument of any judicial system which
seeks to achieve in the particular case and always in an effective manner the objective of determining the existence of a right and
more generally of giving effect to the relevant legal provision whenever the duration of the proceedings is likely to prejudice the
attainment of this objective and therefore to nullify the effectiveness of the judgment.
 If the respondents in the present appeal do not succeed in showing the compatibility of s 47 with art 30 of the EEC Treaty,
the appellants would undoubtedly suffer substantial damage. I agree that the normal means of securing that the appellants rights
are protected is by an undertaking in damages. But in the present case the respondents contend that they should not be required
to give 254 such an undertaking because they are seeking an injunction in aid of their public duty of enforcing the criminal law
and their position is therefore comparable to that of the Attorney General acting on behalf of the Crown. They further contend
that the reason they are unable to offer such an undertaking in damages is that if they had to consider the financial implications of
giving such an undertaking in every case, they could not justify a decision to bring proceedings of this kind under s 222 of the
Local Government Act 1972. Consequently, although they could still proceed by way of prosecution under s 71 of the Shops Act
1950, the law would remain effectively unenforceable. In the Factortame case the applicants were seeking to restrain the Crown
from enforcing a law which they claimed was in breach of obligations under articles of the Treaty. The House of Lords had held
that it had no power to grant interim relief in such a case against the Crown but the Court of Justice ruled that a national rule must
be disregarded if its effect was to prevent the courts from giving full effect to Community law. When after the European Courts
ruling the House considered under the guidelines established in American Cyanamid Co v Ethicon Ltd [1975] 1 All ER 504,
[1975] AC 396 whether to grant interim relief in that case, Lord Goff set out the matters which should guide a court in exercising
its discretion. His exposition was accepted by the House. He said ([1991] 1 All ER 70 at 119, [1991] 1 AC 603 at 672):

I turn to consider the impact on these guidelines of the public interest, with particular reference to cases in which a
public authority is seeking to enforce the law against some person and either the authority seeks an interim injunction to
restrain that person from acting contrary to the law, and that person claims that no such injunction should be granted on the
ground that the relevant law is, for some reason, invalid, or that other person seeks an interim injunction to restrain the
action of the authority on the same ground. I take the first stage. This may be affected in a number of ways. For example,
where the Crown is seeking to enforce the law, it may not be thought right to impose on the Crown the usual undertaking in
damages as a condition of the grant of an injunction: see F Hoffmann-La Roche & Co AG v Secretary of State for Trade
and Industry [1974] 2 All ER 1128, [1975] AC 295.

It is to be observed that Lord Goff expressed a possible reservation about imposing the usual undertaking in damages only in
the case of enforcement of the law by the Crown. He continued ([1991] 1 All ER 70 at 119120, [1991] 1 AC 603 at 672673):

there would be no remedy in damages available to the applicants in the present case for loss suffered by them by
reason of the enforcement of the 1988 Act against them, if the relevant part of the Act should prove to be incompatible with
European law (see Bourgoin SA v Ministry of Agriculture Fisheries and Food [1985] 3 All ER 585, [1986] QB 716).
Conversely, an authority acting in the public interest cannot normally be protected by a remedy in damages because it will
itself have suffered none. It follows that, as a general rule, in cases of this kind involving the public interest, the problem
cannot be solved at the first stage, and it will be necessary for the court to proceed to the second stage, concerned with the
balance of convenience. Turning then to the balance of convenience, it is necessary in cases in which a party is a public
authority performing duties to the public that one must look at the balance of convenience more widely, and take into
account the interests of the public in general to whom these duties are owed: see Smith v Inner London Education
Authority [1978] 1 All ER 411 at 422 per Browne LJ, and see also Sierbien v Westminster City Council (1987) 86 LGR
431. 255Like Browne LJ, I incline to the opinion that this can be treated as one of the special factors referred to by Lord
Diplock in the passage from his speech which I have quoted. In this context, particular stress should be placed on the
importance of upholding the law of the land, in the public interest, bearing in mind the need for stability in our society, and
the duty placed on certain authorities to enforce the law in the public interest. This is of itself an important factor to be
weighed in the balance when assessing the balance of convenience. So if a public authority seeks to enforce what is on its
face the law of the land, and the person against whom such action is taken challenges the validity of that law, matters of
considerable weight have to be put into the balance to outweigh the desirability of enforcing, in the public interest, what is
on its face the law, and so to justify the refusal of an interim injunction in favour of the authority, or to render it just or
convenient to restrain the authority for the time being from enforcing the law.

After referring to views expressed by members of the appellate committee in the Hoffman-La Roche case, Lord Goff
continued ([1991] 1 All ER 70 at 120, [1991] 1 AC 603 at 674):

I myself am of the opinion that in these cases, as in others, the discretion conferred on the court cannot be fettered by a
rule; I respectfully doubt whether there is any rule that, in cases such as these, a party challenging the validity of a law must
(to resist an application for an interim injunction against him, or to obtain an interim injunction restraining the enforcement
of the law) show a strong prima facie case that the law is invalid. It is impossible to foresee what cases may yet come
before the courts; I cannot dismiss from my mind the possibility (no doubt remote) that such a party may suffer such
serious and irreparable harm in the event of the law being enforced against him that it may be just or convenient to restrain
its enforcement by an interim injunction even though so heavy a burden has not been discharged by him. In the end, the
matter is one for the discretion of the court, taking into account all the circumstances of the case.

It is at the second stage of the balance of convenience that Lord Goff states that in cases in which one party is a public
authority performing duties to the public that the interests of the public in general become an important consideration. He laid
particular stress on the importance of upholding the law of the land in the public interest, bearing in mind the need for stability in
our society and the duty placed on certain authorities to enforce the law in the public interest. This, he said, is of itself an
important factor to be weighed in the balance when assessing the balance of convenience. He added ([1991] 1 All ER 70 at 119
120, [1991] 1 AC 603 at 673):

So if a public authority seeks to enforce what is on its face the law of the land, and the person against whom such
action is taken challenges the validity of that law, matters of considerable weight have to be put into the balance to
outweigh the desirability of enforcing, in the public interest, what is on its face the law, and so to justify the refusal of an
interim injunction in favour of the authority

In approaching the grant of an interlocutory injunction, it seems to me that it is as an aspect of the justice of the case that the
court weighs the effect which the grant or refusal of the relief will have on the parties. Where only one party may suffer damage
and it could be substantial, to excuse the opposite party from the usual undertaking would place on only one party a risk of
injustice which I believe a court would contemplate only in the most exceptional circumstances. 256In the present cases the
respondents did not enjoy the traditional immunity from such undertakings afforded to the Crown and, as in the Factortame case,
the court was required to protect rights conferred by Community law. In considering the position under Community law Mervyn
Davies J in the case of the first appellant said ([1990] 1 WLR 1237 at 1247):

(d) It is by no means clear to me that if the defendant were to succeed at trial it would be entitled to any damages in
respect of the period pending trial in that if article 30 is held to nullify section 47 it may do so without retrospective effect
 as to acts done prior to the date of annulment. To my mind the defendant, if successful at trial, ought not to recover
damages in respect of a period prior to the date when section 47 is declared ineffective.

In this, for the reasons stated, I believe the learned judge was in error. His decision was followed in the case of the second
appellants. Accordingly it seems to me that in both cases the appellants have shown the judges discretion to have been exercised
wrongly. Nor do I think that the other circumstances which led the judges to exercise their discretion to grant the relief claimed
in the absence of the usual undertaking in damages justified the exercise of their discretion in that way.
Accordingly I would allow the appeals.

Appeals allowed. Leave to appeal to the House of Lords refused.

Solicitors: Metcalfe Copeman & Pettefor, Peterborough; Sharpe Pritchard agents for MRG Vause, Huddersfield; Hepherd
Winstanley & Pugh, Southampton; Sharpe Pritchard agents for AF lAnson, Shepton Mallet.

Carolyn Toulmin Barrister.

[1991] 4 All ER 257

Re Seagull Manufacturing Co Ltd (in liq)

CIVIL PROCEDURE: COMPANY; Insolvency

CHANCERY DIVISION
MUMMERY J
20, 21, 22 MARCH, 30 APRIL 1991

Insolvency Service Service out of jurisdiction Company in compulsory liquidation Public examination of officer of
company British person resident abroad Whether court having jurisdiction to direct public examination of officer resident
abroad and order service of process out of jurisdiction Whether power to order public examination limited to persons in
England at relevant time Insolvency Act 1986, s 133 Insolvency Rules 1986, r 12.12.

The court has jurisdiction under s 133 a of the Insolvency Act 1986 to order the public examination of a director of a company in
compulsory liquidation regarding the companys affairs irrespective of his nationality and nothwithstanding that he is resident
abroad, since, on its true construction, s 133 is not limited by any territoriality principle and applies to the class of persons set out
in s 133(1), namely persons who have concerned themselves in the affairs of the company which is being wound up in the
specified capacities of officer, liquidator, administrator, receiver, manager or participant in the promotion, formation or
management of the company, whether or not they are British subjects or within the jurisdiction of the English court at the relevant
time. It follows that the court has discretion under r 12.12 b of the Insolvency Rules 1986 to give leave to serve a 257 public
examination order out of the jurisdiction on a person falling within the class of persons specified in s 133(1) of the 1986 Act (see
p 265 b j to p 266 g, post).
________________________________________
a Section 133, so far as material, is set out at p 260 g to j, post
b Rule 12.12, so far as material, is set out at p 261 c, post

Dictum of Lord Scarman in Clark (Inspector of Taxes) v Oceanic Contractors Inc [1983] 1 All ER 133 at 139 applied.
Re Tucker (a bankrupt), ex p Tucker [1988] 1 All ER 603 distinguished.

Notes
For service out of the jurisdiction in insolvency proceedings, see 3(2) Halsburys Laws (4th edn reissue) para 782.
For public examination of officers of a company being wound up, see 7(2) Halsburys Laws (4th edn reissue) paras 1535
1544.
For the Insolvency Act 1986, s 133, see 4 Halsburys Statutes (4th edn) (1987 reissue) 814.
For the Insolvency Rules 1986, r 12.12, see 3 Halsburys Statutory Instruments (1991 reissue) 472.

Cases referred to in judgment

Anglo-African Steamship Co, Re (1886) 32 Ch D 348, CA.
Blain, Ex p, re Sawers (1879) 12 Ch D 522, [187480] All ER Rep 708, CA.
Clark (Inspector of Taxes) v Oceanic Contractors Inc [1983] 1 All ER 133, [1983] 2 AC 130, [1983] 2 WLR 94, HL.
Cooke v Charles A Vogeler Co [1901] AC 102, [19003] All ER Rep 660, HL.
Theophile v Solicitor General [1950] 1 All ER 405, [1950] AC 186, HL.
Tucker (a bankrupt), Re, ex p Tucker [1988] 1 All ER 603, [1990] Ch 148, [1988] 2 WLR 748, CA; rvsg [1987] 2 All ER 23,
[1988] 1 WLR 497.
Wendt, Re, ex p Official Receiver (1889) 22 QBD 733, CA.

Cases also cited

Harrods (Buenos Aires) Ltd, Re [1991] BCLC 69.
Jogia (a bankrupt), Re, ex p the trustee v D Pennellier & Co Ltd [1988] 2 All ER 328, [1988] 1 WLR 484.
MacKinnon v Donaldson Lufkin & Jenrette Securities Corp [1986] 1 All ER 653, [1986] Ch 482.
Macleod v A-G for New South Wales [1891] AC 455, PC.

Appeal
The Official Receiver appealed from the decision of Mr Registrar Pimm on 25 September 1990 setting aside an order dated 17
July 1990 requiring John Colin Slinn, the director of Seagull Manufacturing Co Ltd (in compulsory liquidation), to attend court
for the purpose of being publicly examined and an order for service of a copy of the order on Mr Slinn in Alderney, Channel
Islands on the grounds (i) that the court had jurisdiction under s 133 of the Insolvency Act 1986 to order the attendance of a
British subject who was or had been an officer of a company registered in England and Wales being wound up by the court
notwithstanding his residence abroad and (ii) that the court also had jurisdiction under r 12.12 of the Insolvency Rules 1986, SI
1986/1925, to give leave to serve an order for public examination on such a person abroad. The facts are set out in the judgment.
Nigel Davis for the Official Receiver.
Robin Hollington for Mr Slinn.

Cur adv vult

258

30 April 1991. The following judgment was delivered.

MUMMERY J. This case raises two connected jurisdictional questions. The answer to each question turns on the true
construction of the relevant provisions relating to public examination of persons under the Insolvency Act 1986 and the
Insolvency Rules 1986, SI 1986/1925.
Does the court, on the application of the Official Receiver in a compulsory winding up, have power (1) to direct the public
examination of a director of the company in compulsory liquidation if that director is out of the jurisdiction and (2) to order
service of process, order of the court or other document relating to the public examination to be effected on that director out of
the jurisdiction?
The company in compulsory liquidation is Seagull Manufacturing Co Ltd (Seagull). The director in question is Mr Colin
Slinn. He now lives at 11 Le Bourgage, Alderney, Channel Islands. In the view of the Official Receiver the affairs of Seagull
cannot be duly wound up without the public examination of Mr Slinn in order to establish the conduct of the affairs of the
company and the application of its assets.

The proceedings
The two questions have arisen for decision in the following circumstances. On 17 July 1990 Mr Registrar Buckley, on the
application of the Official Receiver under s 133 of the Insolvency Act 1986 and r 4.211 of the Insolvency Rules 1986, made two
orders: (1) he ordered Mr Slinn to attend at the Royal Courts of Justice, Strand, London on 25 September 1990 for the purposes
of being publicly examined; (2) he made an order pursuant to r 12.12 of the 1986 rules that the Official Receiver be at liberty to
serve Mr Slinn by first class post with a sealed copy of the order for his public examination and also a sealed copy of that order
for service at his address in Alderney or elsewhere within the jurisdiction of the Bailiwick of Guernsey (of which Alderney forms
part).
On 25 September 1990 Mr Registrar Pimm, on the application of Mr Slinn, set aside both orders on the ground that they
were made without jurisdiction since at all material times Mr Slinn was in Alderney.
The Official Receiver appeals against that order pursuant to r 7.47(2) of the 1986 rules by notice of appeal dated 27
September 1990. The grounds of appeal are that: (1) upon its true construction s 133 of the 1986 Act empowers the court to
order the attendance of a British subject who is or has been an officer of a company registered in England and Wales being wound
up by the court, notwithstanding his residence abroad; and (2) upon its true construction r 12.12 of the 1986 rules empowers the
court to give leave to serve an order for public examination upon such a person, notwithstanding his residence abroad.

The facts
The relevant facts are not disputed. Seagull was incorporated in England as a private company on 17 March 1983. It carried
on the business of a computer utility organisation from a registered office in Dorchester. Mr Slinn was a director of Seagull from
27 January 1986 to 3 July 1988. He was also the tenant of the Dorchester premises. Documents filed under the Companies Acts
state that he is a British subject. In affidavit evidence sworn by him in these proceedings he does not deny that he is a British
subject. He claims, however, that from January 1979 until July 1986 he resided and was domiciled in the Isle of Man and that
since July 1986 he has been resident and domiciled in Alderney.
259
Seagull is being wound up by the court following an inquiry instigated by the Department of Trade and Industry on 30 May
1989 under s 447 of the Companies Act 1985. A petition to wind up Seagull on the public interest ground was subsequently
presented by the Department of Trade under s 440 of the Companies Act 1985. The court made a compulsory winding-up order
on 4 April 1990. It was alleged in the petition that Seagull was insolvent. The estimated claims exceed 2m. Since April 1990
the Official Receiver has unsuccessfully attempted to persuade Mr Slinn to submit a statement of affairs and to co-operate with
him in the provision of information required in the winding up.
On 11 April 1990 the Official Receiver obtained an order in aid under s 426 of the 1986 Act addressed to the court of
Alderney. The provisions of that section were extended with modifications to Guernsey with effect from 1 February 1990: see
the Insolvency Act 1986 (Guernsey) Order 1989, SI 1989/2409, made pursuant to s 442 of the 1986 Act. On 25 April 1990 the
court of Alderney ordered the seizure of books and papers of Seagull in Mr Slinns possession as he had refused to hand them
over to the Official Receiver. The order was executed on 27 April 1990. The court also ordered the private examination of Mr
Slinn in Alderney. On 3 May 1990 an examiner was appointed, but no progress was made because on 17 May 1990 Mr Slinn
gave notice of appeal against both orders. The appeals to the Royal Court of the Island of Guernsey were dismissed on 8
November 1990. Mr Slinn is now appealing to the Court of Appeal in Guernsey. The appeals have not been heard and in the
meantime the books and papers of Seagull are in the custody of the court of Guernsey. The Official Receiver has not, therefore,
been able to inspect them.

Statutory provisions
The relevant provisions of the Insolvency Act 1986 for the public examination of officers are contained in ss 133 and 134.
They are two of a number of provisions for investigation procedures in the winding up of a company contained in Ch VI of Pt IV
of the 1986 Act. The provisions of ss 133 and 134 are new and supersede the previous power for public examination exercisable
in more limited circumstances: see s 270 of the Companies Act 1948.
Section 133 provides as follows:

(1) Where a company is being wound up by the court, the official receiver or, in Scotland, the liquidator may at any
time before the dissolution of the company apply to the court for the public examination of any person who(a) is or has
been an officer of the company; or (b) has acted as liquidator or administrator of the company or as receiver or manager or,
in Scotland, receiver of its property; or (c) not being a person falling within paragraph (a) or (b), is or has been concerned,
or has taken part, in the promotion, formation or management of the company
(3) On an application under subsection (1), the court shall direct that a public examination of the person to whom the
application relates shall be held on a day appointed by the court; and that person shall attend on that day and be publicly
examined as to the promotion, formation or management of the company or as to the conduct of its business and affairs, or
his conduct or dealings in relation to the company
The provisions of s 134 are concerned with the enforcement of orders made under s 133.
Chapter 19 of Pt 4 of the Insolvency Rules 1986 contains procedural provisions 260 for the public examination of company
officers and others. Rule 4.211(1) provides:
 If the official receiver applies to the court under section 133 for the public examination of any person, a copy of the
courts order shall, forthwith after its making, be served on that person.
Finally, reference should be made to r 12.12, which contains provision for service outside the jurisdiction:

(1) Order 11 of the Rules of the Supreme Court, and the corresponding County Court Rules, do not apply in
insolvency proceedings.

(2) A bankruptcy petition may, with the leave of the court, be served outside England and Wales in such manner as the
court may direct.
(3) Where for the purposes of insolvency proceedings any process or order of the court, or other document, is required
to be served on a person who is not in England and Wales, the court may order service to be effected within such time, on
such person, at such place and in such manner as its thinks fit, and may also require such proof of service as it thinks fit

By virtue of r 13.7 insolvency proceedings means any proceedings under the 1986 Act or the 1986 rules.

Territoriality and service out of the jurisdiction

The principles governing the teritoriality of legislation and service out of the jurisdiction are clear. They may be
conveniently summarised as follows.
(1) There is a well-settled general rule of statutory construction that English legislation is primarily territorial in effect:
Cooke v Charles A Vogeler Co [1901] AC 102 at 107, [19003] All ER Rep 660 at 662. That means

simply that, unless the contrary is expressly enacted or so plainly implied that the courts must give effect to it, United
Kingdom legislation is applicable only to British subjects or to foreigners who by coming to the United Kingdom, whether
for a short or long time, have made themselves subject to British jurisdiction.

(See Clark (Inspector of Taxes) v Oceanic Contractors Inc [1983] 1 All ER 133 at 139, [1983] 2 AC 130 at 145 per Lord
Scarman.)
That principle was established over a century before in Ex p Blain, re Sawers (1879) 12 Ch D 522, [187480] All ER Rep
708, a decision of the Court of Appeal that the generality of the word debtor in s 6 of the Bankruptcy Act 1869 was qualified or
limited by the territoriality principle. Debtor did not include a foreigner who had never been in the jurisdiction so that the
English court of bankruptcy had no power to make an order for service of notice of a bankruptcy petition out of the jurisdiction
on such a person or to make an adjudication of bankruptcy. See also Cooke v Charles A Vogeler Co [1901] AC 102 at 108,
[19003] All ER Rep 660 at 662 and compare Theophile v Solicitor General [1950] 1 All ER 405, [1950] AC 186, a decision of
the House of Lords that the word debtor, as used in s 1(2) of the Bankruptcy Act 1914, included a foreigner who had committed
an act of bankruptcy, but had left England, where he had carried on a business, and was resident abroad. The order granting leave
to serve a bankruptcy petition out of the jurisdiction was upheld.
(2) In the application of the territoriality rule of construction to the relevant statutory provisions the court must inquire in the
particular case as to the person with respect to whom Parliament is presumed to be legislating. In Clark (Inspector 261 of Taxes)
v Oceanic Contractors Inc [1983] 1 All ER 133 at 144, [1983] 2 AC 130 at 152 Lord Wilberforce formulated the relevant
question as follows: Who is within the legislative grasp, or intendment, of the statute under consideration?
(3) Leave to serve process and orders on persons out of the jurisdiction is not a matter of practice in the exercise of an
inherent power of the court. The power to grant leave to serve out of the jurisdiction must be expressly authorised by statute or
rules having statutory force: see eg Re Anglo-African Steamship Co (1886) 32 Ch D 348 at 350351 and Re Wendt, ex p Official
Receiver (1889) 22 QBD 733 at 735.
The most recent example of the application of these principles to insolvency legislation is Re Tucker (a bankrupt), ex p
Tucker [1988] 1 All ER 603, [1990] Ch 148, a decision of the Court of Appeal that, on its true construction, the provisions of s
25(1) of the Bankruptcy Act 1914 conferring power on the court to require the production of documents by, and attendance for
examination of, the debtor and other persons, did not assert a jurisdiction over British subjects resident abroad. The court
therefore set aside orders made by the registrar, on the application of the trustee in bankruptcy, (1) for the issue of a summons
under s 25 requiring the debtors brother, a British subject living in Belgium, to produce documents and to attend at court for
examination and (2) authorising service of the summons on the debtors brother in Belgium.
The court also refused to exercise its discretion to make an order under s 25(6) of the 1914 Act for the examination of the
debtors brother in Belgium before an examiner appointed by the English court.
The judgments of Dillon LJ in Re Tucker was the sheet anchor of the submissions made on behalf of Mr Slinn. In reliance,
in particular, on a passage in that judgment it was submitted that, like s 25(1) of the 1914 Act, s 133 of the 1986 Act is about
summoning people to appear before an English court to be examined on oath (see [1988] 1 All ER 603 at 609, [1990] Ch 148 at
158). Section 25(1) of the Bankruptcy Act 1914 was in these terms:

The court may, on the application of the official receiver or trustee, at any time after a receiving order has been made
against a debtor, summon before it the debtor or his wife, or any person known or suspected to have in his possession any
of the estate or effects belonging to the debtor, or supposed to be indebted to the debtor, or any person whom the court may
deem capable of giving information respecting the debtor, his dealings or property, and the court may require any such
person to produce any documents in his custody or power relating to the debtor, his dealings or property.

It was submitted that this type of provision must be construed against the background summarised by Dillon LJ in his
judgment in Re Tucker [1988] 1 All ER 603 at 609, [1990] Ch 148 at 158. The general practice in international law is that courts
of a country only have power to summon before them persons who accept service or are present within the territory of that
country when served with the appropriate process. There is no general power in English law either to serve process on British
subjects resident abroad or to serve a subpoena on a British subject resident outside the jurisdiction to compel him to come and
give evidence in an English court. Having referred to those general propositions, Dillon LJ expressed the view that he

would not expect s 25(1) to have empowered the English court to haul before it persons who could not be served with
the necessary summons within the jurisdiction of the English court.
262

He went on to reject the contention of the trustee in bankruptcy that the expression any person in s 25(1) meant any person
in the world or, at least, any British subject anywhere in the world.
I fully agree that, on the authority of Re Tucker, the court must approach the construction of s 133 with all those general
considerations in mind. Ultimately, however, the question as to who are the persons with respect to whom Parliament is
presumed to be legislating in this case must turn on the legislative language, context and purpose of the particular provisions
contained in s 133 of the 1986 Act.
 This was made clear by Dillon LJ in his judgment when he made particular reference to s 25(6) of the Bankruptcy Act 1914,
which was in these terms:

The court may, if it thinks fit, order that any person who if in England would be liable to be brought before it under
this section shall be examined in Scotland or Ireland, or in any other place out of England.

Dillon LJ then remarked that this subsection settled conclusively the disputed question of the territoriality of s 25(1). He
said ([1988] 1 All ER 603 at 609, [1990] Ch 148 at 158):

This wording carries inevitably, in my judgment, the connotation that if the person is not in England he is not liable to
be brought before the English court under the section.

He went on to state ([1988] 1 All ER 603 at 610, [1990] Ch 148 at 158):

Subsection (6) thus confirms that a person who is not at any relevant time in England, and so cannot be served with a
summons of the English court in England, cannot be examined by that court under sub-s (1).

Sir Nicolas Browne-Wilkinson V-C and Lloyd LJ agreed with the judgment of Dillon LJ.
The equivalent provisions in the Insolvency Act 1986 for the private examination of a bankrupt are now contained in ss 366
and 367. Section 367(3) is the equivalent provision to s 25(6) and reads:

The court may, if it thinks fit, order that any person who if within the jurisdiction of the court would be liable to be
summoned to appear before it under section 366 shall be examined in any part of the United Kingdom where he may be for
the time being, or in any place outside the United Kingdom.

There is little doubt that, on the authority of Re Tucker, the court would construe the provisions of ss 366 and 367 as subject
to the same territorial qualification as s 25 of the Bankruptcy Act 1914. The wide discretionary power of the court to order a
private examination of any person with regard to the dealings, affairs and property of the bankrupt thus only applies to such a
person who is in England at the relevant time and can be served with the appropriate summons in England.
Sections 236 and 237 of the Insolvency Act 1986 confer on the court a similar power to order private examination of any
officer of the company and also any person known or suspected to have in his possession any property of the company or
supposed to be indebted to the company or any person whom the court thinks capable of giving information concerning the
promotion, formation, business, dealings, affairs or property of the company (s 236(2)). The enforcement provisions 263 in s 237
contain a sub-s (3) which is similarly worded to s 367(3) of the 1986 Act.
It was submitted on behalf of Mr Slinn that, in the light of these provisions, it was most unlikely that Parliament intended
that s 133 of the 1986 Act should apply to a person out of the jurisdiction or that it should authorise service of a summons or
order of the English court on a person out of the jurisdiction. If there is no power to summon Mr Slinn to attend before an
English court for his private examination and there is no power to serve him out of the jurisdiction with a summons or order for
his private examination, Parliament cannot be presumed to be intending to legislate for the case of Mr Slinn in the context of the
more draconian power of public examination under s 133. By s 426 of the 1986 Act Parliament has provided a procedure for the
examination of a person who is resident out of the jurisdiction. That procedure has already been invoked in this case by the
Official Receiver for the private examination of Mr Slinn in Alderney. In those circumstances it is wrong to presume that
Parliament intended to empower the English courts to grant leave to serve Mr Slinn out of the jurisdiction in respect of any public
examination before the English court. If, on its true construction, s 133 does not confer on the English court any power to direct
service out of the jurisdiction of process or orders relating to public examination of an officer of the company, r 12.12(3) cannot
grant such a power or, if it does, it is ultra vires.
I am not convinced by these contentions that the public examination provisions of s 133 are territorially limited in the same
way as the private examination provisions of ss 236 and 237 in the case of the winding up of a company, and of ss 366 and 367 in
the case of a bankrupt.
The provisions for private examination are different from the provisions of s 133 in two important respects. First, the power
of the court to summon persons to appear before it for private examination extends to a very much wider class of persons than the
courts power in the case of a public examination. The power to summon for a private examination applies not only to any officer
of the company (or the bankrupt) but also to any person who may have in his possession any property of the company (or of the
bankrupt) or who may be indebted to the company (or the bankrupt). It even extends to any person who may be able to give
information to the court concerning the company (or the bankrupt) and the relevant dealings, affairs and property.
As was observed by Dillon LJ in Re Tucker [1988] 1 All ER 603 at 608, [1990] Ch 148 at 156 if the words any person are
given their natural meaning in the private examination provisions they cover any person of any nationality in any part of the
world. The very width of the class of persons specified in the private examination provisions in the bankruptcy legislation was
an important factor in leading the court to the conclusion that the relevant class of persons must be limited by the territoriality
principle and therefore confined to persons in England at the relevant time who could be served with a summons of the English
court in England.
By way of contrast, the power of the court to order public examination under s 133 is confined to a restricted class of
persons who have voluntarily concerned themselves in a specified capacity in the affairs of the company which is being wound
up, ie as officer, liquidator, administrator, receiver or manager, or as participant in the promotion, formation or management of
the company.
The second important difference between the provisions for public examination and for private examination is that the latter
contain express provisions (namely s 237(3) in the case of a company and s 367(3) in the case of a bankrupt) which, in the words
of Dillon LJ in Re Tucker, conclusively and inevitably connote that if 264 the person in question is not in England he is not
liable to be brought before the English court. By way of contrast, such a provision is conspicuously absent from both s 133 and
the provisions for its enforcement in s 134.
In my judgment, it is more appropriate to compare the public examination provisions in the case of companies in s 133 with
the public examination provisions relating to bankrupts than with the private examination provisions relating to bankrupts
construed by the Court of Appeal in Re Tucker.
The relevant provisions for the public examination of a bankrupt were contained in s 15 of the Bankruptcy Act 1914 and are
now contained in s 290 of the Insolvency Act 1986. There can be no doubt that, having regard to the definition of a debtor in s
1(2) of the 1914 Act and the conditions now contained in s 265(1) of the 1986 Act, the power to order the public examination of a
bankrupt was not, and is not, confined to British subjects or other persons present or resident in England. Further, the bankruptcy
rules in force at the relevant time authorised the English court to order service on a debtor who was not in England of an order to
attend a public examination. This was specifically provided in r 17 of the Bankruptcy Rules 1890 and was also covered by the
wide wording of provisions for service out of the jurisdiction contained in r 86 of the Bankruptcy Rules 1952, SI 1952/2113 (as
amended by the bankruptcy (Amendment) Rules 1962, SI 1962/295).
The provisions with respect to the public examination of bankrupts are similar in three respects to the provisions for public
examination under s 133. First, the court may only order the public examination of the bankrupt as to his affairs, dealings and
property: see s 290(1) and (3) of the 1986 Act. There is no power to order the public examination of any other person in a
bankruptcy matter. Similarly, in the case of a winding up the court may only order the public examination of persons who have
voluntarily participated in a specified capacity in the affairs of the company as to the promotion, formation or management of
the company or as to the conduct of its business and affairs, or his conduct or dealings in relation to the company: see s 133(1)
and (3). There is no power under s 133 to order the public examination of any other person.
Secondly, the court has no discretion to refuse to direct a public examination either in the case of a bankrupt or in the case of
the winding up of a company, if the application is duly made in accordance with the provisions of the relevant subsection: see s
290(3) in the case of bankruptcy and s 133(3) in the case of a company in liquidation.
Thirdly, neither the provisions relating to the public examination of a bankrupt nor the provisions relating to the public
examination in the case of a winding up of a company contain any provision similar to that formerly contained in s 25(6) of the
Bankruptcy Act 1914 and now contained, in the case of bankruptcy, in s 367(3) of the 1986 Act and, in the case of companies, in
s 237(3) of that Act.
When I contrast the provisions for public examination and private examination which were contained in the 1914 Act and
are now contained in the 1986 Act and then compare them respectively with the provisions for public examination and private
examination in the case of the winding up of a company, I would expect s 133 to empower the English court to summon before it
for public examination persons who have voluntarily participated in the affairs of the company, even though they cannot be
served with the necessary summons within the jurisdiction of the English court. I would expect the court to have jurisdiction
under s 133 similar in territorial scope to its jurisdiction to order public examination of a bankrupt under s 290 and to serve the
bankrupt out of the jurisdiction.
In my judgment, s 133, on its true construction, plainly implies that its 265 provisions apply to all who fall within a class of
persons specified in s 133(1), whether they are British subjects or not and whether they are within the jurisdiction of the English
court or not at the relevant time. It does not seem to me to involve any violation of the principles of public or private
international law to construe the provisions of s 133 so as to make a person in the specified class liable to public examination,
even though he may be out of the jurisdiction. The winding up of the company is governed by English law. Parliament has
newly legislated for the public examination of specified classes of persons. Those specified classes of persons are restricted to
those who have acted in one capacity or another in relation to the affairs of the company which is either liable to be wound up by
the English court under English law or is, in fact, being so wound up.
In the words of Lord Wilberforce in Clark (Inspector of Taxes) v Oceanic Contractors Inc [1983] 1 All ER 133 at 144,
[1983] 2 AC 130 at 152, I would expect such persons to be within the legislative grasp, or intendment of s 133 whether or not
they are at any relevant time in England and whether or not they can be served with a summons of the English court in England.
The new provisions of s 133 have been drafted along very similar lines to those for the public examination of a bankrupt. In
these circumstances I am of the view that Parliament intended to legislate for those specified persons wherever they are.
If I am right in my construction of s 133, the Official Receivers application against Mr Slinn has been duly made under sub-
s (1) of s 133 and therefore Mr Registrar Buckley had no discretion to refuse an application that a public examination of Mr Slinn
should be held: see the mandatory terms of s 133(3). Rule 4.211 required that a copy of the courts order should forthwith be
served on Mr Slinn. As Mr Slinn was not in England, Mr Registrar Buckley had a discretion under r 12.12 to order service to be
effected within such time, on such person, at such a place and in such manner as he thought fit. In my judgment, the registrar
had the necessary jurisdiction to make both orders of 17 July 1990 and he properly exercised his discretion under r 12.12 by
ordering that the Official Receiver be at liberty to serve Mr Slinn by first class post with a sealed copy of the order for his public
examination and a sealed copy of the order for service at his address in Alderney or elsewhere within the jurisdiction of the
Bailiwick of Guernsey.
For all these reasons I allow the appeal of the Official Receiver and restore the orders made by Mr Registrar Buckley on 17
July 1990.

Appeal allowed

Solicitors: Treasury Solicitor; Vance Harris, Crowborough.

Hazel Hartman Barrister.

266
[1991] 4 All ER 267

Re Paramount Airways Ltd

COMPANY; Insolvency

CHANCERY DIVISION
MERVYN DAVIES J
25 APRIL, 8, 9, 10, 17 MAY, 12, 13, 19 JUNE 1991

Insolvency Service Service out of jurisdiction Transaction at undervalue Office-holder of company seeking reversal of
transaction entered into by company at undervalue Whether court having jurisdiction to entertain application against foreign
person resident abroad and order service of process out of jurisdiction Whether power to order adjustment of prior
transactions having extra-territorial effect Insolvency Act 1986, s 238 Insolvency Rules 1986, r 12.12.

On its true construction the phrase any person in s 238 a of the Insolvency Act 1986, which enables the administrator or
liquidator of a company to apply for an order reversing a transaction entered into by the company with any person at an
undervalue, does not have extra-territorial effect so as to affect a foreigner resident abroad and, accordingly, the court has no
jurisdiction to entertain an application under s 238 seeking an order against a person resident who is abroad with no place of
business in the United Kingdom and who does not carry on business within the jurisdiction, especially where that person is a
foreign bank which has not directly entered into the relevant transaction. It follows that any order under r 12.12 b of the
Insolvency Rules 1986 granting leave to serve a s 238 application on such a person abroad will be set aside (see p 276 b to d j and
p 277 f g, post).
________________________________________
a Section 238 is set out at p 270 c to g, post
b Rule 12.12 is set out at p 270 j to p 271 a, post

Clark (Inspector of Taxes) v Oceanic Contractors Inc [1983] 1 All ER 133 applied.
 Re Seagull Manufacturing Co Ltd (in liq) [1991] 4 All ER 257 considered.

Notes
For service out of the jurisdiction in insolvency proceedings, see 3(2) Halsburys Laws (4th edn reissue) para 782.
For transactions at undervalue, see ibid paras 643644.
For the Insolvency Act 1986, s 238, see 4 Halsburys Statutes (4th edn) (1987 reissue) 887.
For the Insolvency Rules 1986, r 12.12, see 3 Halsburys Statutory Instruments (1991 reissue) 472.

Cases referred to in judgment

Anglo-African Steamship Co, Re (1886) 32 Ch D 348, CA.
Babanaft International Co SA v Bassatne [1989] 1 All ER 433, [1990] Ch 13, [1989] 2 WLR 232, CA.
Blain, Ex p, re Sawers (1879) 12 Ch D 522, [187480] All ER Rep 708, CA.
Clark (Inspector of Taxes) v Oceanic Contractors Inc [1983] 1 All ER 133, [1983] 2 AC 130, [1983] 2 WLR 94, HL.
Cooke v Charles A Vogeler Co [1901] AC 102, [19003] All ER Rep 660, HL.
Derby & Co Ltd v Weldon (No 1) [1989] 1 All ER 469, [1990] Ch 48, [1989] 2 WLR 276, CA.
MacKinnon v Donaldson Lufkin & Jenrette Securities Corp [1986] 1 All ER 653, [1986] Ch 482, [1986] 2 WLR 453.
Prenn v Simmonds [1971] 3 All ER 237, [1971] 1 WLR 1381, HL.
267
Seagull Manufacturing Co Ltd (in liq), Re [1991] 4 All ER 257, [1991] 3 WLR 307.
Theophile v Solicitor General [1950] 1 All ER 405, [1950] AC 186, HL.
Tucker (a bankrupt), Re, ex p Tucker [1988] 1 All ER 603, [1990] Ch 148, [1988] 2 WLR 784, CA.

Cases also cited

Cia Merabello San Nicholas SA, Re [1972] 3 All ER 448, [1973] Ch 75.
Derby & Co Ltd v Weldon (No 6) [1990] 3 All ER 263, [1990] 1 WLR 1139, CA.
Farrell v Alexander [1976] 2 All ER 721, [1977] AC 59, HL.
Galbraith v Grimshaw [1910] AC 508, [190810] All ER Rep 561, HL.
International Westminster Bank plc v Okeanos Maritime Corp [1987] 3 All ER 137, sub nom Re a company (No 00359 of 1987)
[1988] Ch 210.
Jogia (a bankrupt), Re, ex p the trustee v D Pennellier & Co Ltd [1988] 2 All ER 328, [1988] 1 WLR 484.
Macleod v A-G for New South Wales [1891] AC 455, PC.
Manta Line Inc v Sofianites [1984] 1 Lloyds Rep 14, CA.
Robertson, Ex p, re Morton (1875) LR 20 Eq 733.
Tracomin SA v Sudan Oil Seeds Co Ltd (No 1) [1983] 3 All ER 137, [1983] 1 WLR 1026, CA.
Tracomin SA v Sudan Oil Seeds Co Ltd (No 2) [1983] 3 All ER 140, [1983] 1 WLR 1026, CA.
Tucker (a bankrupt), Re (No 2), ex p the trustee v Langton Investment SA [1988] 2 All ER 339, [1988] 1 WLR 497.
Vocalion (Foreign) Ltd, Re [1932] 2 Ch 196, [1932] All ER Rep 519.

Motion
Hambros Bank (Jersey) Ltd (Hambros), by a notice of motion dated 19 March 1991, applied, inter alia, for an order that the order
of Mr Registrar Buckley of 30 November 1990 directing that the joint administrators of Paramount Airways Ltd, Roger Arthur
Powdrill and Joseph Beaumont Atkinson, be at liberty to serve an originating application under s 238 of the Insolvency Act 1986
on Hambros in Jersey claiming payment of moneys transferred to Hambros as a result of prior transactions entered into by
Paramount Airways at an undervalue be set aside on the grounds (i) that the court had no jurisdiction to grant the relief sought by
the originating application or to make such order or, alternatively, (ii) that having regard to all the circumstances of the case it
was not a proper case for service out of the jurisdiction and the court in its discretion should refuse leave for such service. The
facts are set out in the judgment.

Nigel Davis for Hambros;.

Nicholas Merriman QC and Richard Salter for the administrators.

Cur adv vult

19 June 1991. The following judgment was delivered.

MERVYN DAVIES J. This is an application to set aside an order dated 30 November 1990 made by Mr Registrar Buckley. The
application is by a Jersey company Hambros Bank (Jersey) Ltd (Hambros). It is made against Mr Roger Arthur Powdrill and Mr
Joseph Beaumont Atkinson. Mr Powdrill and Mr Atkinson are referred to as the administrators because they are the joint 268
administrators of a company called Paramount Airways Ltd. They were appointed by an order dated 7 August 1989 on a petition
presented by Air 2000 Ltd. The registrars order dated 30 November 1990 was made ex parte. Therein it was ordered that the
administrators be at liberty to serve an originating application (issued on 29 November 1990) by post upon Hambros in the
Channel Islands, more particularly at 13 Broad Street, St Helier, Jersey. Hambros now applies to set aside that order. On the
fourth day of the hearing before me there was an application to amend the application to set aside by adding an application to
strike out the originating application. I declined to allow the amendment.
It is said that the courtwhether registrar or judgehas no jurisdiction to give leave to serve the originating application in
the Channel Islands; alternatively, if such jurisdiction there be, the order ought not to have been made. Before considering those
questions I must set out the events that led to the administrators seeking to serve Hambros in Jersey. As I have said, on 7 August
1989 Paramount was placed in administration. The administrators began to investigate the affairs of the company. Their
inquiries centred on a Mr John Ferriday. He had been a Paramount director. On 13 September 1989 the administrators, in the
name of the company, issued a writ against Mr Ferriday and other defendants. The claims against Mr Ferriday were for breach of
fiduciary duty, with allegations of constructive trust and other matters. The sums claimed were very considerable. The writ was
amended as to the sums claimed on 14 November 1989 and the writ was reissued. The administrators formed the view that Mr
Ferriday had sent sums of money belonging to Paramount to the Channel Islands and that such money was in an account or
accounts at Hambros. Accordingly the administrators started proceedings in the Royal Court of the Island of Jersey. The plaintiff
in such proceedings was Paramount and the defendants were Ryco Trust Ltd and Hambros. I have seen particulars of the
Paramount claim dated 22 September 1989 and Hambros answer thereto dated 27 October 1989. The administrators were
interested in two sums of money in particular, the one being a sum of 1.3m and the other 346,800. As to the 1.3m, that is said
to have been in an account in Lloyds Bank plc in England in the name of Paramount. It was transferred on 4 July 1989 to an
account in Jersey in the name of Ryco Trust at Hambros. At Hambros there was also an account in the name of Anser General
Investments SA, a Panamanian company. On 4 July 1989 the 1.3m was moved from the Ryco account to the Anser account.
Anser is said to be controlled by Mr Ferriday. As to the 346,800, that is part of a sum said to have been held for Paramount by a
firm in England called Martin Boston & Co. On 29 July 1989 346,800 went from the Boston account to the Ryco account in
Jersey. On 1 August 1989 the money was transferred from the Ryco account to the Anser account. The administrators contend
that Hambros knew that the two sums I have mentioned belonged to Paramount. Hambros denied the administrators claim.
The Jersey proceedings were the subject of a consent order dated 27 June 1990. The proceedings were stayed. Paragraph 3
of the consent order is in these terms:

3. That the second defendants [Hambros] will submit to the jurisdiction of the English Court in relation to all claims
and matters arising out of and which currently form the substance of these present proceedings.

The next event to mention is that the administrators obtained leave to add defendants to the action in England. It will be
recalled that on 13 September 1989 Paramount had issued a writ against Mr Ferriday and two others. On 8 November 1990 there
were added as fourth defendant, Standard Chartered Bank, and as fifth 269 defendant, Hambros. The claim against Hambros is
for a declaration that Hambros is liable to pay to Paramount as constructive trustee the sums of 346,800 and 1,300,000, with
orders for payment, alternatively payment of these sums as money had and received or as Paramounts money traceable in equity.
These claims against Hambros are pleaded in an amended statement of claim.
Thus it is that the administrators sue Hambros in England for the sums of 13m and 346,800. In this connection Hambros
submit to the jurisdiction of the English court, as they agreed to do by the Jersey court order dated 27 June 1990. No doubt the
administrators hope to succeed in the writ action. But they desire as well to make use of s 238 of the Insolvency Act 1986.
Section 238 is in these terms:

Transactions at an undervalue (England and Wales).(1) This section applies in the case of a company where( a) an
administration order is made in relation to the company, or (b) the company goes into liquidation; and the office-holder
means the administrator or the liquidator, as the case may be.
(2) Where the company has at a relevant time (defined in section 240) entered into a transaction with any person at an
undervalue, the office-holder may apply to the court for an order under this section.
(3) Subject as follows, the court shall, on such an application, make such order as it thinks fit for restoring the position
to what it would have been if the company had not entered into that transaction.
(4) For the purposes of this section and section 241, a company enters into a transaction with a person at an undervalue
if(a) the company makes a gift to that person or otherwise enters into a transaction with that person on terms that provide
for the company to receive no consideration, or (b) the company enters into a transaction with that person for a
consideration the value of which, in money or moneys worth, is significantly less than the value, in money or moneys
worth, of the consideration provided by the company.
(5) The court shall not make an order under this section in respect of a transaction at an undervalue if it is satisfied( a)
that the company which entered into the transaction did so in good faith and for the purpose of carrying on its business, and
(b) that at the time it did so there were reasonable grounds for believing that the transaction would benefit the company.

I say now that ifsee sub-s (2)Paramount has at a relevant time entered into a transaction with any person at an
undervalue it is common ground that the transaction was at a relevant time.
If the administrators are to make use of s 238 they will be engaging in insolvency proceedings because that phrase is
defined in r 13.7 of the Insolvency Rules 1986, SI 1986/1925, as meaning any proceedings under the 1986 Act or those rules.
Since the proceedings in contemplation involve a Jersey company one must have regard to r 12.12 of the 1986 rules:

Service outside the jurisdiction

12.12(1) Order 11 of the Rules of the Supreme Court, and the corresponding County Court Rules, do not apply in
insolvency proceedings.
(2) A bankruptcy petition may, with the leave of the court, be served outside England and Wales in such manner as the
court may direct.
(3) Where for the purposes of insolvency proceedings any process or order of the court, or other document, is required
to be served on a person who is not in England and Wales, the court may order service to be effected within 270 such time,
on such person, at such place and in such manner as it thinks fit, and may also require such proof of service as it thinks fit.
(4) An application under this Rule shall be supported by an affidavit stating(a) the grounds on which the application
is made, and (b) in what place or country the person to be served is, or probably may be found.

It was under that rule that the administrators on 30 November 1990 obtained ex parte leave to serve Hambros in Jersey; and it is
that leave that I am now asked to set aside.
At first sight the leave in question appears to be a matter for the courts direction under r 12.12(3). I say that because (a) s
238(2) authorises an application against any person, (b) the person here involved is Hambros, (c) Hambros is a Jersey
company without a place of business in England and (d) r 12.12 provides for leave to serve outside the jurisdiction. Mr Nigel
Davis who appeared for Hambros said that no mere matter of discretion arose. He submitted that the court has no jurisdiction to
give leave to serve a s 238 application on Hambros as being a Jersey company without a place of business in England. Mr Davis
accepted that if jurisdiction exists then r 12.12 gives the court power to give leave to serve Hambros. However, on that footing,
he submitted that the court should then in its discretion refuse leave.
Yet a further question arises for decision. Mr Merriman QC for the administrators referred to the consent order dated 27
June 1990 mentioned above. He said that thereby Hambros had submitted to the jurisdiction of the English court on the matter of
the intended s 238 application. Mr Davis said there was no such submission, and, even if there was, that did not avail the
administrators because the parties cannot by their acts or submission confer jurisdiction on the court. He referred to these words
in Dicey and Morris The Conflict of Laws (11th edn, 1987) vol 1, p 302:

Submission cannot give the court jurisdiction to entertain an action or other proceeding which in itself lies beyond the
competence or authority of the court.

See also Cheshire and North Private International Law (11th edn, 1987) p 193. I accept Mr Daviss submissionthat is to say
that even if the parties agreed to submit any s 238 application to the jurisdiction of the English court the English court has no
jurisdiction to hear the application if s 238 is to be construed as not allowing a s 238 application to be made against such a person
as Hambros, ie a company registered in Jersey without any place of business in England and not carrying on business in England.
I add that the question whether or not Hambros did in fact agree to submit the s 238 application to the English court was
argued before me at length. I will therefore express my views on that question.
I have already set out the material part (cl 3) of the Jersey consent order dated 27 June 1990. The question is whether or not
by agreeing to cl 3 Hambros consented to trial in England of not only the proceedings then on record in Jersey but also any
proceedings which might be launched in England under s 238 of the 1986 Act. The answer to that question depends on the true
construction of cl 3. When so construing, evidence of negotiations or of the parties intention is not to be regarded. The evidence
should be
 restricted to evidence of the factual background known to the parties at or before the date of the contract, including
evidence of the genesis and objectively the aim of the transaction.
271

(See Prenn v Simmonds [1971] 3 All ER 237 at 241, [1971] 1 WLR 1381 at 1385.) The factual background was that Paramount
(by the administrators) was suing Mr Ferriday in England for breach of fiduciary duty. As well Paramount (again by the
administrators) was suing Hambros in Jersey. The sums claimed were the same or much the same as those claimed in England
from Mr Ferriday. In the Jersey action the allegation was that Mr Ferriday had caused Paramount money to be transferred to
Jersey, such money being held in accounts at Hambros. It was alleged that the money was to be

held and applied for the benefit of [Paramount]; alternatively, the funds were transferred by or on behalf of Mr
Ferriday in breach of his fiduciary duty to [Paramount].

Thus there were running at the same time the English action against Ferriday and the Jersey action against Hambros. The money
claim was the same in both actions. In this situation it was convenient, at any rate from the point of view of the administrators, to
seek to have one action with Ferriday and Hambros joined as defendants. As I understand it Hambros agreed to this course with
the eventual result that cl 3 was agreed on 27 June 1990. Prior to that date the administrators solicitor in Jersey had mentioned
the possibility of the administrators making use in England of s 238 (see the letter of Messrs Ogier & Cornu (Mr White) dated 14
June 1990). So the possibility that there might be s 238 proceedings was known when the consent order was made. With that
background in mind I turn to words of the consent order. I have seen only the draft but counsel were content to accept the draft
as final. The draft says that Paramount and Hambros Have agreed that these present proceedings can be stayed on the following
terms There follow five terms but term three as I have quoted it is the only presently material term. I see that Hambros
submit in relation to all claims and matters arising out of and which currently form the substance of these present proceedings.
The substance of the Jersey proceedings was the allegationsee para 4 of the order of justice served in Jersey on 22 September
89that the funds held by Hambros were to be held for the benefit of Paramount, alternatively that the funds were transferred by
or on behalf of Mr Ferriday in breach of his fiduciary duty to the plaintiff. Thus the substance of the Jersey proceedings did not
embrace the assertion of a particular statutory claim within s 238 or any equivalent statutory provision in Jersey (if such there be).
For that reason I decline to find that Hambros submitted any s 238 claim to the English jurisdiction.
I add that both counsel desired me to read correspondence and affidavit evidence that was said to bear on the meaning of the
consent order. I did read the documents put before me. There were among them an affidavit by Advocate Michel (for Hambros)
and by Advocate White (for the administrators), and correspondence between Advocate Michel and Advocate White between 14
June 1990 and 26 June 1990. As to those documents I can only say that were I allowed to take them into consideration I would
not change my mind.
I turn now to the principal question put before me, ie whether this court has jurisdiction to entertain a s 238 application
against Hambros.
I was referred to a number of authorities. Ex p Blain, re Sawers (1879) 12 Ch D 522, [187480] All ER Rep 708 was a case
under the Bankruptcy Act 1869. A judgment creditor sought leave to serve bankruptcy petitions on two Chileans resident in
Chile who had never been to England although they were partners with persons in England carrying on business in England.
Sections 6 and 8 of the 1869 Act referred to the debtor or a debtor. James LJ says (12 Ch D 522 at 526, [187480] All ER
Rep 708 at 709):
272

It appears to me that the whole question is governed by the broad, general universal principle that English legislation,
unless the contrary is expressly enacted or so plainly implied as to make it the duty of an English Court to give effect to an
English statute, is applicable only to English subjects or to foreigners who by coming into this country, whether for a long
or a short time, have made themselves during that time subject to English jurisdiction.

Brett LJ says (12 Ch D 522 at 528, [187480] All ER Rep 708 at 711):

It is said that the case is literally within the words of the statute, and so, no doubt, it is. But does it follow that,
because a case is literally within the words of a statute of any country, therefore it is within the jurisdiction of the Courts of
that country? Certainly not. The governing principle is that all legislation is prima facie territorial, that is to say, that the
legislation of any country binds its own subjects and the subjects of other countries who for the time bring themselves
within the allegiance of the legislating power.

See also Cotton LJ (12 Ch D 522 at 530, [187480] All ER Rep 708 at 712).
The learned Lord Justices used very wide words. One sees that in construing a statute

the governing principle is that all legislation is prima facie territorial, that is to say, that the legislation of any country
binds its own subjects and the subjects of other countries who for the time being bring themselves within the allegiance of
the legislating power.

(See 12 Ch D 522 at 528, [187480] All ER Rep 708 at 711 per Brett LJ.) This principle has been maintained in many cases:
see eg Re Anglo-African Steamship Co (1886) 32 Ch D 348, where it was held that the court had no jurisdiction to give leave to
serve notices of orders in the winding up of a company on persons residing out of the jurisdiction; and Cooke v Charles A
Vogeler Co [1901] AC 102, [19003] All ER Rep 660, a case on the Bankruptcy Act 1883 recognising that a debtor or creditor
in the Act must be persons who are subject to the jurisdiction of the English Bankruptcy law; cf Theophile v Solicitor General
[1950] 1 All ER 405, [1950] AC 186. However one comes to more recent times. In Clark (Inspector of Taxes) v Oceanic
Contractors Inc [1983] 1 All ER 133 at 138139, [1983] 2 AC 130 at 144145. Lord Scarman quotes from Ex p Blain parts of
the passages that I have set out above and goes on to say that the territorial principle referred to above is a rule of construction:

Put into the language of today, the general principle being there stated is simply that, unless the contrary is expressly
enacted or so plainly implied that the courts must give effect to it, United Kingdom legislation is applicable only to British
subjects or to foreigners who by coming to the United Kingdom, whether for a short or a long time, have made themselves
subject to British jurisdiction. Two points would seem to be clear: first, that the principle is a rule of construction only
and, second, that it contemplates mere presence within the jurisdiction as sufficient to attract the application of British
legislation.

And Lord Wilberforce says ([1983] 1 All ER 133 at 144, [1983] 2 AC 130 at 152):

Oceanic contends, and the Court of Appeal has held, that the provisions regarding collection of tax by deduction from
wages can never have been intended to apply to a foreign company, non-resident in the United Kingdom, which makes
 payments outside the United Kingdom. In my opinion this contention is erroneous, because it is based on a mistaken
application or 273 understanding of the territorial principle. That principle, which is really a rule of construction of
statutes expressed in general terms, and which as James LJ said is a broad principle, requires an inquiry to be made as to
the persons with respect to whom Parliament is presumed, in the particular case, to be legislating.

So the approach to s 238 is not merely as to territory or location. One must also consider the person with respect to whom
Parliament is presumed, in the particular case of s 238, to be legislating.
Re Tucker (a bankrupt), ex p Tucker [1988] 1 All ER 603, [1990] Ch 148 is a case that followed the Oceanic case. It
concerned s 25 of the Bankruptcy Act 1914, which empowered the court to summon before it persons suspected to have
possession of effects of the debtor. It was held that on a true construction s 25 did not allow of the summoning of a British
subject resident abroad. Dillon LJ referred to the Blain and Oceanic cases and said ([1988] 1 All ER 603 at 609, [1990] Ch 148
at 158):

I look, therefore, to see what s 25(1) is about, and I see that it is about summoning people to appear before an English
court to be examined on oath and to produce documents. I note that the general practice in international law is that the
courts of a country only have power to summon before them persons who accept service or are present within the territory
of that country when served with the appropriate process. There are exceptions under RSC Ord 11, but even under those
rules no general power has been conferred to serve process on British subjects resident abroad. Moreover, the English
court has never had any general power to serve a subpoena ad testificandum or subpoena duces tecum out of the
jurisdiction on a British subject resident outside the United Kingdom, so as to compel him to come and give evidence in an
English court. Against this background I would not expect s 25(1) to have empowered the English court to haul before it
persons who could not be served with the necessary summons within the jurisdiction of the English court.

The cases so far mentioned had under consideration the insolvency law in existence before the passing of the Insolvency Act
1986. I come now to a case under that Act. It is the judgment of Mummery J in Re Seagull Manufacturing Co Ltd (in liq) [1991]
4 All ER 257, [1991] 3 WLR 307. The learned judge had to consider whether or not, in the course of the winding up of an
English company, s 133 of the 1986 Act empowers the court to order a person who had been a director of the company to attend
the court for public examination despite the fact that the director, although a British subject, was at all material times resident
abroad. An order to attend was made. After referring in particular to the Oceanic and Tucker cases the learned judge said
([1991] 4 All ER 257 at 266, [1991] 3 WLR 307 at 316317):

In my judgment, s 133, on its true construction, plainly implies that its provisions apply to all who fall within a class of
person specified in s 133(1), whether they are British subjects or not and whether they are within the jurisdiction of the
English court or not at the relevant time. It does not seem to me to involve any violation of the principles of public or
private international law to construe the provisions of s 133 so as to make a person in the specified class liable to public
examination, even though he may be out of the jurisdiction. The winding up of the company is governed by English law.
Parliament has newly legislated for the public examination of specified classes of persons. Those specified classes of
persons are restricted to those 274 who have acted in one capacity or another in relation to the affairs of a company which
is either liable to be wound up by the English court under English law or is, in fact, being so wound up. In the words of
Lord Wilberforce in Clark (Inspector of Taxes) v Oceanic Contractors Inc [1983] 1 All ER 133 at 144, [1983] 2 AC 130 at
152, I would expect such persons to be within the legislative grasp, or intendment of s 133 whether or not they are at any
relevant time in England and whether or not they can be served with a summons of the English court in England. The new
provisions of s 133 have been drafted along very similar lines to those for the public examination of a bankrupt. In these
circumstances I am of the view that Parliament intended to legislate for those specified persons wherever they are.

The conclusion of Mummery J is, if I may say so, readily understandable and, just as the learned judge had to consider what
persons were within the legislative grasp of s 133, so I have to consider what persons are within the grasp of s 238. One of
course applies to s 238 the rule of construction mentioned by Lord Scarman and Lord Wilberforce. Before seeking to apply the
rule I will first mention some considerations put before me as material but which, to my mind, do not indicate how the rule is to
be applied for present purposes.
(a) Sections 238 to 241 are in a sense new and original and no help is to be derived from the sections about avoiding
transactions that appear in earlier statutes, such as ss 317 and 320 of the Companies Act 1948 and s 42 of the Bankruptcy Act
1914.
(b) Rule 12.12 of the Insolvency Rules 1986 is no pointer as to the meaning of any person in s 238. If s 238 confers no
jurisdiction then r 12.12 cannot authorise service of proceedings as to which the court has no jurisdiction, that is to say service
out can be ordered only in respect of a case within the competence of the court.
(c) It was suggested that the courts attitude towards foreigners (as shown in such cases as Ex p Blain, re Sawers (1879) 12
Ch D 522, [187480] All ER Rep 708) has in recent times changed; so that one may nowadays more readily construe a statute as
being intended to extend to foreigners. The change was said to be illustrated by recent decisions in the Mareva field such as
Derby & Co Ltd v Weldon (No 1) [1989] 1 All ER 469, [1990] Ch 48 and Babanaft International Co SA v Bassatne [1989] 1 All
ER 433, [1990] Ch 13. This suggestion seems to me not to be sustainable. The Insolvency Act 1986 was executed before the
extension of the Mareva jurisdiction and, more importantly, the Blain principle was fully accepted in the Oceanic case in 1983
and has been applied since the passing of the 1986 Act by Mummery J in the Seagull case. In this connection it may be
interesting to note some words of Hoffmann J in MacKinnon v Donaldson Lufkin & Jenrette Securities Corp [1986] 1 All ER 653
at 658, [1986] Ch 482 at 493albeit a case not concerned with insolvency:

The principle is that a state should refrain from demanding obedience to its sovereign authority by foreigners in
respect of their conduct outside the jurisdiction.

(d) Section 241 authorises the making of orders concerning property and s 436 shows that property must be read as
property wherever situated. So it may perhaps be suggested that s 238 should be read as extending to any person with property
abroad. I do not accept that suggestion. The meaning of property as defined in s 436 does not control the meaning of any
person in s 238.
(e) The Civil Jurisdiction and Judgments Act 1982 does not apply to 275 bankruptcy, winding-up or analogous proceedings:
see art 1 of the Convention on Jurisdiction and the Enforcement of Judgments in Civil and Commercial Matters (Brussels, 27
September 1968; EC 46 (1978); Cmnd 7395) set out in Sch 1 to the 1982 Act.
(f) I presume that Hambros is a subsidiary or intimately connected with Hambros Bank in England. That is a peculiarity of
this case that cannot affect the construction of s 238.
Having put aside considerations (a) to (f) above I turn to consider how it is that one construes the words any person in s
238(2). There is a presumption against applying statutory provisions outside the United Kingdom to persons who are not
resident there: see Lord Lowry in the Oceanic case [1983] 1 All ER 133 at 148, [1983] 2 AC 130 at 157. So one starts from the
position that Hambros are not caught by s 238. But then, following Lord Wilberforces guidance, one asks who is within the
legislative grasp of s 238. No doubt there are within that grasp British subjects, companies registered in England and foreigners
present in England. It may well be that the grasp extends to a foreign company carrying on business in England. But having
gone so far there is as yet no justification for saying that a Jersey company such as Hambros (with no address and no business
here) must have been aimed at when s 238 was enacted. Having so far sought to apply the rule of construction in a purely general
sense I go on to consider whether s 238 can be regarded as aimed at a particular person such as Hambros, which has, to put it
generally, been involved with Paramount, ie the company now in administration in England.
I have already summarised Hambros involvement with Paramount, that is to say it is said that Hambros holds in accounts in
Jersey two sums (1.3m and 346,800) being sums which were sent from or at the behest of Paramount to Rycos account with
Hambros in Jersey and then moved from that account to another Hambros account, namely the Anser account; the administrators
contending that Hambros knew that the sums belong to Paramount.
Thus the administrators in any s 238 application will not be alleging any transaction that took place directly between
Paramount and Hambros. The administrators will have to invoke s 241(2):

An order under section 238 or 239 may affect the property of, or impose any obligation on, any person whether or not
he is the person with whom the company in question entered into the transaction or (as the case may be) the person to
whom the preference was given; but such an order(a) shall not prejudice any interest in property which was acquired
from a person other than the company and was acquired in good faith, for value and without notice of the relevant
circumstances, or prejudice any interest deriving from such an interest, and (b) shall not require a person who received a
benefit from the transaction or preference in good faith, for value and without notice of the relevant circumstances to pay a
sum to the office-holder, except where that person was a party to the transaction or the payment is to be in respect of a
preference given to that person at a time when he was a creditor of the company.

Thus one must ask whether the grasp abroad of s 238 extends not only to a person X who has directly entered into a
transaction with the company but also to a person Y who is once or more removed from the companyas is Hambros. I doubt
whether, in light of the territorial principle, s 238 is to be construed as aiming at a succession of persons abroad such as X, Y etc.
It is said that s 238 is designed to frustrate wrongdoing so that it should be 276 construed liberally so as to support that
purpose. I do not think the construction of s 238 can be influenced by any consideration of that kind. Moreover, when one reads
the section it will be seen that it may operate against a person X who has received property at an undervalue irrespective of any
wrongdoing on the part of X; cf ss 238(5) and 241(2) as to the position of a person Y to whom X may have passed the property.
Then it is said that the transaction which the administrators are challenging is a transaction that has a connection with
England (in that the money sought to be recovered was sent from England); so that s 238 ought to authorise the recovery of that
money from a person outside England. That is persuasive. Nevertheless it does not permit me to say that s 238 is construed as
affecting Hambros. In saying that I have in mind Dicey and Morris The Conflict of Laws (11th edn, 1987) vol 1, pp 11101111
and Cheshire and North Private International Law (11th edn, 1987) p 911. Dicey and Morris p 1111 says:

the question, as yet undecided, in what circumstances the courts will compel the creditor to refund if he did not
reside in England or had no knowledge of the adjudication in bankruptcy or obtained the property abroad without legal
process, has given rise to much speculation. It is suggested, although with some hesitation, that in the modern law
jurisdiction to compel creditors to refund the value of property obtained abroad is related to that for restraining creditors
from recovering debts abroad. A creditor who obtains property of the bankrupt situated abroad must be compelled to
refund it to the trustee if, at the time when he received the payment, he was resident in England.

By analogy it seems to me that Hambros having obtained (abroad) Paramount money can be compelled to refund it only if, when
it received the money in Jersey, it had some equivalence of residence in England. It had not. Given the presumption of
territoriality that is implicit in s 238 I am not prepared now to construe s 238 in such a way as runs counter to the sentiment
expressed in the last sentence quoted from Dicey and Morris above.
Having considered the matter as best I can, I conclude, with regret, for the reasons I have given, that the court has no
jurisdiction to hear an application against Hambros under s 238 in that s 238 does not allow an application being made against a
company not registered in England and which does not have a place of business in England and which has not been carrying on
business in England. The order of Mr Registrar Buckley dated 30 November 1990 will be set aside.
I add that had I come to the conclusion that a s 238 application was open to the administrators I should have exercised my
discretion under r 12.12 of the 1986 rules in favour of the administrators. I say that because there is current in England the
Chancery action that I have mentioned. Hambros submitted to the jurisdiction in that regard. A s 238 application could
conveniently be heard with the Chancery action. On the other hand there are now no proceedings between the parties in Jersey;
so that, even if an application akin to s 238 can be made in Jersey, and is made, then the situation would be that there would be
the Chancery action in England and the s 238 action in Jersey, those actions relating to the same subject matter.

Application granted. Leave to appeal granted.

Solicitors: Norton Rose; Wilde Sapte.

Jacqueline Metcalfe Barrister.

277
[1991] 4 All ER 278

Hughes v National Union of Mineworkers and others

TORTS; Negligence: CRIMINAL; Police

QUEENS BENCH DIVISION AT LEEDS

MAY J
12, 13 MARCH 1991

Police Negligence Duty to take care Conduct of police operations Persons to whom duty owed Police officer involved in
operations Police officer injured during violent public disorder Officer part of police force attempting to keep order Officer
suing chief constable for negligently exposing plaintiff to excessive and avoidable risk of injury Whether chief constable liable
to individual officers injured by attacks from rioters Whether contrary to public policy for senior police officer charged with
controlling serious public disorder to be liable to officer injured by attacks from rioters Police Act 1964, s 48(1).
The plaintiff, a serving police officer, was posted from another force to assist the North Yorkshire police in maintaining peace at a
colliery where striking mineworkers were picketing working miners who were being escorted to work. The plaintiff was injured
when a large number of pickets surged forward towards police lines throwing missiles and he was knocked over in the ensuing
disorder. The plaintiff brought an action against the chief constable pursuant to s 48(1) a of the Police Act 1964, which provided
that the chief officer of police was liable in respect of any torts committed by constables under his direction and control in the
performance of their functions. The plaintiff alleged that the officer in charge at the colliery had deployed the forces at his
disposal negligently, so that the plaintiff was exposed to an excessive and avoidable risk of injury. The chief constable applied to
strike out the plaintiffs claim against him as disclosing no reasonable cause of action because the chief constable owed the
plaintiff no relevant duty of care in circumstances where what was in issue was the immediate operational control of police
officers in dealing with violent public disorder and the plaintiffs injuries had been directly caused by those perpetrating the
disorder, since it would not be fair, just and reasonable to impose a duty of care on the chief constable in those circumstances and
would be against public policy to do so. The registrar dismissed the chief constables application. The chief constable appealed.
________________________________________
a Section 48 is set out at p 280 j, post

Held As a matter of public policy senior police officers charged with the task of deploying what might or might not be an
adequate force of officers to control serious public disorder were not generally liable to individual officers under their command
if those officers were injured by attacks from rioters, since to hold that a duty of care was owed in such circumstances would be
significantly detrimental to the control of public order in that critical decisions which often had to be made by senior officers with
little or no time for considered thought would be prejudiced if they were affected by the fear of a potential negligence claim by a
subordinate if rioters injured that subordinate. Accordingly, the plaintiffs claim against the chief constable was bound to fail and
would be struck out. The chief constables appeal would therefore be allowed (see p 288 b to f, post).
Per curiam. Section 48 of the 1964 Act is concerned with the fact of vicarious liability of chief officers of police and does
not bear on the extent or definition of the torts for which they are to be vicariously liable (see p 286 f, post).
278

Notes
For negligence and the duty to take care generally, see 34 Halsburys Laws (4th edn) paras 15, and for cases on the subject, see
36(1) Digest (2nd reissue) 2150, 132221.
For the Police Act 1964, s 48, see 33 Halsburys Statutes (4th edn) 628.

Cases referred to in judgment

Anns v Merton London Borough [1977] 2 All ER 492, [1978] AC 728, [1977] 2 WLR 1024, HL.
B v Islington Health Authority [1991] 1 All ER 825, [1991] 1 QB 638, [1991] 2 WLR 501.
Bourhill (or Hay) v Young [1942] 2 All ER 396, [1943] AC 92, HL.
Caparo Industries plc v Dickman [1990] 1 All ER 568, [1990] 2 AC 605, [1990] 2 WLR 358, HL; rvsg [1989] 1 All ER 798,
[1989] QB 653, [1989] 2 WLR 316, CA.
Donoghue (or MAlister) v Stevenson [1932] AC 562, [1932] All ER Rep 1, HL.
Hill v Chief Constable of West Yorkshire [1988] 2 All ER 238, [1989] AC 53, [1988] 2 WLR 1049, HL.
Home Office v Dorset Yacht Co Ltd [1970] 2 All ER 294, [1970] AC 1004, [1970] 2 WLR 1140, HL.
Knightley v Johns [1982] 1 All ER 851, [1982] 1 WLR 349, CA.
Murphy v Brentwood DC [1990] 2 All ER 908, [1991] 1 AC 398, [1990] 3 WLR 414, HL.
Peabody Donation Fund (Governors) v Sir Lindsay Parkinson & Co Ltd [1984] 3 All ER 529, [1985] AC 210, [1984] 3 WLR
953, HL.
Rigby v Chief Constable of Northamptonshire [1985] 2 All ER 985, [1985] 1 WLR 1242.
Rondel v Worsley [1967] 3 All ER 993, [1969] 1 AC 191, [1967] 3 WLR 1666, HL.
Rowling v Takaro Properties Ltd [1988] 1 All ER 163, [1988] AC 473, [1988] 2 WLR 418, PC.
Sutherland Shire Council v Heyman (1985) 60 ALR 1, Aust HC.
Yuen Kun-yeu v A-G of Hong Kong [1987] 2 All ER 705, [1988] AC 175, [1987] 3 WLR 776, PC.

Appeal
The Chief Constable of the North Yorkshire Police appealed from the decision of Mr District Registrar Cliffe given on 27 July
1990 dismissing the chief constables application to strike out the action brought by the plaintiff, Anthony Hughes, against the
National Union of Mineworkers, the National Union of Mineworkers (Durham area) and the chief constable for damages for
personal injuries received while on duty at Kellingley Colliery, North Yorkshire on 6 September 1984, as disclosing no
reasonable cause of action against the chief constable. The appeal was heard and judgment was given in chambers. At the
request of counsel for the chief constable and with the concurrence of counsel for the plaintiff, the matter was listed for mention
on 15 March 1991 and the judgment was then handed down in open court. The facts are set out in the judgment.

David Gripton for the chief constable;.

David Hall for the plaintiff.

13 March 1991. The following judgment was delivered.

MAY J. This is an appeal by the Chief Constable of the North Yorkshire Police from the decision of Mr District Registrar Cliffe
on 27 July 1990, when he refused to order that the plaintiffs claim against the chief constable, who is the third 279 defendant in
these consolidated proceedings, be struck out as disclosing no reasonable cause of action.
The plaintiff, Anthony Hughes, was a serving police officer in the Lancashire Constabulary, and the action arises from
injuries which he suffered on 6 September 1984 during mineworkers disturbances at Kellingley Colliery in North Yorkshire. The
relevant paragraphs of the statement of claim read as follows:

2. On the 6th day of September 1984 the Plaintiff, in the course of his employment, was posted on the Lancashire
Constabulary Support Unit assisting the North Yorkshire Constabulary in their maintenance of the public peace at the
Kellingley Colliery, North Yorkshire where mineworkers were engaged in picketing working miners who were being
escorted to work.
3. The Plaintiff formed part of the front line of Officers outside the Colliery entrance and had taken up a position at the
end of a line which then joined at a right angle a further line of Police Officers. At about 7 am a loud whistle blew and a
vast number of pickets surged forwards throwing missiles at the Officers and thereafter persons in the surging crowd
struggled with the Plaintiff and knocked him backwards so that he landed on the ground and approximately eight to ten
pickets fell on him causing him the injuries hereinafter set out.
It is then alleged:

4. The said injury was caused by negligence on the part of the Defendant.

The particulars of negligence read as follows:

The Defendant was negligent in that he, his servants or agents: (i) Caused or permitted or required the Plaintiff to take
up a position in the Police line whereby he was not supported by Officers standing behind him; (ii) Failed in time or at all
to notice that the Plaintiff was effectively unprotected in the situation that occurred whereby he was pushed from the front
with no support from behind; (iii) Failed to organise and/or to implement any or any proper system of riot and disorder
control; (iv) Failed to deploy the Officers available in a safe and suitable fashion so that the Plaintiff was properly
protected; (v) Failed to warn the Plaintiff that he was not being supported from the rear; (vi) Exposed the Plaintiff to a risk
of injury; (vii) Failed to exercise any or any proper co-ordination of the Police forces available; (viii) Failed in the matters
set out in sub paragraphs (i)-(vii) above to operate a safe system of work, failed to take any or any proper care for the safety
of the Plaintiff and exposed him to an unnecessary and foreseeable risk of injury, which occurred.

I am told that further and better particulars in answer to a request by other defendants states that the number of mineworkers
attacking the police on the day in question was in the order of 4,000.
The action is brought against the chief constable pursuant to s 48(1) of the Police Act 1964, which provides:

The chief officer of police for any police area shall be liable in respect of torts committed by constables under his
direction and control in the performance or purported performance of their functions in like manner as a master is liable in
respect of torts committed by his servants in the course of their employment, and accordingly shall in respect of any such
torts be treated for all purposes as a joint tortfeasor.

Mr Hall, who appeared for the plaintiff, confirmed that this was in essence a 280 claim which alleged that the particular
police officer or officers in charge at the colliery on the day deployed the available forces negligently so that the plaintiff was
exposed to an excessive and avoidable risk of personal injury. Wider allegations relating to police deployment generally or to
police training or organisation are not relied on. It is not, for instance, alleged that there should have been a larger police force
than there actually was on duty at this colliery on the day in question. In thus limiting the case, the plaintiff abandoned the main
basis, as I understand it, upon which the district registrar decided in favour of the plaintiff, that is that para 4(iii) of the statement
of claim contained an arguable allegation that the chief constable, rather than the officer in charge on the day, should have
implemented a safer system of riot control.
I observe that, beyond the general assertion that the plaintiff was not personally supported by a second and perhaps third line
of officers at the point where he was positioned, the pleading contains no specific allegation of what on the ground the officer in
charge should have done to avoid the risk of personal injury to the plaintiff. It is not, for instance, alleged that any particular
different and safer formation should have been used, nor is there said to have been a particular and identified failure to comply
with standing orders or recognised procedures.
Mr Gripton, who appeared for the chief constable, submitted that in the circumstances of the case the chief constable owed
the plaintiff no relevant duty of care. He accepted that there could be circumstances where a chief constable, as the employer or
master of a constable, owed the constable a duty of care to guard against his personal injury. But he submitted that such a duty
did not extend to circumstances where what was called in question was the immediate operational control of policemen seeking
to deal with violent public disorder where the plaintiffs injuries were directly caused by those perpetrating the disorder.
The submission, as I have understood it, relies essentially on two related points: firstly, that it would not be fair, just or
reasonable to impose such a duty and, secondly that to do so would be against public policy. The first point seeks to rely on
Caparo Industries plc v Dickman [1990] 1 All ER 568, [1990] 2 AC 605 and related cases, the second point on Hill v Chief
Constable of West Yorkshire [1988] 2 All ER 238, [1989] AC 53. Both are decisions of the House of Lords.
Caparo Industries plc v Dickman was a case where negligence was alleged against auditors and actions were brought against
the auditors by shareholders or potential shareholders of the company that was being audited and the headnote reads that it was
held (see [1990] 1 All ER 568):

The three criteria for the imposition of a duty of care were foreseeability of damage, proximity of relationship and the
reasonableness or otherwise of imposing a duty. In determining whether there was a relationship of proximity between the
parties the court, guided by situations in which the existence, scope and limits of a duty of care had previously been held to
exist rather than by a single general principle, would determine whether the particular damage suffered was the kind of
damage which the defendant was under a duty to prevent and whether there were circumstances from which the court could
pragmatically conclude that a duty of care existed.

In Lord Bridges opinion there is reference to the now departed-from case of Anns v Merton London Borough [1977] 2 All
ER 492, [1978] AC 728 and a passage which reads as follows ([1990] 1 All ER 568 at 573574, [1990] 2 AC 605 at 617618):

But since Annss case a series of decisions of the Privy Council and of your Lordships House, notably in judgments
and speeches delivered by Lord Keith, have emphasised the inability of any single general principle to provide 281 a
practical test which can be applied to every situation to determine whether a duty of care is owed and, if so, what is its
scope: see Peabody Donation Fund v Sir Lindsay Parkinson & Co Ltd [1984] 3 All ER 529 at 533534, [1985] AC 210 at
239241, Yuen Kun-yeu v A-G of Hong Kong [1987] 2 All ER 705 at 709712, [1988] AC 175 at 190194, Rowling v
Takaro Properties Ltd [1988] 1 All ER 163 at 172, [1988] AC 473 at 501 and Hill v Chief Constable of West Yorkshire
[1988] 2 All ER 238 at 241, [1989] AC 53 at 60. What emerges is that, in addition to the foreseeability of damage,
necessary ingredients in any situation giving rise to a duty of care are that there should exist between the party owing the
duty and the party to whom it is owed a relationship characterised by the law as one of proximity or neighbourhood
and that the situation should be one in which the court considers it fair, just and reasonable that the law should impose a
duty of a given scope on the one party for the benefit of the other.

Towards the end of Lord Bridges opinion he says ([1990] 1 All ER 568 at 581, [1990] 2 AC 605 at 627):

It is never sufficient to ask simply whether A owes B a duty of care. It is always necessary to determine the scope of
the duty by reference to the kind of damage from which A must take care to save B harmless: The question is always
whether the defendant was under a duty to avoid or prevent that damage, but the actual nature of the damage suffered is
relevant to the existence and extent of any duty to avoid or prevent it. (See Sutherland Shire Council v Heyman (1985) 60
ALR 1 at 48 per Brennan J.)
 Caparo was a case concerning whether auditors owed a duty of care to individual shareholders or to members of the public
at large who relied on the accounts to buy shares in the company. It was a case of pure economic loss, and it is clear that their
Lordships consideration was directed mainly to the existence or otherwise of a duty to guard against such loss. The case did not
concern a duty to guard against personal injury.
It is, however, pointed out that in the passage which I have quoted not only are economic loss cases referred to but also Hill
v Chief Constable of West Yorkshire, which was a case of physical injury. That was a case where the mother and administratix of
a victim of murder brought an action under s 48(1) of the Police Act 1964 claiming damages against the chief constable in whose
area a lot of other previous offences had taken place. The headnote reads (see [1988] 2 All ER 238):

She contended that the circumstances of the earlier murders and attacks were so similar that it was reasonable to infer
that they had been committed by the same person, that it was foreseeable that unless apprehended that person would
commit further offences of the same type, that it was the duty of the police to use their best endeavours and exercise all
reasonable care and skill in apprehending him and that they had been in breach of that duty in the manner in which they
had carried out their investigation, thereby failing to detect S [the murderer] before he murdered [the plaintiffs] daughter.
The chief constable [in that action] applied to strike out [the plaintiffs] claim under RSC Ord 18, r 19 as disclosing no
reasonable cause of action. The question arose whether the police, in the course of carrying out their function of
suppressing crime, owed a duty of care to a member of the public who suffered injury through the activities of a criminal.
The judge held that the police owed no such duty and the Court of Appeal affirmed his decision. [The plaintiff] appealed to
the House of Lords.
282
Held In the absence of any special characteristic or ingredient over and above reasonable foreseeability of likely harm
which would establish proximity of relationship between the victim of a crime and the police, the police did not owe a
general duty to individual members of the public to identify and apprehend an unknown criminal even though it was
reasonably foreseeable that harm was likely to be caused to a member of the public if the criminal was not detected and
apprehended. Furthermore, even if such a duty did exist public policy required that the police should not be liable in such
circumstances. It followed that the chief constable could not be liable in damages for negligence because of failure of the
police to detect S [the murderer] before he murdered [the plaintiffs] daughter. The appeal would therefore be dismissed.

The case was referred to me principally on the public policy aspect of the decision, but it was also pointed out that in the
opinion of Lord Keith he says ([1988] 2 All ER 238 at 240, [1989] AC 53 at 59):

There is no question that a police officer, like anyone else, may be liable in tort to a person who is injured as a direct
result of his acts or omissions. So he may be liable in damages for assault, unlawful arrest, wrongful imprisonment and
malicious prosecution, and also for negligence. Instances where liability for negligence has been established are Knightly v
Johns [1982] 1 All ER 851, [1982] 1 WLR 349 and Rigby v Chief Constable of Northamptonshire [1985] 2 All ER 985,
[1985] 1 WLR 1242.

I shall refer to those two cases later in this judgment.

The decision that the police in this instance owed no duty of care to individual members of public was reached by extensive
reference to Home Office v Dorset Yacht Co Ltd [1970] 2 All ER 294, [1970] AC 1004, and Lord Keith said ([1988] 2 All ER 238
at 242243, [1989] AC 53 at 62):

The Dorset Yacht case was concerned with the special characteristics or ingredients beyond reasonable foreseeability
of likely harm which may result in civil liability for failure to control another man to prevent his doing harm to a third
The conclusion must be that although there existed reasonable foreseeability of likely harm to such as [the plaintiffs
daughter] if [the murderer] were not identified and apprehended, there is absent from the case any such ingredient or
characteristic as led to the liability of the Home Office in the Dorset Yacht case. Nor is there present any additional
characteristic such as might make up the deficiency. The circumstances of the case are therefore not capable of
establishing a duty of care owed towards Miss Hill by the West Yorkshire police.

And then on the public policy aspect, Lord Keith continues: That is sufficient for the disposal of the appeal. Consequently
all the rest of his opinion is obiter but he then goes on ([1988] 2 All ER 238 at 243244, [1989] AC 53 at 6364):

But in my opinion there is another reason why an action for damages in negligence should not lie against the police in
circumstances such as those of the present case, and that is public policy. In Yuen Kun-yeu v A-G of Hong Kong [1987] 2
All ER 705 at 712, [1988] AC 175 at 193, I expressed the view that the category of cases where the second stage of Lord
Wilberforces two-stage test in Anns v Merton London Borough [1977] 2 All ER 492 at 498, [1978] AC 728 at 752 might
fall to be applied was a limited one, one example of that category being Rondel v Worsley [1967] 3 All ER 993, [1969] 1
AC 191. Application of that second stage is, however, capable of constituting a separate 283 and independent ground for
holding that the existence of liability in negligence should not be entertained. Potential existence of such liability may in
many instances be in the general public interest, as tending towards the observance of a higher standard of care in the
carrying on of various different types of activity. I do not, however, consider that this can be said of police activities. The
general sense of public duty which motivates police forces is unlikely to be appreciably reinforced by the imposition of
such liability so far as concerns their function in the investigation and suppression of crime. From time to time they make
mistakes in the exercise of that function, but it is not to be doubted that they apply their best endeavours to the performance
of it. In some instances the imposition of liability may lead to the exercise of a function being carried on in a detrimentally
defensive frame of mind. The possibility of this happening in relation to the investigative operations of the police cannot
be excluded. Further, it would be reasonable to expect that if potential liability were to be imposed it would be not
uncommon for actions to be raised against police forces on the ground that they had failed to catch some criminal as soon
as they might have done, with the result that he went on to commit further crimes. While some such actions might involve
allegations of a simple and straightforward type of failure, for example that a police officer negligently tripped and fell
while pursuing a burglar, others would be likely to enter deeply into the general nature of a police investigation, as indeed
the present action would seek to do. The manner of conduct of such an investigation must necessarily involve a variety of
decisions to be made on matters of policy and discretion, for example as to which particular line of inquiry is most
advantageously to be pursued and what is the most advantageous way to deploy the available resources. Many such
decisions would not be regarded by the courts as appropriate to be called in question, yet elaborate investigation of the facts
might be necessary to ascertain whether or not this was so. A great deal of police time, trouble and expense might be
expected to have to be put into the preparation of the defence to the action and the attendance of witnesses at the trial. The
result would be a significant diversion of police manpower and attention from their most important function, that of the
suppression of crime. Closed investigations would require to be reopened and retraversed, not with the object of bringing
any criminal to justice but to ascertain whether or not they had been competently conducted. I therefore consider that
Glidewell LJ, in his judgment in the Court of Appeal in the present case, was right to take the view that the police were
immune from an action of this kind on grounds similar to those which in Rondel v Worsley were held to render a barrister
 immune from actions for negligence in his conduct of proceedings in court (see [1987] 1 All ER 1173 at 11831184, [1988]
QB 60 at 76).

Lord Templeman said ([1988] 2 All ER 238 at 245, [1989] AC 53 at 6465):

It may be, and we all hope that the lessons of the Yorkshire Ripper case have been learned, that the methods of
handling information and handling the press have been improved, and that co-operation between different police officers is
now more highly organised. The present action would not serve any useful purpose in that regard. The present action
could not consider whether the training of the West Yorkshire police force is sufficiently thorough, whether the selection of
candidates for appointment or promotion is defective, whether rates of pay are sufficient to attract recruits of the required
calibre, whether financial restrictions prevent the provision of 284 modern equipment and facilities or whether the
Yorkshire police force is clever enough and, if not, what can and ought to be done about it. The present action could only
investigate whether an individual member of the police force conscientiously carrying out his duty was negligent when he
was bemused by contradictory information or overlooked significant information or failed to draw inferences which later
appeared to be obvious. That kind of investigation would not achieve the object which [the plaintiff] desires. The
efficiency of a police force can only be investigated by an inquiry instituted by the national or local authorities which are
responsible to the electorate for that efficiency.

There are significant differences between Hills case and the case which is before me, and these in particular include firstly
the question in that case whether the police owed a duty to individual members of the public. In this case the question is whether
senior police officers owe a duty to those under their command. Secondly, the question in Hill was whether considered
operational decisions could be called in question. In this case the question is whether immediate decisions in the heat of a serious
public disorder can be called in question.
Mr Hall for the plaintiff argues that Caparo Industries plc v Dickman [1990] 1 All ER 568, [1990] 2 AC 605 is not in point
because it addresses claims for pure economic loss and not claims, as here, for personal injury or physical damage.
He referred me to the decision of Potts J in B v Islington Health Authority [1991] 1 All ER 825, [1991] 1 QB 638, a case of
personal injury concerning an operation on a pregnant woman which caused injury to her embryo child, and Potts J was there
referred to Caparo Industries plc v Dickman and to Murphy v Brentwood DC [1990] 2 All ER 908, [1991] 1 AC 398. He said
([1991] 1 All ER 825 at 830, [1991] 1 QB 638 at 644645):

In considering the submissions that have been made as to the nature of the duty of care and the approach which should
be adopted in its formulation I have had the speeches delivered by their Lordships in mind, in particular, those of Lord
Bridge and Lord Oliver in both cases and that of Lord Keith in the latter. Both these cases however were concerned with
the duty of care where the loss claimed was purely economic. Different considerations arise where the loss is caused by
physical damage, as Lord Bridge recognised in Caparo Industries plc v Dickman [1990] 1 All ER 568 at 574, [1990] 2 AC
605 at 618: One of the most important distinctions always to be observed lies in the laws essential approach to the
different kinds of damage which one party may have suffered in consequence of the acts or omissions of another. It is one
thing to owe a duty of care to avoid causing injury to the person or property of others. It is quite another to avoid causing
others to suffer purely economic loss. In the same case Lord Oliver said ([1990] 1 All ER 568 at 584585, [1990] 2 AC
605 at 632): it is now clear from a series of decisions in this House that, at least so far as concerns the law of the
United Kingdom, the duty of care in tort depends not solely on the existence of the essential ingredient of the foreseeability
of damage to the plaintiff but on its coincidence with a further ingredient to which has been attached the label proximity
and which was described by Lord Atkin in the course of his speech in Donoghue v Stevenson [1932] AC 562 at 581, [1932]
All ER Rep 1 at 12 as such close and direct relations that the act complained of directly affects a person whom the person
alleged to be bound to take care would know would be directly affected by his careless act. It must be remembered,
however, that Lord Atkin was using these words in the context of loss caused by physical damage where the existence of
the nexus between the careless 285 defendant and the injured plaintiff can rarely give rise to any difficulty. To adopt the
words of Bingham LJ in the instant case ([1989] 1 All ER 798 at 808, [1989] QB 653 at 686): It is enough that the
plaintiff chances to be (out of the whole world) the person with whom the defendant collided or who purchased the
offending ginger beer. Thus I proceed [Potts J continued] on the basis that the nature of the duty of care in cases
involving physical injury and consequential loss remains as it was before the decisions of the House of Lords in Caparo
Industries plc v Dickman [1990] 1 All ER 568, [1990] 2 AC 605 and Murphy v Brentwood DC [1990] 2 All ER 908, [1991]
1 AC 398. In Donoghue v Stevenson [1932] AC 562, [1932] All ER Rep 1 the foresight of a reasonable man was accepted
as a general test as to whether a duty of care existed. In Bourhill v Young [1942] 2 All ER 396 at 403, [1943] AC 92 at 104,
where the issues was whether the presence of a pregnant woman at the scene of an accident was reasonably foreseeable,
Lord Macmillan said: The duty to take care is the duty to avoid doing or omitting to do anything the doing or omitting to
do which may have as its reasonable and probable consequence injury to others and the duty is owed to those to whom
injury may reasonably and probably be anticipated if the duty is not observed. In my view this formulation of the duty is
appropriate in the present case and I respectfully adopt it.

Mr Hall submits that in this case there is proximity and sufficient foreseeability of probable injury so that the duty of care is
established and that the question shifts to whether as a matter of fact the duty was broken. The facts averred, says Mr Hall, must
be taken at this stage as provable, and those facts amount to a breach of the duty. The plaintiff, he says, was so deployed that the
general risk of injury which he accepts existed was increased.
Mr Hall further submits that the scope of s 48 of the Police Act 1964 is wide and that Parliament could have excluded or
limited the liability of chief officers of police had this been an intention. In my view s 48 is concerned with the fact of vicarious
liability and does not bear on the extent or definition of the torts for which the chief officer of police is to be vicariously liable.
On the issue of public policy, Mr Hall expressly limited the scope of the plaintiffs case in the way that I have indicated and
submitted that the case therefore did not raise wide-ranging considerations which would require extensive research and evidence.
The formulation by Potts J is plainly the law where there is personal injury and the injury is perpetrated by the person said to
owe the duty of care. That is not, however, this case, where the plaintiffs injury was perpetrated by the rioting miners whom the
plaintiff with others was deployed to control. In this sense, the present case does not fall directly within the authorities which
Potts J cited and followed. It may be that for such an intermediate case the considerations in the Caparo case come into play, but,
as will appear, I do not consider that this case should be decided on those lines.
I was then referred to two cases directly concerned with liability of police officers, the first of which is Knightley v Johns
[1982] 1 All ER 851, [1982] 1 WLR 349. It is a decision of the Court of Appeal and concerned a traffic accident at the exit of a
tunnel carrying one-way traffic. A number of policemen came on the scene including an inspector, and the inspector forgot to
close the tunnel. In consequence of this, he ordered two police officers on motor cycles, one of whom was the plaintiff, to go
back and close the tunnel. The headnote reads (see [1982] 1 All ER 851):
286

The two officers then rode back through the tunnel against the oncoming traffic. Near the entrance of the tunnel the
plaintiff collided with an oncoming motorist and was injured. The motorist was found on the facts not to have been
 negligent. Both the inspector in ordering the plaintiff to ride back through the tunnel in the face of the oncoming traffic
and the plaintiff in carrying out the order acted contrary to, and in breach of, their police forces standing orders for road
accidents in the tunnel

Held (1) The inspector was negligent in not closing the tunnel before he gave orders for that to be done and also in ordering or
allowing his subordinates, including the plaintiff, to carry out the dangerous manoeuvre of riding back along the tunnel contrary
to the standing orders for road accidents in the tunnel
The case then went on to consider other points which are not material to the case before me.
It is clear from that case that the basis upon which the inspector was held to be negligent depended on the two points, firstly,
that he was negligent in not closing the tunnel and, secondly, that he was negligent in ordering his subordinates to do a very
dangerous thing contrary to explicit standing orders. The standing orders are set out in terms in the judgment of Stephenson LJ
(see [1982] 1 All ER 851 at 856857, [1982] 1 WLR 349 at 356), and he says, having reviewed the facts ([1982] 1 All ER 851 at
858, [1982] 1 WLR 349 at 357):

That satisfies me that he [the inspector] was negligent in not closing the tunnel and in ordering or allowing his
subordinates to do a very dangerous thing contrary to standing orders.

That case shows that a police inspector may owe a duty of care to an officer under his command in what may broadly be
called operational circumstances where his decisions were no doubt taken somewhat in the heat of the moment. The duty may
be characterised as a duty to comply with specific standing orders and the negligence, as I have indicated, was a failure to close
the tunnel and a breach of quite specific provisions of the standing orders.
The second case is Rigby v Chief Constable of Northamptonshire [1985] 2 All ER 985, [1985] 1 WLR 1242, a decision of
Taylor J. The brief facts taken from the headnote were (see [1985] 2 All ER 985):

In 1977 the plaintiffs shop was burnt out when police fired a canister of CS gas into the building in an effort to flush
out a dangerous psychopath who had broken into it. The canister set the shop ablaze. At the time the canister was fired
into the shop there was no fire-fighting equipment to hand, as a fire engine which had been standing by had been called
away.

The case considers whether there was a cause of action in trespass and held that there was not, and then goes on to consider
whether a claim in negligence would succeed, and the brief findings there were that since there was a real and substantial fire risk
involved in firing the gas canister into the building, and since that risk was only acceptable if there was equipment available to
put out a potential fire at an early stage, the defendant, the police officer in charge, had been negligent in firing the gas canister
when no fire-fighting equipment was in attendance.
The plaintiff in that case was a particular member of the public whose shop the dangerous psychopath had occupied. That
again was an operational decision but a more considered one. There appears to have been no particular need to fire the 287
canister at the particular moment that it was fired rather than, for instance, half an hour later. As with Knightley v Johns the
officer in question made a specific identified error.
The particular facts of the case before me are those pleaded in paras 3 and 4 of the statement of claim. The plaintiff was one
of a number of police officers deployed to control serious public disorder by a vast number of picketing miners. He was injured
by some of those disorderly miners. Having considered Hill v Chief Constable of West Yorkshire on the one hand and Knightley v
Johns and Rigby v Chief Constable of Northamptonshire on the other, in my judgment, as a matter of public policy, if senior
police officers charged with the task of deploying what may or may not be an adequate force of officers to control serious public
disorder are to be potentially liable to individual officers under their command if those individuals are injured by attacks from
rioters, that would be significantly detrimental to the control of public order.
It will no doubt often happen that in such circumstances critical decisions have to be made with little or no time for
considered thought and where many individual officers may be in some danger of physical injury of one kind or another. It is
not, I consider, in the public interest that those decisions should generally be the potential target of a negligence claim if rioters
do injure an individual officer, since the fear of such a claim would be likely to affect the decisions to the prejudice of the very
task which the decisions are intended to advance. Accordingly, in my judgment, public policy requires that senior police officers
should not generally be liable to their subordinates who may be injured by rioters or the like for on the spot operational decisions
taken in the course of attempts to control serious public disorder. That, in my judgment, should be the general rule in cases of
policing serious public disorders. There may be exceptions where the plaintiffs injuries arise, as in Knightley v Johns, from
specifically identified antecedent negligence or specific breach of identified regulations, orders or instructions by a particular
senior officer. There is no such specific allegation in the statement of claim in this case and none has been suggested in
argument. It follows that the plaintiffs claim against the third defendant taken at its pleaded highest is bound to fail and that the
claim should be struck out. I therefore allow this appeal.

Appeal allowed.

Solicitors: Hammond Suddards, Bradford; Russell Jones & Walker.

K Mydeen Esq Barrister.

288
[1991] 4 All ER 289

Killick v Roberts
LANDLORD & TENANT; Tenancies: CONTRACT

COURT OF APPEAL (CIVIL DIVISION)

NEILL, MUSTILL AND NOURSE LJJ
14 MAY, 13 JUNE 1991

Rent restriction Protected tenancy Misrepresentation Fraudulent misrepresentation Rescission Effect of rescission
Landlord induced by fraudulent misrepresentation to grant tenant protected tenancy Protected tenancy expiring by effluxion of
time and statutory tenancy arising Rescission of protected tenancy Whether rescission of protected tenancy bringing statutory
tenancy to an end Rent Act 1977, ss 2(1)(a), 98(1).

The plaintiff owned a bungalow which she let out between Easter and the end of October each year as a holiday home and during
the winter months at a reduced rental to persons requiring short-term accommodation. The defendant fraudulently represented to
the plaintiff that he was having a house built for him which would be ready for his occupation at the end of February 1989, and
on the faith of that representation the plaintiff let the bungalow to him from 30 November 1988 to 1 March 1989 under a written
agreement, with the option to extending the tenancy for a further four weeks at a rent of 40 per week. The tenancy was a
protected tenancy for the purposes of the Rent Act 1977. The plaintiff did not, prior to the commencement of the tenancy, give to
the defendant notice in writing that possession might be recovered under Case 13 in Sch 15 to the 1977 Act. On 6 February 1989
the defendant exercised the option to extend the tenancy for a further four weeks until 29 March 1989, but failed to vacate the
bungalow on that date and thereafter became a statutory tenant by virtue of s 2(1)(a)a of the 1977 Act. The plaintiff brought an
action for possession. The judge held that in the circumstances the plaintiff was entitled to have the tenancy agreement rescinded
and ordered that the plaintiff should recover possession. The defendant appealed, contending that by virtue of s 98(1) b of the
1977 Act, which provided that the court could only make an order for possession of a statutory tenancy on the grounds specified
in Sch 15 none of which had any application in the circumstances, the recission of the tenancy agreement had not brought to an
end his statutory tenancy of the bungalow.
________________________________________
a Section 2(1), so far as material, is set out at p 293 a, post
b Section 98(1), so far as material, provides: a court shall not make an order for possession of a dwelling-house which is for the time
being let on a protected tenancy or subject to a statutory tenancy unless the court considers it reasonable to make such an order and ( b)
the circumstances are as specified in any of the Cases in Part I of Schedule 15 to this Act.

Held The plaintiff was entitled to have the tenancy agreement rescinded since she had been induced to enter into it by the
defendants fraud and that remedy, remained available to her notwithstanding that the tenancy had expired by effluxion of time.
Moreover, since the policy of the 1977 Act was to protect those who had been contractual tenants and not to protect a person who
was not entitled to occupy the premises in the first place, it followed that the effect of rescission was to restore the parties to the
position they would have been in if the agreement had not been made, and on rescission of the protected tenancy the statutory
tenancy which had sprung from it was brought to an end. Accordingly the appeal would be dismissed (see p 292 d e and p 293 d
to p 294 b, post).
289
Dicta of Denning LJ in Solle v Butcher [1949] 2 All ER 1107 at 1122 and of Asquith LJ in Haberman v Westminster
Permanent Building Society [1950] 2 All ER 16 at 20 applied.

Notes
For protected tenancies, see 27 Halsburys Laws (4th edn) para 580, and for cases on the subject, see 31(2) Digest (Reissue) 976
979, 78417866.
For statutory tenancies, see 27 Halsburys Laws (4th edn) para 590, and for cases on the subject, see 31(2) Digest (Reissue)
10251031, 81238177.
For the Rent Act 1977, ss 2, 98, see 23 Halsburys Statutes (4th edn) (1989 reissue) 522, 594.

Cases referred to in judgments

Haberman v Westminster Permanent Building Society [1950] 2 All ER 16, [1950] 2 KB 294, CA.
Keeves v Dean, Nunn v Pellegrini [1924] 1 KB 685, [1923] All ER Rep 12, CA.
Peters v Batchelor (1950) 100 LJ 718, CA.
Solle v Butcher [1949] 2 All ER 1107, [1950] 1 KB 671, CA.

Cases also cited

Johnson v Agnew [1979] 1 All ER 883, [1980] AC 367, HL.
Lovibond (John) & Sons Ltd v Vincent [1929] 1 KB 687, [1929] All ER Rep 59, CA.
Sutton v Dorf [1932] 2 KB 304, [1932] All ER Rep 70.
Wilkins v Carlton Shoe Co Ltd (1930) 46 TLR 415, CA.

Appeal
The defendant, Brian Henry Edmund Roberts, appealed from the judgment of Mr Recorder R E Newbold given in the Plymouth
County Court on 1 August 1990 ordering that the tenancy agreement dated 30 November 1988 made between the plaintiff,
Genevieve Rosemary Killick, and the defendant in relation to the premises known as Tremardy, Kiln Lane, Stokenham,
Kingsbridge, Devon, be rescinded and that the defendant give up possession of the premises to the plaintiff. The facts are set out
in the judgment of Nourse LJ.

Christopher Naish for the defendant.

Stephen Lowry for the plaintiff.

Cur adv vult

13 June 1991. The following judgment was delivered.

NOURSE LJ (giving the first judgment at the invitation of Neill LJ). This appeal raises a question under the Rent Act 1977.
Does an order for the rescission of a protected tenancy by reason of a fraudulent misrepresentation on the part of the tenant bring
to an end a statutory tenancy which has taken effect on the expiry of the protected tenancy?
The landlord and the plaintiff in the action is Mrs Genevieve Rosemary Killick. She is the owner of a bungalow known as
Tremardy, Kiln Lane, Stokenham, Kingsbridge, Devon. Since about 1986 she has usually let it as a holiday bungalow between
Easter and the end of October in each year and, during the winter months, at a reduced rental to persons requiring short-term
accommodation. By a written agreement dated 30 November 1988 she let the bungalow to the 290 defendant, Mr Brian Henry
Edmund Roberts, from that date until 1 March 1989, with the option of extending weekly for a further four weeks, at a rent of
40 per week. The agreement did not contain any covenants on the part of either party. As was later found to have been the case,
the plaintiff did not, as she could have done, give notice in writing to the defendant that possession might be recovered under
Case 13 in Sch 15 to the 1977 Act. The other statutory requirements having been satisfied, it is agreed therefore that the tenancy
was a protected tenancy for the purposes of that Act.
 By a letter addressed to the plaintiff dated 6 February 1989 the defendant duly exercised his option to extend the tenancy for
a further four weeks, ie until 29 March 1989. He did not vacate the bungalow on that date. Thereafter he became the statutory
tenant of it by virtue of s 2(1)(a) of the 1977 Act. On 30 March he wrote to the plaintiff asking her to extend the tenancy for a
further four weeks. In a letter of 3 April she refused that request. On 6 April she issued a summons in the Plymouth County
Court claiming possession of the bungalow on the ground that the tenancy had expired on 29 March. On 19 April the defendant
put in an informal defence raising points which were later abandoned.
On 26 May 1989 the defendant served an amended defence alleging that the plaintiff had not, prior to the commencement of
the tenancy, given him written notice that possession of the bungalow might be required under Case 13 in Sch 15 to the 1977 Act.
He claimed the protection of that Act. On 30 May amended particulars of claim were served, in which it was alleged that prior to
the commencement of the tenancy the plaintiff had given the defendant a written notice pursuant to Case 13. On 20 October
1989 reamended particulars of claim were served. They raised additional claims for breaches by the defendant of alleged
obligations to keep the bungalow and its contents in good and tenantable repair and to occupy it for his sole occupation as a
residence only and not to carry on any trade or business there. It was also alleged that, at the time of making the agreement and
in order to induce the plaintiff to let the bungalow to him, the defendant falsely represented to her that he was having a house
built for him elsewhere which would be ready for his occupation at the end of February 1989, and that the plaintiff had acted on
the faith of that representation in agreeing to let the bungalow to him.
The trial took place before Mr Recorder R E Newbold in April and August 1990. At the outset he decided that the plaintiff
could not rely on Case 13 and the trial proceeded on the other issues. In his judgment delivered on 1 August the learned recorder,
while deciding that there had been no breaches of the alleged obligations as to repair and user, found as a fact that the defendant
had made a fraudulent misrepresentation, as pleaded in the reamended particulars of claim, which had had the effect of inducing
the plaintiff to enter into the tenancy agreement. He also found that she had sustained financial loss as a result thereof. Having
referred to several authorities, he held that the plaintiff was entitled to have the tenancy agreement rescinded. He assumed, rather
than decided, that that would have the effect of determining the defendants statutory tenancy of the bungalow. He also found
that if the plaintiff had not let it to the defendant she would have let it to someone who would have caused no difficulty in ending
the agreement at the appropriate date. Although the contrary was submitted in this court, I am satisfied that there was evidence
on which that finding could properly be made.
The recorders order dated 1 August 1990 provided, first, that the tenancy agreement be rescinded, secondly, that the
plaintiff should forthwith recover possession of the bungalow from the defendant and, thirdly, that the plaintiff 291 should
recover damages, ie mesne profits, in the sum of 4,870. It is agreed that 2,800 of that amount represented mesne profits at the
rate of 40 per week, ie at the rate equivalent to the rent paid by the defendant, and that the balance of 2,070 represented the
amount of the extra rent which the plaintiff would have got if she had been able to let the bungalow on holiday lettings during the
summer months. As to costs, it was ordered that, save that the plaintiff should recover the costs of issue of process, there should
be no order up to 20 October 1989 (the date on which the reamended particulars of claim were served), but that thereafter the
plaintiff should have her costs to be taxed on scale 3.
On his appeal to this court the defendant, through Mr Naish, has submitted, first, that the rescission of the tenancy agreement
did not bring to an end his statutory tenancy of the bungalow, secondly, that the loss of extra rent on holiday lettings was caused
by the plaintiffs failure to serve a notice pursuant to Case 13 and, thirdly, that the recorder erred in principle in not giving the
defendant all his costs up to 20 October 1989 and a proportion of them thereafter. Only the first of these submissions has raised a
question of any substance.
As to that question, it is clear that the plaintiff, having been induced to enter into the tenancy agreement by the fraud of the
defendant, was entitled to have it rescinded. Although it may be unusual, and in a sense contradictory, for a tenancy to be
rescinded after it has expired by effluxion of time, I do not doubt that the remedy remains available. The effect of rescission is,
so far as practicable, to restore the parties to the position they would have been in had the contract not been made. Moreover,
being an equitable remedy, it is sometimes granted only on terms. On either count it may be appropriate for the rights of the
parties to be adjusted even though the contract no longer subsists.
What effect did the order for rescission have in this case? In order to answer that question, I must start by supposing,
contrary to the true facts, that the order was made at a time when the tenancy was still subsisting. It appears clear that in that
state of affairs the right to a statutory tenancy would have perished with the protected tenancy: see Solle v Butcher [1949] 2 All
ER 1107, [1950] 1 KB 671, where a subsisting lease of rent protected premises was rescinded on the ground of a common
mistake of fact, the landlord being put on terms to grant the tenant a licence and then a lease of the premises at the full permitted
rent. Denning LJ said ([1949] 2 All ER 1107 at 1122, [1950] 1 KB 671 at 697):

If the tenant does not choose to accept the licence or the new lease, he must go out. He will not be entitled to the
protection of the Rent Restrictions Acts because, the lease being set aside, there will be no initial contractual tenancy from
which a statutory tenancy can spring.

The observations of Asquith LJ in Haberman v Westminster Permanent Building Society [1950] 2 All ER 16 at 20, [1950] 2
KB 294 at 301302 are to much the same effect. It seems probable that a similar view was taken by yet another division of this
court in Peters v Batchelor (1950) 100 LJ 718. However, the report is very brief and it does not specifically state that the
rescission of the lease would necessarily bring to an end the tenants statutory right to remain in occupation.
Accordingly, where a protected tenancy is rescinded while it is still subsisting the tenant does not become a statutory tenant
of the dwelling-house because there is no longer any contractual tenancy from which it can spring. However, Mr Naish
submitted that the position is different where the contractual tenancy has expired before it is rescinded. He pointed to the fact
that here the plaintiff did not issue her proceedings until about a week after the tenancy agreement had expired, so that the
defendant had already become the statutory tenant of the bungalow. He relied on s 2(1)(a) of the 1977 Act:
292

Subject to this Part of this Act(a) after the termination of a protected tenancy of a dwelling-house the person who,
immediately before that termination, was the protected tenant of the dwelling-house shall, if and so long as he occupies the
dwelling-house as his residence, be the statutory tenant of it

Mr Naish then relied on s 98, which provides that the court shall not make an order for possession of a dwelling-house which is
for the time being subject to a statutory tenancy, except on familiar grounds which would only have been available to the plaintiff
here if she had served a written notice under Case 13. Mr Naish emphasised that a statutory tenants right of occupation is
personal to himself and incapable of transmission to a third party except in the special cases provided for by the Act: see eg
Keeves v Dean, Nunn v Pellegrini [1924] 1 KB 685, [1923] All ER Rep 12.
Mr Lowry, for the plaintiff, pointed out that on facts such as we have here the defendants fraud could not have been
discovered until after the tenancy had expired. It was only then that the plaintiff could know that the defendant was not going to
give up possession and that what he had told her about having another house built for him elsewhere was false. Mr Lowry
submitted that it would be an unjustifiable exception to the rule that fraud unravels everything if the statutory tenancy could
survive when the protected tenancy could not.
In my judgment the submissions of Mr Lowry are to be preferred. A statutory tenancy cannot arise unless there is a
protected tenancy from which it can spring. If the effect of the rescission of the protected tenancy is, so far as practicable, to
restore the parties to the position they would have been in had the tenancy not been granted, it would seem to follow that the
statutory tenancy ought to come to an end on the rescission of the protected tenancy. Admittedly the extinction of a statutory
right is different from the extinction of a contractual right. In deciding whether there can be an extinction in the first category we
must look at the policy of the statute under which the right arises. The policy of the 1977 Act is to protect those who have been
contractual tenants. It is not to protect someone who, having been deprived of his contractual tenancy, is adjudged not to have
been entitled to occupy the premises in the first place. I therefore see no reason in principle why a statutory tenancy should
survive the rescission of a protected tenancy which has already expired. On this approach no distinction is to be made between a
rescission ordered on the ground of a fraudulent misrepresentation by the tenant and one ordered, for example, on the ground of a
common mistake of fact. But, if I was wrong in thinking that no such distinction ought to be made, I would nevertheless hold
that it cannot on any footing be the policy of the 1977 Act that a statutory tenancy which has sprung from a protected tenancy
obtained by fraud should survive the rescission of the protected tenancy. For these reasons I would decide the first question in
favour of the plaintiff.
The second and third questions must be decided in like manner. In regard to the second question Mr Naish sought to argue
that it was the plaintiffs failure to serve a notice under Case 13 which caused the defendant to remain in possession. That point
is unarguable. The remaining in possession and the consequential loss to the plaintiff of the extra rent on holiday lettings was
directly caused by the fraudulent misrepresentation which procured the grant of the tenancy.
As to the third question, it is true that the learned recorder, instead of making no order as to the defendants costs up to 20
October 1989, might have ordered the plaintiff to pay his costs up to that date. However, I cannot say that he erred in principle in
not making such an order, particularly when he had found that the plaintiff had only had to go to the court because of the fraud of
the defendant. 293 In regard to the period after 20 October 1989 Mr Naish argued that, since the plaintiff had pursued the action
on four different bases, on only one of which she succeeded, there ought to have been an apportionment of the costs between the
successful and the unsuccessful claims. Again that was a matter well within the recorders discretion and his decision cannot be
interfered with by this court.
Having decided all three questions in favour of the plaintiff, I would dismiss this appeal accordingly.

MUSTILL LJ: I agree.

NEILL LJ: I also agree.

Appeal dismissed.

Solicitors: Cornish & Co, Tolnes; Nash & Co, Plymouth.

LI Zysman Esq Barrister.

[1991] 4 All ER 294

Doyle and others v Northumbria Probation Committee

CIVIL PROCEDURE

QUEENS BENCH DIVISION

HENRY J
23 FEBRUARY, 5, 22 MARCH 1991

Statement of claim Striking out Private law action Public law defence Plaintiff bringing action against public authority
for breach of contract Authority claiming contract ultra vires Whether plaintiff obliged to proceed by judicial review
Whether plaintiffs action should be struck out.

The plaintiffs were employed as probation officers by the defendant probation authority, which was a body corporate established
under statutory powers. In 1975 the authority decided to pay its probation officers home-to-office mileage allowance each day
regardless of whether an officer used his car on official business, that mileage allowance being incorporated in the probation
officers conditions of service and contracts of employment. In 1981 the authority decided to discontinue the home-to-office
mileage allowance because it considered the allowance to be too expensive. The probation officers made it clear that they
considered that such action would be a breach of their contracts of employment. Nevertheless, the authority started to phase out
the allowance from 1 June 1983 and it was finally withdrawn on 1 June 1985. On 27 June 1983 the plaintiffs sent a letter before
action, claiming that the authority was in breach of contract. In October 1984 the authority raised for the first time the defence
that it had no statutory power to pay the allowances. On 24 February 1989, which was just before the expiry of the limitation
period for bringing an action, the plaintiffs, representing 173 other probation officers, issued a writ claiming damages for breach
of contract. The authority applied to strike out the writ and statement of claim and to dismiss the action on the ground that the
action raised questions of public law which ought properly to have been the subject of proceedings by way of judicial review.
294

Held Where a public authority was being sued in an action commenced by writ to enforce a private law claim, such as breach
of contract, and raised by way of defence a public law issue, such as whether the authority had had power to contract, in
circumstances such that the plaintiff was out of time to proceed by way of judicial review, then, applying the principle that a
plaintiff ought not to be required to proceed by way of judicial review in circumstances where a private law right which he sought
to invoke would or might in consequence be adversely affected, the plaintiffs action would not be struck out as an abuse of
process. Accordingly, since the plaintiffs had a genuine private law claim, seeking private law remedies, and their claim in no
way depended on the plaintiffs asserting or proving any public law infringement of their rights and since striking out their claim
and requiring them to proceed by way of judicial review would not merely adversely affect the plaintiffs private law rights, but
would effectively divest them of those rights because, due to the lapse of time, leave to apply for judicial review would not be
granted, the court would not strike out the claim. The application would therefore be dismissed.
Wandsworth London BC v Winder [1984] 3 All ER 976 applied.
OReilly v Mackman [1982] 3 All ER 1124, Cocks v Thanet DC [1982] 3 All ER 1135 and Davy v Spelthorne BC [1983] 3
All ER 278 considered.

Notes
For the scope of judicial review and when judicial review is an exclusive remedy, see 1(1) Halsburys Laws (4th edn reissue)
paras 6465.

Cases referred to in judgment

Cocks v Thanet DC [1982] 3 All ER 1135, [1983] 2 AC 286, [1982] 3 WLR 1121, HL.
Davy v Spelthorne BC [1983] 3 All ER 278, [1984] AC 262, [1983] 3 WLR 742, HL.
Gillick v West Norfolk Health Authority [1985] 3 All ER 402, [1986] AC 112, [1985] 3 WLR 830, HL.
Letang v Cooper [1964] 2 All ER 929, [1965] 1 QB 232, [1964] 3 WLR 573, CA.
McLaren v Home Office [1990] ICR 824, CA.
OReilly v Mackman [1982] 3 All ER 1124, [1983] 2 AC 237, [1982] 3 WLR 1096, HL.
Pyx Granite Co Ltd v Ministry of Housing and Local Government [1959] 3 All ER 1, [1960] AC 260, [1959] 3 WLR 346, HL.
R v Derbyshire CC, ex p Noble [1990] ICR 808, CA.
R v East Berkshire Health Authority, ex p Walsh [1984] 3 All ER 425, [1985] QB 152, [1984] 3 WLR 818, CA.
Wandsworth London BC v Winder [1984] 3 All ER 976, [1985] AC 461, [1984] 3 WLR 1254, HL; affg [1984] 3 All ER 83,
[1985] AC 461, [1984] 3 WLR 563, CA.

Summons
By summons dated 15 June 1990 the defendants, the Northumbria Probation Committee, applied to strike out the writ issued on
24 February 1989 and the statement of claim served on 22 May 1990 and to dismiss the action brought against the committee by
the plaintiffs, Patrick Joseph Doyle, Lynn Margaret Crowther, Wendy Dale, John Davies and Roger Kennington, claiming
damages for breach of the plaintiffs contracts of employment, on the grounds that the action raised questions of public law which
ought properly to be or have been the subject of proceedings by way of judicial review and the bringing of a civil action 295 was
an abuse of process. The summons was heard in chambers but judgment was given by Henry J in open court. The facts are set
out in the judgment.

Brian Langstaff for the plaintiffs.

Derrick Turriff for the committee.

Cur adv vult

22 March 1991. The following judgment was delivered.

HENRY J: The Northumbria Probation Committee is a statutory corporation established under the Powers of Criminal Courts
Act 1973. It is responsible for the probation service in its area, and is the employer of the probation officers in that area. The
plaintiffs in this action are or were probation officers employed by the committee. There are five named plaintiffs, and by
agreement the action is a test case on behalf of a further 173.
In 1975 the committee decided to pay the probation officers employed by it home-to-office mileage in their motor cars, up to
a daily maximum of ten miles each way, and irrespective of whether the probation officer had to use his car on official business
on the day in question. These agreements were incorporated in the local Code of Conditions of Service, and are to be found in
the March 1981 edition in section 2, paras 13 and 14. These conditions of service were, as the name implies, part of the contracts
of employment of probation officers.
In 1981 the committee wished to discontinue these payments as home-to-office mileage was proving very expensive.
However, the probation officers and their union would not agree to this. Negotiation on this subject was deferred while a similar
dispute between the county council and their staff was resolved. Negotiations between the committee and the probation officers
were reopened at the end of 1982, but agreement between them was not reached, and on 18 January 1983 the committee indicated
that the allowances would be withdrawn. The probation officers made it clear that they would regard that as a breach of contract,
and the local union branch indicated that they intended to take legal proceedings at the appropriate time.
On 28 February 1983 the then chief probation officer wrote to all probation officers informing them that the relevant
allowance would be phased out from 1 June 1983 and would be withdrawn with effect from 1 June 1985. The plaintiffs case is
that that letter was an anticipatory breach of their service contracts, and that as from 1 June 1983 the defendants were in actual
breach of the contracts of employment with the probation officers. On 27 June 1983 the solicitors for the plaintiffs sent a letter
before action to the committee, and on 29 June 1983 the secretary to the committee replied denying liability. So the first battle
line was drawn.
At this time the nature of the dispute was viewed by both sides as being governed by the law of contract, uncomplicated by
any limit on the committees powers. The limitation period for such an action is six years. Since the repeal in 1954 of the
provisions originally to be found in the Public Authorities Protection Act 1893, our law has had no different or shorter period of
limitation where an action commenced by writ is brought against a public body.
The plaintiffs made full use (if that is the right word) of those six years, only issuing their writ on 24 February 1989. Even
then they did not serve it on the committee for the best part of 11 monthsagain a period of delay which the rules then allowed
them. By then it was a very stale claim indeed, albeit one 296 permitted by the rules. But the application before me is not one to
dismiss for want of prosecution.
In the years that have passed from June 1983, there has been correspondence between the parties. That correspondence
finally seems to have petered out in about April 1988, until revived by the writ that I am here concerned with. But by October
1984 the nature of the dispute had broadened, with the committee taking as their principal line of defence the fundamental point
that they had never had power under the relevant legislation to pay that particular allowance. This point was inconsistent with
their earlier decision to phase out the payments and represented a complete change of front on their part.
The plaintiffs challenge this interpretation of the committees powers and there was an exchange of counsels opinions on
this point, with conflicting views being put forward. From the way that Mr Turriff (on behalf of the committee) has presented the
case, it seems that this issue of the committees powers may be the only live issue on liability if the action is to proceed. It does
not seem that the committee intend to justify their actions under the law of contract. In the correspondence that I have seen,
however, the committee at no time limited themselves solely to the ultra vires defence. But, by the time the plaintiffs commenced
their action, they knew at least that a major issue in the case was a public law issue relating to the committees powers to
authorise the payments.
The statement of claim was served on the committee on 22 May 1990, and on 15 June 1990 the committee took out a
summons to strike out the writ and statement of claim and to dismiss the action under RSC Ord 18, r 19(1)( b). Helpfully a
schedule was attached to that summons, setting out the grounds of the application which is the one presently before me. It is
sufficient for me to quote two paragraphs of those grounds:

(9) The Committee contend that the terms of the agreement relied on by the Plaintiffs as entitling them to payment of
the sums claimed are ultra vires the Committee.
 (10) In the circumstances this action raises questions of public law which ought properly to be or have been the subject
of proceedings by the Plaintiffs by way of judicial review and the bringing and pursuing of proceedings by way of ordinary
civil action is an abuse of the process of the Court.

The inspiration for this way of proceeding is to be found in the well-known case of OReilly v Mackman [1982] 3 All ER
1124, [1983] 2 AC 237 in the speech of Lord Diplock. I summarise the points he makes.
(i) RSC Ord 53 provides a procedure whereby every type of remedy for the infringement of the rights of an individual that
are entitled to protection in public law can be obtained.
(ii) Built into those procedures are protections against groundless, unmeritorious or tardy harassment of public bodies.
(iii) Such protections are necessary to satisfy the public policy which requires speedy certainty in the resolution of such
disputes in the interests both of good administration and the protection of rights of third parties indirectly affected by the
challenged public law decision.
(iv) So, where an action is commenced by way of writ where the challenge should have been mounted under Ord 53, unless
such an action can be struck out summarily as an abuse of the process of the court, then the whole purpose of the public policy
towards which Ord 53 is directed would be defeated.
Under Ord 53, where the plaintiff wrongly brings his claim in the form of an application for judicial review, the court has
power to order that claim to be continued as though it had been commenced by writ. But, where a claim is wrongly commenced
by writ, the court has no power to convert it into a claim 297 for judicial review. And, if the plaintiffs were now to bring a free-
standing application for judicial review, their delay has been such that I would find it difficult to envisage the court granting leave
to them to apply for such judicial review. Therefore it seems to me that, if the committee succeed in the application that they are
making, that will be the end of the plaintiffs claim.
It seems to me that the correct analysis of the facts that I have analysed are these. The 1975 decision of the committee to
pay home-to-office mileage was a public law decision because of the statutory underpinning to the probation officers conditions
of employment. If this payment had been made ultra vires the decision could have been challenged by way of judicial review by
an interested party, for instance a ratepayer, provided of course that he did so promptly. There was no challenge to that decision.
In 1983 the committee commenced phasing out payment of that allowance. Their decision to do this might or might not
have been in breach of the probation officers contracts of employment, but could not have been ultra vires or a breach of their
public law duties.
That decision to discontinue was not prompted by the view that they had acted ultra vires in paying the allowance, as is
obvious from the fact that the payments were phased out and not discontinued immediately.
In these circumstances, had any action been commenced by the plaintiffs in 1983, realistically any such action would have
had to have been an action by writ for breach of the contracts of employment. No doubt had then been cast on the committees
power to make the payments in the first place, and it is not incumbent on employees of a public authority faced with a prima facie
breach of contract to investigate or prove that the public body which employed them had power to contract with them on the
terms agreed.
Accordingly, it seems to me clear that, in 1983: (a) the plaintiffs had a good private law cause of action for breach of
contract, which they could commence at any time within six years; and (b) had they then applied to proceed by way of judicial
review, the application would very likely have been stayed, as the applications in R v East Berkshire Health Authority, ex p Walsh
[1984] 3 All ER 425, [1985] QB 152 and R v Derbyshire CC, ex p Noble [1990] ICR 808 (cases that I refer to later) were.
It is clear to me that the plaintiffs then had a cause of action for breach of contract. By cause of action I mean a factual
situation, the existence of which entitles one person to obtain from the court a remedy against another person (per Diplock LJ in
Letang v Cooper [1964] 2 All ER 929 at 934, [1965] 1 QB 232 at 242). That accrued cause of action was a genuine private law
claim: it was not a public law challenge disguised as a private law action. Accordingly, no leave was required to bring it at any
time within the six year limitation period, and the financial elements of the relief claimed were not discretionary.
When the situation changed in October 1984, when the ultra vires point was taken, after that it was clear that the committee
were relying on a public law defence. So then a clear public law issue was introduced into the dispute, but by the committee. At
this time the plaintiffs had not issued their writ, and they did not do so until the end of the period private law allowed them, that is
to say for another four and a half years.
If the committee are right, first, in their contention that their 1975 payments were ultra vires and also that, as a result of this,
the matter cannot be decided in an action brought by writ but must be litigated under Ord 53, then their second thoughts in 1984
as to the extent of their powers in 1975 had profound effects on the plaintiffs accrued causes of action. These effects would be:
first, leave would be required; second, the limitation period would be drastically reduced; third, it would be more difficult for
them to obtain cross-examination and discovery of 298 documents; and, fourth, the financial remedies they sought would
become, in theory at any rate, discretionary. Even more fundamentally, if the plaintiffs should in 1984 have proceeded by way of
judicial review, they are, as I have said, unlikely to get leave so to proceed now.
With that introduction, I come now to the rule in OReilly v Mackman. The ratio of that case is to be found in Lord
Diplocks speech ([1982] 3 All ER 1124 at 1134, [1983] 2 AC 237 at 285):

Now that those disadvantages to applicants have been removed and all remedies for infringements of rights protected
by public law can be obtained on an application for judicial review, as can also remedies for infringements of rights under
private law if such infringements should also be involved, it would in my view as a general rule be contrary to public
policy, and as such an abuse of the process of the court, to permit a person seeking to establish that a decision of a public
authority infringed rights to which he was entitled to protection under public law to proceed by way of an ordinary action
and by this means to evade the provisions of Ord 53 for the protection of such authorities. My Lords, I have described this
as a general rule; for, though it may normally be appropriate to apply it by the summary process of striking out the action,
there may be exceptions, particularly where the invalidity of the decision arises as a collateral issue in a claim for
infringement of a right of the plaintiff arising under private law, or where none of the parties objects to the adoption of the
procedure by writ or originating summons. Whether there should be other exceptions should, in my view, at this stage in
the development of procedural public law, be left to be decided on a case to case basis: a process that your Lordships will
be continuing in the next case in which judgment is to be delivered today (see Cocks v Thanet DC [1982] 3 All ER 1135).

The rule as set out there does not cover this case and that is common ground. The reason for that is that the plaintiffs here
do not seek to establish that they had any public law entitlement to the disputed allowance: their claim to it is purely contractual.
Therefore they do not claim any remedy for infringement of their public law rights. Public law only comes into the action as a
result of the committees assertion by way of defenceor anticipated assertion by way of defencethat they had no power to
pay the disputed allowance.
As indicated by Lord Diplock, OReilly v Mackman was extended in Cocks v Thanet DC [1982] 3 All ER 1135, [1983] 2 AC
286. There the plaintiff alleged that the defendant council was in breach of its duty to house him and claimed damages for such
breach. In order to mount his damages claim, he had to establish a breach of public law duties owed to him. He commenced his
action by writ and was stopped in that course, in that it was struck out as an abuse of process of the court in the House of Lords.
As it was there necessary for the plaintiff to show that his public law rights were infringed before he could get his private
law claim off the ground, so it was found that there was an abuse of process for him to go by writ. That extension of the rule in
OReilly v Mackman again does not cover this case, for the same reasons as before.
 Since those two cases have been decided, there has been a wealth of authority on these points and I have been treated to a
review of those authorities. I summarise them very shortly.
In Davy v Spelthorne BC [1983] 3 All ER 278, [1984] AC 262 the plaintiff alleged that he had been given negligent advice
by the defendant local authoritys servant and as a result he had not appealed an enforcement notice. He brought an action for
damages for negligence. He did not have to impugn the enforcement notice 299 directly. He started his action by writ. He was
allowed to continue it by the House of Lords.
In Wandsworth London BC v Winder [1984] 3 All ER 976, [1985] AC 461 the council sued the defendant for arrears of rent.
The defendant, by his defence and counterclaim, asserted that the notices served on him increasing the rent were ultra vires. An
application was made to strike out his defence and counterclaim as an abuse, on the basis that it should have been taken by way
of judicial review. That application failed and so he was allowed to continue with that defence and counterclaim.
In R v East Berkshire Health Authority, ex p Walsh [1984] 3 All ER 425, [1985] QB 152 a dismissed nursing officer sought
certiorari under Ord 53 to quash his dismissal. It was held that he was seeking to enforce his private contractual right and that he
should have proceeded by way of writ. His application for judicial review was therefore stayed.
In Gillick v West Norfolk Health Authority [1985] 3 All ER 402, [1986] AC 112 a mother attacked an area health authoritys
guidance to medical practitioners. It was held that she could have gone by way of judicial review, but because of the strong
private law element she was entitled to proceed by way of ordinary action.
In R v Derbyshire CC, ex p Noble [1990] ICR 808 a deputy police surgeon was dismissed. He sought to quash his dismissal
by certiorari and sought mandamus for his reinstatement. His application for leave to judicially review the decision was
dismissed. It was held that that was not appropriate for judicial review.
In McLaren v Home Office [1990] ICR 824 a prison officer, by a writ, sought a declaration that he was still employed on the
old shift system. The Home Office applied to strike out the action on the basis that he should have gone by judicial review. It
was held that, as the issues related to his private law claim, so he could proceed by way of writ.
Three plain principles emerge from those decisions.
(i) In cases within the OReilly v Mackman doctrine, the courts will be astute to see that there is no evasion of the Ord 53
protections designed to eliminate groundless, unmeritorious or tardy harassment of local authorities by the use of an action by
writ which in reality is seeking redress for the infringement of public law rights.
(ii) However, in cases not within the rule there is no necessary or overriding objection to public law issues being litigated in
writ actions, whether in the Queens Bench Division or in the Chancery Division: see the Davy, Wandsworth London BC and
Gillick cases.
(iii) Order 53 should not be used for the litigation of private law claims.
Looking at those authorities, including OReilly v Mackman and Cocks v Thanet DC, there have been eight reported cases on
this topic cited to me. Five of those eight went to the House of Lords. All eight went to the Court of Appeal. In four cases the
plaintiffs were allowed to proceed with their chosen method of action and in four they were not. The principles that Lord
Diplock expected would emerge from the decisions in OReilly v Mackman have clearly not yet fully been worked out, and the
reason for this seems to me to be clear, namely that the circumstances in which there may be such a mixture of private and public
law claims are infinitely various and can arise in very disparate situations. But the wealth of authority on this point and the
potential for expensive appeals on it leads one to conclude that, until the principles are worked out, there is potentially a
formidable extra hurdle for plaintiffs in litigation where public law and private law mix. It seems to me that this is at present an
area of the law where the forms of action abolished by the Common Law Procedure Acts in the nineteenth century appear to be in
danger of returning to rule us from their graves.
The committee submit to me that these proceedings should be stayed on the 300 basis of the following proposition. They
submit that where a dispute arises which gives rise to an issue of public law (as this does, in the manner I have indicated), and the
determination of that issue is essential to determine whether or not the plaintiff has a good private law claim for breach of
contract, and where that public law issue is effectively the only issue in the proceedings, the plaintiff must proceed by way of
judicial review for the reasons given by Lord Diplock in OReilly v Mackman.
While it is conceded that this proposition would be an extension of any principle so far laid down by the cases, it is said that
it would be a logical extension. The reason for this is, so it is said, that, where a public law decision of an administrative body is
questioned, the need for speedy resolution of it with proper safeguards against meritless claims is in the interest of good
administration, which is the overriding public interest here, so it is said.
From the authorities, I get most help from Davy v Spelthorne BC and Wandsworth London BC v Winder. I find, first, that
this is a genuine private law claim, seeking private law remediesa claim which in no way depends on the plaintiffs asserting or
proving any public law infringement of the plaintiffs rights.
Second, the plaintiffs have, subject to the public law defence, an accrued private law right to private law remedies. I quote
from Lord Frasers speech in Davy v Spelthorne BC [1983] 3 All ER 278 at 283, [1984] AC 262 at 273:

The present proceedings, so far as they consist of a claim for damages for negligence, appear to me to be simply an
ordinary action for tort. They do not raise any issue of public law as a live issue. I cannot improve on the words of Fox LJ,
in the Court of Appeal, when he said: I do not think that the negligence claim is concerned with the infringement of
rights to which [the plaintiff] was entitled to protection under public law, to use Lord Diplocks words in OReilly v
Mackman. The claim, in my opinion, is concerned with the alleged infringement of the plaintiffs rights at common law.
Those rights are not even peripheral to a public law claim. They are the essence of the entire claim (so far as negligence is
concerned).

Substitute breach of contract for negligence in those words and those words would seem to me to apply in this case.
Third, to strike out these proceedings now and to require the plaintiffs to proceed by way of judicial review would not (in the
words of Robert Goff LJ in Wandsworth London BC v Winder [1984] 3 All ER 83 at 97, [1985] AC 461 at 481) merely adversely
affect the plaintiffs private law rights, but would effectively divest the plaintiffs of those rights because, due to the time lapse,
leave for judicial review would not now be granted.
Fourth, it seems to me that the principle annunciated by their Lordships in Wandsworth London BC v Winder applies. I cite
from the headnote the summary of Lord Frasers speech (see [1985] AC 461):

Held, dismissing the appeal, that it was a paramount principle that the private citizens recourse to the courts for the
determination of his rights was not to be excluded except by clear words and that there was nothing in the language of
RSC, Ord 53 which could be taken as abolishing a citizens right to challenge the decision of a local authority in the course
of defending an action of the present nature, nor did section 31 of the Supreme Court Act 1981 which referred only to an
application for judicial review have the effect of limiting a defendants rights sub silentio Dictum of Viscount
Simonds in Pyx Granite Co Ltd v Ministry of Housing and Local Government ([1959] 3 All ER 1 at 6, [1960] AC 260 at
286) applied. OReilly v Mackman and Cocks v Thanet District Council distinguished.
301

I cite the way Robert Goff LJ put matters in the Court of Appeal in Wandsworth London BC v Winder first where, having
cited Lord Frasers speech in Davy v Spelthorne BC, he says ([1984] 3 All ER 83 at 96, [1985] AC 461 at 480):
 I read this passage in Lord Frasers speech as expressing the opinion that the principle in OReilly v Mackman should
not be extended to require a litigant to proceed by way of judicial review in circumstances where his claim for damages for
negligence might in consequence be adversely affected. I can for my part see no reason why the same consideration should
not apply in respect of any private law right which a litigant seeks to invoke, whether by way of action or by way of
defence. For my part, I find it difficult to conceive of a case where a citizens invocation of the ordinary procedure of the
courts in order to enforce his private law rights, or his reliance on his private law rights by way of defence in an action
brought against him, could, as such, amount to an abuse of the process of the court. But in any event I am satisfied that it
cannot be right that his so proceeding should be held to amount to an abuse of process if the effect would be that his power
to enforce his private law rights, or to rely on them by way of defence, either would or might be adversely affected. I am
unable to read RSC Ord 53 or s 31 of the Supreme Court Act 1981 as intended in any way to curtail a citizens private law
rights.

Then again ([1984] 3 All ER 83 at 97, [1985] AC 461 at 481):

He [the defendant] is therefore invoking the protection of his existing private law rights. Furthermore, it is plain that
to require him (as the judge has done) to proceed by way of judicial review would not merely adversely affect the private
law rights on which he seeks to rely but effectively divest him of them, because the time has long since passed when he
was free to make any such application. I fully appreciate that public authorities may be exposed to great inconvenience if
they are unable to invoke the principle of OReilly v Mackman in a case such as the present. But such inconvenience may
arise in many cases where a citizen successfully challenges action by a public authority affecting his private law rights
under a decision by the public authority which proves to have been made ultra vires. The successful challenge by the
citizen may be a source of great embarrassment for the public authority, as it contemplates all the earlier occasions on
which it has given effect to the ultra vires decision and the possibly immense cost to ratepayers of putting the matter right.
Sometimes indeed, as experience has shown, it may even be necessary to legislate in order to extricate the public authority
from its difficulties. But it does not in my judgment follow that there is an abuse of process by the citizen in invoking the
assistance of the ordinary courts, by action or by defence, in order to enforce, or to claim the protection of, his private law
rights. If it is thought that any limit should be placed on citizens proceeding in this way, in the interests of good
administration, then this is, in my judgment, a matter for Parliament.

On the basis of the principles as there expressed, it seems to me in all the circumstances that I would not be justified in
regarding this claim as an abuse of the process of the court. So the application to strike it out therefore fails.

Summons dismissed.

Solicitors: Brian Thompson & Partners, Newcastle upon Tyne; D A Manners, Newcastle upon Tyne.

K Mydeen Esq Barrister.

302
[1991] 4 All ER 303

Lloyds Bank Export Finance Ltd v Inland Revenue Commissioner

TAXATION; Income Tax, Assessment

PRIVY COUNCIL
LORD KEITH OF KINKEL, LORD TEMPLEMAN, LORD JAUNCEY OF TULLICHETTLE, SIR ROBERT MEGARRY AND SIR DAVID CROOM-JOHNSON
20, 21 MAY, 19 JUNE 1991

Income tax Assessment Assessment out of time New Zealand Making assessment Whether assessment only made where
process of determination produces taxable income on which tax payable Whether determination that no tax payable
constituting an assessment Whether further assessment may be made more than four years after determination made that no
tax was payable Income Tax Act 1976(NZ), ss 19, 25.

The taxpayers submitted returns for the 1976 and 1977 years of assessment showing small profits. However, because of
substantial losses in prior years which they were entitled to carry forward and set off, the Commissioner of Inland Revenue made
determinations to the effect that no tax was payable by them for the two years in question. Some five years after the second of
the two determinations the commissioner sought to assess the taxpayers to tax in respect of the years 1976 and 1977. The
taxpayers challenged the assessments on the ground, inter alia, that the four-year time limit under s 25 a of the New Zealand
Income Tax Act 1976 within which the commissioner was entitled to increase an assessment already made had expired and the
further assessments were therefore statute-barred. The judge upheld the taxpayers objections, but the Court of Appeal of New
Zealand allowed an appeal by the commissioner, holding that an assessment under s 19 b of the 1976 Act was made only when
the process of determining the income, if any, of a taxpayer determining the allowable deductions or rebates and ascertaining
thereby the balance of income, if any, on which tax was payable resulted in there being taxable income, that if no amount of
taxable income was produced by that process no assessment had taken place, that the determinations by the commissioner for the
years 1976 and 1977 that no tax was payable by the taxpayers had therefore not constituted assessments, and that accordingly s
25 of the 1976 Act did not apply to bar the commissioner from making fresh assessments for those years. The taxpayers appealed
to the Privy Council.
________________________________________
a Section 25, so far as material, is set out at p 305 h j, post
b Section 19, so far as material, is set out at p 305 e, post

Held The expression make assessments in the context of s 19 of the 1976 Act meant the process by which the commissioner
carried out his statutory obligation to ascertain the amount on which tax was payable and the amount of tax. That process might
show up a positive figure or a nil or a negative figure, but in each case when that process was completed an assessment had been
made, and there was nothing in s 19 or the scheme of the 1976 Act to justify the conclusion that the commissioner only made an
assessment where he determined that there was tax payable. It followed therefore that the commissioners determinations to the
effect that there was no tax payable by the taxpayers for the years 1976 and 1977 constituted assessments for the purposes of s
25 of the 1976 Act, with the result that the commissioner had not been entitled to alter the determinations so as to increase the
amount of income tax for those years more than four years after they 303 were made. The appeal would accordingly be allowed
(see p 306 j, p 307 c to f, p 308 j to p 309 c and p 310 a b, post).

Notes
For assessments to tax and time limits for making assessments, see 23 Halsburys Laws (4th edn reissue) paras 1650, 1659.
Sections 29 and 34 of the Taxes Management Act 1970 make provision for the assessing procedure and ordinary time limits
for making assessments to tax in the United Kingdom. For ss 29 and 34 of the 1970 Act, see 42 Halsburys Statutes (4th edn)
298, 305.

Cases referred to in judgment

Batagol v Federal Comr of Taxation (1963) 109 CLR 243, Aust HC.
IR Comr v V H Farnsworth Ltd [1984] 1 NZLR 428, NZ CA.

Appeal
Lloyds Bank Export Finance Ltd (the taxpayers) appealed with leave of the Court of Appeal of New Zealand (Richardson,
Somers and Bisson JJ) given on 9 July 1990, from the decision of that court (Cooke P, Richardson and Hardie Boys JJ) ([1990] 2
NZLR 154) on 3 April 1990 allowing an appeal by the Commissioner of Inland Revenue from the decision of Tomkins J in the
New Zealand High Court sitting at Auckland (11 TRNZ 733) on 31 May 1988 that determinations made by the commissioner that
no tax was payable by the taxpayers for the years 1976 and 1977 constituted assessments for the purposes of s 19 of the New
Zealand Income Tax Act 1976 and that, because the four-year time limit within which the commissioner was entitled to increase
those assessments had expired, the commissioner was time-barred from making further assessments under s 25 of that Act. The
facts are set out in the judgment of the Board.

Sydney Kentridge QC and David Simcock (of the New Zealand Bar) for the taxpayers;
Peter Jenkin QC and Grant Pearson (both of the New Zealand Bar) for the commissioner.

19 June 1991. The following judgment was delivered.

LORD JAUNCEY OF TULLICHETTLE. This appeal involves the construction of certain sections of the New Zealand Land
and Income Tax Act 1954 which was consolidated in the Income Tax Act 1976. Before looking in detail at the relevant sections it
may be convenient to summarise the circumstances giving rise to the appeal. The fiscal year in New Zealand runs from and to 31
March, so that the year ending 31 March 1980 would be described as the 1980 year. The appellants, Lloyds Bank Export Finance
Ltd (the taxpayers), submitted the necessary returns for the years 1976 and 1977 showing small profits. However, because of
substantial losses in prior years which they were entitled to carry forward and set off, the respondent (the commissioner) made
determinations to the effect that no tax was payable by them in the two years in question. Some five years after the last of the
two determinations the commissioner sought to assess the taxpayers to tax in respect of the above two years. The taxpayers
challenged the assessments on the ground, inter alia, that they were statute-barred by reason of the provisions of s 24 of the 1954
Act. Tompkins J upheld the taxpayers objection to the assessments (see (1988) 11 TRNZ 733) but the Court of Appeal quashed
the orders made in the High Court and declared that the commissioner 304 was not barred by s 25 of the 1976 Act (the re-
enactment of s 24 of the 1954 Act) from making the assessments (see [1990] 2 NZLR 154). The judgment of the Court of
Appeal, which was delivered by Richardson J, found it convenient to refer to the provisions of the 1976 Act rather than to the
corresponding provisions of the 1954 Act and their Lordships are content to do likewise.
It is now necessary to examine the relevant provisions of the 1976 Act in detail. Section 9, which imposes the duty on a
taxpayer to make annual returns, is in the following terms:

Annual returns by taxpayers. Subject to this Act or any regulations under this Act, every taxpayer shall for the
purposes of the assessment and levy of income tax furnish to the Commissioner in each year a return or returns in the
prescribed form or forms setting forth a complete statement of all the assessable and non-assessable income derived by him
during the preceding year, together with such other particulars as may be prescribed.

Assessable income is defined by s 2 of the 1976 Act as income of any kind which is not exempted from income tax otherwise
than by way of a special exemption expressly authorised as such by this Act. In calculating assessable income, expenditure or
loss incurred in the production of that income may be taken into account (see s 104).
Section 19 of the 1976 Act, which imposes the duty on the commissioner to make assessments, is in the following terms:

Commissioner to make assessments. From the returns made as aforesaid and from any other information in his
possession the Commissioner shall in and for every year, and from time to time and at any time thereafter as may be
necessary, make assessments in respect of every taxpayer of the amount on which tax is payable and of the amount of that
tax.

Section 23 deals with amendment of assessments in the following manner:

Amendment of assessments.(1) The Commissioner may from time to time and at any time make all such alterations
in or additions to an assessment as he thinks necessary in order to ensure the correctness thereof, notwithstanding that tax
already assessed may have been paid.
(2) If any such alteration or addition has the effect of imposing any fresh liability or increasing any existing liability,
notice thereof shall be given by the Commissioner to the taxpayer affected.
Section 25, which is relied on by the taxpayers, provides:

Limitation of time for amendment of assessment.(1) When any person has made returns and has been assessed for
income tax for any year, it shall not be lawful for the Commissioner to alter the assessment so as to increase the amount
thereof after the expiration of 4 years from the end of the year in which the assessment was made.
(2) Notwithstanding subsection (1) of this section, in any case where, in the opinion of the Commissioner, the returns so
made are fraudulent or wilfully misleading or omit all mention of income which is of a particular nature or was derived
from a particular source, and in respect of which a return is required to be made, it shall be lawful for the Commissioner to
alter the assessment (being an assessment made on or after the 1st day of April 1958) at any time so as to increase the
amount thereof.

Section 29 requires the commissioner to give notice to the taxpayer after an assessment has been made and is in the following
terms:
 305

Notice of assessment to taxpayer. (1) As soon as conveniently may be after an assessment is made the Commissioner
shall cause notice of the assessment to be given to the taxpayer: Provided that where(a) The taxpayer has, in his return
to which the assessment relates, calculated the amount on which tax is payable or the amount of the tax; or ( b) The
assessment has been made on default by the taxpayer in furnishing any return for the year to which the assessment relates;
or (c) The Commissioner causes a separate statement in relation to the assessment to be given to the taxpayer setting forth
the amount on which tax is payable and the amount of the tax,it shall not be necessary to set forth in the notice of the
assessment any particulars other than particulars as to the amount of tax to be paid by the taxpayer or the amount of tax to
be refunded, as the case may require.
(2) The omission to give any such notice shall not invalidate the assessment or in any manner affect the operation
thereof.

The issue between the parties is whether the determinations, to use a neutral word, by the commissioner for the years 1976
and 1977 that no tax was payable by the taxpayers constituted assessments for the purposes of s 25(1). If they did, the
commissioner accepts that the later assessments were out of time and therefore ineffective. If they did not the later assessments
were not time-barred. The determinations in question took the following form.
(1) By what appears to be a printed form of letter the district commissioner on 5 April 1977 wrote to the taxpayers as
follows:

Dear
Your 1976 return of income has been checked. There is no refund, or further tax to pay.
Yours faithfully

Accompanying that letter was a document headed Income Tax Assessment Notice 1976, with a line drawn through the words.
The document included the following entries:

$
Assessable Income as returned
14,227.00
Loss bfwd
973,237.38
Losses to be cfwd
959,010.38
Balance of Tax
nil.
(2) On 6 March 1978 the district commissioner sent to the taxpayers an undated letter relating to the 1977 return in terms
identical to that which he had sent on 5 April 1977, save that the second sentence began with the words, On the basis of the
return furnished. Accompanying that letter was another document, dated 6 March 1978 and headed Income Tax Assessment
Notice 1977, with two lines drawn through the first three words. This document contained figures of assessable income, loss
brought forward, loss available to be carried forward and a nil balance of tax.
Mr Kentridge QC for the taxpayers submitted that the word assessment meant the process of determining the income of a
taxpayer, if any, of determining the allowable deductions or rebates and of ascertaining thereby the balance of income, if any, on
which tax is payable. This process might show up a positive figure, a nil figure or a negative figure, but in each case an
assessment had been made. Mr Jenkin QC for the commissioner on the other hand adopted the reasoning of the 306 Court of
Appeal in arguing that an assessment only took place when the foregoing process threw up taxable income, which is defined by s
2 as meaning the residue of assessable income, after deducting the amount of all special exemptions to which the taxpayer is
entitled. If no figure of taxable income was produced by the process no assessment had taken place. Mr Jenkin also relied on
the terms of three further sections to which their lordships will refer later.
Section 9 requires a taxpayer to make a return even though he may well know that he will be required to pay no tax. The
return required is of assessable income but such income is capable of producing nil taxable income by the deduction therefrom of
special exemptions. Section 19 imposes on the commissioner the duty to make assessments in respect of every taxpayer of the
amount on which tax is payable. This involves, inter alia, calculating the assessable income. If, as Mr Jenkin contended, the
process of assessment has not taken place until some taxable income has been ascertained, it means that the Commissioner will
not know until he has completed the whole exercise of examining the returns and relevant documents whether he has been
making an assessment or not, even though he has in that process calculated the assessable income. If he has not been making an
assessment what has he been doing and what is the statutory warrant therefor? Mr Jenkins contention also produces the
somewhat curious result that a determination by the Commissioner that $5 tax is payable is an assessment which cannot be
increased after the period specified in s 25(1) has run, whereas a determination that there is no taxable income or that there is a
loss can be revised at any time without limit.
Some support for Mr Kentridges argument is to be found in s 23(2), which, in the context of amendment of assessments,
uses the words imposing any fresh liability or increasing any existing liability. the reference to fresh liability suggests that the
section contemplated an alteration which imposed liability to tax where none existed before. Further support for the argument is
to be found in s 29(1), which clearly contemplates that a notice of assessment given after an assessment has been made shall in
certain circumstances contain a statement of the amount of tax to be refunded. In this situation the assessment would necessarily
have produced the result that not only was no tax payable by the taxpayer but that tax was repayable to him by the commissioner.
If an assessment is made in such a situation it is difficult to see why it is not also made when no tax is payable without a refund.
Mr Jenkin however argued that the consideration of three sections, namely ss 188(1), 38(2) and (3) and 21, showed that the
taxpayers argument was wrong. Section 188(1) and (2) is in the following terms:

(1) Losses incurred may be set off against future profits.For the purposes of this section any loss incurred by a
taxpayer shall be ascertained in accordance with the provisions of this Act for the calculation of assessable income.
(2) Any taxpayer who satisfies the Commissioner that he has, in any income year, incurred a loss shall, subject to this
section, be entitled to claim that the loss be carried forward and deducted from or set off against the assessable income
derived in the first income year after the income year in which the loss was incurred, so far as that income extends, and, so
far as it cannot then be deducted or set off, be deducted from or set off against the assessable income derived in the next
income year, and so on.

It was as a result of the application of s 188(2) that the prior losses incurred by the taxpayers resulted in nil determinations in the
years 1976 and 1977. Mr Jenkin argued that the distinction between assessable income and taxable income was crucial to s
188(1). If s 188 had intended that a loss could be a subject of an 307 assessment, the set-off in sub-s (2) would have been against
taxable and not assessable income. Their Lordships consider that this argument is unsound and that in any event the terms of s
188 cannot assist in the proper construction of ss 19 and 25. It is purely fortuitous that the new determinations in this appeal
arose as a result of the application of s 188; they could equally well have arisen because the taxpayers had made a loss in the year
of assessment or because their assessable income had been exactly reduced to nil by the special exemptions.
Mr Jenkin next argued that s 38 contemplated that there could only be a year of assessment in relation to a taxpayer when he
had taxable income. Section 38, so far as relevant for this argument, is in the following terms:

(2) Subject to this Act, income tax shall be payable by every person on all income derived by him during the year
for which the tax is payable.
(3) The year in which income is so derived is in this Act referred to as the income year, and the year for which income
tax is payable is in this Act referred to as the year of assessment.

If income tax was not payable by a taxpayer for a particular year then that year could not be a year of assessment and therefore no
assessment had been made on it. Their Lordships reject this argument. Section 9 requires the taxpayer to make a return of all
income assessable or not derived during the preceding year, and s 38(3) draws a distinction between the years in which income is
derived and assessed. Income is derived in one year which is the income year and the tax is assessed in another year, probably
the following, which is the year of assessment. If in sub-s (2) the words during the year etc are read with shall be payable
rather than with income derived the whole thing falls into place and the subsections cannot bear the construction which Mr
Jenkin seeks to place on them. There can still be a year of assessment although the relevant income year produces no income on
which tax is payable.
Finally, Mr Jenkin referred to s 21, which provides, inter alia:

If any person makes default in furnishing any return [the commissioner] may make an assessment of the amount on
which in his judgment tax ought to be levied and of the amount of that tax, and that person shall be liable to pay the tax so
assessed, save in so far as he establishes on objection that the assessment is excessive or that he is not chargeable with tax.

He submitted that the final eight words of the section showed that if a person had a nil tax liability no assessment should be made
on it. Their Lordships do not so construe these words. They appear to have been intended to cover a situation where a person
was not a taxpayer at all within the definition in s 2 at the relevant time, eg because he had by then ceased to be an agent or
trustee or had never been such, and not to cover the situation where an admitted taxpayer has a nil taxable income.
Reference was also made to the Australian case of Batagol v Federal Comr of Taxation (1963) 109 CLR 243, where there
was a similar issue as to whether an assessment was time-barred. However, the wording of the statute under consideration was
significantly different and their Lordships agree with Tompkins J that it is not of assistance in this case.
Their Lordships have no doubt that the arguments for the taxpayers are to be preferred and that the Commissioners statutory
duties under s 19 in relation to a taxpayers return extend not only to the production of a result which produces taxable income
but also to results which produce a nil return or a loss. Any other construction would produce the anomalies and illogicalities
already referred to. Whichever of these three results the commissioner arrives at he has made an 308 assessment for the purposes
of s 19 and hence s 25. It is to be noted that the latter section uses the words assessed for income tax, that is to say for the
purposes of income tax, rather than to income tax. Their Lordships cannot do better than quote the following passage from the
judgment of Tompkins J:

In my opinion the expression make assessments in the context of s 17, means the process by which the
Commissioner carries out his statutory obligation to ascertain the amount on which tax is payable and the amount of tax. I
find nothing in the section, nor in the statutory scheme, to justify a conclusion that the Commissioner only makes an
assessment where he determines that there is tax payable. A conclusion that there is no amount on which tax is payable and
that as a consequence there is no tax payable involves making an assessment from the returns and other information in his
possession just as much as if the result of the assessment were to find that there was an amount on which tax was payable
and consequently there was tax payable.

(The reference is to s 17 of the 1954 act, which was later replaced by s 19 of the 1976 Act.)
In reaching this conclusion their Lordships are fortified by two further considerations. In the first place the purpose of s
25(1) is to achieve finality and to enable the taxpayer and the commissioner to close the books and dispose of their papers after
the stipulated period. The exercise required to be carried out by the commissioner in terms of s 19 is capable of producing three
different results namely: (1) that the taxpayer has taxable income; (2) that he has no taxable income; and (3) that he has a loss
which he may carry forward in terms of s 188. To accept the argument of Mr Jenkin and the reasoning of the Court of Appeal
would mean that only in the first instance would finality be achieved, whereas in the other two the commissioner could reopen his
determination at any time in the future, a result which would appear to be contrary to the spirit of s 25, to quote the words of
Cooke J in IR Comr v V H Farnsworth Ltd [1984] 1 NZLR 428 at 430.
In the second place the provisions of pt III of the 1976 Act, headed Objections to Assessments, envisage that such
objections will be dealt with by the Taxation Review Authority, a body particularly experienced in taxation matters. It would be
entirely logical that the legislature should have intended that all matters involving determinations by the commissioner
consequent on receipt of a taxpayers return as to tax payable or not payable should be dealt with by that body. Such a result
would follow from the conclusions which their Lordships have reached. If on the other hand Mr Jenkins argument were correct
it would mean that the determinations by the commissioner resulting in a nil payment of tax or in a loss could only be challenged
by a taxpayer in the ordinary courts by judicial review or some other legal process. This would appear to defeat substantially the
purpose of pt III.
It only remains to refer to one further matter to which the Court of Appeal had some regard, namely the amendment to s 19
occasioned by s 20 of the Income Tax Amendment Act 1980. The amendment of s 19 required the commissioner to make
determinations of losses and provided that such determinations were to be treated as assessments. This amendment, it was said,
reflected the common understanding in income tax practice that a letter confirming the assessment of the amount of a loss to be
carried forward under s 188 was not an assessment. It is noteworthy that the amendment does not deal with a situation where
there is no loss but simply no taxable income. Had the construction of the relevant section of the 1976 Act been in dubio it might
have been appropriate to turn to the 309 amendments for assistance. However, as their Lordships are of the opinion that the
construction and intention of those sections are clear, it follows that the construction cannot be affected by the later amending
Act.
Their Lordships will therefore humbly advise Her Majesty that this appeal should be allowed, the order of the Court of
Appeal set aside and the order of Tompkins J restored. The commissioner must pay the taxpayers costs in the Court of Appeal
and before their Lordships Board.

Appeal allowed.

Solicitors: Linklaters & Paines; Allen & Overy.

 Mary Rose Plummer Barrister.
[1991] 4 All ER 310

R v Civil Service Appeal Board, ex parte Cunningham

ADMINISTRATIVE

COURT OF APPEAL, CIVIL DIVISION

LORD DONALDSON MR, MCCOWAN AND LEGGATT LJJ
20 FEBRUARY, 4 MARCH 1991

Judicial review Duty to give reasons Civil Service Appeal Board Board deciding unfair dismissal claims by Crown servants
Whether board under duty to give reasons when deciding whether dismissal of Crown servant fair or unfair and, if unfair, when
assessing amount of compensation Employment Protection (Consolidation) Act 1978, s 146.

The applicant, a 45year-old prison officer, was dismissed from the prison service after he allegedly assaulted a prisoner. He
appealed against his dismissal to the Civil Service Appeal Board, which held that his dismissal was unfair and recommended that
he be reinstated. The Home Office, as it was entitled to do, refused to reinstate him and the board then assessed the compensation
for unfair dismissal at 6,500. Since the applicants employment was regarded as police service he was prevented by s 146 a of
Employment Protection (Consolidation) Act 1978 from appealing to an industrial tribunal, which would have assessed
compensation of between 14,240 and 16,374 in comparable circumstances. The board refused to give reasons for its award on
the ground that it employed simple and informal procedures and that to ensure a non-legalistic approach to the merits of each
individual case it had adopted a policy of not giving reasons for any award. The applicant applied for judicial review of the
boards decision on the grounds that the award was prima facie irrational and the boards refusal to give reasons was a breach of
natural justice. The judge granted the application because of the boards failure to give reasons. The board appealed. The
applicant cross-appealed from the judges finding that the award was not prima facie irrational.
310
________________________________________
a Section 146, so far as material, provides:
(2) Part V [relating to unfair dismissal] do[es] not apply to employment under a contract of employment in police service or to persons
engaged in such employment.
(3) In subsection (2), police service means service (a) as a member of any constabulary or (b) in any other capacity by virtue of which a
person has the powers or privileges of a constable

Held Having regard to the facts that the Civil Service Appeal Board carried out a judicial function and that an industrial
tribunal was required to give reasons in comparable circumstances when it made a decision on an unfair dismissal claim, natural
justice required the board to give reasons when deciding whether the dismissal of a person in Crown employment who was barred
from making a complaint to an industrial tribunal was fair or unfair and, if unfair, when assessing the appropriate amount of
compensation, so that its decision could be judged to be lawful or unlawful. It followed that the board was required to give
reasons for the way in which it had reached the award made to the applicant and in the absence of such reasons the award, when
compared to awards made by industrial tribunals in comparable circumstances, was so low as to be prima facie irrational. The
applicant was therefore entitled to judicial review of the boards award. Accordingly the boards appeal would be dismissed and
the applicants cross-appeal allowed (see p 316 e to g, p 317 h, p 318 h j, p 319 g, p 320 c to e, p 322 c to e h to p 323 b h j and p
324 d e j to p 325 a g to p 326 d, post).
Dictum of Lord Bridge in Lloyd v McMahon [1987] 1 All ER 1118 at 1161 applied.
Per curiam. The reasons given by the board need be no more than a concise statement of the way in which it arrived at its
decision and the figure awarded (see p 319 j, p 323 c and p 326 d, post).

Notes
For the obligation of a body carrying out a judicial function to give reasons for its decisions, see 1 Halsburys Laws (4th edn
reissue) para 99.
For the Employment Protection (Consolidation) Act 1978, s 146, see 16 Halsburys Statutes (4th edn) (1990 reissue) 374.

Cases referred to in judgments

Alexander Machinery (Dudley) Ltd v Crabtree [1974] ICR 120, NIRC.
Breen v Amalgamated Engineering Union [1971] 1 All ER 1148, [1971] 2 QB 175, [1971] WLR 742, CA.
Cooper v Wandsworth Board of Works (1863) 14 CBNS 180, 143 ER 414.
Council of Civil Service Unions v Minister for the Civil Service [1984] 3 All ER 935, [1985] AC 374, [1984] 3 WLR 1174, HL.
Lloyd v McMahon [1987] 1 All ER 1118, [1987] AC 625, [1987] 2 WLR 821, CA and HL.
Lonrho plc v Secretary of State for Trade and Industry [1989] 2 All ER 609, [1989] 1 WLR 525, HL.
Norton Tool Co Ltd v Tewson [1973] 1 All ER 183, [1973] 1 WLR 45, NIRC.
Public Services Board of New South Wales v Osmond [1987] LRC (Const) 681, (1986) 63 ALR 559, Aust HC.
R v Civil Service Appeal Board, ex p Bruce (A-G intervening) [1988] 3 All ER 686, DC; affd [1989] 2 All ER 907, CA.
R v Immigration Appeal Tribunal, ex p Khan (Mahmud) [1983] 2 All ER 420, [1983] QB 790, [1983] 2 WLR 759, CA.
R v Lancashire CC, ex p Huddleston [1986] 2 All ER 941, CA.
Wiseman v Borneman [1969] 3 All ER 275, [1971] AC 297, [1969] 3 WLR 706, HL.

Cases also cited

R v Panel on Take-overs and Mergers, ex p Guinness plc [1989] 1 All ER 509, [1990] QB 146, CA.
Westminster City Council v Great Portland Estates plc [1984] 3 All ER 744, [1985] AC 661, HL.
311

Appeal
The Civil Service Appeal Board appealed from the decision of Otton J on 25 May 1990 granting the application of Thomas
Cunningham for judicial review of the boards decision on 27 January to award Mr Cunningham the sum of 6,500 compensation
for the unfair termination of his employment as a prison officer and its refusal in a letter dated 15 February 1989 to give reasons
for the amount of the award, on the grounds that both the decision and the letter were ultra vires and unlawful. Mr Cunningham
cross-appealed from the judges finding that the award was not prima facie irrational. The facts are set out in the judgment of
Lord Donaldson MR.

John Laws and Robert Jay for the board.

David Pannick for Mr Cunningham.

Cur adv vult

4 March 1991. The following judgments were delivered.

LORD DONALDSON OF LYMINGTON MR.

The background
On 12 February 1988 Mr Cunningham was given notice of dismissal from the prison service following upon an alleged
assault on a prisoner. Although the incident was investigated by the police, Mr Cunningham was not prosecuted. He had been in
the prison service for 23 years, was aged 45 and was the physical education officer at one of HM detention centres. Mr
Cunningham appealed to the Civil Service Appeal Board, which on 8 November 1988 ruled that his dismissal had been unfair
and recommended that he be reinstated.
The Home Office, as it was entitled to do, declined to accept that recommendation. On or about 27 January 1989 the board
assessed the compensation due to Mr Cunningham at 6,500. Mr Cunningham had been in receipt of his full pay until 4 January
1989, but thereafter the only payment by the Home Office was 6,500 on 10 February 1989.
Mr Cunningham was understandably aggrieved at this award. His pay as a prison officer was at the rate of 16,900 pa.
Following the refusal to reinstate him, he had to seek other employment and it appears that the best which he has been able to
achieve is a part time post with a local authority at a salary of 8,300 pa. We were not told for how long he was unemployed, but
if these facts are correct, even after obtaining substituted employment, he has been suffering a continuing loss at the rate of
8,600 pa or 165 per week, quite apart from any loss of pension rights. Most people in Crown employment faced with such a
situation could complain to an industrial tribunal under the Employment Protection (Consolidation) Act 1978 and seek
compensation (see s 138). Unfortunately Mr Cunningham is in a select category of employment which is regarded as police
service and is excluded from the benefit of the relevant parts of the 1978 Act (see s 146(2) and (3)).
Mr Cunninghams dissatisfaction has been in no way assuaged by calculations which have been made by his legal advisers
as to what an industrial tribunal would be likely to have awarded by way of compensation. They advise him that he would have
been entitled to a basic award under s 73 calculated at the rate of one and a half weeks pay in respect of his last four years of
service, during which he was over the age of 41, subject to a maximum of 164 per week and at the rate of one weeks pay,
subject to the same maximum, in respect of the previous 31216 years service, there being a 20year overall limit. This would
have produced 3,608. In addition he would have been entitled to a compensatory award under s 74(1) of the 1978 Act. This at
the relevant time was subject to a maximum of 8,500. The basis upon which it is awarded is:

such amount as the tribunal considers just and equitable in all the circumstances having regard to the loss sustained
by the complainant in consequence of the dismissal in so far as that loss is attributable to action taken by the employer.

Given the difficulty which confronted Mr Cunningham in obtaining other employment, which was probably foreseeable, and the
degree of loss which he has in fact suffered consequent upon his unfair dismissal, his advisers not unreasonably calculated that he
could have expected a maximum award of 8,500. In considering his advice, it is necessary to have regard to s 74(6), which
provides:

Where the tribunal finds that the dismissal was to any extent caused or contributed to by any action of the complainant
it shall reduce the amount of the compensatory award by such proportion as it considers just and equitable having regard to
that finding

and to the similar section which applies to the basic award (s 73(7B)). However, as Mr David Pannick, who has appeared for Mr
Cunningham, pointed out, it would be difficult, although perhaps not impossible, to justify a reduction of a sufficiently high order
under this head in a case in which the board had recommended reinstatement. Absent such a reduction the basic and
compensatory award would have amounted to 12,108 and accordingly there would have to have been a reduction of nearly 50%.
Finally there is yet another award which he could have claimed, namely one under s 71(2), which applies where a tribunal has
ordered reinstatement and the employer refuses to comply with the order. Such an award is compensatory, but is subject to a
minimum of 13 weeks pay (2,132) and a maximum of 26 weeks pay (4,264) (see s 71(2)(b)(ii)). Aggregating these figures, it
is submitted that Mr Cunningham had reasonable grounds for thinking that an industrial tribunal would have awarded him
between 14,240 and 16,374 less the 6,500 already paid by the Home Office.

The application for judicial review

In these circumstances it is not surprising that Mr Cunningham should have sought some avenue of redress. There is no
right of appeal from the boards decision and accordingly in March 1989 he applied for, and Roch J granted him, leave to apply
for judicial review. His attack was two-pronged. First he attacked the decision to award him only 6,500 as compensation upon
the grounds that it was prima facie irrational and sought an order that it be reconsidered. Second he attacked the refusal by the
board to supply him with any reasons justifying the amount of the award and sought an order that the board give reasons. On
both grounds he sought a declaration that the board had exceeded its powers and acted unlawfully.
The application for judicial review was heard by Otton J, who on 25 May 1990 declared the decision of the board to award
compensation of 6,500 and its subsequent refusal to supply Mr Cunningham with reasons for the award to be unlawful and ultra
vires. In giving reasons for that decision, the learned judge made it clear that he rejected the attack upon the amount of the award
per se and rested his judgment upon the failure to give reasons either initially or upon request.
313

The appeal and cross-appeal

The board now appeals upon the grounds that it is under no obligation to give any reasons for its award and Mr Cunningham
cross-appeals upon the grounds that the award is prima facie irrational. Although in a sense the appeal and cross-appeal are
independent of each other, both involve a consideration of the duty of the board to give reasons initially or, if not then, upon leave
to apply for judicial review being granted. These are issues of considerable general public importance in the field of public law
and for that reason, and in deference to the excellent arguments with which we were assisted by Mr John Laws, appearing for the
board, and by Mr David Pannick we took time to consider our decision and have put our judgments into writing.

The boards susceptibility to judicial review

 This was accepted on this appeal. Previously it had been so decided by the Divisional Court in R v Civil Service Appeal
Board, ex p Bruce (A-G intervening) [1988] 3 All ER 686. There it was held that the board was a public law body, but in the
exercise of its discretion the court declined to give Mr Bruce any relief since he had available to him and was taking advantage of
the alternative remedy of applying for compensation to an industrial tribunal. On appeal to this court, the only relevant challenge
was to the exercise of that discretion (see [1989] 2 All ER 907).

The jurisdiction of the board

The boards jurisdiction is derived from the Civil Service Order in Council 1982, art 4 of which authorised the promulgation
by the Minister for the Civil Service of a Code for Civil Service Pay and Conditions of Service. Paragraph 14 was in these terms:

For the most part, the relationship between the civil servant and the Crown remains one regulated under the
prerogative and based on personal appointment. As such, a civil servant does not have a contract of employment
enforceable in the courts but rather a letter of appointment, and technically the Crown still retains the right to dismiss a
civil servant at pleasure. Recently, however, the legal position of civil servants has been radically changed by the growing
trend for legislation to apply to the Civil Service either directly, by the provisions of the Acts themselves or by government
assurances that the conditions applying to civil servants will not be less favourable than those applying to other
employees.

Paragraphs 10120 to 10137 give United Kingdom based civil servants under notice of dismissal or compulsory premature
retirement (other than on medical grounds) a right of appeal to the board subject to conditions as to minimum length of service
and age which are immaterial in the case of Mr Cunningham. The constitution of the board which hears appeals bears a striking
resemblance to that of an industrial tribunal, consisting of an independent chairman and two members, one drawn from a panel
nominated by the official side and one from a panel nominated by the staff side. It is provided by para 10134:

The Appeal Board will operate without undue formality. Its purpose is to decide whether the decision to retire
prematurely or to dismiss is fair. If the board decides that it is not, it may recommend to the head of the employing
department either that the appellant shall not be retired or dismissed; or that compensation, or additional compensation in a
case of premature retirement, should be paid.
314

Paragraph 10135 provides:

If a recommendation not to retire or dismiss is rejected by the department, the Appeal Board will consider whether to
recommend compensation, or additional compensation in the case of premature retirement.

Paragraph 10137 provides:

The employing department shall pay any compensation recommended by the Appeal Board.

Section 146 of the 1978 Act has the effect of disapplying to prison officers the provisions of s 54(1), which provides:

In every employment to which this section applies every employee shall have the right not to be unfairly dismissed by
his employer.

However, notwithstanding any contention that Crown employees may have their employment determined at pleasure, I do not
understand it to be contended that, where this is effected unfairly within the meaning of the 1978 Act, Crown employees
excluded from the benefits of the Act will not have a legitimate expectation that they will be compensated in the same way and to
the same extent as would be the case if the Act applied. Indeed this is implicit in the boards evidence contained in an affidavit
by its chairman. Whilst resolutely declining to depart from the practice of the board not to give reasons, he points out that the
average compensation award made by the board in 28 cases heard during 1988 was 2,201.56 compared with the median award
made by industrial tribunals in unfair dismissal cases in a comparable period, which was 1,865.

The cross-appeal
In R v Lancashire CC, ex p Huddleston [1986] 2 All ER 941 at 945 I expressed the view that we had now reached the
position in the development of judicial review at which public law bodies and the courts should be regarded as being in
partnership in a common endeavour to maintain the highest standards of public administration, including, I would add, the
administration of justice. It followed from this that, if leave to apply for judicial review was granted by the court, the court was
entitled to expect that the respondent would give the court sufficient information to enable it to do justice and that in some cases
this would involve giving reasons or fuller reasons for a decision than the complainant himself would have been entitled to.
Parker LJ and Sir George Waller did not share my unease at the limited disclosure made by the council in that case, but I do not
understand them to have disagreed with the principle.
Those of us with experience of judicial review are very much aware that the scope of the authority of decision-makers can
vary very widely and so long as that authority is not exceeded it is not for the courts to intervene. They and not the courts are the
decision-makers in terms of policy. They and not the courts are the judges in the case of judicial or quasi-judicial decisions
which are lawful. The public law jurisdiction of the courts is supervisory and not appellate in character. All this is very much
present to the minds of judges who are asked to give leave to apply for judicial review. Such leave will only be granted if the
applicant makes out a prima facie case that something has gone wrong of a nature and extent which might call for the exercise of
the judicial review jurisdiction. Whatever the initial position, the fact that leave to apply for judicial review has been granted
calls for some reply from the respondent. How detailed that reply should be will depend upon the circumstances of the particular
case. He does not have to justify 315 the merits of his decision, but he does have to dispel the prima facie case that it was
unlawful, something which would not arise if leave to appeal had been refused.
I am far from saying that the award of 6,500 to Mr Cunningham could never be justified in the sense of being shown to
have been not irrational. If the board had responded to the substance of Mr Cunninghams application for judicial review, it
might have said that rightly or wrongly it thought that he could obtain other employment as beneficial as that of prison officer
and could do so within a relatively short time. Any such conclusion would probably have been wrong, but it would have been a
decision reached in good faith within the scope of its authority. If the board had responded by saying that they would have
awarded X but had reduced it to 6,500 by an application (by analogy) of ss 74(6) and 73(7B) of the 1978 Act and had done so
after giving full consideration to the fact that in all the circumstances the members had felt it right to recommend that he be
reinstated, it would have been for consideration whether that, right or more probably wrong, was a decision which was open to
them. But the board has said nothing except that the level of its awards overall, including cases where reinstatements not
recommended, do not differ widely from the level of award by industrial tribunals. This is interesting, but is simply not
responsive to Mr Cunninghams complaint or to the courts inquiry, which is limited to the award in Mr Cunninghams case.
 In fairness to the board it must be emphasised that it is not being unco-operative. It has been advised, mistakenly as I think,
that to attempt any justification of a particular award, however surprising that award might be, would be to concede the right of
every claimant to reasons. As I have sought to show, this is not so. The principles of public law will require that those affected
by decisions are given the reasons for those decisions in some cases, but not in others. A classic example of the latter category is
a decision not to appoint or not to promote an employee or office holder or to fail an examinee. But, once the public law court
has concluded that there is an arguable case that the decision is unlawful, the position is transformed. The applicant may still not
be entitled to reasons, but the court is.
In the present case in my judgment the award of 6,500 is so low in what appear to be the circumstances that it is prima
facie irrational and, in the absence of explanation, should be so regarded and quashed in order to enable the board to reconsider it.
If the board was minded to affirm its award, it would have to give Mr Cunningham further information in order to displace the
implication that it was still irrational. All this assumes that the board is correct in asserting that, absent leave being granted to
apply for judicial review of one of its awards, it is under no duty to give reasons and to that proposition I now turn.

The appeal
The essence of Otton Js reasons for his decision is contained in the following passage from his judgment:

In return for forfeiting the right [to apply to an industrial tribunal], he had been given a government assurance, as
recorded in para 14 of the code, that the conditions applying to civil servants will not be less favourable than those
applying to other employees. This, in my judgment, gave rise to a legitimate expectation that he would be so treated.
Thus, in Lord Denning MRs words, he was a man who had a legitimate expectation of which it would not be fair to
deprive him without reasons given, and those should be afforded to him (see Breen v Amalgamated Engineering Union
[1971] 1 All ER 3161148 [1971] 2 QB 175 at 191). In the words of Donaldson P (in Norton Tool Co Ltd v Tewson [1973]
1 All ER 183 at 187, [1973] 1 WLR 45 at 49), it is a corollary of the discretion conferred upon the board that it is their duty
to set out their reasoning in sufficient form to show the principles on which they have proceeded. Adopting Lord Lane CJs
observations (in R v Immigration Appeal Tribunal, ex p Khan (Mahmud) [1983] 2 All ER 420 at 423, [1983] QB 790 at
794795), the reasons for the lower amount is not obvious. Mr Cunningham is entitled to know, either expressly or
inferentially stated, what it was to which the board were addressing their mind in arriving at their conclusion. It must be
obvious to the board that Mr Cunningham is left with a burning sense of grievance. They should be sensitive to the fact
that he is left with a real feeling of injustice, that having been found to have been unfairly dismissed, he has been deprived
of his just desserts (as he sees them). He retains a lurking suspicion that the board still hold against him the fact that he
was in the dining hall during that riot and was accused of assaulting a prisoner. The stigma of the occasion still attaches to
him, and this influenced the sum awarded by the board. Thus, in the particular circumstances of this case, and without
wishing to establish any precedent whatsoever, I am prepared to spell out an obligation on this board to give succinct
reasons, if only to put the mind of Mr Cunningham at rest. I would therefore allow this application.

There are three possible bases for holding that the board should have given reasons for their award. The first is that there is
a general rule of the common law or, if that be different, a principle of natural justice that a public law authority should always or
even usually give reasons for its decisions. I am not sure to what extent this was advanced before Otton J, but he rejected it
decisively. Suffice it to say that the proposition is unarguable and it was not argued in this court. If authority be needed it is
provided by the decision of the High Court of Australia in Public Service Board of New South Wales v Osmond [1987] LRC
(Const) 681, and the English and other Commonwealth cases there cited. I would only comment that, although Gibbs CJ may be
right in saying (at 688) that s 12 of the Tribunals and Inquiries Act 1971 applied to the decisions of industrial tribunals exercising
their jurisdiction under the Industrial Relations Act 1971 as distinct from their jurisdiction under the Industrial Training Act 1964,
this never occurred to anyone at the time and the decisions in Norton Tool Co Ltd v Tewson [1973] 1 All ER 183, [1973] 1 WLR
45 and Alexander Machinery (Dudley) Ltd v Crabtree [1974] ICR 120 were not based on any such consideration.
The second is that a tribunal exercising a jurisdiction which mirrors that of the industrial tribunals which are required to give
reasons and further or alternatively a tribunal which is exercising a judicial function from which there is no appeal should give
sufficient reasons to enable a party to know why he has failed to secure any or, as the case may be, all of the relief which he
sought and above all to be satisfied that the decision was lawful. This Otton J rejected.
The third is that Mr Cunningham and others who resort to the board have a legitimate expectation that it will give reasons.
This, as I have shown, the judge accepted.
I take it as established that the remit and authority of the board is to adjudicate upon the issue of whether a dismissal was fair
or unfair and, if unfair, on the appropriate amount of compensation, applying the same approach as would be appropriate on an
application of the Employment Protection (Consolidation) Act 1978. No other basis for its decisions has been suggested and the
whole concept of an unfair dismissal and compensation for such dismissal is a creature of that 317 Act and its predecessors. That
being so, the issue is whether natural justice, or fairness in action as it has been called, requires that some and, if so, what
reasons be given for its decisions.
I accept at once that some judicial decisions do not call for reasons, the commonest and most outstanding being those of
magistrates. However, they are distinguishable from decisions by the board for two reasons. First, there is a right of appeal to
the Crown Court, which hears the matter de novo and customarily does give reasons for its decisions. Second, there is a right to
require the magistrates to state a case for the opinion of the High Court on any question of law. This right would enable an
aggrieved party to know whether he had grounds for raising any issue which would found an application for judicial review,
although his remedy would procedurally be different.
I accept that the various decisions requiring industrial tribunals to give reasons and indicating the extent of the reasons
appropriate have to be read in the context that Parliament has given the parties a right of appeal to the Employment Appeal
Tribunal (in succession to the National Industrial Relations Court) on questions of law and the reasoning is based upon the
entitlement of the parties to know whether a question of law arises.
I accept that many tribunals, including the Immigration Appeal Tribunal, are required by statute law to give reasons and to
that extent the position of the board is distinguishable.
I accept that however desirable it may be that decision-makers shall give reasons, and even more essential that they shall
have them and know what they are, that is not the same as being required by statute or the common law to communicate such
reasons to those affected. However, I do not accept that, just because Parliament has ruled that some tribunals should be required
to give reasons for their decisions, it follows that the common law is unable to impose a similar requirement upon other tribunals,
if justice so requires. As Lord Bridge put it in Lloyd v McMahon [1987] 1 All ER 1118 at 1161, [1987] 1 AC 625 at 702703:

My Lords, the so-called rules of natural justice are not engraved on tablets of stone. To use the phrase which better
expresses the underlying concept, what the requirements of fairness demand when any body, domestic, administrative or
judicial, has to make a decision which will affect the rights of individuals depends on the character of the decision-making
body, the kind of decision it has to make and the statutory or other framework in which it operates. In particular, it is well
established that when a statute has conferred on any body the power to make decisions affecting individuals, the courts will
not only require the procedure prescribed by the statute to be followed, but will readily imply so much and no more to be
introduced by way of additional procedural safeguards as will ensure the attainment of fairness.
 Accordingly, I take as my starting point a consideration of what is the character of the decision-making body. The answer
is that it is not domestic. In this it is to be distinguished from internal appeal bodies dealing with industrial relations problems,
including dismissals, in large companies or private organisations. Whether the board is dealing with prison officers, who do not
have access to industrial tribunals, or with other Crown employees who do, it is an independent public law body wholly divorced
from management, albeit established by the Crown. Nor is it in any way administrative or even quasi-judicial. It is a fully
judicial body.
318
I then have to consider the framework in which it operates. It is unaffected by statute. It gives decisions which in practice
determine rights as between the Crown and its employees. That some Crown employees may have additional rights is
immaterial. There is no appeal from its decisions on either fact or law, but it is obliged to exercise its functions in accordance
with the law and, for reasons which I have already given, in accordance with, albeit not under, the Employment Protection
(Consolidation) Act 1978.
I then ask myself what additional procedural safeguards are required to ensure the attainment of fairness. The answer is, I
believe, to be found in the judgment of Lord Lane CJ in R v Immigration Appeal Tribunal, ex p Khan (Mahmud) [1983] 2 All ER
420 at 423, [1983] QB 790 at 794795, which I do not believe owed anything to the fact that the Immigration Appeal Tribunal is
required by statute to give some reasons for its decisions:

The important matter which must be borne in mind by tribunals in the present type of circumstances is that it must be
apparent from what they state by way of reasons first of all that they have considered the point which is at issue between
the parties, and they should indicate the evidence upon which they have come to their conclusions. Where one gets a
decision of a tribunal which either fails to set out the issue which the tribunal is determining either directly or by inference,
or fails either directly or by inference to set out the basis on which it has reached its determination on that issue, then that is
a matter which will be very closely regarded by this court, and in normal circumstances will result in the decision of the
tribunal being quashed. The reason is this. A party appearing before a tribunal is entitled to know, either expressly stated
by it or inferentially stated, what it is to which the tribunal is addressing its mind. In some cases it may be perfectly
obvious without any express reference to it by the tribunal; in other cases it may not. Second, the appellant is entitled to
know the basis of fact on which the conclusion has been reached. Once again in many cases it may be quite obvious
without the necessity of expressly stating it, in other cases it may not.

Judged by that standard the board should have given outline reasons sufficient to show to what they were directing their
mind and thereby indirectly showing not whether their decision was right or wrong, which is a matter solely for them, but
whether their decision was lawful. Any other conclusion would reduce the board to the status of a free-wheeling palm tree.
The boards objection to giving reasons, which curiously is fully supported by both the official and the staff sides, is that this
would tend to militate against informality and would lead to an undesirable reliance upon a body of precedent. I find this totally
unconvincing. The evidence shows that those who advise applicants and departments do so frequently and must be well aware of
the boards previous decisions and of the circumstances in which they were made. There must therefore already be a body of
precedent. If the board have no regard to their previous decisions, they must be acting inconsistently and be failing to do justice
as between applicants. This I am loathe to believe. As to informality, no one has yet complained that the industrial tribunals lack
informality, yet they give reasons for their decisions. A complaint of legalism is another matter, but there is no reason why the
giving of brief reasons should lead to this most distressing of diseases.
This leaves only the ground upon which Otton J decided this case. Mr Laws submits that
319

Legitimate, or reasonable, expectation may arise either from an express promise given on behalf of a public authority
or from the existence of a regular practice which the claimant can reasonably expect to continue.

(See Council of Civil Service Unions v Minister for the Civil Service [1984] 3 All ER 935 at 944, [1985] AC 374 at 401 per Lord
Fraser.)
There has been no regular, or possibly any, practice of the board involving giving reasons and Mr Laws submits that the fact
that the board apply the 1978 Act does not give rise to any legitimate expectation that they will do so in the way in which
industrial tribunals do. Any duty to give reasons is, as he puts it, a free-standing duty.
I agree that the issue is what has been promised by the Minister for the Civil Service. It is that the conditions applying to
civil servants will not be less favourable than those applying to other employees. If this stood alone it might not suffice, but the
minister has interpreted this as entitling civil servants to a right to apply to a tribunal which is analogous to an industrial tribunal
and applies the same law as do those tribunals and has done so notwithstanding that some other employees have no access to an
industrial tribunal (see ss 141 to 146 of the 1978 Act). If the governments promise goes this far, as clearly it does, I cannot see
how it can be interpreted as not extending to a right to apply to a tribunal which, like an industrial tribunal, does give reasons.
Conditions of employment which give a right to apply to a tribunal which gives reasons are more favourable than conditions
which give a right to apply to one which does not and there are no countervailing advantages offered to those in Crown
employment.
I would therefore dismiss the appeal not only upon the ground of legitimate expectation on which Otton J rested his
decision, but also upon the broader ground that fairness requires a tribunal such as the board to give sufficient reasons for its
decision to enable the parties to know the issues to which it addressed its mind and that it acted lawfully.

McCOWAN LJ. The basic submission of Mr Laws, counsel for the Civil Service Appeal Board, before this court has been that
there was no obligation on the board to give reasons for its decision in the absence of a statutory requirement (and none is
suggested in this case) or of a legitimate expectation aroused either by a practice on the part of the board of giving reasons or of
an assurance that they would be given. There is no question of a practice of giving reasons: it is common ground that the board
has never given reasons. Hence, argues Mr Laws, the case comes down to whether any assurance had been given.
Mr Laws is, in my judgment, right in saying that the ratio of Otton Js decision is to be found in his judgment where he said:

In return for forfeiting the right [the judge is here referring to the right to go to an industrial tribunal], he had been
given a government assurance, as recorded in para 14 of the code, that the conditions applying to civil servants will not be
less favourable than those applying to other employees. This, in my judgment, gave rise to a legitimate expectation that
he would be so treated.

I am bound to say that I find the learned judges phrase In return for forfeiting the right unsupported by the facts. There
was no evidence that Mr Cunningham or any other prison officer had agreed to forfeit a right to go to an industrial tribunal in
return for any government assurance. Indeed, as Mr Laws pointed 320 out, it cannot be appropriate to speak of a man forfeiting a
right which he has never had.
Mr Laws further drew to the courts attention that there are other groups of workers (not government employees) who are
not entitled to go to an industrial tribunal. This means that the right to go to an industrial tribunal applies neither to all civil
servants nor to all other employees. I am, therefore, unable to see how an assurance that the conditions applying to civil servants
will not be less favourable than those applying to other employees can be interpreted as meaning that a civil servant who is not
entitled to go to an industrial tribunal will be treated by the board in exactly the same way as if he had been so entitled. It would
be wrong, in any event, to take para 14 of the Civil Service Pay and Conditions of Service Code (which contains the words in
question) in isolation and ignore para 10136, dealing with recommendations of compensation by the board, which says: The
Secretary to the Appeal Board will notify the appellant of the Boards recommendation It does not add and the reasons
therefor. This is not suggestive of any promise that the board will give reasons.
Accordingly, I do not consider that anything that had occurred in the past gave Mr Cunningham a legitimate expectation that
the board would give him reasons for the amount of compensation recommended by it. That, submits Mr Laws, is the end of the
case. Mr Pannick argues, however, that he does not need to rely on legitimate expectation: it is sufficient if he makes out a case
of procedural unfairness.
For this proposition Mr Pannick relies chiefly on passages in the speeches of their Lordships in Wiseman v Borneman [1969]
3 All ER 275, [1971] AC 297. In that case the Inland Revenue Commissioners, having considered statutory declarations made by
the appellants, submitted them to the appropriate tribunal to determine whether there was a prima facie case for proceeding in the
matter. The registrar of the tribunal refused the appellants request to be represented by counsel at that determination and to be
given copies of the commissioners certificate and counter-statement. The appellants argued that this procedure was not in
accordance with natural justice. Their Lordships unanimously dismissed their appeal. Lord Reid said ([1969] 3 All ER 275 at
277, [1971] AC 297 at 308):

Natural justice requires that the procedure before any tribunal which is acting judicially shall be fair in all the
circumstances, and I would be sorry to see this fundamental general principle degenerate into a series of hard and fast rules.
For a long time the courts have, without objection from Parliament, supplemented procedure laid down in legislation where
they have found that to be necessary for this purpose. But before this unusual kind of power is exercised it must be clear
that the statutory procedure is insufficient to achieve justice and that to require additional steps would not frustrate the
apparent purpose of the legislation.

Lord Morris said ([1969] 3 All ER 275 at 278, [1971] AC 297 at 309):

The principles and procedures are to be applied which, in any particular situation or set of circumstances, are right and
just and fair. Natural justice, it has been said, is only fair play in action. Nor do we wait for directions from Parliament.
The common law has abundant riches: there may we find what BYLES, J., called the justice of the common law
(Cooper v. Wandsworth Board of Works ((1863) 14 CBNS 180 at 194, 143 ER 414 at 420)).

Lord Wilberforce added ([1969] 3 All ER 275 at 285, [1971] AC 297 at 317):

I am not, therefore, satisfied with an approach which merely takes the 321 relevant statutory provision (Finance Act
1960, s 28(4)), subjects it to a literal analysis and cuts straight through to the conclusion that Parliament has laid down a
fixed procedure which only has to be literally followed to be immune from attack. It is necessary to look at the procedure
in its setting and ask the question whether it operates unfairly to the taxpayer to a point where the courts must supply the
legislative omission.

In response, Mr Laws says that this authority is for two reasons of no assistance to the respondent. In the first place, he
argues, in the absence of a statutory provision there remains the necessity to establish a legitimate expectation based either on a
practice or an assurance. I cannot, however, find any trace of such a prerequisite in the speeches of their Lordships.
Secondly, Mr Laws submits that that case is to be distinguished, because it was about procedure at a hearing, whereas the
present is about the form of a determination given after the hearing. I cannot believe that procedure for these purposes ends
with final speeches. It would produce a most unsatisfactory situation if it did. To accord with natural justice a tribunal must
permit a party to state his case. But how will that avail him if he has no idea whether any attention has been paid by the tribunal
to what he said? Suppose, for the sake of argument, he argues that a particular matter is irrelevant and should be ignored by the
tribunal in arriving at its recommendation. How could he, in the absence of reasons, know that they had not rejected his
submission and taken the matter into account? How could he formulate a case on the point for judicial review? By that analysis I
unhesitatingly conclude that the form of the recommendation is part of the procedure of the hearing and no less subject to the
requirements of natural justice than any other part.
According to the evidence of Mr Forman, the chairman of the Civil Service Appeal Board:

The members of the CSAB are aware of the rules and guidelines adopted by the Industrial Tribunals when they are
assessing awards of compensation, and the CSAB has regard to the principles inherent in those rules as a framework for its
assessment of awards.

He goes on in his affidavit to show that in fact the average award made by the board is somewhat higher than that made by
industrial tribunals. Mr Pannick demonstrated to the court, without contradiction from Mr Laws, that had Mr Cunningham been
able to go to an industrial tribunal the maximum award which he could have received would have been more than twice the
award he actually received from the board. Taking account of his age, his length of service, the salary he was receiving at the
time of his dismissal and the recommendation from the board that he be reinstated, he could reasonably have expected to come
close to the maximum. To this day neither he, nor for that matter this court, has any idea why the board recommended that he
receive so little.
As Mr Pannick says, it cries out for some explanation from the board. As I would put it, not only is justice not seen to have
been done but there is no way, in the absence of reasons from the board, in which it can be judged whether in fact it has been
done. I find that a thoroughly unsatisfactory situation, in which this court should hold, if it can properly do so, that the board
ought to give reasons for its recommendation.
In reaching a conclusion as to the propriety of Otton Js order, I am influenced by the following factors.
1. There is no appeal from the boards determination of the amount of compensation.
322
2. In making that determination the board is carrying out a judicial function.
3. The board is susceptible to judicial review.
4. The procedure provided for by the code, that is to say the provision of a recommendation without reasons, is insufficient
to achieve justice.
5. There is no statute which requires the courts to tolerate that unfairness.
6. The giving of short reasons would not frustrate the apparent purpose of the code.
7. It is not a case where the giving of reasons would be harmful to the public interest.
These considerations drive me to the view that this is a case where the board should have given reasons and I would,
therefore, dismiss the appeal.
 I add only that I see no reason why the board need take more than a few simple sentences to state those reasons, or why the
necessity to do this should in any way prejudice the informality of the proceedings or, in Mr Formans words, lead to bodies of
precedent and legalistic concepts.

LEGGATT LJ. Mr Cunningham had served as a prison officer for 23 years when on 12 February 1988 he was unfairly
dismissed by notice which expired on 4 January 1989. Until then he received full pay at the rate of 16,900 pa. The Civil
Service Appeal Board (the board) recommended that he be reinstated, but he was not; and in January 1989, when he was 45 years
old, he was awarded compensation by the board in the sum of 6,500. He had in the meanwhile acquired a part-time job at a
salary of 8,300 pa. By letter of 15 February 1989 the board declined to explain how the sum awarded had been calculated,
saying:

It is not the practice of the Civil Service Appeal Board to enter into discussions about the amount of compensation
awarded. I can only assure you that the Board took fully into account all the relevant factors bearing on Mr Cunninghams
case and is satisfied that the amount of compensation awarded is fair and reasonable.

Otton J granted a declaration that both the letter awarding 6,500 and the letter refusing reasons were ultra vires and unlawful.
Against that order the board now appeals and Mr Cunningham cross-appeals.
Although non-statutory, the board was created by a minister of the Crown under prerogative power conferred by Order in
Council. Its relevant functions are of a public nature and judicial. The Home Office is bound to comply with its decisions on
compensation, and rightly so since the determination of the amount of compensation for unfair dismissal obviously affects the
means of livelihood of the individual concerned. In short, the board is a public law body amenable to judicial review at the
instigation of a person aggrieved.
I have not been much assisted by the articles relied on by Mr Pannick, distinguished though their authors are, because they
are recommending, advocating or protesting what the law ought to be: they are not intent on demonstrating what, in a context
such as the present, the law is. But it seems obvious that for the same reason of fairness that an applicant is entitled to know the
case he has to meet, so should he be entitled to know the reasons for an award of compensation, so that in the event of error he
may be equipped to apply to the court for judicial review. For it is only by judicial review that the boards award can be
challenged. Mr Cunningham has a right of appeal not by way of hearing de novo, as on appeal from a magistrates court, but
only if it can be shown that he has not been fairly treated by the board.
323
It is therefore pertinent to ask why the board refrains from giving reasons. In his affidavit Mr Forman, then chairman of the
board, sought to explain the boards view that the parties appearing before it are better served by the existing procedures,
saying:

The basis of the Boards view is that great value is attached to the existence of simple and informal procedures. It is
thought likely that the giving of reasons would lead to comparisons being drawn between cases, and as a result, bodies of
precedent and legalistic concepts would be deployed to a greater extent. This would be so because often the same union
officials or firms of solicitors appear before the Board on a regular basis. It is considered that the creation of a body of
precedent would detract from the non-legalistic approach taken by the Board to the merits of every individual case.

Mr Forman says that consistently with that policy it is also the Boards practice not to give reasons for the amount of any award
made.
Despite Mr Formans asseverations that the parties are better served by this process, the inadequacy of his explanations why
that should be so prompts the cynical suspicion that the board may be more affected by the fact that it is less trouble for the board
if reasons do not have to be given, that reasons render the inner workings of the board open to public scrutiny, and that reasons
may constitute hostages to fortune in a case such as this. I can see no force in any of Mr Formans excuses for not explaining
how the figure was arrived at. There is no reason why a body of precedent should detract from the non-legalistic approach taken
by the Board to the merits of every individual case. There need be nothing legalistic about the giving of reasons or the reasons
given; nor need the board cease to act in an informal atmosphere. While weighing the merits of every individual case, the board
should obviously pay regard, in the interests of consistency, to other comparable decisions of its own.
In his affidavit Mr Forman also said:

The members of the CSAB are aware of the rules and guidelines adopted by Industrial Tribunals when they are
assessing awards of compensation, and the CSAB has regard to the principles inherent in these rules as a framework for its
assessment of awards.

He then remarked that the average compensation award by the board during 1988 was 2,201.56, while in the year ended 31
March 1988 the median award made by industrial tribunals in unfair dismissal cases was 1,865.
Apart from the fact that the periods are different, statistically it is unhelpful to compare an average with a median figure, and
in any event it does nothing to dispel the belief that the compensation awarded to Mr Cunningham was, as his solicitors asserted,
meagre. Applying the rules and guidelines adopted by industrial tribunals, Mr Cunningham would have been entitled, as Lord
Donaldson MR has explained, to an award under ss 73(3) and 74(1) of the Employment Protection (Consolidation) Act 1978 of
12,108, without regard to any award of additional compensation under s 71(2)(b)(ii) of between 4,264 and 2,132.
Since the board recommended reinstatement it cannot be supposed that they arrived at their award of 6,500 by making a
reduction as under ss 74(6) and 73(7B) on the ground that the dismissal was caused or contributed to by any action of Mr
Cunningham.
Mr Laws argues that Mr Cunningham cannot succeed unless he can prove the existence of a statutory duty to give reasons or
a legitimate expectation that he would be given them. I do not accept that the courts powers are so circumscribed. 324The fact
that the boards principal function is to alleviate the rigour of summary dismissal does not mean that the person dismissed should
not be accorded natural justice or that the board need not deal fairly with him. Without an obligation to give reasons the boards
procedures cannot be checked, let alone challenged; and without reasons neither the person dismissed nor the court can tell
whether to apply for or to grant judicial review.
In relation to many, if not most, administrative decisions it may well be undesirable, for one reason or another, to give
reasons. But there are not here, as in certain contexts there are, any valid grounds for adhering to the general rule that there is no
duty to give reasons. On the contrary, there are here particular grounds for departing from the general rule. Mr Cunningham has
a legitimate grievance, because it looks as though his compensation is less than it should be, and yet he has not been told the basis
of assessment.
This is not a case in which the board was subject to any statutory duty to give reasons like that imposed on certain tribunals
by s 12(1) of the Tribunals and Inquiries Act 1971. Mr Cunningham could not have had any legitimate expectation by virtue of
any practice or promise of the board that it would follow industrial tribunals in giving reasons for the award of particular sums. It
is true that the practice of the board is obviously modelled on that of industrial tribunals. But that fact cannot carry with it any
assurance that in every respect the board will apply the practice of industrial tribunals, despite the fact that in particular in relation
to the giving of reasons it has never done so.
 The minister has given an assurance that the conditions applying to civil servants will not be less favourable than those
applying to other employees. But since not all other employees are entitled to go to an industrial tribunal, that assurance cannot
mean that all civil servants who, like Mr Cunningham, are not entitled to go to an industrial tribunal can expect to be treated as
though they were, and so be in a better position than other employees who are not entitled to do so.
One of the main areas in which supervision has to be exercised by way of judicial review is over procedural requirements,
for the purpose of ensuring the right to a fair adjudication. The procedure of a public body is not only required to be fair in so far
as an individual affected by its decisions has a legitimate expectation that it will be. Nor does natural justice or fairness require
the giving of reasons for a decision only when an obligation to give them is imposed by statute.
The cardinal principles of natural justice are that no one shall be judge in his own cause and that everyone is entitled to a
hearing. But the subject-matter of the decision or the circumstances of the adjudication may necessitate more than that. An
award of compensation by the board concerns the applicants means of livelihood for the period to which the award relates. The
boards determination binds the Home Office, and also the applicant subject to his right to challenge it by applying for judicial
review. But that right is nugatory unless the award is so aberrant as to compel the inference that it must have been wrong, or
unless the board explains how the figure was arrived at, so as to enable the applicant to tell whether the award can be successfully
impugned.
Those two grounds for requiring reasons elide here. As Lord Bridge said in Lloyd v McMahon [1987] 1 All ER 1118 at
1161, [1987] AC 625 at 703:

the courts will readily imply so much and no more by way of additional procedural safeguards as will ensure
the attainment of fairness.

By additional Lord Bridge meant in addition to such as may be prescribed by statute. Here none were: but the principle
remains, and with added importance.
325
Since the board has elected as a matter of practice not to give reasons, and has given none to Mr Cunningham, it has been
bound by its own logic not to attempt to justify for the benefit of the court the figure awarded. In default of explanation Mr
Cunninghams award was so far below what, by analogy with the award of an industrial tribunal, he was entitled to expect as in
my judgment to compel the inference that the assessment was irrational, if not perverse. Because there was no general duty to
give reasons, the absence of reasons does not by itself entitle the court to hold that the award was not supportable. But the
unexplained meagreness of the award does compel that inference. As Lord Keith said in Lonrho plc v Secretary of State for
Trade and Industry [1989] 2 All ER 609 at 620, [1989] 1 WLR 525 at 539:

The only significance of the absence of reasons is that if all other known facts and circumstances appear to point
overwhelmingly in favour of a different decision, the decision-maker, who has given no reasons cannot complain if the
court draws the inference that he had no rational reason for his decision.

In my judgment the duty to act fairly in this case extends to an obligation to give reasons. Nothing more onerous is
demanded of the board than a concise statement of the means by which they arrived at the figure awarded. Albeit for reasons
which go wider than those relied on by the judge, I too agree that the appeal should be dismissed and the cross-appeal allowed.

Solicitors: Treasury Solicitor; Mishcon de Reya

Appeal dismissed. Cross-Appeal allowed. Application for leave to appeal to the House of Lords refused.

Frances Rustin Barrister.

326
[1991] 4 All ER 327

Norris v Checksfield
LANDLORD & TENANT; Tenancies

COURT OF APPEAL, CIVIL DIVISION

BALCOMBE, WOOLF AND STAUGHTON LJJ
16, 17 APRIL 1991

Licence Licence to occupy premises Employee Occupation in return for services Defendant employee permitted to reside
in employers house adjacent to employers business on condition that he obtained PSV licence Employee disqualified from
driving Employer dismissing employee and seeking possession of house Whether employee occupying house under service
tenancy or licence Whether statutory requirements as to giving of notice applying Protection from Eviction Act 1977, s 5(1A).

The defendant, a semi-skilled mechanic employed by the plaintiff, was permitted to reside in a house adjacent to the plaintiffs
garage and coach business on condition that he obtained a PSV licence so that he would be able to drive coaches for the plaintiff
and that his licence to occupy the house would cease forthwith on the termination of his employment. The defendant paid 5 per
week rent which was deducted from his salary. The defendant was in fact disqualified from driving but did not inform the
plaintiff of that fact. When the plaintiff discovered that the defendant was disqualified he dismissed him and ten days later gave
him notice to quit the house. A week later the plaintiff commenced proceedings in the county court for possession. The judge
granted the plaintiff possession. The defendant appealed, contending that an employee who was allowed to occupy premises
belonging to his employer when the occupation was not beneficial to his employment at the time he was allowed into occupation
was a tenant who was protected as such rather than a mere licensee and that a service occupancy was a periodic licence in
respect of which the requirements as to the giving of notice in s 5(1A) a of the Protection from Eviction Act 1977 applied.
________________________________________
a Section 5(1A) is set out at p 331 e f, post

Held Exclusive occupation of an employers residential premises by an employee in anticipation that the employees work
would at some time in the future be beneficial to his employment created a licence rather than a tenancy, notwithstanding that at
the time the occupation was entered into, the employees occupation of the premises was irrelevant to the employees existing
duties. Furthermore, the termination of a licence which was expressed to come to an end with the termination of the employees
employment did not have to comply with the requirements in s 5(1A) of the 1977 Act as to the giving of notice, since an
employment licence was not a periodic licence for the purposes of s 5(1A) of the Act. It followed that since the defendant had
gone into occupation in order better to perform his duties when he became a coach driver he had gone into occupation as a
licensee rather than a tenant and, furthermore, the plaintiff was not required to give the defendant notice to terminate his licence
since it came to an end when his employment was terminated. The plaintiff was therefore entitled to possession. The appeal
would accordingly be dismissed (see p 329 f to h, p 330 d h to p 331 c, p 333 b c g h and p 334 b, post).

Notes
For employee tenants, see 27 Halsburys Laws (4th edn) para 14.
For the Protection from Eviction Act 1977, s 5, see 23 Halsburys Statutes (4th edn) (1989 reissue) 314.
327

Cases referred to in judgments

AG Securities v Vaughan [1988] 3 All ER 1058, [1990] AC 417, [1988] 3 WLR 1205, HL.
Australian Blue Metal Ltd v Hughes [1962] 3 All ER 335, [1963] AC 74, [1962] 3 WLR 802, PC.
Fox v Dalby (1874) LR 10 CP 285.
Glasgow City Corp v Johnstone [1965] 1 All ER 730, [1965] AC 609, [1965] 2 WLR 657, HL.
Ivory v Palmer [1975] ICR 340, CA.
Lace v Chantler [1944] KB 368, CA.
Smith v Seghill Overseers (1875) LR 10 QB 422, [187480] All ER Rep 373, DC.
Street v Mountford [1985] 2 All ER 289, [1985] AC 809, [1985] 2 WLR 877, HL.

Cases also cited

Mellor v Watkins (1874) LR 9 QB 400.
Postcastle Properties Ltd v Perridge (1985) 18 HLR 100, CA.
Richardson v Koefod [1969] 3 All ER 1264, [1969] 1 WLR 1812, CA.
Royal Philanthropic Society v County (1895) 18 HLR 83, CA.
Scrimgeour v Waller (1980) 257 EG 61, CA.

Appeal
The defendant, Stephen Checksfield, appealed from the judgment of Judge Hammerton delivered at the Hastings County Court
on 24 April 1990 whereby he granted the plaintiff, Jesse William Norris (trading as J Davis & Son), an order for possession of the
premises at 2 Highfield Bungalow, Highgate, Hawkhurst, Kent. The fact are set out in the judgment of Woolf LJ.

Martin Seaward for the defendant.

Martyn Zeidman for the plaintiff.

17 April 1991. The following judgments were delivered.

WOOLF LJ (delivering the first judgment at the invitation of Balcombe LJ). This is an appeal from a decision of Judge
Hammerton at the Hastings County Court given on 24 April 1990 when he granted the plaintiff an order for possession of 2
Highfield Bungalow, Highgate, Hawkhurst, Kent.
The appeal raises two issues as to the occupation of premises belonging to his employer by an employee. The first issue is
whether an employee who has exclusive occupation of the premises and pays rent can be a licensee if his existing work does not,
although his future anticipated work would, benefit as a result of his being in occupation. The second issue is as to the
application of the requirements as to the giving of notice in s 5(1A) of the Protection from Eviction Act 1977 (the 1977 Act) as
amended by the Housing Act 1988 (the 1988 Act) to a licence which is expressed to come to an end with the employees
employment.

The facts
For the purposes of both issues I can summarise the facts quite briefly, basing myself on the note of the judgment of Judge
Hammerton. In 1988 the defendant worked for the plaintiff as a semi-skilled mechanic. In 1989 he was invited to resume that
employment and started in July 1989. At that time he was living in lodgings approximately one mile away. In August 1989 the
defendant was seen by the plaintiff and asked if he would like to reside at the bungalow, which was the subject of the
proceedings, which had previously been occupied by another 328 employee. The defendant wanted to occupy the premises and
he was allowed into possession on two specific terms which the plaintiff made clear. The first was not of any relevance. The
second was that the defendant would be able to drive coaches for the plaintiffs business and would apply for a PSV licence for
this purpose. In the plaintiffs opinion, for this work it was clearly desirable that the defendant should be in the bungalow since
this would make him readily available in an emergency or if there was urgent work. The judge found that it was on that
condition that occupancy of the bungalow was granted to the defendant.
Before the defendant moved into the premises he was asked to, and did, sign a document confirming the terms of his
occupation. That document referred to the defendant having a licence and so far as relevant provided:

It is a condition of your employment that you shall occupy [the premises] or such other alternative property as the
employer may provide and that on termination of your employment your licence to occupy such property shall cease
forthwith.

In addition it was arranged that the defendant would have the sum of 5 per week deducted from his salary in relation to his
occupation.
At a later date, 13 October 1989, the defendant was given a statement of the main particulars of his employment. These
showed that he was to be employed as a semi-skilled mechanic, his normal hours of work were eight to five, Monday to Friday,
Saturday if agreed. He was to give and receive one weeks notice to terminate the employment but could be dismissed instantly
for misconduct.
Possibly because he was unaware of this until October 1989, as he contended, the defendant did not tell the plaintiff that he
was disqualified from driving. About the same time the plaintiff learned that this was the situation from the police and this,
together with his no longer being a satisfactory employee, caused the plaintiff to dismiss the defendant summarily. About ten
days later, by letter delivered on 11 December 1989, the plaintiff informed the defendant that he was required to vacate the
bungalow. The proceedings for possession were instituted on 18 December 1989.
In relation to the thorny issue as to when an employee is a licensee and not a tenant of premises belonging to his employer
which he is allowed to occupy, Mr Seaward, who appears on behalf of the defendant, is prepared to accept Mr Zeidmans
submission on behalf of the plaintiff. Mr Zeidman submitted that an employee can be a licensee, although his occupation of the
premises is not necessary for the purposes of the employment, if he is genuinely required to occupy the premises for the better
performance of his duties.
In my judgment this submission accurately reflects the law. We have been referred to a number of authorities which set out
different tests. The most helpful decision is that of the House of Lords in Glasgow City Corp v Johnstone [1965] 1 All ER 730,
[1965] AC 609. In that case Lord Reid (with whose speech Lord Wilberforce agreed) said ([1965] 1 All ER 730 at 732, [1965]
AC 609 at 618):

So if necessity were the criterion the appeal would succeed; but if it is sufficient for the respondents to show that their
servant is bound to reside there, and that his residing there is of material assistance to them in the carrying out of their
activities then the appellants must fail on this point.

Lord Reid then went on to examine a number of English authorities and concluded this part of his speech by saying ([1965] 1 All
ER 730 at 733, [1965] AC 609 at 619):
329

In requiring that the occupation should be necessary I think that MELLOR, J.s judgment [in Smith v Seghill
Overseers (1875) LR 10 QB 422, [187480] All ER Rep 373] is out of line with the other authorities, and the authorities on
this topic appear to me to support the respondents contention in the present case.

Lord Reid was therefore of the opinion that it would be sufficient if the employees occupation was of material assistance
to his employment. It need not be necessary for his employment. The same view was taken by Lord Evershed and Lord
Hodson. Lord Guest stated the position which must exist for there to be a licence in the following terms ([1965] 1 All ER 730 at
739740, [1965] AC 609 at 629):

The residence must be ancillary to the duties which the servant has to perform (Smith v. Seghill Overseers ((1875) LR
10 QB 422, [187480] All ER Rep 373)) or put in another way the requirement must be with a view to the more efficient
performance of the servants duties (Fox v. Dalby ((1874) LR 10 CP 285)).

As Mr Seaward correctly submitted, it would not suffice if the occupation was a fringe benefit or merely an inducement to
encourage the employee to work better.
Unless the occupation fulfilled this test, the fact that the employee had exclusive possession and paid rent would almost
inevitable establish a service tenancy: see generally Street v Mountford [1985] 2 All ER 289, [1985] AC 809 and AG Securities v
Vaughan [1988] 3 All ER 1058 at 1065, [1990] 1 AC 459 per Lord Templeman.
If in this case, as was contemplated, when the defendant went into occupation he had obtained a PSV licence and had
changed the nature of his job so that he became a coach driver, the judge would undoubtedly have been entitled to regard the
defendant as a licensee. He would then have entered into occupation under a document which described the relationship in terms
of a licence and the occupation would be beneficial to the defendants employment on the judges findings. His occupation
would enable him to assist his employer in cases of emergency or on short notice.
However, Mr Seaward submits that the employment situation which has to be considered is that which existed in fact at the
time the licence was entered into. Not the situation which might exist in the future. The situation which existed at the time the
licence was entered into was that the defendants occupation of the premises was irrelevant to the defendants employment as a
semi-skilled mechanic. In that employment he was not required to assist with emergencies and he could perform the work
equally as well from the lodgings at which he was previously living or indeed from any other address which was within travelling
distance to his place of work. Occupation was beneficial to the defendant but not beneficial to his employment.
There is no previous decision of the courts which directly conflicts with Mr Seawards approach. However, I have no
hesitation in coming to the conclusion that notwithstanding this argument the judge was entitled to come to the conclusion that
the defendant was a licensee. Although the defendant was unable to obtain the necessary PSV licence to drive coaches, he was
on the judges finding only allowed into occupation on the basis that he would obtain the necessary qualifications and work as a
coach driver. In my judgment it would not be sensible, unless compelled to do so, to restrict an employers ability to grant a
licence to situations where the employment which would be benefited by the employee taking up occupation commenced
simultaneously with or prior to the occupation of the premises. There may be many circumstances where it would 330 be
desirable for the employee to take up occupation before the relevant work commenced. What is required is that there should be a
sufficient factual nexus between the commencement of the occupation of the premises and the employment which would benefit
from that occupation. If for some reason it becomes apparent that the employee is not going to be able to fulfil the requirements
of that employment within a reasonable time, then the position may be different. However, if the situation is one where it is
contemplated, as was the position here, that the employee would, within a reasonable time, be able to take up the relevant
employment, that will suffice. The fact that the employee during the intervals may be performing some other duties which are
not affected by the occupation of the premises does not prevent a licence coming into existence.
On the facts found by the judge in this case, this was therefore a case where it was proper to regard the defendant as going
into occupation as a licensee in order better to perform his duties when he became a coach driver.

The second issue

Section 5 of the Protection from Eviction Act 1977, as amended, provides:

(1) Subject to subsection (1B) below no notice by a landlord or a tenant to quit any premises let (whether before or
after the commencement of this Act) as a dwelling shall be valid unless( a) it is in writing and contains such information
as may be prescribed, and (b) it is given not less than 4 weeks before the date on which it is to take effect.
(1A) Subject to subsection (1B) below, no notice by a licensor or licensee to determine a periodic licence to occupy
premises as a dwelling (whether the licence was granted before or after the passing of this Act) shall be valid unless( a) it
is in writing and contains such information as may be prescribed, and (b) it is given not less than 4 weeks before the date
on which it is to take effect.
(1B) Nothing in subsection (1) or subsection (1A) above applies to(a) premises let on an excluded tenancy which is
entered into on or after the date on which the Housing Act 1988 came into force unless it is entered into pursuant to a
contract made before that date; or (b) premises occupied under an excluded licence.
(2) In this section prescribed means prescribed by regulations made by the Secretary of State by statutory instrument,
and a statutory instrument containing any such regulations shall be subject to annulment in pursuance of a resolution of
either House of Parliament.
(3) Regulations under this section may make different provision in relation to different descriptions of lettings and
different circumstances.

No notice was given to the defendant which complies with sub-s (1A). However, that subsection is only contravened where
a notice, which does not comply with the subsection, is given to determine a period licence. If no notice is required, the
subsection has no application. It is contended on behalf of the plaintiff that the defendants licence was not a periodic licence and
that it did not require a notice of termination but automatically came to an end as a result of the cessation of the defendants
employment. Although the document which the defendant signed before entering into possession was not a complete record of
the terms on which he was allowed into occupation (for example, it did not mention the rent), it clearly states that the licence was
to cease forthwith on termination of the defendants employment.
The draftsmans reference to a periodic licence in sub-s (1A) creates so far as I 331 am aware a new animal. Periodic
tenancies referred to in sub-s (1) are well known but I am not aware of any previous reference to a periodic licence to occupy
premises. Clearly the draftsman in sub-s (1A) was creating a parallel situation to that in sub-s (1) but wished to restrict it not
only to licences which were required to be determined by notice but also to those licences which could be properly described as
periodic.
There is no definition of a periodic licence in either the 1977 Act or the amending Housing Act 1988. However, in s 45(1) of
the Housing Act 1988 a fixed term tenancy is defined as meaning any tenancy other than a periodic tenancy. Mr Seaward draws
attention to the contrast between a fixed term tenancy and a periodic tenancy which this interpretation provision identifies. He
also referred the court to Lace v Chantler [1944] KB 368 where this court held that a tenancy for the duration of the war did not
create a leasehold interest because it was impossible to say at the outset how long the tenancy would last and therefore it was not
of a sufficiently certain duration. Although Staughton LJ, with his intimate knowledge of the arcane areas of landlord and tenant
law, was able to point out that Lace v Chantler has been overtaken by subsequent statutory intervention (the Validation of War
Time Leases Act 1944), Mr Seaward submits that the decision in that case should still be applied in this case because the date on
which the defendants employment would cease was equally incapable of identification at the commencement of the occupation
in this case as it was in Lace v Chantler.
He submits that it is desirable in the case of a service occupancy that the statutory restriction on the period of notice required
to determine the licence should apply, so as to protect the position of a former employee. He also submits that for the statutory
requirement to apply in this sort of case would be beneficial because the prescribed particulars which are required to be given by
s 5(2) of the 1977 Act would provide a valuable safeguard for the employee. (The prescribed information which has to be given
includes a reference to the desirability of obtaining advice from a solicitor and the ability to obtain legal advice and assistance
under the legal aid scheme.)
While I recognise the benefits which could follow for former employees if Mr Seaward is correct, I am unable to accept his
argument and see real disadvantage in practice if he were correct.
Before the 1977 Act was amended, a licence which was expressed to be terminable on an employees employment coming to
an end would come to an end without the requirement of any notice. That this is the position is supported by the decision of this
court in Ivory v Palmer [1975] ICR 340. In that case it was held that a contractual licence which was ancillary to a contract of
employment came to an end when the contract of employment was terminated even though the termination was wrongful. It was
argued that that case can be distinguished from the situation here because no rent was payable for the occupation and the
contractual licence was interwoven with the contract of employment. I cannot see why the fact that there is only one contract
instead of two should make any difference to the situation as long as the contract dealing with the right to occupation makes it
clear that it is to come to an end with the employment. The fact that rent is payable with reference to a period of time such as a
week would only be of significance if there was no other express or implied event which terminates the licence. In that situation
the period in relation to which the rent is payable may provide guidance as to the length of notice which would be reasonable
before the licence could be terminated. If no notice is required, then the fact that the rent was payable periodically is not relevant
as to when the licence terminates.
332
The question whether a requirement of reasonable notice is to be implied in a licence has to be answered in the light of the
circumstances existing when the licence is created: see Australian Blue Metal Ltd v Hughes [1962] 3 All ER 335 at 342, [1963]
AC 74 at 99 per Lord Devlin. In this case therefore, in my judgment, no notice was required to terminate the licence. The
employment could be ended summarily if appropriate or on a weeks notice and when the employment came to an end so did the
licence. That being the position, s 5(1A) of the 1977 Act can have no application. There is no notice which is needed which is
relevant for the purposes of that subsection. Further, even if that approach is not correct, the question remains as to whether or
not this was a periodic licence. In my judgment it was not. This was a licence for a single period, namely, the period of
employment. The subsection in referring to a periodic licence confines its operation to those licences which continue for a series
of periods until terminated by a notice. The analogy is with weekly, monthly, or quarterly tenancies. Having regard to the
document which the defendant signed before he went into occupation, the fact that a weekly deduction was made from his wages
by way of rent is not sufficient to turn this licence into a periodic licence.
The approach adopted above means that s 5 of the 1977 Act, as amended, will not apply to the great majority, but not
necessarily all, employment licences. Those licences will usually end with the employment. This appears to me to make good
sense. If the premises are required to be occupied by an employee for the better performance of his employment, it is sensible
that the premises should be required to be vacated as soon as the employment comes to an end so that they can be occupied by
another employee. It is not difficult to envisage circumstances where greater inconvenience could be caused even by a delay of
four weeks after the end of a period of employment. A degree of support for this approach is provided by s 8(2) of the 1977 Act.
That subsection provides:

For the purposes of Part I of this Act a person who, under the terms of his employment, had exclusive possession of
any premises other than as a tenant shall be deemed to have been a tenant and the expressions let and tenancy shall be
construed accordingly.

This subsection does not apply to s 5 because that section is in Pt II and not in Pt I of the 1977 Act. As s 8 has been
amended by the 1988 Act, if the arguments advanced on behalf of the defendant are correct, and Parliament intended s 5, as
amended, to apply to the situation here under consideration, then that object could have been achieved by amending s 8(2) so that
it applied to Pt II of the Act as well. Section 5 is the only section in Pt II of the 1977 Act. In fact, Parliament did not amend sub-s
(2).
No notice being required to terminate the defendants licence, I would dismiss this appeal.

STAUGHTON LJ. I agree that this appeal should be dismissed for the reasons so clearly given by Woolf LJ. I was at one time
troubled by a single sentence in the judgment of Lush J in Smith v Seghill Overseers (1875) LR 10 QB 422 at 431, [187480] All
ER Rep 373 at 376. In that case Smith was a mineworker and lived in a house which belonged to his employers. His occupation
was to cease at the time when his employment ceased. Lush J said: It is true that the holding is not for any fixed term If
one reads that with s 45(1) of the Housing Act 1988, one finds there that fixed term tenancy means any tenancy other than a
periodic tenancy. It would follow that if the definition given by Lush J also applies, then a tenancy which is to expire when the
employment expires is a periodic tenancy. However, it seems to me that in the Housing Act 1988 Parliament provided a 333
different rule to that which had found favour with Lush J in 1875. Parliament decided that any tenancy which was not a periodic
tenancy was a fixed term tenancy, although Lush J in 1875 thought that a tenancy for the duration of employment was not of that
description. That has allayed my doubts on that aspect of the case, and I agree that the appeal must be dismissed.

BALCOMBE LJ. I agree that this appeal should be dismissed for the reasons given by Woolf and Staughton LJJ.
Appeal dismissed. Leave to appeal to the House of Lords refused.

Solicitors: Holden & Co, Hastings; Menneer Idle & Brackett, St Leonards-on-Sea.

Raina Levy Barrister.

[1991] 4 All ER 334

Re Harrods (Buenos Aires) Ltd

CIVIL PROCEDURE

COURT OF APPEAL, CIVIL DIVISION

DILLON, STOCKER AND BINGHAM LJJ
29, 30 NOVEMBER, 19 DECEMBER 1990

Practice Stay of proceedings Jurisdiction Appropriate forum Company domiciled in England and Argentina Companys
issued share capital owned by two Swiss companies Minority shareholder presenting petition in English courts for order that
majority shareholder purchase its shares in company Majority shareholder applying for stay of proceedings on ground of
forum non conveniens Whether English court having jurisdiction to stay proceedings Whether domicile rule in Convention on
Jurisdiction and the Enforcement of Civil and Commercial Judgments removing English courts discretion to stay action on
ground of forum non conveniens Civil Jurisdiction and Judgments Act 1982, s 49, Sch 1, art 2.

Two Swiss companies, I and L, owned 51% and 49% respectively of the issued share capital of a company incorporated in
England. The companys registered office was in England but its business was carried on and it was managed and controlled
exclusively in Argentina. In 1989 L, the minority shareholder, claimed that the companys affairs were being conducted in a
manner unfairly prejudicial to it and presented a petition seeking an order under s 459 of the Companies Act 1985 directing I, the
majority shareholder, to purchase its shares or, alternatively, that the company be wound up compulsorily under the Insolvency
Act 1986. L obtained leave to serve the petition on I out of the jurisdiction. I subsequently sought an order that the petition and
all proceedings be stayed on the ground that Argentina was the appropriate forum for the trial of the issues. The judge dismissed
Is claim, holding that the English court and not the Argentine court was the appropriate forum for the trial of the issues. I
appealed. On appeal L raised a preliminary issue on jurisdiction contending that, although s 49 a of the Civil Jurisdiction and
Judgments Act 1982 preserved the power of the English court to stay or dismiss proceedings where to do so was not inconsistent
with the 1968 Convention on Jurisdiction and the Enforcement of Civil and Commercial 334 Judgments (which had the force of
law in the United Kingdom by virtue of s 2(1) of the 1982 Act and was set out in Sch 1 to that Act), the court had no jurisdiction
to refuse to decide the issues on the ground of forum non conveniens since the company was domiciled in England (albeit it was
also domiciled in Argentina) and under art 2 b of the convention persons domiciled in a convention country were required to be
sued in that country, whatever their nationality. I contended that art 2 did not have the wide mandatory effect proposed by L
where the only conflict was between the courts of a convention country and the courts of a non-convention country.
________________________________________
a Section 49 provides: Nothing in this Act shall prevent any court in the United Kingdom from staying, sisting, striking out or dismissing any
proceedings before it on the ground of forum non conveniens or otherwise, where to do so is not inconsistent with the 1968 Convention.
b Article 2, so far as material, is set out at p 338, d, post

Held The court had a discretionary jurisdiction under the 1968 convention to stay or dismiss proceedings properly served on a
defendant domiciled in England on the ground that the case would be more appropriately heard elsewhere in circumstances where
the conflict of jurisdiction was between the English courts and the courts of a non-convention country, since, on its true
construction and in view of its object of establishing an expeditious, harmonious and certain procedure for securing the reciprocal
recognition and enforcement of judgments as between convention countries, the convention was intended and designed to
regulate relations only as between convention countries. Consequently the domicile rule in art 2 did not have the wide mandatory
effect of requiring the courts of a convention country to hear and determine proceedings commenced in that country on the basis
of the defendants domicile irrespective of whether the only conflict was between the courts of a single convention country and
those of a non-convention country. It followed that the court retained jurisdiction under s 49 of the 1982 Act to stay or dismiss
Ls petition on the ground of forum non conveniens if it determined that the Argentine court was the more appropriate forum to
decide the issues (see p 339 c to e, p 341 h to p 342 a, p 343 a to d j to p 344 b, p 345 d e g and p 347 b to g, post).
S & W Berisford plc v New Hampshire Insurance Co [1990] 2 All ER 321 and Arkwright Mutual Insurance Co Ltd v
Bryanston Insurance Co Ltd [1990] 2 All ER 335 overruled.

Notes
For stay of proceedings on ground of forum non conveniens, see 37 Halsburys Laws (4th edn) para 444.
For jurisdiction of the English courts in respect of the 1968 convention, see Supplement to 8 Halsburys Laws (4th edn) para
768B.
For the Civil Jurisdiction and Judgments Act 1982, ss 2, 49, Sch 1, art 2, see 11 Halsburys Statutes (4th edn) 909, 924, 929.

Cases referred to in judgments

Abidin Daver, The [1984] 1 All ER 470, [1984] AC 398, [1984] 2 WLR 196, HL.
Arkwright Mutual Insurance Co v Bryanston Insurance Co Ltd [1990] 2 All ER 335, [1990] 2 QB 649, [1990] 3 WLR 705.
Berisford (S & W) plc v New Hampshire Insurance Co [1990] 2 All ER 321, [1990] 2 QB 631, [1990] 3 WLR 688.
Lufttransportunternehmen GmbH & Co KG v Eurocontrol Case 29/76 [1976] ECR 1541.
Spiliada Maritime Corp v Cansulex Ltd, The Spiliada [1986] 3 All ER 843, [1987] AC 460, [1986] 3 WLR 972, HL.
335

Cases also cited

Arab Monetary Fund v Hashim (No 3) [1990] 1 All ER 685, [1991] AC 114; rvsd in part [1990] 2 All ER 769, [1990] 2 AC 114,
CA; rvsd [1991] 1 All ER 871, [1991] 2 AC 114, HL.
Deichland, The [1989] 2 All ER 1066, [1990] 1 QB 361, CA.
Kalfelis v Bankhaus Schrder Munchmeyer Hengst und Co (trading as Hema Beteiligungsgesellschaft GmbH and ors) Case
189/87 [1988] ECR 5565.
Overseas Union Insurance Ltd v New Hampshire Insurance Ltd (1988) Times, 27 September.

Preliminary issue
Intercomfinanz SA, a Swiss company owning 51% of the issued share capital of Harrods (Buenos Aires) Ltd, a company
incorporated in England, appealed with the leave of Nicholls LJ given on 14 June 1990 from a decision of Harman J made on 5
April 1990 ([1991] BCLC 69) dismissing a summons issued by Intercomfinanz on 20 November 1989, seeking, inter alia, an
order that a petition brought under s 459 of the Companies Act 1985 and the Insolvency Act 1986 by the respondent, Ladenimor
SA, another Swiss company, which owned the remaining 49% of the shares in Harrods (Buenos Aires) Ltd, be stayed on the
ground that Argentina was a more appropriate forum for the trial of the issues raised. On appeal Ladenimor raised a preliminary
issue, namely that as a result of the Convention on Jurisdiction and the Enforcement of Judgments in Civil and Commercial
Matters 1968 the English court had no jurisdiction to refuse to decide the issues on the ground of forum non conveniens since the
company was domiciled in England, albeit that it was also domiciled in Argentina. The hearing of the substantive appeal was
adjourned to a later date. The facts are set out in the judgment of Dillon LJ.

Alan Boyle for Intercomfinanz.

Michael Briggs for Ladenimor.

Cur adv vult

19 December 1990. The following judgments were delivered.

DILLON LJ. This case comes before this court on appeal from a decision of Harman J in the Chancery Division of 5 April 1990
(see [1991] BCLC 69).
The proceedings in which the appeal is brought are entitled In the matter of Harrods (Buenos Aires) Ltd. That company
was incorporated in England in 1913 under the Companies Act 1908 and 1913, and its registered office is and has always been in
England. But its business is and has always been exclusively carried on in Argentina and its central management and control is
exercised in Argentina; its principal activity is to carry on a department store or general store in Buenos Aires.
Since 1979, the company has had two shareholders only, both of which are companies incorporated in Switzerland and
whose central management and control is exercised in Switzerland, viz the present appellant, Intercomfinanz SA, which owns
51% of the issued share capital of the company and the present respondent, Ladenimor SA, which owns the remaining 49%.
The present proceedings were commenced on 7 July 1989 by the presentation by Ladenimor in the Companies Court of a
petition under the Companies Act 1985 and the Insolvency Act 1986. The primary case put forward by Ladenimor is that the
affairs of the company have been and are being conducted by the present management in a manner which is unfairly prejudicial
to Ladenimor 336 within the meaning of s 459 of the Companies Act 1985, and the primary relief sought is an order that
Intercomfinanz purchase Ladenimors shares in the company at a price representing 49% of the value of the company and upon
the basis that there be added back to the value of the company such loss as may be found to have been caused to the company by
the matters complained of in the petition. In the alternative, however, it is submitted in the petition that it is just and equitable
that the company should be wound up, and a compulsory winding-up order is sought under the Insolvency Act 1986. It is not in
doubt that the company is solvent.
Under the relevant statutory rules, the company was a necessary party to the proceedings, whether the relief sought was a
winding-up order, or merely an order against Intercomfinanz under s 459 of the 1985 Act, and there was of course no difficulty in
serving the company at its registered office in England. In addition on an ex parte application Ladenimor obtained from Mr
Registrar Buckley on 12 July 1989 an order under RSC Ord 11 giving leave to Ladenimor to serve the petition on Intercomfinanz
out of the Jurisdiction.
The upshot of that was that Intercomfinanz, by its English solicitors, issued a summons on 20 November 1989 claiming: (1)
an order that the order of Mr Registrar Buckley giving leave to serve the petition on Intercomfinanz be set aside; (2) an order that
the service of the petition on Intercomfinanz be set aside; and (3) an order that the petition and all proceedings thereon be stayed,
on the grounds that there is another forum (namely Argentina) having competent jurisdiction which is the appropriate forum for
the trial of the issues raised by the petition.
That summons came before Harman J and by his order now under appeal he dismissed it. He held, in effect, firstly, that
leave under Ord 11 to serve the petition out of the jurisdiction was never required, on a true appreciation of the statutory position
with the consequence that any lack of proper disclosure in the affidavit which was put before Mr Registrar Buckley was
immaterialand, secondly, that the English court, and not the Argentine court, was the appropriate forum for the trial of the
issues raised by the petition.
Harman J refused Intercomfinanz leave to appeal against his order, but leave to appeal was granted by Nicholls LJ on 14
June 1990. He commented:

Although the company was incorporated in England and although a decision on whether or not to grant a stay is a
matter of discretion for the judge, Intercomfinanz SA has a seriously arguable case on the application of the Spiliada
principles in the unusual circumstances present here [see Spiliada Maritime Corp v Cansulex Ltd, The Spiliada [1986] 3 All
ER 843, [1987] AC 460].

In this court a preliminary issue of importance has been taken on behalf of Ladenimor. It is submitted that as the result of
the Convention on Jurisdiction and the Enforcement of Judgments in Civil and Commercial Matters between the original member
states of the EEC, to which the United Kingdom, Denmark and Ireland acceded in 1978 after joining the EEC, the English court
has no jurisdiction to refuse on the grounds of forum non conveniens to decide the issues raised by the petition or to stay the
petition since the company is for the purposes of the 1968 convention domiciled in England (albeit also domiciled in Argentina).
The terms of the convention are set out in Sched 1 to the Civil Jurisdiction and Judgments Act 1982, and under s 2 of that
Act, the convention has the force of law in the United Kingdom.
The preamble to the convention sets out the genesis of the convention in the following terms:
337

The High Contracting Parties to the Treaty establishing the European Economic Community,
Desiring to implement the provisions of Article 220 of that Treaty by virtue of which they undertook to secure the
simplification of formalities governing the reciprocal recognition and enforcement of judgments of courts or tribunals;
Anxious to strengthen in the Community the legal protection of persons (therein established;
Considering that it is necessary for this purpose to determine the international jurisdiction of their courts, to facilitate
recognition and to introduce an expeditious procedure for securing the enforcement of judgments, authentic instruments
and court settlements;
Have decided to conclude this Convention
 The scope of the 1968 convention is prescribed in art 1 in Title I. With exceptions which are immaterial to the present case
it is to apply in civil and commercial matters whatever the nature of the court or tribunal.
Title II, comprising arts 2 to 24, is headed Jurisdiction. Section 1 of the Title, comprising arts 2 to 4 is headed General
provisions.
Article 2 provides:

Subject to the provisions of this Convention, persons domiciled in a Contracting State shall, whatever their nationality,
be sued in the courts of that State

That is the article fundamental to the preliminary issue.

It is not in doubt that the company is domiciled in the United Kingdom, although also domiciled in Argentina, and that
Intercomfinanz and Ladenimor are domiciled in Switzerland; see s 42(3) and (6) of the 1982 Act.
Article 3 of the 1968 convention provides that persons domiciled in a contracting state may be sued in the courts of another
contracting state only by virtue of the rules set out in ss 2 to 6 of Title II. The second paragraph of art 3 then lists particular
provisions of the laws of the various contracting states including the United Kingdom which are not to be applicable as against
persons domiciled in other contracting states; the details are not relevant.
Article 4 then provides:

If the defendant is not domiciled in a Contracting State, the jurisdiction of the courts of each Contracting State shall,
subject to the provisions of Article 16, be determined by the law of that State. As against such a defendant, any person
domiciled in a Contracting State may, whatever his nationality, avail himself in that State of the rules of jurisdiction there in
force, and in particular those specified in the second paragraph of Article 3, in the same way as the nationals of that State.

There are then further articles setting out detailed provisions, many of which in various respects qualify art 2. I shall have to
refer to some of these later. There are also, under Title III, detailed articles (arts 25 to 49) dealing with the recognition and
enforcement of judgments.
It is in particular to be noted that the doctrine of forum conveniens under English and Scottish law, as elaborated by Lord
Goff of Chieveley in The Spiliada [1986] 3 All ER 843, [1987] 1 AC 460, is not a recognised basis for jurisdiction under any of
the articles of the 1968 convention, where the contest is between the jurisdiction of contracting states. As between the
contracting states the general principle of the convention is that the court first properly seised of a cause of 338 action under the
convention shall exercise jurisdiction. Thus arts 21 and 23 provide as follows:

ARTICLE 21

Where proceedings involving the same cause of action and between the same parties are brought in the courts of
different Contracting States, any court other than the court first seised shall of its own motion decline jurisdiction in favour
of that court

ARTICLE 23

Where actions come within the exclusive jurisdiction of several courts, any court other than the court first seised shall
decline jurisdiction in favour of that court.

Against that background s 49 of the 1982 Act provides that nothing in the Act shall prevent any court in the United Kingdom
from staying, sisting, striking out, or dismissing any proceedings before it on the ground of forum non conveniens or otherwise
where to do so is not inconsistent with the convention. It is implicit in that section, in my judgment, that the court cannot stay or
strike out or dismiss any proceedings on the ground of forum non conveniens where to do so would be inconsistent with the
convention, and that covers all cases where the defendant in proceedings in England is domiciled in England and the conflict of
jurisdiction is between the jurisdiction of the English court and jurisdiction of the courts of some other contracting state.
The crucial question in the present case is whether the English court can stay, strike out or dismiss proceedings on the
ground of forum non conveniens, where the defendant in the English proceedings is domiciled in England, but the conflict of
jurisdiction is between the jurisdiction of the English court and the jurisdiction of the courts of a state which is not a contracting
state, no other contracting state being involved.
That question came before the Commercial Court in S & W Berisford plc v New Hampshire Insurance Co [1990] 2 All ER
321, [1990] 2 QB 631. In that case the second plaintiff, which was the relevant plaintiff, was an American company based in
New York. The defendant was an American insurance company domiciled in New Hampshire, but the disputes arose out of the
operations of the defendants London branch, and consequently the defendant was deemed, for the purposes of the convention, to
be domiciled in the United Kingdom. It was held by Hobhouse J in those circumstances (a) that since the parties had not agreed
that the courts of any other contracting state should have jurisdiction, art 2 of the convention required that the defendant should
be sued in the United Kingdom, (b) that to stay the proceedings on the ground of forum non conveniensviz that the courts of
New York were the more appropriate forumwould be inconsistent with the convention and (c) that accordingly the English
court had no jurisdiction under s 49 of the 1982 Act to stay the action.
The ratio of the judgment of Hobhouse J is to be found in his judgment [1990] 2 All ER 321 at 331332, [1990] 2 QB 631 at
700701. The crux is, in my judgment, to be found where the judge said ([1990] 2 All ER 321 at 332, [1990] 2 QB 631 at 701):

It is clear that the convention is designed (subject to art 4) to achieve uniformity and to harmonise the relevant
procedural and jurisdictional rules of the courts of the contracting states. The convention leaves no room for the
application of any discretionary jurisdiction by the courts of this country; the availability of such a discretion would destroy
the framework 339 of the convention and create lack of uniformity in the interpretation and implementation of the
convention.

That decision of Hobhouse J was followed by Potter J in Arkwright Mutual Insurance Co v Bryanston Insurance Co Ltd
[1990] 2 All ER 335, [1990] 2 QB 649. In that case the plaintiff, an American insurance company, had a claim on London
reinsurers who disputed the claim on the ground that the loss was not covered by the policy. The reinsurers commenced
proceedings against the plaintiff in New York for a declaration that they were not liable. The plaintiff then commenced an action
in London against the reinsurers claiming payment, and the reinsurers applied to stay the English proceedings on the ground of
forum non conveniens and lis alibi pendens. They contended that the New York court was the more appropriate court to decide
the issue.
The arguments in favour of a stay were summarised by Potter J under eight heads. Heads (1) to (6) are as follows ([1990] 2
All ER 335 at 345, [1990] 2 QB 649 at 715):
 (1) The convention, being concerned, or principally concerned, to govern relations between contracting states, which
thereby adopted mutual obligations and accepted regulation of their own potentially competing jurisdictions, should not
readily be construed as operating so as to deprive or inhibit non-contracting states in relation to cases where the jurisdiction
of such states would otherwise plainly be most appropriate for determination of the dispute in question. The convention
being concerned to decide which of the contracting states should assume jurisdiction in cases of competition inter se, no
violence is done or inconsistency effected by one contracting state staying proceedings in its courts in favour of a non-
contracting state.
(2) The general rule as to domicile imposed by art 2 is not to be regarded as so overwhelming or all-pervading as to
preclude stay in all cases where it is not expressly required or permitted by the convention. The rule of domicile is the
prima facie rule only, within a sophisticated framework of provisions which recognise a number of exceptions in individual
situations, the most logical and compelling of which are those dealt with in arts 5 to 6A (special jurisdiction), art 16
(exclusive jurisdiction) and art 17 (foreign jurisdiction clauses).
(3) Any English court should be slow so to construe the convention as to inhibit the valuable and important jurisdiction
of stay on grounds of forum non conveniens, which is designed to promote comity, to encourage efficiency in the
resolution of disputes, to prevent duplication of time and cost in litigation, and to avoid inconsistent judgments in two
jurisdictions.
(4) Albeit arts 21 to 23 constitute a more limited and rigid scheme for allotment of jurisdiction than that achieved by
application of a general principle of forum non conveniens they are concerned to give effect to the network of provisions in
arts 2 to 20 and to avoid the risk of inconsistent judgments in two or more contracting states, by requiring dismissal or stay
of actions in favour of the court of the contracting state first seised. If there is no jurisdiction for a contracting state in
which a defendant is domiciled or otherwise properly sued to decline jurisdiction, or to stay, in favour of the courts of a
non-contracting state, that creates the remarkable situation whereby the convention determines the appropriate forum
(according to its own provisions) for the competing jurisdictions of contracting states, but requires entertainment of suit in
the domicile of the defendant (without the application of any test of appropriateness) where a non-contracting state is
concerned.
340
(5) Even if the Berisford case is right in respect of the broad principle of forum non conveniens, it need and should not
be applied in respect of the more limited case of lis alibi pendens, the very ground of stay contemplated by art 21 in respect
of contracting states.
(6) Given that the purposes of the convention are avoidance within the courts of the Community of inconsistent
judgments and simplification of enforcement of judgments within those courts, neither purpose will be disturbed by the
exercise of a jurisdiction to stay on grounds of forum non conveniens and/or lis alibi pendens in favour of the courts of a
non-member state.

These arguments, however, though recognised as powerful, were rejected by Potter J on the ground that he agreed with the
decision of Hobhouse J in Berisford and preferred the logic of the Berisford case.
The answer to the question depends on the true construction of the 1968 convention and that is a matter of European law.
The Court of Justice of the European Communities has jurisdiction to give rulings on the interpretation of the convention under
the Protocol on the Interpretation of the 1968 Convention by the European Court signed at Luxembourg in June 1971. The text
of the 1971 protocol is set out as Sch 2 to the 1982 Act, and that specifies the courts which may request the Court of Justice to
give preliminary rulings on questions of interpretation; they include the courts of the contracting states when they are sitting in an
appellate capacity.
In addition the 1982 Act provides by s 3(1) that any question as to the meaning or effect of any provision of the convention
shall, if not referred to the European Court in accordance with the 1971 protocol, be determined in accordance with the principles
laid down by and any relevant decision of the Court of Justice.
It is further provided that in ascertaining the meaning or effect of any provision of the convention the courts may consider
the reports of M P Jenard and Professor Peter Schlosser and shall give them such weight as is appropriate in the circumstances
(for these reports see (1979) OJ C59, pp 1, 66, 71). These reports are both referred to in the judgments of Hobhouse J in
Berisford and Potter J in Arkwright and in this court we have had copious citation from both reports. For my part, I find it
difficult to give much weight to the reports in relation to the question with which we are concerned because I do not think that M
Jenard or Professor Schlosser had that question in contemplation. There are general statements in the reports which can be used
as pointers either way, without themselves solving the question in issue. Moreover at the time even of the Schlosser report, the
English doctrine of forum non conveniens was considerably less fully developed than it is now; the decisions in The Abidin
Daver [1984] 1 All ER 470, [1984] AC 398 and even more, The Spiliada [1986] 3 All ER 843, [1987] AC 460 came later.
As I see it the starting point in approaching the construction of the convention, must be art 220 of the EEC Treaty, since the
preamble to the convention shows as the starting point the desire of the parties to implement that article. The object of art 220
was to secure the simplification of formalities governing the reciprocal recognition and enforcement of judgments of courts or
tribunals between the member states of the community.
To achieve such recognition and enforcement it was evidently decided that the contracting states should have a common
basis of international jurisdictionor jurisdiction in the international orderin the matters which fall within the scope of the
convention. But the common basis of jurisdiction envisaged does not apply worldwide since under art 4 if a defendant is not
domiciled in a contracting state 341 the jurisdiction of the courts of each contracting state are to be determined by the national
law. The desideratum expressed in para 78 of Professor Schlossers report that A plaintiff must be sure which court had
jurisdiction. He should not have to waste his time and money risking that the court concerned may consider itself less competent
than another (see (1979) OJ C59, p 97) is thus very obviously not met where the defendant is not domiciled in a contracting
state. Indeed the following passages in para 78 to show that Professor Schlosser was only concerned in that paragraph with the
protection of persons domiciled in the contracting states and with choices, which should not be on the ground of forum
conveniens, between the courts of several contracting states having jurisdiction. That is in line with references in the Jenard
report, eg the reference to an autonomous system of international jurisdiction in relations between the Member States and the
statement that

the purpose of the Convention is also, by establishing common rules of jurisdiction, to achieve, in relation between the
Six and in the field which it was required to cover, a genuine legal systemization which will ensure the greatest possible
degree of legal certainty.

(See (1979) OJ C59, pp 7, 15.)

For the English court to refuse jurisdiction, in a case against a person domiciled in England, on the ground that the court of
some non-contracting state is the more appropriate court to decide the matters in issue does not in any way impair the object of
the convention of establishing an expeditious, harmonious, and, I would add, certain procedure for securing the enforcement of
judgments, since ex hypothesi if the English court refuses jurisdiction there will be no judgment of the English court to be
enforced in the other contracting states. Equally and for the same reason such a refusal of jurisdiction would not impair the
object of the convention that there should, subject to the very large exception of art 4, be a uniform international jurisdiction for
obtaining the judgments which are to be so enforced.
 But if the English court as a result of art 2 of the convention does not have the power to decline jurisdiction to entertain an
action against a person domiciled in England on the ground that the courts of a non-contracting state are the more appropriate
forum, the English court must equally have no power to refuse to entertain such an action on the ground of lis alibi pendens, if the
lis is pending in the courts of a non-contracting state. Articles 21 and 22 of the convention are only concerned with the position
where proceedings involving the same cause of action and between the same parties, or where related actions are brought in the
courts of different contracting states. There is nothing at all in the convention to deal with the situation where there is one lis
pending in a court of a contracting state against a person domiciled in that state and another, and possibly earlier, lis pending, in
proceedings involving the same cause of action or in a related action, in the courts of a non-contracting state.
Again art 17 of the convention provides that if the parties have agreed that the courts of a particular contracting state shall
have exclusive jurisdiction to settle any disputes which may arise in connection with a particular legal relationship, then the
courts of that state shall have exclusive jurisdiction to settle such disputes. There is nothing at all in the convention to deal with
the situation where the parties have agreed that the courts of a non-contracting state shall have exclusive jurisdiction to resolve
their disputes. But if art 2 has the full mandatory effect which Hobhouse J thought it has, the English courts would be bound to
hear and decide an action against a person domiciled in England even though both parties 342 to the action had agreed that the
courts of some non-contracting statebe it New York or Argentinashould have exclusive jurisdiction.
Such results would, in my judgment, be contrary to the intentions of the convention. Since the convention is merely an
agreement between the contracting states among themselves, I do not agree with Hobhouse J that the framework of the
convention would be destroyed if there were available to the English court a discretion to refuse jurisdiction, on the ground that
the courts of a non-contracting state were the appropriate forum, in a case with which no other contracting state is in any way
concerned. I do not accept that art 2 has the very wide mandatory effect which Hobhouse J would ascribe to it where the only
conflict is between the courts of a single contracting state and the courts of a non-contracting state.
Respectfully differing, therefore, from the rulings of Hobhouse J and Potter J in Berisford and Arkwright, I would reject the
preliminary issue raised by Ladenimor, and I would hold that the English court has jurisdiction to stay or dismiss the petition on
the ground of forum non conveniens if the English court holds that the courts of Argentina are the more appropriate forum to
decide the issues.
I would add that it is not appropriate, in my judgment, for this court to request the European Court of Justice to give a ruling
on this issue.

STOCKER LJ. I have read the judgments of Dillon and Bingham LJJ, which I agree with, and have nothing to add.

BINGHAM LJ. Before the learned judge it was common ground that he had a discretion to stay Ladenimors proceedings
against Harrods (Buenos Aires) Ltd on the ground of forum non conveniens if he was of the opinion that, applying the Spiliada
test in this rather novel situation, good reason for doing so existed (see Spiliada Maritime Corp v Consulex Ltd, The Spiliada
[1986] 3 All ER 843, [1987] AC 460). The question in issue was whether the judge should exercise that discretion in favour of
the Argentinian court on the ground that it was the appropriate forum for trial of the proceedings.
In this court Mr Briggs for Ladenimor contended that the judge had no such discretion. He based this argument on the Civil
Jurisdiction and Judgments Act 1982 and the conventions to which that Act gave the force of law in the United Kingdom. His
submission was, in brief, that since the company was, by virtue of s 42 of the 1982 Act, domiciled here, the conventions required
the English court to accept jurisdiction and forbade it to decline jurisdiction in favour of the Argentinian court whether that was
judged to be the appropriate forum or not. Mr Briggs accepted that, despite the Act and the conventions, the judge retained a
discretion to stay Ladenimors proceedings against Intercomfinanz, which is not on any showing domiciled here, but he
submitted that Intercomfinanzs application to stay had to be judged on the basis that the proceedings against the company would
continue in any event. The argument thus raised is of some obvious general importance.
In interpreting the 1982 Act our task is, as always, to ascertain the intention of Parliament and give effect to it. But insofar
as the Act is intended to give legal effect to the conventions and to implement the United Kingdoms international obligation to
give legal effect to the conventions, we must assume (in the absence of a clear indication to the contrary, which is not to be found
here) that Parliament intended the conventions to be incorporated into English law so as faithfully to reflect the international
consensus embodied in them. The conventions themselves are in part set out in schedules to the Act, but it cannot be doubted that
in 343 interpreting them we are required first to consider the objectives and scheme of the conventions and secondly the general
principles which stem from the corpus of the national legal systems of the contracting states (see Lufttransportunternehmen
GmbH & Co KG v Eurocontrol Case 29/76 [1976] ECR 1541). For this purpose we must adopt an international and
communautaire, not a national and chauvinistic, approach. Although these conventions do not expressly provide, like art 18 of
the Rome Convention (set out in the Schedule to the Contracts (Applicable Law) Act 1990), that In the interpretation and
application of the preceding uniform rules, regard shall be had to their international character and to the desirability of achieving
uniformity in their interpretation and application, it is plain that that is the basis upon which we should act.
As the preamble to the 1968 convention and the Jenard report make clear, that convention was negotiated pursuant to the
obligation undertaken by the original member states in art 220 of the EEC Treaty to enter into negotiations with each other with a
view to securing for the benefit of their nationals

the simplification of formalities governing the reciprocal recognition and enforcement of judgments of courts or
tribunals and of arbitration awards.

When instigating the negotiations which led to the 1968 convention, the EC Commission observed:

As jurisdiction in both civil and commercial matters is derived from the sovereignty of Member States, and since the
effect of judicial acts is confined to each national territory, legal protection and, hence, legal certainty in the common
market are essentially dependent on the adoption by the Member States of a satisfactory solution to the problem of
recognition and enforcement of judgments.

(See the Jenard report (1979) OJ C59, p 3.)

If member states were to recognise and enforce each others judgments virtually on the nod, it was plainly desirable, so far
as possible, to agree on a common basis for accepting jurisdiction, so as to minimise the number of occasions on which state A
would have to recognise and enforce a judgment given by state B in circumstances where state A would not itself have accepted
jurisdiction. Given the reference in art 220 to the benefit of their nationals, one might have expected the common basis of
jurisdiction to be founded on nationality, as the Jenard report acknowledges (see (1979) OJ C59, p 14). But instead the common
basis of jurisdiction was firmly founded on the domicile of the defendant. The Jenard report explains the intentions of the
original negotiators (p 13):

Underlying the Convention is the idea that the Member States of the European Economic Community wanted to set up
a common market with characteristics similar to those of a vast internal market. Everything possible must therefore be
done not only to eliminate any obstacles to the functioning of this market, but also to promote its development. From this
point of view, the territory of the Contracting States may be regarded as forming a single entity: it follows, for the purpose
 of laying down rules on jurisdiction that a very clear distinction can be drawn between litigants who are domiciled within
the Community and those who are not.

The domicile of the Community-based defendant is not in all cases a determinative test. It was necessary to make special
provision for agreements conferring exclusive jurisdiction on a specific court, a matter which became of greatly increased
importance on the accession of the United Kingdom owing to 344 the frequency with which jurisdiction is conferred upon
United Kingdom courts in international trade (Schlosser report (1979) OJ C59, p 124, para 177), and cases of dual domicile
(discussed in the Schlosser report pp 9697, 120, 125, paras 75, 162 and 181): see arts 17 and 21 of the 1968 convention. But
for the Community-domiciled defendant the state of domicile is the state upon which jurisdiction is primarily conferred. For that
reason Ireland and the United Kingdom cannot found jurisdiction on service during temporary presence in the country nor
Scotland on the grounds listed in paras (b) and (c) of art 3(2): see art 3 and the Schlosser report pp 99100, paras 85 and 86.
Further, the jurisdiction of English courts in respect of persons domiciled in the Community can no longer be based on the
ground that the claim concerns a contract which was concluded in England or is governed by English law (Schlosser report p
100, para 87).
As the extract from the Jenard report (1979) OJ C59, p 13 quoted above makes clear, however, there is a clear and
fundamental distinction between the position of the Community-domiciled defendant and the defendant domiciled elsewhere. In
respect of the latter, contracting states may, by virtue of art 4 of the 1968 convention, continue to apply their traditional rules: the
French may assert their exorbitant jurisdiction under arts 14 and 15 of the Civil Code (Jenard report, pp 19, 20); the Scots on the
bases specified in sub-paras (b) and (c) of the second para of art 3; the English on the basis of service during temporary residence
or because the contract was made here or was governed by English law. Thus in the present case, Intercomfinanz being
domiciled in none of the contracting states, it would not violate the letter or the spirit of the conventions if the English court were
to assume jurisdiction over it on any of the traditional grounds, however exorbitant. For the purposes of recognition and
enforcement no distinction is drawn between judgments against defendants domiciled within and judgments against defendants
domiciled outside contracting states. While, therefore, the conventions reduce the number of cases in which state A will have to
recognise and enforce judgments given by state B in circumstances where state A would not itself have accepted jurisdiction, they
do not eliminate such cases altogether.
In contending that the English court was not only entitled but bound to accept jurisdiction in Ladenimors proceedings
against the company, Mr Briggs relied in particular on the wide unambiguous and mandatory language of art 2. He also relied on
the third recital in the preamble to the 1968 convention as showing that the purpose of the convention was to determine the
international jurisdiction of the courts of the contracting states. It is, however plain, adopting the approach to interpretation
which I have outlined above, that art 2 must be interpreted so as to reflect the purpose and scheme of the convention as a whole.
The reference to international jurisdiction in the preamble is, in my view, intended to make clear that the convention is in no way
concerned with the national jurisdiction of the courts of the contracting states, ie with cases lacking any international element (see
the Jenard report (1979) OJ C59, p 8).
Mr Boyle for Intercomfinanz accepted that, since the company is domiciled here, and since there is no exclusive jurisdiction
clause, and since no proceedings had been first started in another contracting state, the English court would have to accept
jurisdiction if the alternative forum alleged to be appropriate were, instead of Argentina, the court of any other contracting state.
In any choice of jurisdiction between the courts of contracting states, he accepted that the conventions provide a mandatory and
comprehensive code. But he submitted that the conventions were directed and directed only to control of relations between
contracting states among themselves. If this court were to decline jurisdiction in favour of the Argentinian court, how could that
possibly prejudice 345 any Community interest which the conventions were designed to protect or promote? If, as he contended,
the answer was that it could not, since the enforceability of an Argentinian judgment in any contracting state would depend on
bilateral arrangements between Argentina and that state and it was very unlikely that an Argentinian judgment would be more
readily enforceable than an English judgment, that was a sure sign that the conventions were not intended to apply in such a
situation.
Both parties made references to excerpts from the Jenard and Schlosser reports, while urging us to read more extensively in
the reports. I think there is an obvious danger in seizing on occasional passages here and there in these long and closely-reasoned
reports to support one view or the other when it is acknowledged that the present question was never squarely addressed. I have
read the reports much more extensively than the reasonable bounds of oral argument permitted to counsel and am in the result of
opinion that the thrust of the reports gives much more support to Mr Boyles argument for Intercomfinanz than to Mr Briggs for
Ladenimor. I give one example. Both reports consider in detail the existence of earlier bilateral or trilateral conventions between
contracting states, some of which are indeed listed in art 55 of the 1968 convention. Yet save for an isolated (and I think
irrelevant) reference to a convention between France and Switzerland (see the Jenard report, p 14), there is (so far as I can trace)
no reference to any convention between any contracting state and any non-contracting state. On Mr Boyles argument this is
understandable: in the absence of any conflict or potential conflict of jurisdiction between contracting states, the conventions
have no role. If, however, the conventions govern relations between a contracting state and a non-contracting state even when
there is no conflict or potential conflict between contracting states one would expect all conventions to fall for consideration and
examination.
Mr Briggs was able to rely on two recent authorities as supporting his submission. The first, a reserved decision of
Hobhouse J, was S & W Berisford plc v New Hampshire Insurance Co [1990] 2 All ER 321, [1990] 2 QB 631. In that case the
effective plaintiff was a New York company and the defendant, although a New Hampshire company, carried on business and was
served at an office in the City of London. The defendant sought a stay, contending that New York was the appropriate forum.
The plaintiff resisted, contending that by virtue of the Act and the conventions the court had no discretion to grant a stay and that
in any event the grounds for granting a stay were not made out. The judge agreed with the plaintiff on both these points. The
argument addressed to us by Intercomfinanz, if correct, would have ensured the defendants success on the first of these points,
but the argument was not put. Thus the judge did not have to rule on it expressly. But the tenor of his judgment strongly suggests
that if he had had to rule on it he would have rejected it.
Such was the inference drawn, in my view rightly, by Potter J in the second case, Arkwright Mutual Insurance Co v
Bryanston Insurance Co Ltd [1990] 2 All ER 335, [1990] 2 QB 649. In those proceedings the plaintiff was a Massachusetts
insurer and the defendants were English reinsurers resisting a claim under policies of reinsurance. Before the English
proceedings began, the reinsurers had issued proceedings against the insurer in New York for a declaration that they were not
liable to the insurer. After issue of the proceedings here the reinsurers asked the court to stay them in the exercise of its discretion
on the grounds of forum non conveniens and lis alibi pendens. The insurer, relying on the 1982 Act and the conventions,
contended that the court no longer had such a discretion to exercise. Counsel for the reinsurers took issue with that proposition
on a number of grounds which are quoted in the judgment of Dillon LJ.
346
The learned judge, in a reserved judgment, rejected the reinsurers submission and upheld the insurers submission, founded
on the decision of Hobhouse J, that, for the English court to retain its former wide discretion in respect of the doctrine of forum
non conveniens would be inconsistent with the convention (see [1990] 2 All ER 335 at 349, [1990] 2 QB 649 at 662). I do not
however think that the judge specifically addressed himself to counsels arguments which I have quoted, which seem to me
powerfully persuasive.
Ladenimors argument is of course strengthened by these two first-instance judgments which, although not binding on us,
are entitled to respect. They have, however, provoked a critical note bearing the very considerable authority of Mr Lawrence
Collins, Forum Non Conveniens and the Brussels Convention (1990) 106 LQR 535. I would for my part adopt his conclusion
(at 538539):

When the European Court comes to consider the application of the Convention to non-Contracting States, it should
seek the answer in treaty interpretation, and ultimately in public international law. The Convention was intended to
regulate jurisdiction as between the Contracting States. Thus the Convention provides that in principle domiciliaries of a
Contracting State should be sued in that State, subject to important and far-reaching exceptions, and not in other
Contracting States. Once a court in a Contracting State has jurisdiction it is entitled, vis--vis other states, to exercise that
jurisdiction and other courts cannot. But the States which were parties to the Convention had no interest in requiring a
Contracting State to exercise a jurisdiction where the competing jurisdiction was in a non-Contracting State. The
Contracting States were setting up an intra-convention mandatory system of jurisdiction. They were not regulating
relations with non-Contracting States. (Mr Collinss emphasis.)

Section 49 of the Act preserves the power of the English court to stay or dismiss any proceedings before it, on the ground of
forum non conveniens or otherwise, where to do so is not inconsistent with the 1968 convention. The ultimate question,
therefore, is whether exercise of the discretionary power here in issue in the present situation (where the only alternative forum is
in a non-contracting state) is inconsistent with the 1968 convention. I conclude that it is not and accordingly accept the argument
of Intercomfinanz on this point.
Since preparing this judgment I have had the advantage of reading in draft the judgment of Dillon LJ, with which I am in
full agreement. Like him, I do not think it necessary to request the Court of Justice to rule on the question of interpretation of the
1968 convention raised in this case to enable this court to give judgment on it.

Preliminary issue raised by Ladenimor decided accordingly.

Solicitors: Frere Cholmeley; Bower Cotton & Bower.

Carolyn Toulmin Barrister.

347
[1991] 4 All ER 348

Re Harrods (Buenos Aires) Ltd (No 2)

CIVIL PROCEDURE

COURT OF APPEAL, CIVIL DIVISION

DILLON, STOCKER AND BINGHAM LJJ
6, 7, 8 FEBRUARY, 13 MARCH 1991

Practice Service out of jurisdiction Action relating to English company Leave English company operating exclusively in
Argentina Minority shareholder of company seeking buy-out order against majority shareholder on basis of unfair prejudice
Whether minority shareholder requiring leave to serve unfair prejudice petition out of jurisdiction RSC Ord 11, r 1 (2)(b)
Companies (Unfair Prejudice Applications) Proceedings Rules 1986, r 4(2).Practice Stay of proceedings Exercise of
discretion Appropriate forum Forum with which action having most real and substantial connection Balance of fairness
and convenience Action relating to English company English company operating exclusively in Argentina Minority
shareholder of company seeking buy-out order against majority shareholder on basis of unfair prejudice All economic and
management considerations connected with Argentina All witnesses and documents in Argentina Buy-out remedy not
available in Argentina Minority shareholder entitled to damages in Argentina for loss caused by majority shareholder deceit or
negligence Whether absence of identical relief in foreign forum preventing plaintiff/petitioner from obtaining substantial justice
in foreign forum Whether English court proper forum to decide affairs of company incorporated in England.

Two Swiss companies, I and L, owned 51% and 49% respectively of the issued share capital of a company incorporated in
England. The companys registered office was in England but its business was carried on and it was managed and controlled
exclusively in Argentina. In 1989 L, the minority shareholder, claimed that the companys affairs were being conducted in a
manner unfairly prejudicial to it and presented a petition under ss 459 and 461 of the Companies Act 1985 seeking orders
directing I, the majority shareholder, to purchase its shares in the company or, alternatively, that the company be wound up
compulsorily under the Insolvency Act 1986. L obtained leave under RSC Ord 11, r 1(1) to serve the petition on I out of the
jurisdiction. I applied for the order giving L such leave and the consequent service of the petition to be set aside and for the
proceedings on the petition to be stayed on the ground that Argentina was the natural forum for the trial of the issues raised in
view of the strong connection the case had with Argentina, as demonstrated by the fact that all the relevant events took place in
Argentina, all the witnesses and documents were located in Argentina and all the evidence would be in Spanish. The judge
dismissed Is application, holding (i) that leave to serve the petition out of the jurisdiction was not required since Ord 11, r 1(2)
(b)a permitted service out of the jurisdiction without leave in petitions under ss 459 and 461 of the 1985 Act, which the court had
power to hear and determine notwithstanding that the person against whom the claim was made was not within the jurisdiction or
that the wrongful act, neglect or default giving rise to 348 the petition did not take place within the jurisdiction, or, alternatively,
the mandatory requirement in r 4(2) b of the Companies (Unfair Prejudice Applications) Proceedings Rules 1986 obliging the
petitioner to serve a s 459 petition on every respondent named in the petition as well as on the company overrode Ord 11, r1(1),
and (ii) that England was the appropriate forum for the trial of the issues because the company was incorporated in England and
the proceedings were by petition in the Companies Court and sought relief under the English companies legislation in respect of
the affairs of an English company and L would not be able to obtain substantial justice in Argentina if the case were tried there
because, under Argentine law, L would not be able to obtain an order for the purchase of its shares by I at a price uplifted to take
account of the loss caused by Is conduct or any other remedy which would fully compensate L for its loss. I appealed,
contending, in respect of the procedural issue, that the requirement of obtaining leave under Ord 11, r 1(1) to serve the petition on
I out of the jurisdiction was not excluded by Ord 11, r 1(2)(b) or r 4(2) of the 1986 rules and, in respect of the substantive issue,
that the discretion exercised by the judge in refusing to stay the English proceedings should be set aside because he had
misdirected himself as to the two-stage test to be applied in forum non conveniens cases.
________________________________________
a Order 11, r 1(2)(b) is set out at p 358 c d, post
b Rule 4(2) provides: In the case of a petition based upon section 459 of the Act, the petitioner shall also, at least 14 days before the return
day, serve a sealed copy of the petition on every respondent named in the petition.

Held (1) On their true construction neither RSC Ord 11, r 1(2)(b) nor r 4(2) of the 1986 rules authorised a petition under s 459
of the 1985 Act to be served out of the jurisdiction without the leave of the court. In order to fall within Ord 11, r 1(2)( b) an
enactment, if it did not use the precise wording in the rule, at least had to indicate on its face that it was expressly contemplating
proceedings against persons who were not within the jurisdiction of the court or where the wrongful act, neglect or default giving
rise to the claim did not take place within the jurisdiction and it was not enough that the enactment, like the Companies Act 1985,
gave a remedy in general cases without any express contemplation of a foreign element. Similarly, there was no express
exclusion of Ord 11, r 1(1) in the 1986 rules and the general words in r 4(2) requiring service of a s 459 petition on every
respondent named in the petition were insufficient warrant for excluding Ord 11, r 1(1), which accordingly applied by virtue of
the express provision in r 2(2) c that the Rules of the Supreme Court and the practice of the High Court were to apply to
proceedings under the 1985 Act. It followed that L had required leave to serve the petition on I out of the jurisdiction and that the
burden lay on L to show that England was clearly the more appropriate forum for the trial of the issues raised in the petition
rather than on I to show that Argentina was more appropriate (see p 359 b to c f to h, p 361 c d and p 365 c d, post).
________________________________________
c Rule 2(2) is set out at p 358 a, post

(2) (Dillon LJ dissenting) Where there was a conflict of jurisdiction between an English court and the courts of another
country, the appropriate forum for the trial of the action had to be decided according to the suitability for the interests of all the
parties and the ends of justice and the court, in making that decision, had to look first at such connecting factors as convenience,
expense, availability of witnesses, governing law, place of residence and place of business and, if they indicated that the case had
its closest and most real connection with the foreign 349 court, the English court would then consider whether or not substantial
justice could be obtained in the foreign forum through local remedies, irrespective of whether those remedies differed from
English remedies. On the facts, the appropriate forum for the trial of the action was Argentina and, having regard to the question
whether the minority shareholder L could obtain justice in Argentina, it was clear that although the Argentine courts had no power
identical to that under ss 459 and 461 of the 1985 Act to order the majority shareholder, I, to purchase Ls shares, the Argentine
courts powers to wind up the company on the equivalent of just and equitable grounds and to award damages for negligent
and/or unlawful handling of the companys business indicated that L could obtain substantial justice in Argentina. Accordingly,
since the judge had made no attempt to weigh the factors connecting the case with Argentina and had misdirected himself
regarding the issue of whether L could obtain substantial justice in Argentina, the court was free to exercise its own discretion and
would grant the stay of proceedings sought by I. The appeal would accordingly be allowed (see p 363 j to p 364 b e to p 365 b, p
366 g to p 367 c g and p 368 a f h to p 369 d, post); Spiliada Maritime Corp v Cansulex Ltd, The Spiliada [1986] 3 All ER 843
and dictim of Lord Goff in de Dampierre v de Dampierre [1987] 2 All ER 1 at 12 applied.

Notes
For service out of the jurisdiction generally, see 37 Halsburys Laws (4th edn) para 171, and for cases on the subject, see 37(2)
Digest (Reissue) 278282, 17911813.
For stay of proceedings on the ground of forum non conveniens, see 37 Halsburys Laws (4th edn) para 444.
For the protection of company members against unfair prejudice, see 7(2) Halsburys Laws (4th edn reissue) paras 1236
1240.
For the Companies Act 1985, s 459, see 8 Halsburys Statutes (4th edn) (1991 reissue) 531.
For the Insolvency Act 1986, see 4 Halsburys Statutes (4th edn) (1987 reissue) 717.
For the Companies (Unfair Prejudice Applications) Proceedings Rules 1986, rr 2, 4, see 3 Halsburys Statutory Instruments
(1991 reissue) 506.

Cases referred to in judgments

Abidin Daver, The [1984] 1 All ER 470, [1984] AC 398, [1984] 2 WLR 196, HL.
de Dampierre v de Dampierre [1987] 2 All ER 1, [1988] AC 92, [1987] 2 WLR 1006, HL.
Ebrahimi v Westbourne Galleries Ltd [1972] 2 All ER 492, [1973] AC 360, [1972] 2 WLR 1289, HL.
Harmer (H R) Ltd, Re [1958] 3 All ER 689, [1959] 1 WLR 62, CA.
Scottish Co-operative Wholesale Society Ltd v Meyer [1958] 3 All ER 66, [1959] AC 324, [1958] 3 WLR 404.
Sim v Robinow (1892) 19 R (Ct of Sess) 665.
Spiliada Maritime Corp v Cansulex Ltd, The Spiliada [1986] 3 All ER 843, [1987] AC 460, [1986] 3 WLR 972, HL.

Cases also cited or referred to in skeleton arguments

Arkwright Mutual Insurance Co v Bryanston Insurance Co Ltd [1990] 2 All ER 335, [1990] 2 QB 649.
350
Berisford (S & W) plc v New Hampshire Insurance Co [1990] 2 All ER 321, [1990] 2 QB 631.
Company, Re a (No 004377 of 1986) [1987] BCLC 94.
Hagen, The [1908] P 189, CA.
Overseas Union Insurance Ltd v New Hampshire Insurance Ltd (1988) Times, 28 September.
Socit du Gaz de Paris v Socit Anonyme de Navigation Les Armateurs Francais 1926 SC (HL) 13.

Interlocutory appeal
Intercomfinanz SA, a Swiss company owning 51% of the issued share capital of Harrods (Buenos Aires) Ltd, a company
incorporated in England, appealed with the leave of Nicholls LJ given on 14 June 1990 from a decision of Harman J ([1991]
BCLC 69) given on 5 April 1990 by which the judge (i) dismissed a summons issued by Intercomfinanz on 20 November 1989
seeking to have the order of Mr Registrar Buckley made on 12 July 1989 giving Ladenimor SA, another Swiss company which
owned the remaining 49% of the shares in the English company, leave to serve a petition brought under ss 459 and 461 of the
Companies Act 1985 and the Insolvency Act 1986 out of the jurisdiction on Intercomfinanz and the consequent service set aside
and to have the petition proceedings stayed on the ground that Argentina was the natural forum for the trial of the issues and (ii)
held that England was the more appropriate forum for the resolution of the dispute between the parties. The facts are set out in
the judgment of Dillon LJ on a preliminary issue raised by Ladenimor in respect of which the Court of Appeal held that it had
jurisdiction to stay, strike out or dismiss the proceedings on the ground of forum non conveniens (see [1991] 4 All ER 334,
[1991] 3 WLR 397).

Alan Boyle for Intercomfinanz.

Michael Briggs for Ladenimor.
 Cur adv vult

13 March 1991. The following judgments were delivered.

DILLON LJ. The background to this appeal, down to the granting of leave to appeal by Nicholls LJ, is set out in my judgment,
handed down on 19 December 1990, on a point argued as a preliminary issue in the appeal (see [1991] 4 All ER 334, [1991] 3
WLR 397). I do not need to repeat it here.
We are now concerned with the substantive issue on the appeal, viz the decision of Harman J that the English court and not
the Argentine court was the appropriate forum for the trial of the issues raised by the petition (see [1991] BCLC 69). This led
him to dismiss Intercomfinanzs summons of 20 November 1989 whereby Intercomfinanz had claimed to have the order of Mr
Registrar Buckley giving leave to serve the petition on Intercomfinanz, and the consequent service, set aside and had claimed also
to have the petition and all proceedings thereon stayed on the ground that the Argentine court was the appropriate forum for the
trial of the issues raised by the petition.
Any question which of two countries courts is the appropriate forum for the trial of proceedings has to be decided according
to Spiliada principles: see Spiliada 351 Maritime Corp v Cansulex Ltd, The Spiliada [1986] 3 All ER 843, [1987] AC 460. The
question is therefore to be decided at the discretion of the judge at first instance, and it is well known that the grounds on which
the appellate court may interfere with the exercise of the judges discretion are very limited. Lord Templeman in Spiliada [1986]
3 All ER 843 at 846847, [1987] AC 460 at 465 stressed that in such a case an appeal should be rare and the appellate court
should be slow to interfere. The question whether this court is entitled to interfere is to my mind the most difficult question on
the appeal.
As I see it, in the context of this particular case what we have to consider first, if there is to be any possibility of this court
interfering with the decision of Harman J, is whether the judge asked himself the right questions. That involves considering (a)
what he should have asked himself and (b) what he actually asked himself, and comparing the two. If he did not ask himself the
right questions, we have to consider what the consequence is.
Before I turn to that, I can dispose of one subsidiary point. In Spiliada [1986] 3 All ER 843 at 856859, [1987] AC 460 at
478482 Lord Goff of Chieveley devotes a section of his speech to considering how the principle of Spiliada is applied in cases
where the court exercises its discretionary power under RSC Ord 11. It so happens that the applicability of Ord 11 to this petition
raises a question of some difficulty to which I shall have to come. Ladenimors solicitors applied to Mr Registrar Buckley for,
and obtained, leave under Ord 11 to serve the petition on Intercomfinanz out of the jurisdiction. But Ladenimor accepts that there
was material non-disclosure to the court on its part on that application. Harman J held that on the true construction of the various
rules in issue the leave sought under Ord 11 was not needed, and so the non-disclosure was immaterial. But he also said that, had
leave been needed, the defects in the affidavit in support of the application under Ord 11 would have led him at least to set aside
the order for service out without more ado on the ground that it had been obtained without proper disclosure. In this court, many
months later, neither side asks us to take such a summary course which would merely lead to a fresh application for leave. Both
parties have put in all their evidence, and both ask us to decide the substantive issue on that evidence.
As I understand the speech of Lord Goff in Spiliada, what the court has to look for is the forum, having competent
jurisdiction, in which the case may be tried more suitably for the interests of all parties and for the ends of justice; see the test of
Lord Kinnear in Sim v Robinow (1892) 19 R (Ct of Sess) 665. To that endif questions of onus and the effect of Ord 11 are for
the moment left to the sidethe court looks first for the appropriate or natural forum, being that with which the action has the
most real and substantial connection (see Spiliada [1986] 3 All ER 843 at 856, [1987] AC 460 at 478).
It is therefore natural to ask what the case or action is, as Harman J did. At this point I have reservations about Harman Js
approach. He seems to have accepted a submission from Mr Briggs for Ladenimor that proceedings within the trust or company
jurisdiction of the Chancery Division were to be distinguished from proceedings in the Commercial Court which were truly
litigation inter partes. Thus Harman J sets out in his judgment that cases in the Commercial Court, to which many international
cases are brought, are all matters of true litigation inter partes (see [1991] BCLC 69 at 76). But he then goes on to contrast
applications by trustees in the Chancery Division for directions in relation to their trust. His conclusion seems to be that only the
English High Court here in London can regulate the affairs of an English trust. In line with this approach and with Mr Briggs
argument, the judge, when he comes to formulate the crucial 352 question, says that the question must always be: how is this
company properly to be regulated? ([1991] BCLC 69 at 77).
In my judgment, however, the petition in the present case bears no resemblance whatsoever to an application to the court by
trustees for directions or guidance. It is litigation inter partes, between Ladenimor and Intercomfinanz, just as much as any action
in the Commercial Court.
In considering the connection of the proceedings with each forum, the court is plainly not limited to factors of convenience
in the preparation for and conduct of a trial. But equally the court must not ignore such factors. It must also consider any issues
of law that arise in the case, and any special factor independent of the parties which may make trial in one forum rather than the
other more appropriate, such as the Cambridgeshire factor in Spiliada.
So far as factors of law are concerned the fundamental point to my mind in this case is that this company has a twofold
position.
On the one hand it was incorporated in England and so is subject to the winding-up jurisdiction of the English court under
the Insolvency Act 1986, and subject to the general jurisdiction of the English court under the Companies Act 1985. It has made
all returns to the Companies Registry here that are required by United Kingdom law, has a registered office here and has regularly
held its annual general meetings here, albeit for formal business only since the shares were acquired by Ladenimor and
Intercomfinanz in 1979. Its accounts continue to be made up in accordance with the requirements of United Kingdom law as to
the payment of dividends; in particular on the advice of English solicitors it abstained from paying dividends out of current
trading profits at a time when it still had accumulated trading losses from past years.
On the other hand, the companys business has always been carried on in Argentina and nowhere else. It has a registered
office in Argentina and complies with all requirements of Argentine law. It is common ground that under art 124 of the Argentine
Company Law the company falls to be considered as a local company formed and registered in Argentina; it is thus subject to the
winding up jurisdiction of the Argentine court. There is nothing surprising in this; if the roles were reversed and the company
had been incorporated in Argentina but had always carried on all its business activities in England, it would have had to have had
an office for service of process here and would have been subject to the winding up jurisdiction of the English court as well as to
that of the Argentine court.
The case put in the petition is that it is alleged by Ladenimor (1) that the affairs of the company have been, are being and for
as long as the same remain under the control of a Mr Atilio Gibertoni (who, it is alleged, beneficially owns and controls
Intercomfinanz) will be conducted in a manner which is unfairly prejudicial to the interests of Ladenimor and further or
alternatively (2) that it is just and equitable that the company should be wound up. The matters of fact relied on in support of that
case are almost entirely concerned with the management of the company in Argentina, and with what has happened in Argentina.
It is said, for instance, that under Mr Gibertonis control and by his procurement the following matters took place.
(i) The company entered into the business of cattle breeding in Argentina. The herds owned by the company have been
mixed with the herds owned by other Argentine companies which Mr Gibertoni controls, and all calves born to the mixed herds
have been attributed to those other Argentine companies to the exclusion of the company. Thus the companys share of the
profits of the cattle-breeding has been diverted to Mr Gibertonis other companies.
353
 (ii) From 1984 to the present time the company has made loans to Argentine companies owned or controlled by Mr
Gibertoni which (a) were not made for the benefit of the company and detracted from the companys ability to develop its
primary department store business or (b) fell short of the best commercial investment of any capital surplus to the companys
working requirements then reasonably obtainable within Argentina and (c) were in several cases made in favour of companies
with deteriorating balance sheets representing a risk of default.
(iii) The company in October 1983 and again in 1987 acquired, from Argentine companies owned or controlled by Mr
Gibertoni and at vastly excessive prices, shares constituting a minority interest in another Argentine company, Timbo SA, which
was in the majority ownership and control of Mr Gibertoni.
(iv) When it was decided that because the company could not, under United Kingdom law, lawfully pay dividends out of its
trading profits, loans should be made to their shareholders in proportion to their shareholdings, the amounts attributable to
Ladenimors shares were not paid to Ladenimor but, it would seem, to a bank account in Lugano which it is said was under the
control of Mr Gibertoni.
It is also said that the Miserocchi family, who are Italian and control Ladenimor, have been excluded by Intercomfinanz/Mr
Gibertoni from all participation in the management of the company.
It follows that all contemporary documents relating to the matters which will have to be investigated at the trial of the issues
raised in the petition will have been written in Spanish, or possibly, in the case of correspondence with the Miserocchis, in Italian
and will have to be translated into English if the trial is in England. Moreover, most of the witnesses will be Spanish-speaking
people who do not know English and will have to give evidence through interpreters if the trial is in England. That would
necessarily make it more difficult for a judge to assess the truthfulness and honesty of witnesses. Mr Briggs rightly pointed out
that the extent to which oral evidence would be needed at the trial would depend on how far it was possible for the parties to
agree the facts after exchange of witness statements. But he conceded that if the trial of the petition took place in England it
would be in his words, a pretty ghastly trial.
There is a further minor factor that, as I understand the position, there have been other proceedings launched by Ladenimor
or the Miserocchi family in relation to other Argentine companies, in which allegations similar to those raised in the petition have
been made.
Mr Briggs urges that the relationship between the shareholders in the company is governed by the memorandum and articles
of association which are governed by English law. But the allegations in the petition do not depend on the construction of the
memorandum and articles. He also seeks to place some reliance on the fact that when Intercomfinanz and Ladenimor bought the
share capital of the company in 1979, they bought from an English bank, Grindley Brandts Ltd, under a contract which is
governed by English law. Nothing turns, however, on their obligations qua Grindley Brandts. Though they of course knew that
they were buying the share capital of a company incorporated in England, they also knew that it was a company whose whole
business was in Argentina and which was subject to Argentine law.
Harman J plainly appreciated that the factual issues in dispute favoured trial in Argentina (see [1991] BCLC 69 at 77). He
commented that there is no doubt that all the principal witnesses are Argentinianan overstatement in that the 354 Miserocchis
are Italian. But in considering which was the more appropriate forum he seems to have put the factual issues to one side, and
concentrated only on the fact that the remedies sought by Ladenimor by the petition were remedies made available by English
statutes in respect of a company incorporated in England.
Thus he says, putting what he saw as the crucial question (at 77):

None the less, as it seems to me, the question must always be: how is this company properly to be regulated?

He then goes on:

When one is looking at a company incorporated in England, which has its life and being only by virtue of the act of the
English law creating this artificial person, it is to my mind extremely difficult to see that it can be appropriate to hold that
the forum appropriate to decide that sort of matter is any forum other than the forum of the English court. It is, as Mr
Briggs submitted, in my view blindingly obvious what the answer to the question is once the question is posed.
(Harman Js emphasis.)

With every respect to the judge, the answer is only blindingly obvious to him because of the premises which are built into
the way he has posed his question. These are in part, as I read the judgment as a whole, his analogy of an application to the
English court for directions in respect of an English trust. But more seriously in my judgment he has failed to keep in mind at
this crucial stage in his judgment that this company is by Argentine law to be considered as a local, Argentinian company. I do
not regard it as at all blindingly obvious that relief for the dishonest management of an Argentinian company in the Argentine
should be granted by a court other than the Argentinian court. That illustrates that the question formulated may by limiting the
premises on which it is formulated dictate the answer. That is in my respectful view what the judge has done here, instead of
concentrating on the question as put in Spiliada itself.
One can test the matter further by an analogy. Let it be assumed, contrary to the fact, that the only relief claimed in the
petition is a compulsory winding-up order on just and equitable grounds. (I fully appreciate that that is very far from being
Ladenimors preferred alternative, since a winding-up order would not, without subsequent misfeasance proceedings, compensate
Ladenimor for the wrongs which, if Ladenimor is right, it has suffered from Mr Gibertonis management of the company.) The
evidence of Argentine law before this court is scanty but not disputed. It consists of an affidavit by a Dr Bomchil, a partner in a
Buenos Aires law firm who has been a practising lawyer in Argentina since 1973 and is one of the three directors of the company,
and an affidavit by a Mr Seitun, who was enrolled as an advocate in Argentina in 1985 and has for several years advised Mr
Gibertoni and a number of the companies referred to in the petition.
It appears from their evidence that under art 94(4) of the Argentine Company Law, a company can be wound up by the
Argentine court if the fulfilment of the corporate object is impossible. Dr Bomchil states that this applies in companies and
partnerships where disagreement between the members on how the entitys business should be conducted has turned the
fulfilment of its object into an impossible achievement. He continues:

In the case of companies there have been several cases in which the courts have considered the affectio societatis
(the willingness of the shareholders 355 to do business together) to be an essential element of the companys continued
existence, particularly in companies with small numbers of shareholders, and consequently have ruled that a lack of the
same justifies an order winding up the Company.

That approach seems to bear resemblances to the position on just and equitable winding-up petitions which the English
courts reached by the decision of the House of Lords in Ebrahimi v Westbourne Galleries Ltd [1972] 2 All ER 492, [1973] AC
360 after an earlier divergence of judicial opinion. Since Ladenimor has not troubled to put in any relevant evidence of Argentine
law, I do not think that we can at this stage reject the evidence of Dr Bomchil and Mr Seitun because they have not spelt out in
detail how the jurisprudence in Argentina has developed on a topic which the English courts, before Westbourne Galleries, found
difficult.
Accordingly, accepting their uncontradicated evidence for present purposes, I would have no doubt that, if the only relief
sought by the petitioner was a winding up of the company on just and equitable grounds, the Argentine court would be the court
with which the action/dispute had the most real and substantial connection, and the Argentine court would be the court in which
the case would be tried more suitably for the interests of all parties and for the ends of justice. This is perhaps underlined by the
fact that the evidence raises a doubt whether a winding-up order made against the company by the English court would be
recognised by the Argentine courts; as the assets are in Argentina a winding-up order made by the English court would be of very
limited use if it was not recognised in Argentina.
The crucial factor in the present appeal is therefore that the primary relief which Ladenimor seeks is the order under ss 459
and 461 of the Companies Act 1985 that Intercomfinanz purchase Ladenimors shares in the company at a price representing 49%
of the value of the company and upon the basis that there be added back to the value of the company such loss as may be found to
have been caused to it by the matters complained of in the petition.
It is clear from Mr Seituns affidavit that a compulsory acquisition of Ladenimors shares such as that sought in the petition
is not available in Argentina. What is available in Argentina is, as I understand the evidence, firstly, a winding-up order, which
would lead to the realisation of the remaining assets of the company and distribution of the net proceeds among the shareholders
and, secondly and additionally, a claim for damages under art 54 of the Argentine Company Law.
In Mr Seituns translation, art 54 provides as follows:

Article 54: The partners or controlling entities who fraudulently or with negligence cause damages to a company are
jointly and severally liable to repair such damages, and cannot pretend to compensate with the profit that they may have
generated in other business. The partner or controlling entity that applies funds of the company to his own use or business
or that of third parties must bring to the company any resulting profit, but he will bear any loss. Any Company activity that
hiddenly procures objectives foreign to the company, that is just a way to violate the law, the public order or to frustrate
rights of third parties, will be directly attributable to the members or controlling parties who made it possible, who will
respond jointly and severally and without limitation for damages caused.

Dr Bomchil says, and it has not been challenged, in relation to art 54:
356

Any shareholder may sue other shareholders based on this provision. In effect Article 54 makes the controlling
shareholders liable for a negligent or unlawful handling of the companys business.

We do not know how the Argentine jurisprudence has developed in relation to art 54, and Mr Briggs submits that it is very
far from clear that Ladenimor would be able to recover damages against Intercomfinanz under art 54 in respect of Ladenimors
losses occasioned by the matters alleged in the petition, assuming them to be established. He says additionally that art 54 could
not compensate Ladenimor for the loss it would suffer if as a result of the matters complained of in the petition there is a
winding-up order and a forced sale by the liquidator of the companys remaining assets. As I see it, any sale by a liquidator of the
companys main asset, the department store, would be likely to be a sale of it as a going concern, unless a higher price could be
achieved by a sale for redevelopment, and not a sale on a break up. But a sale by the liquidator of the department store as a going
concern might yet be a forced sale in that the liquidator might not be selling at the best time; one cannot usefully speculate.
Before considering how the claim for relief under s 459 of the Companies Act 1985, and the difference in that field between
English and Argentinian relief, affects the application in this case of Spiliada principles I find it appropriate to consider the
position under Ord 11, since in Spiliada [1986] 3 All ER 843 at 858, [1987] AC 460 at 480 Lord Goff stated that in the Ord 11
cases the burden of proof rests on the plaintiff whereas in the forum non conveniens cases that burden rests on the defendant.
Under the Companies Act 1948, the same statute contained both the provisions for the compulsory winding up of a company
on just and equitable grounds on the petition of a contributory, and, in s 210, a provision rather more limited in its scope than the
present s 459 for relief against oppression. Applications under either head were governed by the same set of rules, the
Companies (Winding Up) Rules 1949, SI 1949/330. Those rules required the petition to be served on the company, but do not
appear to have required service on anyone else. The practice which developedprobably inevitably in view of the way s 210
was draftedwas that a petitioner who wanted his shares to be bought from him under s 210 by, eg an oppressive majority,
would ask in the one petition in the alternative for a purchase order under s 210 or a winding-up order on just and equitable
grounds.
Section 210 was replaced by provisions in the Companies Act 1980 in the same terms as those now to be found in ss 459 and
461 of the Companies Act 1985. But while those provisions, relating to what are for convenience called unfair prejudice
applications remain in a Companies Act, the 1985 Act, the statutory provisions for the winding up of companies, including the
winding up of a solvent company on a contributorys petition on just and equitable grounds, are now to be found in a different
statute, the Insolvency Act 1986. The consequence is that where, as here, a petitioner combines in one petition an application for
relief for unfair prejudice under s 459 and an application for a winding-up order on just and equitable grounds, there are two
different sets of rules applicable to the alternative applications.
These are the Companies (Unfair Prejudice Applications) Proceedings Rules 1986, SI 1986/2000, and the Insolvency Rules
1986, SI 1986/1925.
Both these sets of rules were made under the same statutory provision, namely s 411 of the Insolvency Act 1986 (as to which
see s 461(6) of the 1985 Act as amended) by the same rule-making authority, namely the Lord Chancellor with 357 the
concurrence of the Secretary of State after consulting the Insolvency Rules Committee referred to in s 413 of the Insolvency Act
1986. They were made within the same month, though not on the same day, and came into operation/force on the same date, 29
December 1986. But it is far from clear that they have the same effect in relation to Ord 11.
In the Insolvency Rules 1986, which cover a very wide range of matters in detail, it is expressly provided in r 12.12 that Ord
11 and the corresponding County Court Rules do not apply in insolvency proceedings. Insolvency proceedings are defined in r
13.7 as meaning any proceedings under the 1986 Act or the Insolvency Rules. In lieu it is provided by rule 12.12(3) that:

Where for the purposes of insolvency proceedings any process or order of the court, or other document, is required to
be served on a person who is not in England and Wales, the court may order service to be effected within such time, on
such person, at such place and in such manner as it thinks fit

By contrast, in the Unfair Prejudice Applications Rules 1986, which are a very short set of rules, there is no reference to Ord
11. But it is provided in r 2(2) that:

Except so far as inconsistent with the Act and these Rules, the Rules of the Supreme Court and the practice of the High
Court apply to proceedings under Part XVII of the Act in the High Court

with an appropriate alternative provision in relation to county courts. The Act here is the Companies Act 1985 and Pt XVII of it
includes ss 459 and 461.
Harman J held that Ord 11 nonetheless did not apply to an application under ss 459 and 461. He reached that conclusion for
two reasons.
One was that he held that the position was covered by Ord 11, r 1(2)(b) and service out of the jurisdiction without leave of
the court was thereby permitted. Rule 1(2)(b) provides that:
 (2) Service of a writ out of the jurisdiction is permissible without the leave of the Court provided that each claim made
by the writ is (b) a claim which by virtue of any other enactment [sc other than the Civil Jurisdiction and Judgments Act
1982] the High Court has power to hear and determine notwithstanding that the person against whom the claim is made is
not within the jurisdiction of the Court or that the wrongful act, neglect or default giving rise to the claim did not take place
within its jurisdiction.

As to that, we have had the advantage, which the judge did not have, of research by counsel into the antecedents of the rule.
It was first introduced in, for practical purposes, its present form, by para 5 of the Rules of the Supreme Court (No 2) Order
1963, SI 1963/1989. It seems plain that the reason for its introduction was the enactment of the Civil Aviation (Eurocontrol) Act
1962. That Act was enacted to give effect to an international convention concluded at Brussels (the International Convention
relating to Co-operation for the Safety of Air Navigation 1960) and s 7(3) provides as follows:

A court in any part of the United Kingdom shall have jurisdiction(a) to hear and determine a claim for charges
payable to the Minister by virtue of regulations under section four of this Act, notwithstanding that the person against
whom the claim is made is not resident within the jurisdiction of the court; (b) to hear and determine a claim against the
Organisation [the European Organisation for the Safety of Air Navigation] for damages in 358 respect of any wrongful act,
neglect or default, notwithstanding that that act, neglect or default did not take place within the jurisdiction of the court or
that the Organisation is not present within the jurisdiction of the court: Provided that a court shall not have jurisdiction by
virtue of paragraph (b) of this subsection in respect of damage or injury sustained wholly within or over a country to which
this Act does not extend.

That is the wording picked up in Ord 11, r 1(2)(b).

It appears, however, that r 1(2)(b) may have been intended to have a wider scope than only applying where its actual
wording has been used in a statute, as in s 7(3) of the 1962 Act. There are some Acts, such as the Carriage by Air Act 1961 and
the Carriage of Goods by Road Act 1965, which were enacted to make the terms of certain international conventions to which the
United Kingdom had acceded part of United Kingdom law. Actions brought under these Acts were at one time listed in Ord 11, r
1(1) as among the cases in which leave to serve out of the jurisdiction could be obtained under Ord 11. But they are no longer so
listed. It may have been thought that as the jurisdiction provisions of the conventions, laying down in what courts proceedings
can be brought, are now part of the statutes and have force in this country by virtue of the statutes, leave under Ord 11 is not
necessary because of Ord 11, r 1(2)(b) and so these statutes should not be listed in Ord 11, r 1(1).
But in my judgment to be within Ord 11, r 1(2)(b) an enactment must, if it does not use the precise wording in the rule, at
least indicate on its face that it is expressly contemplating proceedings against persons who are not within the jurisdiction of the
court or where the wrongful act, neglect or default giving rise to the claim did not take place within the jurisdiction. It is not
enough, in my judgment, that the enactment, like the Companies Act 1985, gives a remedy in general casesagainst other
members of the companywithout any express contemplation of a foreign element. Indeed if the judges reasoning on this
point were right it would seem that any proceedings to claim an injunction could be brought, without leave under Ord 11, against
a person who is not within the jurisdiction of the court and could proceed to trial without any such leave because under an
enactment, s 37 of the Supreme Court Act 1981, the High Court has power by order (whether interlocutory or final) to grant an
injunction in all cases in which it appears to the court to be just and convenient to do so.
Harman Js alternative reason for holding that an application under Ord 11 was not necessary where it was desired to serve a
petition under s 459 on a person who was not within the jurisdiction of the court was founded on r 2(2) of the Unfair Prejudice
Applications Rules 1986. He considered that it was inconsistent with the Companies Act 1985 and those rules that Ord 11 should
apply to such a petition. He considered in particular that service was comprehensively dealt with by r 4 of the Unfair Prejudice
Applications Rules 1986, which required service of a petition under s 459 on every respondent named in the petition as well as on
the company. He considered that it would be curious if the rule mandatorily obliged the petitioner to serve respondents named in
the petition, but yet the petitioner had to get leave to effect such service; he concluded that there would be an inevitable conflict
between the two rules.
I am afraid that I do not agree. It is a commonplace that a plaintiff has to serve all the defendants named in his proceedings
but if defendants are not within the jurisdiction of this court he has to get leave under Ord 11 to do so, so that it can be tested
whether the foreigner should be brought before this court. I do not therefore see any inconsistency or inevitable conflict.
359
I do not know why it was thought fit to disapply Ord 11 in the Insolvency Rules 1986 and not, at any rate in plain terms, in
the Unfair Prejudice Applications Rules 1986. Indeed I do not know if anyone ever gave conscious attention to that question.
But the provision in r 2(2) of those rules and the practice of the High Court applicable to proceedings under Pt XVII of the
Companies Act 1985 in the High Court has the effect, in my judgment, that Ladenimor needed to obtain leave under Ord 11
before it could serve the petition on Intercomfinanz in so far as the petition claimed relief against Intercomfinanz under ss 459
and 461. Consequently the burden of showing that relief should be sought here rather than in Argentina rests on Ladenimor.
Against this background, somewhat lengthily set out, my view is that Harman J misdirected himself as to the nature of these
English proceedings by petition in the Companies Court and partly for that reason asked himself the wrong question at the crucial
stage in his judgment. That led him directly to the answer he gave to the summons before him. He also misdirected himself in
relation to Ord 11, but since he did not decide the case on onus that was not material to his conclusion.
My own view is that in all the circumstances, and even in the light of the claim for relief under ss 459 and 461, the Argentine
court is the court with which the dispute has the most real and substantial connection. Even so, it remains to consider whether
Ladenimor can nonetheless show that the loss of the procedural benefit in this country of the availability as a form of relief of a
purchase order under ss 459 and 461 is so serious that leave to proceed in this country should be given and the service under Ord
11 should be allowed to stand because in the absence of that form of relief substantial justice will not be done in the appropriate
forum, viz Argentina: see Spiliada [1986] 3 All ER 843 at 859, [1987] AC 460 at 482.
Protecting ordinary shareholders against aggression by the majority has always been a problem in company law. See the
turgid history of the minority shareholders action, apart from the problems of a just and equitable winding-up petition before
Ebrahimi v Westbourne Galleries Ltd [1972] 2 All ER 492, [1973] AC 360. Section 210 of the Companies Act 1948 was
therefore when introduced a significant step forward. But in England, as opposed to Scotland, difficulty was experienced in
applying the section. Jenkins LJ recorded in Re H R Harmer Ltd [1958] 3 All ER 689 at 698, [1959] 1 WLR 62 at 75 that there
was no English case before Harmer on which an order had been made under the section. He then referred to Scottish decisions,
including a decision in the House of Lords in Scottish Co-operative Wholesale Society Ltd v Meyer [1958] 3 All ER 66, [1959]
AC 324, which had pointed the way forward. Even so, however, for several years before the enactment of the Companies Act
1980 which introduced the provisions, now to be found in ss 459 and 461 of the 1985 Act, it was generally known that more
extensive provisions than s 210 had been introduced by legislation in other English-speaking jurisdictions where the company
law had been derived from English company law and, ultimately, from the Companies Act 1862.
I therefore regard ss 459 and 461 as very important and desirable safeguards for shareholders against a very real wrong.
In Spiliada [1986] 3 All ER 843 at 860, [1987] AC 460 at 483 Lord Goff suggested that in some cases it may be possible to
reconcile the procedural advantages available to one party under one of the competing jurisdictions with the closer ties between
the case and the other jurisdiction by imposing conditions on a grant of leave to bring proceedings here or on a stay of
proceedings here. In 360 the present case, however, I cannot see any possible reconciliation; conditions imposed by the English
court cannot give the Argentine court jurisdiction to make a purchase order against Intercomfinanz of Ladenimors shares.
It is, therefore, a question of weighing the extent by which the remedy for oppression available in England under s 459 is
better than the combined remedies of a winding-up order and an award of damages under Argentine law against the very close
ties between the case and Argentina and the huge advantages of having the trial in Argentina. I personally regard the remedy
under s 459 as significantly preferable to the combination of remedies in Argentina. Indeed, it was because the remedies
previously available in England, which would have included a combination of a winding-up order and subsequent misfeasance
proceedings in the liquidation, were unsatisfactory that the predecessor of ss 459 and 461 was enacted in the Companies Act
1980. I therefore personally find the balancing exercise difficult. I could not say that the conclusion the judge reachedby
whatever routewas a conclusion obviously wrong.
Is the result that Ladenimor has failed to discharge the onus on it in an Ord 11 case of showing not merely that England is
the appropriate forum for the trial but that this is clearly so? (See Spiliada [1986] 3 All ER 843 at 858, [1987] AC 460 at 481.).
Or is the result that for this court to decide the balancing exercise in favour of Argentina would simply be for this court to form a
different view of the weight to be given to the factors which the judge had in mind and so would not be a permissible course for
an appellate court? (See Spiliada [1986] 3 All ER 843 at 861, [1987] AC 460 at 486.)
After some hesitation, I have formed the view that the latter is the correct assessment of the position, and that, though I
disagree with the route by which the judge reached his conclusion, this court cannot interfere with that conclusion.
Accordingly, I would dismiss this appeal.

STOCKER LJ. I have had the benefit of reading in draft the judgments of Dillon and Bingham LJJ. They reach different
conclusions, although in agreement that in some respects the learned judge seems to have incorrectly applied the principles
enunciated in the House of Lords in Spiliada Maritime Corp v Cansulex Ltd, The Spiliada [1986] 3 All ER 843, [1987] AC 460.
Both are in agreement with regard to the construction of RSC Ord 11, r 1(2)(b) and of the Insolvency Rules 1986, SI 1986/1925,
and the Companies (Unfair Prejudice Applications) Proceedings Rules 1986, SI 1986/2000, and I do not propose in this judgment
to add any comment of my own on these matters, save to say that I agree with their views.
I therefore confine this judgment to the question whether or not the judge correctly applied the principles of Spiliada to the
facts of this case, and if he did not whether this court is entitled to interfere with the judges exercise of his discretion. It seems to
me that it was mainly upon the resolution of the latter question that Dillon and Bingham LJJ reached different conclusions as to
the outcome of this appeal.
The basic principle enunciated by Lord Goff of Chieveley in Spiliada [1986] 3 All ER 843 at 854, [1987] AC 460 at 476
reads:

In my opinion, having regard to the authorities (including in particular the Scottish authorities), the law can at present
be summarised as follows. (a) The basic principle is that a stay will only be granted on the ground of forum non
conveniens where the court is satisfied that there is some other 361 available forum, having competent jurisdiction, which
is the appropriate forum for the trial of the action, ie in which the case may be tried more suitably for the interests of all the
parties and the ends of justice.

As to the proper method by which a court should apply this basic principle in cases of stay of proceedings, Lord Goff cites
Lord Keith of Kinkel in The Abidin Daver [1984] 1 All ER 470 at 479, [1984] AC 398 at 415:

the natural forum as being that with which the action had the most real and substantial connection.

(See [1986] 3 All ER 843 at 856, [1987] AC 460 at 478).

Lord Goff continued:

So it is for connecting factors in this sense that the court must first look; and these will include not only factors
affecting convenience or expense (such as availability of witnesses), but also other factors such as the law governing the
relevant transaction and the places where the parties respectively reside or carry on business.

And he also said:

If however the court concludes at that stage that there is some other available forum which prima facie is clearly more
appropriate for the trial of the action, it will ordinarily grant a stay unless there are circumstances by reason of which
justice requires that a stay should nevertheless not be granted. In this inquiry, the court will consider all the circumstances
of the case, including circumstances which go beyond those taken into account when considering connecting factors with
other jurisdictions. One such factor can be the fact, if established objectively by cogent evidence, that the plaintiff will not
obtain justice in the foreign jurisdiction

These are principles of general application.

The questions, as it seems to me, which arise on this appeal are: (i) did the judge correctly apply these principles in reaching
his conclusion; (ii) if he did not, was his discretion correctly exercised nonetheless; (iii) if it was not, is this court entitled to
substitute its own discretion for that of the judge; and (iv) if so, what is the consequence of the exercise of that discretion by this
court?
The first question involves examination of the approach adopted by the judge. He cites Lord Goffs dictum already cited
that the natural forum is that with which the action had the most real and substantial connection, and his further statement it is
for connecting factors that the court must first look (see [1991] BCLC 69 at 76). Thus far, it would appear that the judge had
the Spiliada approach to the problem in mind. However, he does not then proceed to consider the connecting factors. In fact, he
goes on to draw a distinction between the type of action with which the Spiliada case was concerned and non-adversarial
proceedings in the Chancery Division, and seems to have found that different principles may be appropriate in such
circumstances, for he says ([1991] BCLC 69 at 76):

Here in this present case, again, one has a matter which is very far from the formulations adopted by Lord Goff.

And he continues:

Here one has an application by a member of an English company, pursuant to an express right given by an English
statute, in respect of a 362 matter where the English law gives a particular remedy by s 461 of the 1985 Act as a matter of
discretion, enabling it to effect what Mr. Briggs rather neatly described as corporate divorce. The order made requires a
buy-out by one side of the other, and it may be by the petitioner of the respondent, or by the respondent of the petitioner, or
it may in many cases be by the company of the petitioner. That will alter the future conduct of the affairs of the company,
which will affect many people other than the two major protagonists in their future rights and entitlements. All such
 matters are plainly matters where the English law applies to the English artificial entity which has been created. None of
that has much resemblance to a lis inter partes in the Commercial Court.

He has not at that stage considered the connecting factors in deciding what is the most appropriate forum, but having posed
this question to himself, answers it by reference to the question What is this action?, and he answers his question as follows
([1991] BCLC 69 at 77):

I have, therefore, to ask: what is the appropriate forum for the trial of this action? To answer that question I have to
pose another: what is this action? This action is a petition, in my judgment, for relief against the conduct of the companys
business in a manner unfairly prejudicial to some part at least of its members, including the petitioner. The court will hear
a whole series of instances of things that have been done, acts that have been committed, and it will have to decide whether
the allegation that this or that was done is true or false. But in the end what the court, in my judgment, has to do in these
matters is reach an overall conclusion: has the petitioner suffered by reason of the conduct of the companys affairs in such
a manner as to be unfairly prejudicial to him? That is a general conclusion, but it is the essential conclusion and the
foundation for the jurisdiction. (Harman Js emphasis.)

This answer seems to me to beg the question, and I agree with the comment of Bingham LJ that the question the judge posed
to himself cannot properly be answered by reference to the relief claimed. This seems to be an error compounded by the fact that
I cannot agree that the proceedings with which this court is concerned are of the non-adversarial type which the judge suggests
they are. The whole issues which the court of trial will have to resolve turn upon the resolution of disputed issues of fact
requiring lengthy and complicated investigation of these facts. The issue before the parties, so far as the buy-out relief under ss
459 and 461 of the Companies Act 1985 is concerned is, at least in this case, essentially adversarial, and the Spiliada principles
are very relevant and the starting point ought to have been consideration of the connecting factors in order to ascertain the most
appropriate forum. The judge then makes a short, if not cursory, reference to the fact that the issues before the court at trial will
involve investigation of a whole series of acts committed in Argentina, but does not otherwise at this stage analyse what will be
involved in such an investigation (see [1991] BCLC 69 at 77). Indeed, he seems to discount the difficulties involved in this
process. He then poses to himself the question: how is this company properly to be regulated?, a question which seems to me
to pre-empt the conclusion, having regard to the judges general approach to the problem. He answers the question as follows
([1991] BCLC 69 at 7778):

When one is looking at a company incorporated in England, which has its life and being only by virtue of the act of the
English law creating this 363 artificial person, it is to my mind extremely difficult to see that it can be appropriate to hold
that the forum appropriate to decide that sort of matter is any forum other than the forum of the English court. It is, as
Mr Briggs submitted, in my view blindingly obvious what the answer to the question is once the question is posed
when I am asked to stay a petition and drive from the English seat of justice a person entitled by English statute to a
remedy which it is conceded is not available anywhere else, it is impossible, that being a relationship governed by English
law, for one to come to a conclusion that another forum will be the better or the more appropriate forum.

In my view, the approach of the learned judge with regard to the first stage laid down by Lord Goff in Spiliada was seriously
flawed.
I will not set out in detail the multifarious issues which will arise, and which point to a very strong connection with
Argentina. They appear from the terms of the petition, which has been set out in the judgment of Dillon LJ. All the witnesses
will have to give their evidence in Spanish. All the documents and relevant books of account, not only of this company, but other
companies the consideration of which may be involved, are in Argentina. The evidence of the documents will require them to be
translated. The relevant events all took place in Argentina. The difficulties of a trial in this country are such that it is not easy to
see how such a trial is to be conducted. At the very least, it will present a formidable task for a trial judge.
For these reasons, I would, without hesitation, reach the conclusion that at the end of the first stage of Spiliada the
appropriate forum would be Argentina. At this point the second stage of Spiliada fell to be considered, that is to say that even if
the connecting factors indicate that the appropriate forum would be Argentina, if there are circumstances by reason of which
justice requires that a stay should nevertheless not be grantedie that it can be established by cogent evidence that the plaintiff
will not obtain justice in a foreign jurisdictionthen a stay should not be granted. This is an overriding consideration, so that
even if the judge is in error with regard to the appropriate forum, he will nevertheless have reached the correct conclusion in the
exercise of his discretion if he made a reasonable appraisal of the factors and drew a conclusion from that appraisal which could
properly be supported. The judge did not specifically consider this aspect of the matter as the second stage of the Spiliada test.
He expressed his conclusion in these terms ([1991] BCLC 69 at 79):

The result of that would be that the petitioner could not obtain, according to the undoubted and uncontroverted
evidence before me, the remedy which it primarily seeks, the corporate divorce or buy-out. It could, perhaps, obtain a
winding up on grounds that seem not at all dissimilar to a just and equitable winding up, but the petition is quite plainly
aimed, and Mr Briggs asserted justifiably that it was, primarily at obtaining a buy-out on the proper basis of valuation,
giving the petitioner all the value which it was entitled to. That, in Argentina, cannot be obtained. That, by English
standards applying to this English company, is a right that Parliament has granted. That right I would be defeating if I were
to grant a stay in this case.

In my view the proper test is whether or not the petitioner can obtain justice in Argentina. There is no requirement that he
should be able to obtain the identical relief. Lord Goff said in de Dampierre v de Dampierre [1987] 2 All ER 1 at 12, [1988] AC
92 at 110:
364

I find it impossible to conclude that, objectively speaking, justice would not be done if the wife was compelled to
pursue her remedy for financial provision under such a regime in the courts of a country which provide, most plainly, the
natural forum for the resolution of this matrimonial dispute.

It is true that the Argentine courts cannot make a buy-out order under s 459. This is not, in my view, decisive of the matter
as the learned judge considered that it was. The judge did not consider whether the remedydamageswas such as to provide
the petitioner with substantial justice, even though the cause of action by which this was to be obtained differed from the
statutory provision available in this country. The Argentinian courts can make a winding-up order on the equivalent of a just and
equitable ground, and such an order might be advantageous to the petitioner since a winding-up order obtained in this country
might not be recognised in Argentina. Argentinian law with regard to the scope of the remedy in damages was uncontroverted for
the purpose of this application before the court, and would seem to be apt to include compensation for any loss sustained through
the fact of winding up, and consequent sale of the assets or of the business as a going concern if this was due to the conduct of the
majority shareholder. It was not, in my mind, established that the remedy available in Argentina was significantly of less value
than the remedy available in this country under s 459.
 Thus, the question for this court is whether or not the discretion exercised by the judge should be set aside on established
grounds, since if it cannot this court cannot interfere or exercise its own discretion afresh. The judge did not correctly apply the
Spiliada test in order to ascertain the appropriate forum, and in my view, in failing to do so, he reached a manifestly wrong
conclusion. He did not apply the correct test as to whether or not substantial justice could be obtained in Argentina. These
matters seem to me to be so fundamental to the proper exercise of discretion that this court is entitled to set that discretion aside
and exercise its own discretion. In the exercise of that discretion, I would, for my part, grant a stay. I do so for the reasons I have
given, and for those expressed by Bingham LJ.
Accordingly, I would allow this appeal.

BINGHAM LJ. On the construction of RSC Ord 11, r 1(2)(b), the Insolvency Rules 1986, SI 1986/1925, and the Companies
(Unfair Prejudice Applications) Proceedings Rules 1986, SI 1986/2000, I am in complete agreement with the judgment of Dillon
LJ, which I have had the benefit of reading in draft. Although we are differing from the judge, there is nothing I can usefully add.
It follows that our approach to onus must also differ from that of the judge. But it is common ground that the outcome of this
appeal cannot turn on fine questions of onus. The judge did not rule against Intercomfinanz because it had failed to discharge the
onus which (as he held) lay on it, but because the greater appropriateness of the English forum was in his judgment blindingly
obvious (see [1991] BCLC 69 at 77). The substantial issue on the appeal is whether that judgment is shown to be wrong. I am
therefore content to approach the case as if the burden lay on Intercomfinanz, although in truth it lay on Ladenimor.
Before applying the test in Spiliada Maritime Corp v Cansulex Ltd, The Spiliada [1986] 3 All ER 843, [1987] AC 460, the
learned judge posed the question: What is this action? ([1991] BCLC 69 at 77.) That was a very pertinent question. One
cannot decide where a matter should be most appropriately and justly tried without being clear what is to be tried. But I do not
think the question should be 365 answered simply by reference to the relief claimed, since in an English action the relief claimed
will almost inevitably be framed in English terms, particularly where it is statutory. An English pleader will not claim triple
damages or dommage-intrt, appropriate as such relief may be elsewhere. Thus when the judge answered the question by
quoting part of the language of s 459 of the Companies Act 1985 he was unconsciously building in a bias towards the choice of
an English forum.
I regard this case as one in which the minority shareholder complains that the majority shareholder, through Mr Gibertoni,
has abused its power as majority shareholder and caused the company to pursue objects outside its corporate objects, to lend
money to and invest in companies connected with Mr Gibertoni, to divert money which should have been advanced to the
minority shareholder and to deny board representation to the minority shareholder, in each case to the prejudice of the company
and the minority shareholder. The minority shareholder seeks an order that the majority shareholder buy its shares at a price
uplifted to make good the depreciation which the majority shareholders conduct has caused to the actual value of the shares.
Thus the minority shareholder seeks severance of its relations with the majority shareholder and the company with full
compensation for the majority shareholders wrongdoing. Alternatively, the minority shareholder seeks an order that the
company be wound up. This is all relief which the English court can give if the minority shareholder makes good its complaints.
It is no doubt true, as the learned judge pointed out, that the Spiliada test must be applied having due regard to the nature of
the proceedings in question, and in the Spiliada case itself the House of Lords may well have had ordinary adversarial litigation
primarily in mind because that is what it was dealing with and what most of the antecedent cases were concerned with. The
principles laid down by Lord Goff in the Spiliada were, however, entirely general in their terms and de Dampierre v de
Dampierre [1987] 2 All ER 1, [1988] AC 92 makes plain that their application is not limited to ordinary adversarial litigation.
The essential test remains the same, as the judge recognised when he set out to apply it.
The starting point must be the basic principle formulated by Lord Goff in Spiliada [1986] 3 All ER 843 at 854, [1987] AC
460 at 476:

that a stay will only be granted on the ground of forum non conveniens where the court is satisfied that there is
some other available forum, having competent jurisdiction, which is the appropriate forum for the trial of the action, ie in
which the case may be tried more suitably for the interests of all the parties and the ends of justice.

The words I have emphasised make clear, as does the reference to justice, that a broad overall view must be taken: the primary
task is not to decide which forum is advantageous or disadvantageous to any particular party. The court should look first to see
what factors there are, taking this broad overall view, which point in the direction of another forum: at that stage it is connecting
factors (including convenience, expense, availability of witnesses, governing law, place of residence and place of business) which
must be considered (see [1986] 3 All ER 843 at 856, [1987] AC 460 at 477478). If it is shown that there is some other available
forum which prima facie is clearly more appropriate for the trial of the action a stay will ordinarily be granted unless on a
consideration of all the circumstances justice requires that a stay should not be granted ([1986] 3 All ER 843 at 856, [1987] AC
460 at 478). If a plaintiff can show that he will not obtain justice in the foreign 366 jurisdiction, that is of course a powerful
reason for refusing a stay, since in such a case the foreign forum can scarcely be a more suitable forum for the interests of all the
parties and for the ends of justice ([1986] 3 All ER 843 at 856, [1987] AC 460 at 478).
It is common ground that the factors connecting this action with the Argentine forum are strong and obvious. All the
economic, logistical and management considerations which loom large in any substantial action point strongly towards Argentina.
The company carried on business, and the acts complained of were done, there not here. The witnesses are there, not here, and in
the main speak Spanish, not English, a significant matter in an action where credibility is very much in issue. The documents and
records are there, not here, and are in Spanish, not English. The court there would bring to the evaluation of factual evidence a
familiarity with local conditions which a court here would necessarily lack. Expert evidence would be needed here which would
not be needed there. The court there would be much better placed to assess the significance of related proceedings which have
already taken place there. While an English court called on to try this case would no doubt do so as best it could, the difficulties
would in my view be such as to make the reliability of the outcome problematical.
The factor which is relied on as connecting this action with England is the incorporation of the company here. This has
certain formal consequences inasmuch as it has a registered office here, annual meetings are held here, the companys local
accounts are translated into sterling and the minute book of general meetings is kept here. It has also had certain practical
consequences: the evidence shows that legal advice was taken in London to ensure that English company law rules were not
infringed when a distribution to shareholders was to be made. But the point which Mr Briggs, for Ladenimor, stressed in
argument, and which I think impressed the judge, was that the relationship of the three parties involved in this action (Ladenimor,
Intercomfinanz and the company) is by virtue of the companys English incorporation an English law relationship. The
companys constitution, contained in its memorandum and articles, is framed with reference to English company law, which
accordingly governs the rights and obligations of the parties among themselves. Now, when it is alleged that the relationship has
broken down, the English court is said to be the obvious forum to resolve the dispute as the forum most familiar with the
governing law and practice.
These are not negligible considerations. The only question is whether they can bear the preponderant weight which the
learned judge gave to them. I am of opinion that they cannot, and for two main reasons.
(1) While we know little or nothing of the history of the company before 1979, it seems highly improbable that the present
shareholders, if promoting the company today (or in 1979) would choose or have chosen to incorporate it in England. It is hard
to think of a reason why they should wish to incorporate the company in a place so far removed geographically, economically and
culturally from its commercial base and management. If this is so, the English incorporation of the company may fairly be
regarded as an anomalous historical survival. The situation is not closely analogous with that in which parties to a contract
deliberately choose to subject their bargain to the provisions of a given law.
(2) In parallel with its somewhat ghostly legal existence in England the company has a legal, in addition to a robust
corporeal, existence in Argentina. That the effect of Argentine law is to treat the company as if it were an Argentine corporation
is no longer in controversy. Thus while English law treats the company as English, Argentine law treats the company as
Argentine.
367
In a case where nothing appears to turn on the details of the companys constitution, the ultra vires rule being apparently the
same in both jurisdictions, these considerations seem to me to deprive the companys English incorporation of almost all the force
it might otherwise have.
At the first stage of the Spiliada test I reach a conclusion almost as strong as that of the judge but to the opposite effect. It
seems to me clear on the evidence that the Argentine court has jurisdiction to entertain this action (although the relief it can give
is different, as considered below) and that it is the forum in which the action may be tried much more suitably for the interests of
all the parties and the ends of justice.
The judge was powerfully impressed by the fact that the Argentine court cannot afford the buy-out relief claimed by the
minority shareholder under s 459 of the 1985 Act. As I understand him, he regarded this as a very weighty factor connecting this
action with the English forum. I think this matter more properly falls for consideration at the second stage of the Spiliada test
when (the greater appropriateness of another forum having been established) it is necessary to consider whether justice requires
that a stay should not be granted and whether it appears that one party cannot obtain justice in the foreign forum. In applying this
test it cannot of itself be enough that some difference exists between English law or procedure and those of the foreign forum
because such will always be the case (and was, for example, in de Dampierre v de Dampierre [1987] 2 All ER 1, [1988] AC 92).
The test must be applied as one of substance, not legal technicality.
If I have correctly characterised the substance of this action, it seems to me exaggerated to hold that the minority shareholder
cannot obtain substantial justice in Argentina. If successful, it will not obtain an order for purchase of its shares by the majority
shareholder at a price uplifted to take account of loss caused by the majority shareholders conduct. Uncontradicted evidence of
Argentine law does, however, establish that the minority shareholder may if successful recover against the majority shareholder
damages for loss caused by the majority shareholders deceit or negligence. The majority shareholder is directly liable for
negligent or unlawful handling of the companys business. There is nothing in the evidence to suggest that the damages
recoverable by the minority shareholder would not include compensation for loss sustained on sale of the companys business or
assets during winding up, even though the minority shareholder had asked for the company to be wound up, if the request for
winding up were shown to be a direct result of the majority shareholders conduct. Nor, as it seems to me, is there evidence to
support the judges proposition (however true in this country) that sale of a companys assets by a liquidator would be likely to
produce a depreciated price in Argentina; much might turn on an Argentine liquidators power to continue the companys
business until it could be profitably sold as a going concern. On the facts of this case, I can see no reason why the relief
obtainable in England is significantly better than the relief obtainable in Argentina and the evidence falls far short of showing that
it would be unjust to confine the minority shareholder to its remedies in Argentina. The alternative relief sought by the minority
shareholder in its petition, the winding up of the company, may be granted in either forum; the only difference is that an English
order will be ineffective in Argentina (where it matters) whereas an Argentine order will be effective there. And an Argentine
winding-up order will of course sever the minority shareholders relations with the majority shareholder and the company.
Assuming, as the judge held, that the onus of showing that a stay should be granted lay on the majority shareholder, I
consider that it has comfortably 368 discharged that onus. But the Court of Appeal must be very slow to interfere, and to reach a
different conclusion is not good ground for doing so in a discretionary field unless the judges exercise of discretion can be
impugned on the familiar grounds. I consider it can. In posing as the question to be answered How is this company properly to
be regulated?, the judge did not direct himself in accordance with the Spiliada case and moreover put the question in a way
which pre-empted the answer, since he plainly regarded the Spiliada test as not altogether apt where a case fell within the
supervisory jurisdiction of the Companies Court or the Chancery Division. In my view, this is in all essentials adversarial
litigation (as evidenced by the fact that the company has not been represented before us) and the judge erred in regarding it
otherwise, as he did in finding any analogy with the administration of a trust. I do not think the judge attempted to weigh
(although he did briefly mention) the factors connecting this action with Argentina, nor did he pay due regard to the companys
legal as well as factual existence in Argentina. He did not adequately consider how, in substance, the relief available to the
minority shareholder in Argentina fell short of the relief available here, and made no mention of the minority shareholders right
to damages, a very important feature of the relief available in Argentina. In short, the judge clearly felt that only the Companies
Court could be the proper forum in which to resolve a dispute of this kind involving an English company. That approach may be
understandable, but it is not in my view the approach laid down by the Spiliada case.
I accordingly conclude that the learned judge misdirected himself and that it is for this court to exercise its discretion afresh.
Doing so, I would allow the appeal and grant Intercomfinanz the stay it seeks.

Appeal allowed. Leave to appeal to the House of Lords granted.

Solicitors: Frere Cholmeley; Bower Cotton & Bower.

Carolyn Toulmin Barrister.

369
[1991] 4 All ER 370

McMenamin (Inspector of Taxes) v Diggles

TAXATION; Income Tax, Emoluments from office or employment

CHANCERY DIVISION
SCOTT J
6, 7 JUNE 1991

Income tax Emoluments from office or employment Office Barristers clerk Taxpayer employed as barristers senior clerk
Taxpayer entering into new contractual arrangement with members of chambers Taxpayer agreeing to provide full clerking
services to chambers in return for percentage of barristers fees Taxpayer assessed to income tax on emoluments from office or
employment Whether taxpayer holding office of barristers head clerk Income and Corporation Taxes Act 1970, s 181 (1)
(Sch E).
In 1964 the taxpayer became a junior clerk to a set of barristers chambers. In 1970 he became the senior clerk under a contract
of employment and was assessable to income tax under Sch E as an employee. In 1985 new contractual arrangements were
brought into effect between the taxpayer and each member of chambers whereby the taxpayer agreed to provide at his own cost
and expense a full clerking service in return for a specified percentage of the gross income of each member. Under the
agreement the taxpayer could either himself act as head clerk or provide some other suitably qualified and experienced person to
act as one. In the event the taxpayer acted as head clerk himself and discharged his contractual obligations under the agreement
by providing all the traditional services provided by a head clerk to barristers chambers. The taxpayer was assessed to income
tax under Sch E for the years 198586 to 198788 on emoluments from an office or employment. He appealed to the Special
Commissioners against the assessments, contending that he was neither employed nor the holder of an office but was self-
employed and that the assessments should therefore have been made under Sch D on the profits of a trade, profession or vocation.
The commissioners concluded that the taxpayer was not the holder of an office but was self-employed. The Crown appealed,
contending that the structure of the profession of barrister envisaged that each barrister should have the services of a person
occupying the office of clerk to chambers.

Held The question whether a particular occupation followed by a taxpayer during the relevant taxing period constituted an
office for the purpose of Case 1 of Sch E in s 181(1) a of the 1970 Act involved an issue of mixed law and fact: it involved law
to the extent that the meaning to be given to the word office was a matter of construction, and it involved fact because the nature
and incidents of the occupation in question were essentially matters of fact. Although in many cases offices involved a public
element and appointment thereto was made in a formal manner, eg by letters patent or under the sign manual, formal appointment
and a public element were not essential requirements for an office. On the other hand, although it was implicit in the Bars
code of conduct that every set of barristers chambers was expected to have a clerk, since otherwise a barrister could not comply
with the code, and thus the structure of the profession of barristers envisaged that each barrister should have the services of a
person occupying the office of clerk to chambers, it did not follow that a clerk to barristers chambers held an office within s
181. On its true construction the 1985 agreement left it open to the taxpayer, in rendering the full clerking services to each of
the barristers with whom he had contracted, either himself to act as head clerk or to 370 provide some other suitably qualified or
experienced person to do so while none the less remaining entitled to receive the emoluments due to him under the agreement.
The taxpayer was not appointed to the position of senior clerk by the 1985 agreement; rather, his assumption of the role of senior
clerk was the result of his own decision to fill that role, that being the means most convenient to him for the discharge of the
contractual obligations owed by him to the individual barristers under that agreement, and it was very difficult to regard the
position filled by him as a consequence of his decision thus to discharge his contractual obligations as an office. In the
circumstances the Crown had been unable to show that the Special Commissioners had misdirected themselves in law, and the
appeal would accordingly be dismissed (see p 380 h j, p 381 j to p 382 b e, p 383 b to d and p 384 a to f, post).
________________________________________
a Section 181(1), so far as material, is set out at p 380 g, post

Notes
For the meaning of office for income tax purposes, see 23 Halsburys Laws (4th edn reissue) para 666, and for cases on the
subject, see 28(1) Digest (2nd reissue) 461464, 22262235.
In relation to tax for the year 198889 and subsequent years of assessment s 181 of the Income and Corporation Taxes Act
1970 was replaced by s 19 of the Income and Corporation Taxes Act 1988. For s 19 of the 1988 Act, see 44 Halsburys Statutes
(4th edn) 57.

Cases referred to in judgment

Edwards (Inspector of Taxes) v Bairstow [1955] 3 All ER 48, [1956] AC 14, [1955] 3 WLR 410, HL.
Edwards (Inspector of Taxes) v Clinch [1981] 3 All ER 543, [1982] AC 845, [1981] 3 WLR 707, HL; affg [1980] 3 All ER 278,
[1981] Ch 1, [1980] 3 WLR 521, CA; rvsg [1979] 1 All ER 648, [1979] 1 WLR 338.
Great Western Rly Co v Bater (Surveyor of Taxes) [1920] 3 KB 266.

Case stated
1. On 21, 22, 23 and 26 February 1990 two of the Commissioners for the Special Purposes of the Income Tax Acts heard
appeals by Stephen John Diggles (the taxpayer) against assessments to income tax under Sch E, each in the sum of 35,000, for
198586, 198687 and 198788.
2. Shortly stated the question for the commissioners decision was whether, in those years, the taxpayers remuneration as a
barristers clerk was properly taxable under Sch E as emoluments from an office or employment.
3. The commissioners heard oral evidence from the taxpayer, Mr B Maddocks, barrister, and Mr F Taylor, an inspector of
taxes (retired). [The agreed documents which were put in evidence were then listed.]
4. In addition to the cases referred to in the commissioners decision they were referred to the following:
Ellis (Inspector of Taxes) v Lucas [1966] 2 All ER 935, [1967] Ch 858, [1966] 3 WLR 382.
Fall (Inspector of Taxes) v Hitchen [1973] 1 All ER 368, [1973] 1 WLR 286.
Hill v Beckett [1915] 1 KB 578, DC.
IRC v Brander & Cruickshank [1971] 1 All ER 36, [1971] 1 WLR 212, HL.
McMillan v Guest [1942] 1 All ER 606, [1942] AC 561, HL.
Magraw v Havers (10 May 1978; Case 29915/77/A), Industrial Tribunal.
Mitchell (Inspector of Taxes) v Ross [1961] 3 All ER 49, [1962] AC 814, [1961] 3 WLR 411, HL.
371
Nethermere (St Neots) Ltd v Gardiner [1984] ICR 612, CA.
OKelly v Trusthouse Forte plc [1983] 3 All ER 456, [1984] QB 90, [1983] 3 WLR 605, CA.
Robinson v Hill [1910] 1 KB 94, DC.
Sidey v Phillips (Inspector of Taxes) [1987] STC 87.
Walls v Sinnett (Inspector of Taxes) [1987] STC 236.
The tribunals decision in Magraw v Havers contained a list (a) of the duties undertaken by the senior clerk and (b) of his powers
and responsibilities, which the taxpayer considered to be broadly applicable to his case.
5. The commissioners reserved their decision and gave it in writing on 29 March 1990, allowing the appeals and
discharging the assessments. A copy of the decision, which set out the facts, the contentions of the parties and the reasons for
their conclusion, was annexed to and formed part of the case.
6. The inspector immediately after the determination of the appeal declared to the commissioners his dissatisfaction
therewith as being erroneous in point of law and on 20 April 1990 required them to state a case for the opinion of the High Court
pursuant to the Taxes Management Act 1970, s 56.
7. The question of law for the opinion of the court was whether the commissioners had erred in law in holding that the
taxpayer performed the duties of a barristers clerk as an independent contractor and not as the holder of an office nor as an
employee during the years in question.
DECISION
The appellant, Mr Diggles (the taxpayer), appeals against assessments to income tax under Sch E for 198586, 198687 and
198788.
The taxpayer is the senior clerk to the barristers chambers known as St Jamess Chambers, 68 Quay Street, Manchester and
the question for decision is whether he is properly assessed under Sch E on emoluments from an office or employment or
whether, as he contends, the assessment should be made under Sch D on the profits of a trade, profession or vocation. The
following facts are agreed.
1. This set of chambers has been in existence for over 70 years, originally at 3 St Jamess Square, Manchester and from
1984 at their present address, where they adopted the name St Jamess Chambers. The head of chambers then was Mr L J
Porter, who retired in March 1987 and was succeeded by Mr B C Maddocks. The original premises were held under successive
tenancies at full market rents. The present building was purchased by four members as trustees for the members in 62 shares held
in varying proportions, the arrangement being that new members purchase the shares of retiring members.
2. The taxpayer became a junior clerk to the chambers in January 1964 at the age of 17. The senior clerk then was Mr R C
Randall. At that time there were some nine members. The senior clerk was rewarded in the traditional manner by the clerks fee
collected from the solicitor client along with the fee in guineas payable to the barrister. Thus a fee note for a conference would be
2 7s being two guineas for the barrister and five shillings for the clerk. He did not receive the shilling in the guinea (a practice
in some chambers), but some junior members paid an additional sum of 10s or 1 per week to the clerk.
3. This system was abolished with decimalisation in 1971, following which the senior clerk was paid a commission at an
agreed percentage of all fees collected.
4. The taxpayer became senior clerk on 20 April 1970 when Mr Randall retired. There were then ten members of the
chambers. His initial commission was 5% of gross fees earned by the members. It was increased to 5 1/2% in January 1972 and
then to 61/2% in February 1974.
372
5. On 28 April 1970 the then head of chambers, Mr R J Hardy, gave the taxpayer a written statement of his terms of
employment under s 4 of the Contracts of Employment Act 1963. That statement set out the basis of his remuneration, his
normal hours of working, his holiday entitlement and his right to payment during sickness or incapacity through injury. It
provided that the employment could be terminated by three months notice on either side. The statement was signed by Mr Hardy
on behalf of himself and the other members of the chambers.
6. Between August 1978 and October 1985 the taxpayer paid a contribution towards chambers expenses calculated as a
percentage of his commission in the same way as the members.
7. Down to 7 October 1985 the taxpayer was treated as an employee for the purposes of income tax and national insurance
and value added tax, paying income tax under Sch E by way of assessment, following the practice then and now generally
applied by the Revenue to barristers senior clerks.
8. Immediately before that date there were two junior clerks to the chambers, Miss Paula Magnall (now Mrs Garlick), who
was first employed in the year 1980, and Miss Susan Barnes (now Mrs Bamberger), who was first employed in the year 1981.
They were both paid salaries by the chambers, which deducted tax under the PAYE system.
9. On 7 October 1985 an agreement was signed between the taxpayer and the 20 barristers who were then members of the
chambers whereby, as a separate contract between each of the barristers of the one part and the taxpayer of the other part, the
taxpayer agreed to provide at his own cost and expense for each barrister a Full Clerking Service in return for 83% of the
barristers gross earnings (defined to include remuneration from a part-time legal appointment as well as professional fees).
10. The expression Full Clerking Services was stated to include:

(a) The provision of the services of a full-time Head Clerk of not less than 10 years experience in that capacity being
either Mr Diggles or some other Clerk with that qualification. (b) The provision of a Junior Clerk or Junior Clerks and
other ancillary staff (but not including any typists) whose services may be reasonably necessary to enable the Head Clerk to
render efficiently the Full Clerking Services.

And to enable the head clerk and other staff supplied by the taxpayer to render the full clerking services efficiently they were to
be provided with an adequate clerks room and facilities at the chambers.
11. The taxpayer was to render an account of the barristers gross earnings for the preceding month on the first day of every
month and the barrister was to pay the sum due to the taxpayer within seven days of the delivery of the account.
12. The agreement was to continue until determined by either party on 12 months written notice, or 6 months in the case of
a barrister who was retiring from practice; and it would terminate forthwith if a barrister obtained a full-time judicial
appointment. After termination the taxpayer would do his best to collect outstanding fees and he would be entitled to his
commission on them.
13. As from 7 October 1985 the taxpayer was registered for value added tax and made his quarterly value added tax returns
as a person in business on his own account, making taxable supplies of services, on which he charged and collected value added
tax.
14. As from the same date and in accordance with the agreement, the taxpayer engaged Miss Magnall and Miss Barnes as
junior clerks and he also engaged an assistant, Mr Liam Mooney, and occasional casual helpers. Miss Magnall (Mrs 373 Garlick)
left in June 1989 to have a child and was paid statutory maternity pay by the taxpayer, who engaged a new junior clerk, Miss
Helen Berkley, with effect from 29 March 1989. Written statements of terms required by the Employment Protection
(Consolidation) Act 1978 (as amended) were signed by the taxpayer as employer in respect of Miss Magnall, Miss Barnes, Mr
Mooney and Miss Berkley.
15. The work of the junior clerks covers the full range of the senior clerks responsibilities and is allocated to them by the
taxpayer as required. But in general the negotiation of fees on privately paid work is carried out by the senior clerk personally.
16. At all material times the Code of Conduct for the Bar of England and Wales (3rd edn, 1985) (the rules) required that a
barrister might not practice unless he were a member of (or temporarily permitted the use of) professional chambers and that he
must have the services of the clerk of chambers. The rules also provide that a partnership is not permissible between practising
barristers, but they may agree to share expenses.
17. The expenses of chambers (apart from rates apportioned according to occupation) are apportioned between the members
rateably according to income. Subject to that sharing of expenses, each member is in practice on his own account and in
competition with other barristers including other members of chambers. He may, and not infrequently does, appear in court
against another member and advises and acts for a client against the client of another member.
18. At all material times the taxpayers name was exhibited on the exterior of the St Jamess Chambers beside the
description clerk and the words Clerk S J Diggles appeared at the foot of the list of barristers at the St Jamess Chambers in
entries for Waterlows Solicitors and Barristers Directory and Diary.
19. The taxpayer was at all material times a qualified member of the Barristers Clerks Association.
We heard oral evidence of the taxpayer and of Mr Maddocks from which we find that the proposal to give the taxpayer self-
employed status came from the head of the chambers. Changes in the national insurance regulations in 1984 had substantially
increased the employers class 1 contribution in respect of a well-paid employee by removing the top limit of salary at which
contributions had previously ceased. Even before that the position of the senior clerk had been seen as somewhat hybrid, capable
of being treated as employment or as self-employment. Mr Porter in particular had thought it unsatisfactory that the senior clerk
should be paid on a commission basis for providing his services as clerk while the chambers paid the junior staff to assist him.
Mr Porter and Mr Maddocks decided that it would be better to make him responsible for providing all clerking services on a self-
employed basis. But they preferred to keep the typists in their employment since typing services were rendered directly to the
members of chambers.
The taxpayer was at first reluctant to make the change because he would lose the security of employment, including the right
to a redundancy payment if things went wrong, and he would assume the responsibilities of an employer towards the junior
clerks. But he realised that self-employed status would have some advantages. He would have 12 months notice of termination;
he could take his holiday when he chose; and he would be free to take on staff as he wished without consulting anyone. The right
to put in a substitute as head clerk might also be useful if he were sick or, later on, if he should want to ease up as he approached
retirement. On reflection he was content to accept the change. So far as he knew the option of keeping his employed status was
not available to him.
The term full clerking services was not defined in the new agreement because 374 it was thought that all concerned would
know what it meant and any attempt to define it was likely to do more harm than good. The taxpayer has continued to manage
the chambers as before and does his best to further the practice of each member. But since his personal stake in maintaining the
chambers income is now higher he would feel more independent if he had to answer criticism from members (which in fact he
has not) about matters such as the distribution of work. He now manages the clerking arrangements entirely on his own without
consultation. In 1988, for example, he took on and paid some temporary staff to assist in putting the chambers records onto a
computer.
The taxpayer submits a monthly account of clerking fees, plus value added tax, to each member of chambers and this should
be paid within seven days. For one reason or another, however, he may be owed at any one time something between 3,000 and
6,000 by a member of chambers. Since he has to meet all the expenses of employing staff out of his fees, as well as meeting
some chambers expenses for which he is entitled to be reimbursed, he may run into cash flow problems which he did not
experience before October 1985. He estimates that he needs to hold about 15,000 of his own money available to fund his
financial obligations under the agreement.
The attention of each witness was directed in cross-examination to passages in the Bar Councils Code of Conduct as in
force from 1985 onwards. Each acknowledged that the work of everyone in chambers, including clerks and typists, may involve
matters for which the head of chambers has responsibility under the Code of Conduct. He must, for example, take all reasonable
steps to ensure that the chambers are administered competently and efficiently and in a manner which is fair and equitable for all
members and pupils, and to ensure that the clerks and other staff carry out their duties in a correct and efficient manner. The
Code of Conduct also places obligations on each individual barrister, not to allow touting on his behalf, for example, nor to
communicate confidential information entrusted to him by his lay client, and he is made responsible for the actions of his clerks.
The Barristers Clerks Association issues its own code of conduct but its contents were not in evidence.
The taxpayers remuneration was fixed at 83% of gross earnings under the agreement on the basis of figures prepared by
Thornton Baker, chartered accountants. The object was to remunerate him at much the same level as before, bearing in mind that
in future he would have to pay the junior clerks but would not be contributing to the general chambers expenses.
The first question which arises on those facts is whether the taxpayers remuneration came from an employment, or perhaps
from a number of employments (which would lead to the same result for tax purposes).
We were referred, as is usual in cases of this kind, to a number of authorities in which the distinction has had to be drawn
between a contract for services and a contract of service. In some of them the question has arisen in relation to a series of short
engagements, as in Market Investigations Ltd v Minister of Social Security [1968] 3 All ER 732, [1969] 2 QB 173 (where part-
time interviewers were held to be employed under contracts of service) and in W F & R K Swan (Hellenic) Ltd v Secretary of
State for Social Services (18 January 1983, unreported; QBD) (where tour managers were held to be engaged under contracts for
services). And there is Davies (Inspector of Taxes) v Braithwaite [1931] 2 KB 628, [1931] All ER Rep 792, in which a series of
acting engagements constituted the exercise of a profession. That is not the situation in the present case, since the taxpayer has
been clerk to the same chambers for a number of years but Mr Oliver QC, who represents him, claims some support nevertheless
from cases such as Braithwaite. In general, he 375 says, a number of separate contracts indicates professional activity rather than
employment; and he points out that the taxpayer had a separate contract with each member of the chambers, about 20 in all.
Closer to the facts of this case are Massey v Crown Life Insurance Co [1978] 2 All ER 576, [1978] 1 WLR 676, in which the
branch manager of an insurance company entered into a new agreement designed to give him self-employed status while
continuing to perform the same duties as before, and Ready Mixed Concrete (South East) Ltd v Minister of Pensions and
National Insurance [1968] 1 All ER 433, [1968] 2 QB 497, in which persons previously employed by the company in a different
capacity were invited to become owner-drivers and deliver concrete on the companys behalf as independent contractors. In both
of those cases the facts were found to justify the conclusion that the legal relationship accorded with the parties declared
intention. In Ferguson v John Dawson & Partners (Contractors) Ltd [1976] 3 All ER 817, [1976] 1 WLR 1213 on the other hand
the true legal relationship was held to be that of employer and employee although the plaintiff had specifically been taken on as a
labour-only sub-contractor.
In the search for guiding principles one usually starts from the judgment of MacKenna J in the Ready Mixed Concrete case
[1968] 1 All ER 433 at 439440, [1968] 2 QB 497 at 515:

A contract of service exists if the following three conditions are fulfilled: (i) The servant agrees that in consideration
of a wage or other remuneration he will provide his own work and skill in the performance of some service for his master.
(ii) He agrees, expressly or impliedly, that in the performance of that service he will be subject to the others control in a
sufficient degree to make that other master. (iii) The other provisions of the contract are consistent with its being a contract
of service.

His Lordship emphasised in relation to his first condition the servants obligation to provide his own work and skill, for he added:

Freedom to do a job either by ones own hands, or by anothers is inconsistent with a contract of service, though a
limited or occasional power of delegation may not be

In the Swan (Hellenic) case McCullough J went through a check-list, first compiled by Waterhouse J in Addison v London
Philharmonic Orchestra Ltd [1981] ICR 261 at 271, of ten, or possibly eleven, aspects of the relationship between parties which,
in the light of the authorities, may prove to be of significance in resolving questions of this kind. He found none of them decisive
and concluded in the end that the only factor of major significance was the intention of the parties as deduced from the terms
which they agreed as to tax and national insurance. We do not propose to run through the whole of the check-list but we shall
refer to some items from it as we consider the rival arguments.
Mr Oliver, applying the control test which, although no longer regarded as decisive, remains a relevant factor, says that the
taxpayer was not under the control necessary for an employment. He had wide discretion as to the way in which he provided
clerking services, with no fixed hours of work and no obligation to obey orders. He had to avoid breaches of the Code of
Conduct because he was supplying services to barristers who were bound by that Code of Conduct but that does not mean that he
was controlled in the sense required for a contract of service. Applying another test from the check-list, Mr Oliver submits that
the taxpayer was carrying on business on his own account and not for a master or masters. By his efforts he could increase the
fees coming into the chambers, and thereby increase his income, and he had a financial stake in the provision of 376 clerking
services. He had to bear the cost of hiring junior clerks and he had 15,000 of his own money committed to the business. He
intended to provide services, not necessarily his own, as an independent contractor and that is precisely what he did. Admittedly
the chambers provided the premises and equipment for him and his employees to use but that is not a significant factor since his
function was to provide management services only.
Mr Cotton, for the Crown, contends that the agreement of 7 October 1985 effected no change in the taxpayers status. He
has remained an employee, albeit now serving 20 masters under separate contracts of employment. The relationship between a
barrister and his senior clerk involves a degree of control by the barrister which necessarily makes the clerk an employee because
the clerks duties have to be performed in such a way as to comply with the Code of Conduct and the barrister is responsible for
his actions. The same is true of the junior clerks and if the senior clerk engages them he must do so as agent for the chambers.
All the conditions set out in the Ready Mixed Concrete case are satisfied. As to (1), the provision of personal services, the
taxpayer does not have unlimited power to delegate his functions. He can put in another head clerk but the agreement puts some
obligations on him personally.
If one asks whether the taxpayer is in business on his own account the answer must be No, in the Crowns submission. He
provides no equipment and only some of the junior staff who assist him, assuming for the moment that the clerks are his servants.
His ability to increase his profits by his own efforts is limited because he has to provide clerking services within the established
framework of the chambers. By attracting work to the chambers he can increase his remuneration but that was equally so before
October 1985 and it is true of any employee remunerated on a commission basis. Applying another test from the check-list, taken
from the judgment of Denning LJ in Bank voor Handel en Scheepvaart NV v Slatford [1952] 2 All ER 956 at 971, [1953] 1 QB
248 at 295, he is inescapably part and parcel of the chambers organisation and in its service. The parties may have intended to
change his status but they could not effectively do so. Even if the agreement had stated in terms that the taxpayer should provide
clerking services as an independent contractor, which it did not, it would not have been conclusive because the parties may
misdescribe their relationship, as in Ferguson v John Dawson & Partners (Contractors) Ltd.
There is some force in the Crowns contentions and they were cogently presented, but we have come to the conclusion that
they should not succeed. The part and parcel test, though possibly decisive in some cases, is not always so. McCullough J
found it unhelpful in the Swan (Hellenic) case. The decisive factors here are, in our opinion, the intention of the parties to change
the status of the senior clerk and the terms of the agreement of 7 October 1985 which was designed to give effect to that
intention. The agreement was drawn in broad terms, with little provision for matters of detail, but it covered the main features,
that the taxpayer should provide full clerking services for each barrister at his own cost, that he could render those services
through a suitably qualified head clerk other than himself if he chose and that he was to employ the junior clerks whom he
needed to assist him. Those features point to a contract for services rather than a contract of service and the existence of 20
separate contracts does, we think, point to the same conclusion, even though not conclusively.
The Crowns argument says, in effect, that the relationship between a barrister and his clerk can be conducted only on a
master and servant basis; but we are not convinced that that is right. The barristers responsibility for the actions of his clerks
under the Code of Conduct is a matter between himself and the Bar Council, which does not dictate the terms on which the clerks
(senior and junior) are 377 engaged. His remedy, if the Code of Conduct is breached, is surely to dismiss an employed clerk or
terminate the contract of an independent contractor. Nor does it seem to us that the obligations imposed on the taxpayer by the
agreement are necessarily those of an employed person, requiring him to render personal services under the control of a master.
We accept that the solution to the question does not lie simply in the minds of the parties. As McCullough J said in the
Swan (Hellenic) case:

I have to determine the nature of the obligations of the parties to one another. This depends on the terms which they
expressly agreed and on such further terms as are to be implied. One asks: what was their intention? This does not mean
what was the relationship they wanted to create, nor what was the relationship they thought they had created. The only
relevant intention is that which is to be inferred from the agreed terms.

But in this case we find that the agreed terms reflected the parties intention to put the senior clerk onto a self-employed footing
and we are satisfied on the evidence that those agreed terms were given practical effect. We conclude that the taxpayer has not
been in the employment of the chambers or of any member of those chambers since 7 October 1985. And we move on to
consider whether he held an office within the meaning of that term in s 181 of the Income and Corporation Taxes Act 1970.
In Edwards (Inspector of Taxes) v Clinch [1981] 3 All ER 543, [1982] AC 845 the House of Lords reconsidered Rowlatt Js
definition of an office in Great Western Rly Co v Bater (Surveyor of Taxes) [1920] 3 KB 266 at 274 as something

which was a subsisting, permanent, substantive position, which had an existence independent of the person who filled
it, and which went on and was filled in succession by successive holders

and gave it broad approval, although the wording is not to be treated as sacrosanct and it is not to be applied too rigidly. Lord
Wilberforce said ([1981] 3 All ER 543 at 546, [1982] AC 845 at 861):

For myself I would accept that a rigid requirement of permanence is no longer appropriate, nor is vouched by any
decided case, and continuity need not be regarded as an absolute qualification. But still the word must involve a degree
of continuance (not necessarily continuity) and of independent existence: it must connote a post to which a person can be
appointed, which he can vacate and to which a successor can be appointed.

Mr Oliver submits, in reliance on a passage from the judgment of Buckley LJ in the same case ([1980] 3 All ER 278 at 281,
[1981] Ch 1 at 6), that to satisfy the requirement of an independent existence an office must owe its existence to some
constituent instrument, whether it be a charter, statute, declaration of trust, contract (other than a contract of personal service) or
instrument of some other kind. While we think it probable that most offices will be created by some such instrument (and the
list is an extensive one) we do not find sufficient authority for that statement to add it as a necessary requirement of an office in
all cases.
Mr Oliver also submits that an office must contain a public element: an office-holder must be a person to some extent in
the public domain, although he concedes that the degree of publicity required is incapable of precise definition. This element was
stated most clearly by Lord Bridge in his dissenting speech in Clinch [1981] 3 All ER 543 at 563, [1982] AC 845 at 881 where he
relied on a dictionary definition of office as: A position or place to which certain duties are 378 attached, esp one of a more or
less public character , but the majority of their Lordships found dictionary definitions unhelpful. Again it seems to us that
this may be a relevant factor, since an office will more often than not contain some public element, but the authorities do not
establish that it is an essential requirement, or at any rate not one that can be usefully quantified.
The Crown contends in this case that the taxpayer holds an office, or possibly a number of separate offices, as clerk to the St
Jamess Chambers, a recognised post to which someone else would be appointed if he were to retire or die. If a constituent
instrument is required, which Mr Cotton does not admit, it is the Code of Conduct, which, at the relevant time, required every
barrister to have the services of a clerk. In so far as a public element is required it is present since the clerk to chambers had a
public function in the provision of legal services to those members of the public who need them.
 The speeches in Edwards v Clinch have to be read in their context. Mr Clinchs appointment to conduct an inquiry for the
Secretary of State for the Environment had its origin in statute and required him to perform duties of an obviously public nature.
The question was whether it had the necessary elements of permanence and continuity in the sense that it could be vacated and
filled by someone else; and the House of Lords held that it did not. As Lord Lowry put it ([1981] 3 All ER 543 at 553, [1982] AC
845 at 870):

To be in a position of authority is not necessarily to hold an office, and when you appoint somebody to do something
you do not thereby appoint him to be something (in other words to hold an office), unless the Act or other relevant
instrument says so. (Lord Lowrys emphasis.)

In other cases the area of debate will be different. There must, for example, be many positions in commercial organisations
which will have to be filled by others when the present holders leave; and in some of those cases the name of the holder may be
displayed for the information of the public. But not all such persons could be said to hold offices for the purposes of Sch E: they
are simply employees appointed to perform duties of a managerial or supervisory nature. A hotel manager is an example of that
sort of post. In the end it comes down, we think, to a matter of impression in each case; and reviewing all the relevant
circumstances of this case we conclude that the taxpayer did not hold an office, nor a number of offices. The strongest features in
the Crowns case are that, at the time, barristers were required to have the services of a clerk and that the taxpayers name appears
as clerk both at the entrance to the chambers and in various professional publications, but those features of the case are not
sufficient for the success of their argument. The taxpayers function has been at all times to perform the duties of senior clerk to
the members of the chambers. Those are important duties but we find it impossible to say that when he took them on he was
appointed to a post which can be classed as an office for the purposes of Sch E.
The right conclusion is, in our judgment, that he has performed those duties as an employed person before 7 October 1985
and as an independent contractor, providing clerking services under contract, since that date.
The appeal succeeds and the Sch E assessments for the three years under appeal are discharged.

Launcelot Henderson for the Crown.

Stephen Oliver QC and Timothy Lyons for the taxpayer.
379

7 June 1991. The following judgment was delivered.

SCOTT J. This is an appeal by the Crown against the determination by the Special Commissioners of appeals by the taxpayer
against assessments to income tax under Sch E for the years 198586, 198687 and 198788.
The taxpayer, Mr Diggles, is and was at all material times the senior clerk of a leading set of barristers chambers in
Manchester known as St Jamess Chambers.
The first main question before the Special Commissioners was whether for the three years of assessment I have mentioned
the taxpayer was employed and hence amenable to assessments under Sch E or was self-employed, in which case he would have
been amenable to being assessed for tax under Sch D. The second question was whether the assessments under Sch E could be
upheld, even though on a true view of the relevant facts the taxpayer was self-employed, on the ground that during the relevant
years of assessment he was the holder of an office within the meaning of that word in the relevant provision in the Income and
Corporation Taxes Act 1970.
In the event, the Special Commissioners concluded, first, that the taxpayer was self-employed and, second, that as a matter
of impression the taxpayer was not the holder of an office for the purposes of the relevant statutory provision.
The Crown appealed by case stated against the decision of the Special Commissioners. The grounds of appeal were, first,
that the Special Commissioners were wrong in finding in favour of self-employment rather than employment. That part of the
appeal is no longer pursued. It is accepted by the Crown that the conclusions of fact made by the Special Commissioners in
regard to that issue are such as to prevent the success of the appeal. But the appeal has continued on the second point, namely
whether during the relevant period the taxpayer was the holder of an office. The office the Crown has in mind is the office of
senior clerk to the chambers.
It is accepted by Mr Henderson, who appears for the Crown, that the appeal can succeed only if one of two possible bases is
established. The Crown must establish either that the Special Commissioners misdirected themselves in law or that they reached
a conclusion that no tribunal properly directed could have reached.
I should start by referring to s 181 of the 1970 Act, which contains the relevant charging provision. In sub-s (1), under the
heading Schedule E, it is provided as follows:

1. Tax under this Schedule shall be charged in respect of any office or employment on emoluments therefrom which
fall under one, or more than one, of the following CasesCase I: where the person holding the office or employment is
resident and ordinarily resident in the United Kingdom

I need not read anything further.

In my opinion, the question whether a particular occupation followed by the taxpayer during the relevant taxing period
constitutes an office for the purpose of this statutory provision involves an issue of mixed fact and law. It involves law to the
extent that the meaning to be given to the word office is a matter of construction, and it involves fact because the nature and
incidents of the occupation in question are essentially matters of fact. The determination of the issue requires the application of
the facts, as found, to the proper legal meaning of the word office.
The most recent case relevant to the matters argued before me is Edwards (Inspector of Taxes) v Clinch [1981] 3 All ER 543,
[1982] AC 845. In that case Lord Wilberforce referred to the manner in which the resolution of the question whether or not there
was the holding of an office for tax purposes ought to be approached ([1981] 3 All ER 543 at 546, [1982] AC 845 at 861):
380

It is necessary to appraise the characteristics of the taxpayers appointment. There is in this task an element of
common-sense evaluation of fact, a task which is committed in the first place to the General Commissioners. Their finding
was for the taxpayer, and though this is far from sacrosanct, indeed I think that they applied the Rowlatt definition [see
Great Western Rly Co v Bater (Surveyor of Taxes) [1920] 3 KB 266 at 274 per Rowlatt J] too literally, nevertheless it is not
in my opinion wholly to be disregarded. They described it as merely a transient, indeterminate, once-only execution of a
task for which [the taxpayer] was peculiarly qualified (see [1979] 1 All ER 648 at 650), adding an analogy which I do not
find appropriate.

The primary facts as found by the Special Commissioners were not the subject of any substantial dispute. The taxpayer had
been the senior clerk at St Jamess Chambers for a considerable number of years before the tax years to which I have referred.
Up until 7 October 1985 it is common ground that he was senior clerk of the chambers under a contract of employment. It is also
common ground that up to that date he was properly amenable to being assessed to tax under Sch E as an employed person.
 But on 7 October 1985 new contractual arrangements were brought into effect between the taxpayer and each of the
members of the chambers. There was a written agreement of that date signed by each member of the chambers and by the
taxpayer. The recitals to the agreement included the following:

whereas in this Agreement the expression Full Clerking Services shall include: (a) The provision of the services
of a full-time Head Clerk of not less than 10 years experience in that capacity being either [the taxpayer] or some other
Clerk with that qualification. (b) The provision of a Junior Clerk or Junior Clerks and other ancillary staff (but not
including any typists) whose services may be reasonably necessary to enable the Head Clerk to render efficiently the Full
Clerking Services.

Then followed the operative part of the agreement:

it is agreed as a separate contract between each of the Barristers of the one part and [the taxpayer] of the other part
that [the taxpayer] will at his own cost and expense provide for each of the Barristers a Full Clerking Service at the
Chambers upon the terms and conditions set out in the second Schedule hereto.

The terms set out in the second schedule included provision for a specified percentage of gross earnings to be paid by each
barrister to the taxpayer, and imposed the obligation on the taxpayer to account to each barrister for the gross earnings of that
barrister during the preceding calendar month and to show the amount owed by the barrister to him under the remuneration
provision to which I have just referred.
One paragraph in the second schedule provided as follows:

The Head Clerk and other staff supplied by [the taxpayer] shall be provided with an adequate Clerks Room and
facilities at the Chambers to enable them to carry on the Full Clerking Services efficiently.

As a matter of construction of the agreement, it seems reasonably clear to me that the agreement held it open to the taxpayer,
in rendering the Full Clerking Services to each of the barristers with whom he had contracted, either himself to act as head clerk
or to provide some other suitably qualified or experienced person to do so.
381
After 7 October 1985 the occupation by the taxpayer of the position of head clerk was not a necessary consequence of the
contractual provisions of the agreement. He could, consistently with those provisions, have nominated some other individual as
head clerk while none the less remaining entitled to receive the emoluments due to him under the agreement. In the event,
throughout the relevant period he acted, and I believe still acts, as head clerk. He has been described as head clerk in various
publications and reference books. The services which the taxpayer has supplied in discharging his contractual obligation to
provide Full Clerking Services have included all the traditional services provided by head clerks to barristers chambers.
There is one additional matter of fact on which great reliance was placed by the Crown and to which I must refer. The
barristers profession is, to a degree, controlled by self-regulation. The Bar Council issues a code of conduct approved by the
profession itself. The code of conduct in force during the relevant periodthe three years I have mentionedincluded a rule in
the following terms (Code of Conduct for the Bar of England and Wales (3rd edn, 1985)):

26. A barrister who is a member of professional chambers must: (a) have his name exhibited at the chambers; (b) have
the right to make such use of the chambers, and of its administration and facilities, as his practice requires; (c) have the
services of the clerk of the chambers

It is implicit in that rule that every chambers is expected to have a clerk; otherwise, barristers could not comply with r 26(c).
It was thus argued by Mr Henderson that the structure of the profession of barrister envisaged that each barrister should have the
services of a person occupying the office of clerk of chambers, and in a sense that is so. But it does not follow that a clerk in
barristers chambers holds an office within the meaning of that expression in s 181 of the 1970 Act.
In Edwards v Clinch [1981] 3 All ER 543 at 546, [1982] AC 845 at 861 Lord Wilberforce dealt with the meaning of the
word office:

It would seem to me that the legislature, by continuing to use the word [office] in the taxing words of Sch E without
any corrective definition, showed a general intention to adopt the judicial interpretation of it which, though uncritically, has
been consistent and continuous. For myself I would accept that a rigid requirement of permanence is no longer
appropriate, nor is vouched by any decided case, and continuity need not be regarded as an absolute qualification. But still,
if any meaning is to be given to office in this legislation, as distinguished from employment or profession or trade
or vocation (these are the various words used in order to tax people on their earnings), the word must involve a degree of
continuance (not necessarily continuity) and of independent existence: it must connote a post to which a person can be
appointed, which he can vacate and to which a successor can be appointed. This is the concept which was accepted by all
three of the members of the Court of Appeal, who all desired, in my opinion rightly, to combine some degree of
consistency with what had become accepted notions in the law of income tax, with practical common-sense requirements,
and without treating as authoritative decisions which were reached for reasons which may no longer be appropriate (see
[1980] 3 All ER 278 at 280, [1981] Ch 1 at 5 per Buckley LJ). Thus Buckley LJ accepted that to constitute an office a post
need not be capable of permanent or prolonged or indefinite existence, a development of the law with which I agree.
382

In argument before me Mr Henderson for the Crown and Mr Oliver QC for the taxpayer have referred to various features
which an office might be expected to have. Mr Oliver referred to the circumstance that, in general, one would expect an office
to be associated with some constituent instrument (as he called it) creating and defining the office in question. Mr Henderson for
his part accepted that many, perhaps most, offices caught by Sch E would be offices associated with constituent instruments of
the sort referred to by Mr Oliver. But Mr Henderson said, and Mr Oliver agreed, that a constituent instrument was not an
essential requirement. It was no more than a feature usually associated with a Sch E office. It was also suggested that an
office should have some degree of public relevance. If that is right, a wholly private occupation would never be an office for
the purpose of Sch E. Many posts or occupations which are, beyond argument, offices do involve a public element. But I think it
is accepted that it would be possible to have an office for the purpose of Sch E which was not associated with any public element.
Another feature of possible importance is the manner in which the individual came to hold the alleged office. Appointment
to many offices is made in a formal manner, eg by letters patent, or under the sign manual. Some appointments are made by
formal documents referring to the post to be filled and defining it. Formality of appointment is a feature which may be associated
with most offices falling within Sch E. But again it probably would be going too far to say that without some formal appointment
there could not be an office falling within Sch E.
Mr Henderson referred to the well-known remark about an elephant being a beast easy to recognise but difficult to define.
An office, he suggested, might be in the same state. I think that approach is one that the Special Commissioners may have
adopted. In the case stated they referred to Edwards v Clinch and a dictum of Lord Lowry ([1981] 3 All ER 543 at 553, [1982]
AC 845 at 870):

To be in a position of authority is not necessarily to hold an office, and when you appoint somebody to do something
you do not thereby appoint him to be something (in other words to hold an office), unless the Act or other relevant
instrument says so. (Lord Lowrys emphasis.)

Another way of putting the same point would be that an office is something more than a job description. That this sort of
consideration was in the minds of the Special Commissioners may be seen from their remarks in the case stated:

[The taxpayers] function has been at all times to perform the duties of Senior Clerk to the members of the Chambers.
Those are important duties but we find it impossible to say that when he took them on he was appointed to a post which
can be classed as an office for the purposes of Schedule E.

The bulk of the case stated deals with the main question argued before the Special Commissioners, namely whether the
taxpayer was employed under a contract of employment or was self-employed. The text dealing with the point regarding an
office forms a relatively short part of the case stated. It is no criticism of the Special Commissioners, but it is a fair comment,
that they dealt fairly cursorily with that part of the argument. However, they referred to the leading cases. They cited the tests
which the dicta in those cases suggest should be applied in order to decide whether an individual is the holder of an office.
It is difficult for Mr Henderson to point to any misdirection of law. If there was no misdirection of law, the only remaining
attack on the Special Commissioners conclusion is that the primary facts which they found did not permit the conclusion that the
taxpayer was not the holder of an office for the 383 purpose of Sch E. But if the various indicia of an office to which
reference was made in argument and to which reference had been made in the cases are adopted and if the taxpayers duties under
the 7 October 1985 agreement are weighed against those indicia, it becomes very difficult to apply an Edwards v Bairstow
criticism to the Special Commissioners conclusion (see Edwards (Inspector of Taxes) v Bairstow [1955] 3 All ER 48, [1956] AC
14). There is no obvious constituent instrument in the present case. The best that Mr Henderson can do is point to r 26(c) of the
Bars Code of Conduct. But that code is not precise as to the manner in which barristers chambers are to be administered.
Provided that the arrangements made result in the efficient running of chambers, I do not believe that a disciplinary case for
breach of the code could be made against a barrister on the ground that there was no person specifically appointed as clerk of
chambers.
The taxpayers duties as clerk of St Jamess Chambers were in no sense public duties. His assumption of the role of senior
clerk was not under any formal appointment. He was not so appointed by the written agreement of 7 October 1985 itself. His
assumption of the role of senior clerk was the result of his own decision to fill that role. That was the means most convenient to
him for the discharge of the contractual obligations he owed the individual barristers under the agreement. I find it very difficult
to regard the position filled by the taxpayer as a consequence of his decision thus to discharge his contractual obligations as an
office. I, like Mr Henderson, can picture an elephant but if I try to picture a Sch E office I do not bring to mind a barristers
senior clerkship. I think that the taxpayers senior clerkship was more of a job description than the holding of a Sch E office.
In my judgment, whether or not it is possible for barristers chambers to arrange their affairs so as to constitute their senior
clerk the holder of an officeand it may be possiblethe Special Commissioners conclusion in the present case that that had
not happened was one which it was open to them on the evidence before them to come to. I do not think their decision is
vulnerable to attack on Edwards v Bairstow lines. Accordingly, I dismiss the appeal.
There is a minor point which is not the subject of dispute between the parties. The Special Commissioners discharged the
assessment for 198586 notwithstanding it was common ground that until 7 October 1985 the taxpayer had been working under a
contract of employment and therefore up to that date was amenable to being taxed under Sch E. To that extent, therefore, the
discharge of the assessment cannot be maintained and some appropriate order must be made.

Appeal dismissed.

Solicitors: Solicitor of Inland Revenue; Stephen Oliver QC and Timothy Lyons.

Rengan Krishnan Barrister.

384
[1991] 4 All ER 385

Re Barlow Clowes Gilt Managers Ltd

COMPANY; Insolvency

CHANCERY DIVISION
MILLET J
20, 21, 22, 23, 24 MAY, 6 JUNE 1991

Company Compulsory winding up Liquidator Information provided to liquidator Use in criminal trial of persons
connected with company Information supplied to liquidators voluntarily and in confidence Persons charged with offences
following collapse of company requesting liquidators to provide transcripts of interviews conducted by liquidators Whether
liquidators under duty to assist directors of company in defending criminal charges -- Whether liquidators ought to provide
directors with information given to liquidators in confidence in course of winding up Whether contrary to public policy for
liquidators to disclose information provided to them voluntarily and in confidence.

Following an order for the compulsory winding up of two associated English and Gibraltarian deposit-taking companies after
they had collapsed owing a total liability to investors of over 115m the liquidators of the English company conducted a series of
interviews with persons who had been closely involved, mostly in a professional capacity, with the two companies. The purpose
of the interviews was to establish whether civil claims could be brought on behalf of investors against the companies or by the
companies against third parties. Although the persons interviewed could have been compelled by an order made under s 236 of
the Insolvency Act 1986 to attend for examination by the liquidators, the witnesses attended voluntarily in circumstances of
confidentiality on the assurance, express or implied, that any information given to the liquidators would be used solely for the
proper purposes of the liquidation. Four persons connected with the companies who had been arrested and charged with theft and
fraud and were due to be tried in the Crown Court requested copies of the transcripts of the interviews from the liquidators. The
liquidators applied to the court for a direction whether they were at liberty to disclose the transcripts to the defendants. The
defendants, supported by the Serious Fraud Office, contended that the public interest in ensuring that the defendants had a fair
trial outweighed the assurances of confidentiality and the interests of the liquidation.

Held The liquidators of a company were under no duty to assist directors of the company in defending criminal charges brought
against them by providing the directors with information given to the liquidators in confidence in the course of winding up the
company and it would be against public policy for such information provided voluntarily and in confidence to be disclosed as it
would jeopardise the proper and efficient functioning of the liquidation, the court in its capacity as the Companies Court
responsible for the winding up of the two companies would direct the liquidators not to make voluntary disclosure of the
transcripts to the defendants, to claim public interest immunity if necessary in response to any witness statement issued by the
defendants and not to disclose the transcripts unless ordered to do so by the Crown Court, which was the appropriate court to
weigh the competing interests for and against disclosure and to make a final decision on the matter (see p 391 f to p 392 d, p 393
j to p 394 b e g and p 395 a j to p 396 b j to p 397 b g, post).
Dicta of Sir Nicolas Browne-Wilkinson V-C in Marcel v Comr of Police of the Metropolis [1991] 1 All ER 845 at 853 and in
Cloverbay Ltd (joint administrators) v Bank of Credit and Commerce International SA [1991] 1 All ER 894 at 900 applied.
385

Notes
For liquidators powers and the duty to provide information to the liquidator, see 7(2) Halsburys Laws (4th edn reissue) para
15741575, 16761677.

Cases referred to in judgment

A-G v Guardian Newspapers Ltd (No 2) [1988] 3 All ER 545, [1990] 1 AC 109, [1988] 3 WLR 776, HL.
Air Canada v Secretary of State for Trade (No 2) [1983] 1 All ER 910, [1983] 2 AC 394, [1983] 2 WLR 494, HL.
Cloverbay Ltd (joint administrators) v Bank of Credit and Commerce International SA [1991] 1 All ER 894, [1991] Ch 90,
[1990] 3 WLR 574, CA.
Crompton (Alfred) Amusement Machines Ltd v Customs and Excise Comrs (No 2) [1973] 2 All ER 1169, [1974] AC 405, [1973]
3 WLR 268, HL.
Esal (Commodities) Ltd, Re (No 2) [1990] BCC 708.
Greys Brewery Co, Re (1883) 25 Ch D 400.
Lion Laboratories Ltd v Evans [1984] 2 All ER 417, [1985] QB 526, [1984] 3 WLR 539, CA.
Marcel v Comr of Police of the Metropolis [1991] 1 All ER 845, [1991] 2 WLR 1118.
North Australian Territory Co, Re (1890) 45 Ch D 87, CA.
R v Cheltenham Justices, ex p Secretary of State for Trade [1977] 1 All ER 460, [1977] 1 WLR 95, DC.
R v Flint Justices, ex p Roberts (1 July 1988, unreported), DC.
R v Hallett [1986] Crim LR 462, CA.
R v Skegness Magistrates Court, ex p Cardy [1985] RTR 49, DC.
Tyler, Re, ex p Official Receiver [1907] 1 KB 865, [19047] All ER Rep 181, CA.
W v Egdell [1990] 1 All ER 835, [1990] Ch 359, [1990] 2 WLR 471, CA.

Summons
By summons issued on 11 April 1991, as amended, Michael Jordan and Nigel Hamilton, the joint liquidators of Barlow Clowes
Gilt Managers Ltd (BCGM), applied to the court pursuant to s 168(3) of the Insolvency Act 1986 seeking a direction that they be
at liberty to disclose to the respective solicitors of the defendants, Mr Clowes, Mr Cramer, Dr Naylor and Mr Newman, the
transcripts of the interviews of 16 named persons (the witnesses) which were conducted on behalf of the liquidators between June
and November 1989. The summons was heard in chambers but judgment was given by Morritt J in open court. The facts are set
out in the judgment.

John Lindsay QC and David Ashton for the liquidators.

Anthony Hacking QC and Martin Steiger for Mr Clowes.
Kenneth Hamer for Mr Cramer.
Mary Arden QC and Justin Gau for the Serious Fraud Office.
Michael Crystal QC and Mark Phillips for Mr Connolly and Mr Counsell, two of the witnesses.
Jonathan Sumption QC and Mark Howard for Mr Pilkington, another witness.

Cur adv vult

386

6 June 1991. The following judgment was delivered.

MILLETT J. This is an application by Mr Michael Jordan, chairman of Cork Gully, and Mr Nigel Hamilton, a partner in Ernst
& Young, the joint liquidators of Barlow Clowes Gilt Managers Ltd (BCGM), for directions pursuant to s 168(3) of the
Insolvency Act 1986. I will refer to the applicants as the liquidators.
By their summons as amended, the liquidators seek a direction that they may be at liberty to disclose to the respective
solicitors of Mr Clowes, Mr Cramer, Dr Naylor and Mr Newman (the defendants) the transcripts of the interviews of 16 named
persons (the witnesses) which were conducted on behalf of the liquidators between June and November 1989.
BCGM was a deposit-taking company which attracted investment from members of the public. It was ordered to be
compulsorily wound up by the High Court on 6 July 1988. Shortly afterwards the liquidators were appointed joint liquidators of
BCGM. They have also been appointed joint receivers of certain portfolio investments. Meanwhile a sister company, Barlow
Clowes International Ltd (BCI), had been placed in compulsory liquidation by an order of the Supreme Court of Gibraltar, and
Mr Jordan became one of the two joint liquidators. The affairs of the two companies are entangled.
On 15 June 1988 Mr Clowes was arrested. He was subsequently rearrested, and the other three defendants were arrested, on
7 December 1988. They have been charged with serious criminal offences in connection with the affairs of BCGM and BCI. All
four defendants are charged with conspiracy to contravene s 13(1) of the Prevention of Fraud (Investments) Act 1958 and with
numerous counts of theft. The prosecution allege an investment fraud of enormous proportions carried out between 1984 and
1988. In June 1988 the total liability to investors is said to have been over 115m. The prosecution allege that members of the
public were induced to deposit their moneys in the belief that they would be invested in gilt-edged securities, that only 19m
was in fact so invested and that the rest was taken by the defendants for their own benefit or for the benefit of their families. Mr
Clowes alone faces charges of theft totalling some 62m. The prosecution is being conducted by the Serious Fraud Office in
accordance with the provisions of the Criminal Justice Act 1987. Phillips J has been assigned to try the case. The defendants
have been arraigned and Phillips J is now holding the preparatory hearings. For convenience, the trial has been split into two.
The date for the start of the first trial, in which all four defendants are involved, has been fixed for 2 July. The second trial will
not begin until the first has been concluded. Again, all four defendants are involved, this time with two others.
For the purposes of their own investigations, the liquidators instructed Mr David Graham QC, a partner in Coopers &
Lybrand Deloitte (of which Cork Gully is the insolvency practice) to conduct a series of interviews with persons who had been
closely involved, mostly in a professional capacity, with the various Barlow Clowes companies. Sixteen such persons are named
in the summons. The positions that they held and the parts that they played in connection with the affairs of BCGM or BCI or
their predecessor companies are set out in the affidavit of Mr Richard Smyth and it is not necessary to recite them further. In
addition to the 16 witnesses named in the summons, Mr Graham also interviewed two other witnesses, a Mr Richard Hooper and
a Mr James Levy.
The purpose of these interviews was to enable the liquidators to ascertain the facts generally but with particular reference to
establishing whether or not civil claims could be brought on behalf of investors against BCGM or BCI, or by either of those
companies against third parties. It was no part of Mr Grahams function, 387nor was it the purpose of the interviews, to
investigate whether criminal offences had been committed.
The witnesses were invited to attend and did so on a voluntary basis. Many considered that it was their professional duty to
provide assistance to the liquidators. Some were accompanied by their legal advisers. In every case a record of the interview
was transcribed and retained, and a copy was supplied to the witness and, where appropriate, his legal adviser. In every case the
interview was conducted in circumstances of confidentiality. In many cases this was made explicit, either in correspondence
before the interview took place, or orally by Mr Graham at the outset of the interview. But where it was not explicit it was
certainly implicit. This cannot have been understood to mean that the liquidators could make no use of the information they were
given and could not impart it to anyone if they judged it necessary to enable them to carry out their duties as liquidators. But it is
clear that the information was obtained by means of assurances, express or implied, that it would be used solely for the proper
purposes of the liquidation. Moreover, although the witnesses attended voluntarily, they did so in response to a threat, often
express but always implicit, that if they did not attend voluntarily the liquidators would have recourse to the statutory powers in
the Insolvency Act 1986 to compel their attendance at a private examination conducted by the court.
All 16 witnesses were later interviewed by inspectors appointed by the Department of Trade and Industry. Transcripts of
those interviews were passed to the Serious Fraud Office, and have been duly supplied to the defendants either as annexures to
witness statements or as unused material in accordance with the Attorney Generals guidelines (see Practice Note [1982] 1 All ER
734). The prosecution intend to call eight of them as prosecution witnesses, two of them (Mr Suttie and Mr Walker) at the second
trial only. One (Mr Counsell) is to be called at the second trial, but will be tendered by the prosecution for cross-examination by
the defence at the first trial. Four others have made witness statements, but it is not intended to call or tender them at either trial.
The remaining three (including Mr Connolly) have not given witness statements to the Serious Fraud Office.
In January 1990 the Serious Fraud Office obtained from the liquidators copies of the transcripts of Mr Grahams interviews
of Mr Hooper, Mr Levy, Mr Walker and Mr Suttie. They were supplied voluntarily on receipt of an assurance that they were
required by the Serious Fraud Office for the purpose of their investigations and that their production could if necessary be
compelled by a notice under s 2(2) of the Criminal Justice Act 1987. Copies of the transcripts of the interviews of Mr Hooper
and Mr Levy have been duly supplied by the prosecution to the defence in accordance with the Attorney Generals guidelines.
In March 1991 Mr Clowess solicitors sought and obtained from the liquidators solicitors a list of the names of all the
witnesses who had been interviewed by Mr Graham and the dates of their respective interviews. They then asked to be supplied
with copies of all the transcripts with the exception of those relating to Mr Hooper and Mr Levy, which were already in their
possession. In due course they were informed that the liquidators would not voluntarily release the transcripts, and would if
necessary object to being compelled to produce them on grounds of public interest immunity.
On 5 April 1991 a witness summons was issued out of the Central Criminal Court on the application of Mr Clowess
solicitors. It was directed to Mr Jordan, and called for the production of the transcripts of the interviews given by the witnesses
to Mr Graham. The defendants have since learned that the Serious 388 Fraud Office also have in their possession transcripts of
the interviews of Mr Walker and Mr Suttie (who it will be remembered are witnesses at the second trial only) and intend to
supply them to the defence in due course. The defendants therefore no longer press the liquidators for the production of those
transcripts.
On 9 April 1991 a hearing took place before Phillips J. The liquidators were represented by counsel. He told Phillips J that
he would be applying to set aside the witness summons served on Mr Jordan under s 2(2) of the Criminal Procedure (Attendance
of Witnesses) Act 1965 on the ground that the transcripts were not material evidence within the meaning of the section. He made
it clear that the liquidators did not wish to be unhelpful or unco-operative, but he said that the interviews had been conducted on a
confidential basis, and that the liquidators would claim public interest immunity if necessary. In the course of the discussion,
counsel indicated that the liquidators would wish to seek the directions of the Companies Court, which might be persuaded to
authorise the transcripts to be disclosed on a voluntary basis, in which case there would be no further problem. The liquidators
application was then adjourned to enable the present application to be made. Before adjourning the proceedings, and in an
endeavour to provide some helpful guidance to this court, Phillips J made the following observation:

Perhaps it would not be out of place for me to say simply this. If these individuals are going to be called to give
evidence about the matters about which they have already spoken to the liquidator, as far as the interests of criminal justice
is concerned, it seems to me that those interests would best be served by the defence having the opportunity to see what
those witnesses have said about the matters in question on an earlier and more contemporaneous occasion. I do not think
that I can say more than that by way of assistance to any discretion that a judge may have in the Companies Court.

The present summons was issued by the liquidators on 11 April 1991. The respondents formally represented before me are:
(i) Mr Clowes and Mr Cramer, who also speak for the other two defendants, and who argue that the transcripts should be
disclosed; (ii) Mr Connolly, Mr Counsell and Mr Pilkington, who also speak for the other witnesses, all of whom object to the
disclosure of the transcripts; and (iii) the Serious Fraud Office, who have been allowed to intervene and who support the claim
for disclosure. The fact that the opposing arguments have been advanced by those with a direct interest has allowed the
liquidators to remain neutral, but the evidence filed on their behalf shows that their own inclination would be to oppose
disclosure.
During the course of the argument counsel for the Serious Fraud Office told me that it was the intention of the Serious Fraud
Office to issue a notice under s 2 of the Criminal Justice Act 1987 upon the liquidators in order to require the production of the
transcript of Mr Pilkingtons interview, and that the issue of similar notices in respect of Mr Tree and Mr Sinsteads transcripts
was under active consideration. Any material obtained by such means will in due course be supplied to the defence in accordance
with the Attorney Generals guidelines. Counsel accepted, however, that such notices could be issued only for the production of
material genuinely required for the purpose of the Serious Fraud Offices investigations, which are continuing, and could not
properly be issued merely to obtain material requested by the defence. I have been much pressed with the argument that the right
of the defendants to have the transcripts made available to them for the purpose of their defence should not depend upon 389 the
fortuitous circumstance that they were also required for the purpose of the Serious Fraud Offices investigations.
The liquidators do not suggest that the transcripts contain sensitive information or that this particular liquidation would be
impeded or made more difficult by the disclosure of the transcripts or any parts of them. In terms of public interest immunity, it
is a class claim and not a contents claim.
 The evidence sworn on behalf of Mr Clowes is to the following effect. Mr Clowess legal advisers believe that Mr Graham
interviewed the witnesses because he rightly assumed that they might have evidence relevant to his inquiry. They believe that the
material contained in the transcripts of those interviews is likely to be equally relevant to the preparation and conduct of Mr
Clowess defence and cross-examination of prosecution witnesses at his trial. The transcripts of the interviews of Mr Hooper and
Mr Levy have provided valuable assistance in the preparation of Mr Clowess defence generally and the cross-examination of Mr
Hooper in particular. A sight of the remaining transcripts would enable the defendants to discover whether there is any
inconsistency between the evidence given by a witness to the liquidators and the statements made by that witness to the
Department of Trade and Industry and the Serious Fraud Office; if so, this would be of obvious value in cross-examination. A
sight of the transcripts would also enable the defendants to discover whether any of the witnesses made observations which
would be helpful to the defence, and this would enable a decision to be made whether to require a witness not presently intended
to be called by the prosecution to be tendered for cross-examination by the defence. There is, on the other hand, no evidence that
any of the transcripts actually contains any such material (of either kind), and no particular reason to suspect that it does. Mr
Hacking QC, who appeared for Mr Clowes before me and will be representing him at his trial, frankly told me that until he saw
the transcripts he could not say that they would be of any use. The most he could say was that the transcripts of Mr Hooper and
Mr Levy had proved to be relevant and helpful, and his experience told him that the remaining transcripts might prove to be so
too. The defendants are willing to give undertakings to the court that the transcripts should be used solely for the purpose of
defending the criminal proceedings brought against them.
Mr Cramers solicitor has similarly deposed that

it would substantially prejudice Mr Cramers defence were he to be denied the opportunity to learn what [the
witnesses] said to [the liquidators] during the course of their investigations.

It would not, I think, be unfair to say that the defendants wish to embark upon a fishing expedition, and that what they hope to
catch is not primary evidence but material for cross-examination.
The Serious Fraud Office, no doubt mindful of the danger to the prosecution if the jury should come to believe that material
helpful to the defence was being withheld from them, support the defendants claim. Mr Tate, the assistant director of the Serious
Fraud Office, has deposed that the transcripts (which he has not seen) are or may become relevant to the criminal proceedings,
and gives it as his view that it is in the interests of justice that such interviews should be disclosed.
In the course of the argument a number of peripheral and irrelevant issues have been debated. Two of them can be disposed
of at once. The defendants submitted that the transcripts could be obtained directly from the witnesses themselves, either by the
issue of a witness summons or in the course of cross-examination at the trial. Accordingly, they submitted, they might as well be
390 disclosed by the liquidators now. Mr Hacking was especially confident that skilful cross-examination would flush them
out. I am not satisfied that this is so, certainly in the case of some of the witnesses, and not all of them will be available for
cross-examination. But in any case the fact that a document can be obtained from another source is hardly a sufficient reason for
requiring the liquidators to produce it: quite the reverse.
The second issue is concerned with legal professional privilege. The liquidators are almost certainly entitled to claim such
privilege for the transcripts. This would be a complete answer to a notice requiring production issued by the Serious Fraud Office
(see s 2(9) of the Criminal Justice Act 1987), and would at least have to be considered if raised in answer to a request for
production made by the defendants. The liquidators are not bound to assert their privilege, however, and by seeking the
directions of the court in relation to the defendants request for disclosure they are, inter alia, asking whether they should assert it.
The very facts which make any claim to public interest immunity a class claim and not a contents claim mean that there is no
compelling reason for the liquidators to claim legal professional privilege in respect of the transcripts, or for the court to direct
them to do so in the interest of the liquidation.
In considering the question whether the transcripts should be made available to the defendants, it is essential in my judgment
to distinguish clearly between the functions of this court, which is the Companies Court responsible for the winding up of
BCGM, and those of the Crown Court, responsible for the conduct of the criminal proceedings which have been brought against
the defendants. The present application is made to the Companies Court, and there are, in my view, two questions which fall to
be decided. The first question is whether that court should authorise or direct the liquidators, who are its own officers, to disclose
the transcripts or any of them to the defendants voluntarily, that is to say irrespective of the issue of a witness summons. The
second, which will arise only if the answer to the first is No, is what steps should the liquidators be directed to take in relation to
the witness summons issued by Mr Clowes or any similar witness summons which may be issued by any of the other defendants
hereafter?
Quite apart from any question of public interest immunity, there are powerful reasons for not permitting the voluntary
disclosure of the transcripts by the liquidators. The information was obtained in circumstances of confidentiality and by
assurances, express or implied, that it would be used only for the purpose of the liquidation. Those assurances were given by
officers of this court. They were properly given in order to obtain information necessary to enable this court to carry out its
functions. The information is now sought to be used for purposes collateral to the liquidation and foreign to those for which it
was obtained. It ought to be unthinkable that the court should authorise its own officers to renege on their assurances in such
circumstances in the absence of some compelling reason to do so.
Had the information been obtained by the use of the courts compulsory powers under s 236 of the Insolvency Act 1986,
assurances of confidentiality would not have been given, but they would not have been necessary, for disclosure would have been
permitted only to the extent that such disclosure was for the benefit of the liquidation. The general principle is stated by Sir
Nicolas Browne-Wilkinson V-C in Marcel v Comr of Police of the Metropolis [1991] 1 All ER 845 at 853, [1991] 2 WLR 1118 at
1127:

the underlying principle is that private information obtained under compulsory powers cannot be used for purposes
other than those for which the powers were conferred.
391

In my judgment, it makes no difference that the information is obtained informally, not by the use of the courts compulsory
powers but under the threat of them. In Re Esal (Commodities) Ltd (No 2) [1990] BCC 708 at 723 I said:

where leave is sought to make use of material obtained by the use or under the threat of sec 268 proceedings, then,
save in exceptional circumstances, leave should be granted only if the use proposed to be made is within the purpose of the
statutory procedure, that is to say, that the use proposed to be made of the material is to assist the beneficial winding-up of
the company.

This provides an answer to a submission of counsel for the Serious Fraud Office, who submitted that in the case of a private
examination r 9.5 of the Insolvency Rules 1986, SI 1986/1925, gives the court a general dispensing power which deprives the
principle of much of its force. I do not accept this. The power to order disclosure under r 9.5 is conferred on the Companies
Court and is exercisable for the benefit of the liquidation. The effect of the rule is that the record of a private examination may be
open to inspection by the liquidator or the Official Receiver or, with the leave of the court, other persons; but such other persons
will need to show that inspection by them is for the benefit of the liquidation. In my judgment, r 9.5 is not a power to dispense
with the general principle but to secure compliance with it.
But the general principle is not unqualified. Like the doctrine of confidentiality itself, it is limited in nature and may be
overridden by a countervailing public interest which favours disclosure: see A-G v Guardian Newspapers Ltd (No 2) [1988] 3 All
ER 545 at 659, [1990] 1 AC 109 at 282 per Lord Goff, Lion Laboratories Ltd v Evans [1984] 2 All ER 417, [1985] QB 526, W v
Egdell [1990] 1 All ER 835 at 848, [1990] Ch 359 at 419 and Marcel v Comr of Police of the Metropolis [1991] 1 All ER 845 at
857, [1991] 2 WLR 1118 at 1128. The defence of disclosure in the public interest is well established in actions for breach of
confidence.
The defendants submit that there is just such a countervailing public interest in ensuring the proper administration of justice,
particularly criminal justice. The reported cases are full of observations to the effect that in a civil action the court should be
possessed of all relevant information to enable it to reach a decision: see eg Alfred Crompton Amusement Machines Ltd v
Customs and Excise Comrs (No 2) [1973] 2 All ER 1169 at 1185, [1974] AC 405 at 434 per Lord Cross; although, as Lord Fraser
pointed out in Air Canada v Secretary of State for Trade (No 2) [1983] 1 All ER 910 at 916, [1983] 2 AC 394 at 434, the general
rule is subject to some qualification: the very existence of legal professional privilege and public interest immunity constitutes
qualification. In Marcel v Comr of Police of the Metropolis Sir Nicolas Browne-Wilkinson V-C held that the public interest in
ensuring that documents obtained by compulsory powers should be used only for the purpose for which they were obtained
should be inviolate, and outweighed the countervailing public interest that all relevant information should be available to a civil
court. In a serious criminal case, however, the defendants submit, the balance falls otherwise.
The defendants rightly submit that where the liberty of the subject is involved the weight of the public interest favouring
disclosure is very great indeed. The police may even be required to disclose the identity of an informer if such disclosure is
necessary to show the innocence of the accused, to prevent a possible miscarriage of justice, or to prevent the possibility that the
accused may be deprived of the opportunity of casting doubt upon the case against him: see R v Hallett [1986] Crim LR 462.
392
National security apart (and perhaps not even then), it is submitted, nothing can override the overwhelming public interest in
ensuring that an innocent man is not wrongly convicted. Private assurances of confidentiality and the interests of the liquidation
must yield to the imperative of allowing defendants facing a serious criminal charge to have recourse to any material which may
however remotely assist their defence. A useful test, it is submitted, can be found in the Attorney Generals guidelines, which
require the prosecution to make available to the defence any material which has some bearing on the offence(s) charged and the
surrounding circumstances of the case. The transcripts plainly come within this description.
This is an attractive argument, but I am satisfied that it is mistaken. It is a feature common to both systems of justice, civil
and criminal, that there is a strong public interest that the court should have all relevant information made available to it. But the
courts have never assumed or been granted the power to compel the production of all such information regardless of its nature
and source. That would amount to an intolerable invasion of privacy. Statute and rules of court made under statutory power have
long established the circumstances in which production can be compelled in the interests of justice, and have thereby resolved the
conflict between the two competing public interests. A sharp distinction has been drawn between the position of those who are
litigants and those who are not. In a civil action, for example, a litigant, whether plaintiff or defendant, must give discovery of all
documents relating to matters in question in the action: see RSC Ord 24, r 1(1). This is a wide test: the documents do not need
to be admissible in evidence; it is sufficient that they are or may be relevant to an issue in the case. But a third party is under no
similar obligation to assist the parties. Save in exceptional circumstances, he is not subject to the process of discovery at all.
In a criminal case, the defendant is under no obligation to assist the prosecution. With certain limited exceptions, he is
entitled to the so-called right of silence. But the prosecution is in a different position. Traditionally it is not regarded as a
combatant. It has duties to be objective and balanced in the presentation of its case, and must not withhold from the defence
matters, whether strictly evidence or not, which may prove helpful to the defence. What is expected from the prosecution is very
different from what is expected from an ordinary litigant. The Attorney Generals guidelines provide guidance to the prosecution
in the performance of its duties. They do not have the force of law. They are independent of the rules of evidence or the
substantive law. They have nothing to do with discovery. But the Crown Court will have regard to them and will ensure that they
are observed so that a fair trial can take place in accordance with the best traditions of English justice.
But all this has nothing to do with the third party who is not himself involved except possibly as a witness. He is under no
obligation to provide voluntary assistance whether to the prosecution or the defence. He is not bound to disclose his private
documents except to the extent that statute has laid such an obligation upon him. The extent of that obligation is to be found in s
2 of the Criminal Justice Act 1987. It is to produce material evidence. This has been defined by the courts and is far narrower
than the class of material which the prosecution must disclose to the defence in accordance with the Attorney Generals
guidelines. This is not fortuitous, for s 2 applies equally whether the documents are required by the prosecution or the defence.
In my judgment, therefore, neither law nor public policy imposes on the liquidators a general duty to assist the defendants to
meet the charges brought 393 against them. The limit of their obligation has been laid down by Parliament, and it is to produce
any material evidence in their possession in response to a properly issued witness summons. Parliament has thus determined
the extent to which the individuals right to privacy may be invaded in the interests of criminal justice, and in my judgment my
discretion to give the liquidators the directions they seek ought to be exercised in accordance with the policy laid down by
Parliament.
Accordingly, I shall direct the liquidators not to make voluntary disclosure of the transcripts to the defendants or their
solicitors. Whether the transcripts do or do not constitute material evidence is a question for the Crown Court, not the Companies
Court, to decide. It is, however, right to say that in my experience whenever there are parallel investigations by the police, the
Department of Trade and Industry and the liquidators of a collapsed company, as in the present case, the task of the liquidators is
to obtain information, not evidence. They do not impound documents; it is sufficient for their purpose to inspect the documents,
to take copies and to note where the originals may be found. If a witness has material evidence in his possession, it can be
obtained by the police or the Crown Prosecution Service, whose task it is not only to investigate the facts but to assemble the
evidence required for a successful prosecution. What the witness says to the liquidators is not evidence; and it will be an
exceptional case in which they have any primary evidence in their possession.
As I say, the question whether the transcripts do or do not constitute or contain material evidence is a question for the Crown
Court, for it goes to the jurisdiction of that court to issue the witness summons. All I need say is that, on the evidence before me,
and as at present advised, it appears strongly arguable that they do not: see R v Cheltenham Justices, ex p Secretary of State for
Trade [1977] 1 All ER 460, [1977] 1 WLR 95, R v Skegness Magistrates Court, ex p Cardys [1985] RTR 49 and R v Flint
Justices, ex p Roberts (1 July 1988, unreported), from which it appears that there is no jurisdiction to compel the production of a
document which is required merely for the purposes of cross-examination. Indeed, it is merely speculation that the transcripts
will even provide material for cross-examination. They may or may not. Accordingly, I shall direct the liquidators to restore
their application to set aside Mr Clowess witness summons and to press for it to be discharged.
This may make it unnecessary for Phillips J to consider the question of public interest immunity. In case it becomes
relevant, however, I shall state my opinion that there is an important public interest against disclosure of the transcripts. Under
our legal system, the compulsory winding up of an insolvent company is entrusted to the judiciary. It is carried out by the
Companies Court through the medium of its own officers, who are registered insolvency practitioners. The courts function is not
limited to deciding issues between litigants. As Farwell LJ said in Re Tyler, ex p Official Receiver [1907] 1 KB 865 at 871,
[19047] All ER Rep 181 at 184:
 Our Courts have two functions, one to decide rights between the parties and the other to administer estates. In
administering estates, whether in Chancery, bankruptcy, or the winding up of companies, the Court itself by its officer often
finds itself in the position of a quasi-litigant.

The liquidation of an insolvent company can affect many thousands, even tens of thousands, of innocent people. In the case of a
company like BCGM it can affect peoples life savings. In the case of a major trading company it can affect its customers and
suppliers and the livelihood of many thousands of persons employed by other companies whose viability is threatened by the
collapse of the 394 company in liquidation. An insolvent liquidation cannot be dismissed as just a case about money. There is
a major public interest in ensuring that the liquidation of an insolvent company is conducted by the courts officers in an efficient
and expeditious manner.
In order to enable liquidators to discharge their functions, they need to have access to information about the company, its
assets, liabilities, dealings and affairs from those capable of giving such information to them. These will include not merely the
former directors, but others such as auditors, solicitors and bankers. Most of the witnesses in the present case fall into these
categories. To this end Parliament has entrusted the Companies Court with extraordinary powers. Section 236(2) of the
Insolvency Act 1986 gives the court power to summon a person before it on the application of a liquidator (or any office-
holder) if the person is: (a) an office holder of the company (eg a director); (b) a person known or suspected to have in his
possession any property of the company or supposed to be indebted to the company; or (c) any person whom the court thinks
capable of giving information concerning the promotion, formation, business, dealings, affairs or property of the company. These
powers are granted to enable the liquidator to ascertain the facts about the companys affairs, so that he may carry out the
liquidation in all its various aspects. In Cloverbay Ltd (joint administrators) v Bank of Credit and Commerce International SA
[1991] 1 All ER 894 at 900, [1991] Ch 90 at 102 Sir Nicolas Browne-Wilkinson V-C explained the need for the jurisdiction:

the reason for the inquisitorial jurisdiction contained in s 236 is that a liquidator or administrator comes into the
company with no previous knowledge and frequently finds that the companys records are missing or defective. The
purpose of s 236 is to enable him to get sufficient information to reconstitute the state of knowledge that the company
should possess. In my judgment its purpose is not to put the company in a better position than it would have enjoyed if
liquidation or administration had not supervened. In many cases an order under s 236 may have the result that the purpose
is in such improved position But that is the result of the order not the purpose for which it is made. (Sir Nicolas
Browne-Wilkinson V-Cs emphasis.)

The process is an extraordinary and secret mode of obtaining information required for the proper conduct of the winding up.
The sectionearlier versions of which stretch back into the middle of the last centuryhas been described as conferring an
extraordinary power of an inquisitorial nature and even compared (not, I think, favourably) to the Star Chamber: see Re Greys
Brewery Co (1883) 25 Ch D 400 at 408 per Chitty J and Re North Australian Territory Co (1890) 45 Ch D 87 at 93 per Bowen
LJ. The courts powers under the section are backed by powers of arrest and seizure. The power is potentially oppressive and is
exercised with caution, specially against persons who are not former officers of the company. The court will go to great lengths
to limit the exercise of the power and the advantage that may be taken of it. Rule 9(1) of the 1986 rules provides that the written
record of a private examination is not to be filed on the courts records; and r 9(5) provides that it cannot be inspected without an
order of the court by anyone other than the liquidator or the Official Receiver. Those provisions are a necessary safeguard to
ensure that the information obtained by means of this extraordinary process is used only for the purpose of the liquidation.
Given the liquidators powers to obtain information by compulsion, it has become the widespread practice for responsible
persons to whom requests for information are addressed by liquidators to co-operate with the liquidators and to provide them
with copy documents and other information and to submit to 395 being questioned on an informal basis and without a formal
order of the court. This is done on the implicit (if not explicit) understanding that the information supplied will be treated as
confidential and will not be used except for the purpose of the liquidation. If there comes to be a generally perceived risk that the
records of such informal interviews may be disclosed to third parties, there is an obvious danger that professional men will no
longer co-operate with liquidators on a voluntary basis, but will insist on liquidators having recourse to the courts compulsory
powers so that they may enjoy the protection of r 9. Mr Christopher Morris, a leading insolvency practitioner, has deposed:

It is frequently the case that office holders need to carry out interviews with the relevant individuals within a very
short time of their appointment in order to protect or trace the companys assets or to take other prompt action to avoid the
dissipation or concealment of assets. Speed is frequently crucial and the speed with which the office holders are able to
obtain the necessary information may have a material impact on the sums ultimately realisable for the benefit of creditors
of the company. Anything which delays or restricts the ability of the office holders to obtain information is likely to hinder
their task. Although such requests for information are made pursuant to the powers conferred on office holders by, inter
alia, s 236 of the Insolvency Act 1986, it is my experience, and I believe those of my colleagues and insolvency
practitioners in general, that the greater part of those parties to whom such requests for information are addressed are
prepared to co-operate with the office holders voluntarily without the need for the office holders to seek the relevant court
orders under the Act. I believe that they do so on the basis that the information will be treated as confidential and used only
for the purposes of the office holders functions. I am therefore concerned that if there is a generally perceived risk that the
records of such interviews may be disclosed to third parties, particularly if as a result those records may in effect enter the
public domain, the individuals concerned will no longer co-operate with the office holders on a voluntary basis but will
instead compel office holders to obtain the relevant orders from the court. I am also concerned that the making of such
orders is likely to be more frequently contested on the basis that they would be oppressive. Office holders would in effect
receive the minimum of co-operation rather than the maximum. Applications to the court involve both delay and expense.
Further, if interviews are carried out under the auspices of a court order then I believe that they would inevitably become
more formal. It is likely that interviewees will press for advance notice of the questions which are to be put to them. They
will seek to be legally represented at the interviews. Valuable information may not be forthcoming or only forthcoming
with much less speed. The whole process of obtaining information will become less effective to the detriment of the
company, its creditors and contributors. I believe that there is a serious risk that permitting the transcripts of the interviews
conducted by office holders to be disclosed to parties in criminal proceedings, to be used for purposes unconnected with the
office holders functions, may have adverse consequences for the ability of office holders to fulfil their functions.

I am satisfied that these are real risks, and that the proper and efficient functioning of the process of compulsory liquidation
would be jeopardised if transcripts of the informal interviews of witnesses carried out by liquidators were to be made generally
available to defendants to criminal proceedings.
If the liquidation of insolvent companies were entrusted to the executive 396 branch of government, the foregoing would be
embodied in a certificate signed by the appropriate minister. As it is entrusted to the judicial branch, the place of the certificate
must be taken by the doctrine of judicial notice. I have set out the position at some length in the hope that it may be of some
assistance to Phillips J should the question of public interest immunity fall to be considered.
Like a ministers certificate, the foregoing is not, of course, conclusive. If any of the transcripts should be found to
constitute or contain material evidence and so be the proper subject of a witness summons, it will be necessary to balance the
competing interests for and against disclosure. That exercise will have to be undertaken by the Crown Court, not (as some
counsel submitted) this court. It may even become necessary for Phillips J to inspect the transcripts to satisfy himself that the
evidence is not peripheral or vestigial but of sufficient importance to the issues in the criminal trial to justify disclosure. In Air
Canada v Secretary of State for Trade (No 2) [1983] 1 All ER 910 at 916917, [1983] 2 AC 394 at 434435 the House of Lords
held that a judge ought not to inspect documents for which public interest immunity is claimed until at least persuaded that
inspection is likely to satisfy him to take the further step of ordering production. Lord Fraser added:

in order to persuade the court even to inspect documents for which public interest immunity is claimed, the party
seeking disclosure ought at least to satisfy the court that the documents are very likely to contain material which would
give substantial support to his contention on an issue which arises in the case, and that without them he might be deprived
of the means of proper presentation of his case

That test would clearly exclude fishing applications. Whether it is an appropriate test in the present context will be for
Phillips J to decide. Air Canada was a civil case in which the documents were sought from the opposite party to the litigation
and were prima facie discoverable, for the mere fact that giving discovery involves a breach of confidence is not of itself an
independent objection to discovery: see Alfred Crompton Amusement Machines Ltd v Customs and Excise Comrs [1973] 2 All
ER 1169 at 1180, [1974] AC 405 at 429. The present case is in some respects a fortiori, for although it is a criminal case the
documents are in the possession of a third party and there is no jurisdiction to compel disclosure unless they constitute material
evidence. The threshold test may therefore be a different one, but it is unlikely to be less stringent or to permit a fishing
expedition.
I shall therefore direct the liquidators to restore the application to Phillips J to claim public interest immunity if necessary
and not to disclose the transcripts unless ordered to do so by the Crown Court.

Direction accordingly.

Solicitors: D J Freeman & Co; Burton Copeland, Manchester; Walker Morris Scott Turnbull, Leeds; Serious Fraud Office;
Freshfields; Linklaters & Paines.

Jacqueline Metcalfe Barrister.

397
[1991] 4 All ER 398

Securities and Investments Board and another v Financial Intermediaries

Managers and Brokers Regulatory Association Ltd and another
BANKING & FINANCE

CHANCERY DIVISION
MORRITT J
13, 14, 21 JUNE 1991

Investment business Investors compensation scheme Liability incurred by authorised persons in connection with investment
businesses Claims against authorised persons unable to satisfy liabilities Scheme coming into operation on 27 August 1988
Provisions defining investment and investment business coming into force on 18 December 1986 Whether compensation
payable in respect of liabilities incurred before compensation scheme became effective Whether compensation payable in
respect of liabilities incurred after 18 December 1986 Financial Services Act 1986, ss 1, 3, 54.

The Financial Services Act 1986 came into effect, as provided by the Act, on such days as the Secretary of State appointed.
Section 1a of and Sch 1 to that Act defining investment and investment business were brought into effect on 18 December
1986 and s 54b, providing for the establishment of a scheme for compensating investors in cases where persons who are, or have
been, authorised persons are unable, or unlikely to be unable, to satisfy claims in respect of any description of civil liability
incurred by them in connection with their investment businesses was brought into effect on 4 June 1987. The powers conferred
by s 54 to establish the compensation scheme were delegated by the Secretary of State to the Securities and Investments Board,
which made rules establishing the compensation scheme with effect from 27 August 1988. The scheme was administered by the
second plaintiff and was financed by a levy on persons authorised to carry on business under the Act. Section 3 c and Ch III of
the 1986 Act provided that it was unlawful to carry on investment business unless authorised and prescribing who were
authorised persons, were brought into effect on 29 April 1988. The second defendant placed 8,000 with an investment company
for investment at their discretion in gilt-edged securities, the money being paid as to of 6,000 on 30 May 1985, ie before the Act
received the royal assent, and as to a further 2,000 on 24 August 1987, ie after ss 1 and 54 and Sch 1 came into force but before
the date (29 April 1988) on which persons could become authorised persons for the purposes of the Act and before the
compensation scheme came into effect. The company with whom the second defendant deposited her money collapsed. She
applied to the second plaintiff for compensation under the scheme. The board and the second plaintiff issued an originating
summons seeking the determination of the court whether on the true construction of s 54 the boards power to make rules to
establish the compensation scheme extended to compensating investors claims in respect of an authorised persons liability
whenever incurred, or whether the scheme only covered liability incurred within the period or periods on or after the
commencement date of the rules or during times at which the person who incurred the liability was an 398 authorised person or
on or after the commencement date (18 December 1986) of the provisions (s 1 and Sch 1) which gave meaning to investment
business in s 54 or any other, and, if so, what other period or periods.
________________________________________
a Section 1, so far as material, is set out at p 400 h i, post
b Section 54, so far as material, is set out at p 400 j to p 401 a, post
c Section 3 is set out at p 401 b, post

Held The compensation scheme established by the Securities and Investments Board under s 54 of the 1986 Act for
compensating investors who suffered loss as the result of the collapse of an authorised investment business was restricted to
liabilities to investors incurred on or after 18 December 1986 when the provisions (s 1 of and Sch 1 to the Act) which gave
meaning to the words investment business in s 54 were brought into effect, since s 54 provided for compensation to be payable
in cases where persons who are, or have been, authorised persons under the Act to carry on investment business incurred
liabilities in connection with their investment business and therefore it was a prerequisite to being entitled to compensation from
the scheme that the liability was incurred by an authorised person in connection with an investment business, which could only
occur after that term was defined by the 1984 Act, ie after 18 December 1986 when s 1 and Sch 1 were brought into effect. It was
not essential however, that the scheme had come into operation or that the person carrying on the investment business giving rise
to the liability was authorised at the time the liability was incurred (see p 408 j to p 409 a f to p 410 a c e to p 411 a d, post).

Notes
For the investors compensation scheme, see Supplement to 30 Halsburys Laws (4th edn) para 343.
For the Financial Services Act 1986, ss 1, 3, 54, see 30 Halsburys Statutes (4th edn) (1991 reissue) 168, 170, 223.

Cases referred to in judgment

Aiden Shipping Co Ltd v Interbulk Ltd, The Vimeira [1986] 2 All ER 409, [1986] AC 965, [1986] 2 WLR 1051, HL.
Arnold v Central Electricity Generating Board [1987] 3 All ER 694, [1988] AC 228, [1987] 3 All ER 1009, HL.
Bradford Union Guardians v Wiltshire Clerk of the Peace (1868) LR 3 QB 604.
Brindle v HW Smith (Cabinets) Ltd [1973] 1 All ER 230, [1972] 1 WLR 1653, CA.
Lauri v Renad [1892] 3 Ch 402, CA.
Lewis v Lewis [1984] 2 All ER 497, [1984] Fam 79, [1984] 3 WLR 45, CA; affd [1985] 2 All ER 449, [1985] AC 828, [1985] 2
WLR 962, HL.
Master Ladies Tailors Organisation v Minister of Labour and National Service [1950] 2 All ER 525.
OReilly v Mackman [1982] 3 All ER 1124, [1983] 2 AC 237, [1982] 3 WLR 1096, HL.
Pearce v Secretary of State for Defence [1988] 2 All ER 348, [1988] AC 755, [1988] 2 WLR 1027, HL.
R v St Mary, Whitechapel (Inhabitants) (1848) 12 QB 120, 116 ER 811.
R v Secretary of State for Trade and Industry, ex p R [1989] 1 All ER 647, [1989] 1 WLR 372, DC.
Solicitors Clerk, Re a [1957] 3 All ER 617, [1957] 1 WLR 1219, DC.
Yew Bon Tew v Kenderaan Bas Mara [1982] 3 All ER 833, [1983] 1 AC 553, [1982] 3 WLR 1026, PC.

Cases also cited

R v Kirk Case 63/83 [1985] 1 All ER 453, [1984] ECR 2689, CJEC.
399
Swain v Law Society [1980] 3 All ER 615, [1980] 1 WLR 1335; rvsd in part [1981] 3 All ER 797, [1982] 1 WLR 17, CA; rvsd
[1982] 2 All ER 827, [1983] AC 598, HL.

Originating summons
The plaintiffs, the Securities and Investments Board and the Investors Compensation Scheme Ltd, sought the determination of the
court whether on the true construction of s 54 of the Financial Services Act 1986 the power conferred on the Secretary of State by
s 54 and vested in the first plaintiff by the Financial Services Act 1986 (Delegation) Order 1987, SI 1987/942, to make rules to
establish a scheme for compensating investors in cases where persons who are or have been authorised persons are unable or
likely to be unable to satisfy claims in respect of any description of civil liability incurred by them in connection with their
investment business extends to compensating investors in respect of such liability (i) whensoever so incurred or (ii) so incurred
only with any period or periods and if (ii) whether the period is or the periods are any one or more of the following, namely (iii)
on or after the commencement date of the rules (27 August 1988), (iv) during times at which the person who incurred the liability
was an authorised person (29 April 1988), (v) on or after the commencement date (18 December 1986) of the provisions (s 1 and
Sch 1) which give meaning to the words investment business in the said s 54 or (vi) any other and if so what other period or
periods. The defendants were the Financial Intermediaries Managers and Brokers Regulatory Association Ltd and Mrs Linda
Susan Kelsey who had lodged a claim with the second plaintiff for compensation from the scheme in respect of moneys deposited
with Dunsdale Securities Ltd which had gone into liquidation. The facts are set out in the judgment.

John Lindsay QC and Michael Green for the plaintiffs.

Robin Potts QC for the first defendant.
Patrick Howell QC and Guy Newey for the second defendant.

Cur adv vult

21 June 1991. The following judgment was delivered.

MORRITT J: The Financial Services Act 1986 received the royal assent on 7 November 1986 but, with one immaterial
exception, was only to come into force on such day or days as the Secretary of State might by order appoint. By such an order
the Secretary of State brought s 1 and certain paragraphs of Sch 1 into effect on 18 December 1986 (see SI 1986/2246).
Subsections (1) and (2) of s 1 provide:

(1) In this Act, unless the context otherwise requires, investment means any asset, right or interest falling within any
paragraph in Part I of Schedule 1 to this Act.
(2) In this Act investment business means the business of engaging in one or more of the activities which fall within
the paragraphs in Part II of that Schedule and are not excluded by Part III of that Schedule.

By a further order made by the Secretary of State s 54 came into force on 4 June 1987 (see SI 1987/1907). Subsection 1 of that
section provides as follows:

The Secretary of State may by rules establish a scheme for compensating investors in cases where persons who are or
have been authorised persons are 400 unable, or likely to be unable, to satisfy claims in respect of any description of civil
liability incurred by them in connection with their investment businesses.

The powers conferred by that section had already been delegated by the Secretary of State to the first plaintiff (the Securities and
Investments Board).
By the eighth commencement order made by the Secretary of State, S 3 came into effect on 29 April 1988 (see SI 1988/740).
That section provides:

No person shall carry on, or purport to carry on, investment business in the United Kingdom unless he is an authorised
person under Chapter III or an exempted person under Chapter IV of this Part of this Act.
 On the same day, and by virtue of the same order, the provisions of Ch III, which prescribe who is an authorised person, also
came into effect. In summary, a person is authorised if he is a member of a recognised self-regulatory organisation, or
professional body, or an authorised insurer, registered friendly society or operator of a recognised collective investment scheme,
or holds the authority of the Security of State, or the equivalent in certain member states.
On 27 July 1988 the Securities and Investments Board made rules, pursuant to s 54, with effect from 27 August 1988, which
were replaced by new rules made on 21 June 1990, with effect from 15 July 1990. Under both sets of rules the compensation
scheme so established was to be administered by the second plaintiff, Investors Compensation Scheme Ltd, and financed by the
levying of contributions from authorised persons, either directly, or indirectly through the recognised self-regulating
organisations or professional bodies, as permitted by s 54(2)(a) and (c).
The first defendant, the Financial Intermediaries Managers and Brokers Regulatory Association Ltd (FIMBRA), is a
recognised self-regulating organisation. It has claimed, on behalf of its members, and on its own behalf, that s 54 does not
authorise the payment of compensation to investors in respect of liabilities to investors, whenever incurred, but only in respect of
liabilities to investors incurred after the compensation scheme came into effect on 27 August 1988 and at a time when the person
incurring the liability to the investor was an authorised person within the meaning of the 1986 Act. It is concerned thereby to
limit the liability to contribute to the financing of the scheme.
Accordingly, the plaintiffs issued the originating summons now before me. They seek the determination of the court of the
questions:

Whether, on the true construction of section 54 of the above-named Act, the power conferred on the Secretary of State
by the said section and vested in the first-named Plaintiff by the Financial Services Act 1986 (Delegation) Order 1987, to
make rules to establish a Scheme for compensating investors in cases where persons who are or have been authorised
persons are unable or likely to be unable to satisfy claims in respect of any description of civil liability incurred by them in
connection with their investment businesses extends to compensating investors in respect of such liability:(i) whensoever
so incurred or (ii) so incurred only within any period or periods and if (ii), whether the period is or the periods are any one
or more of the following, namely:(iii) on or after the commencement date of the rules; (iv) during times at which the
person who incurred the liability was an authorised person; (v) on or after the commencement date (18 December 1986) of
the provisions (section 1 and Schedule 1) which give meaning to the words investment business in the said section 54; or
(vi) any other and if so what other period or periods.
401

As both plaintiffs owe continuing duties to both investors and authorised persons, they were concerned to remain, so far as
possible, neutral between the conflicting arguments. Accordingly, they joined the second defendant, Mrs Kelsey, on her own
behalf, and, if necessary, to represent investors as a class.
Mrs Kelsey placed 8,000 with Dunsdale Securities Ltd for investment at their discretion in gilt-edged securities. She paid
to that company 6,000 on 30 May 1985, that is before the Financial Services Act 1986 received the royal assent, and a further
1,000 on 24 August 1987, which was after s 1 and Sch 1, defining investment and investment business, and s 54 came into
force, but before the date (28 April 1988) on which persons could become authorised persons for the purposes of the 1986 Act,
and before the compensation scheme came into effect.
Dunsdale Securities Ltd has since failed, and Mrs Kelsey has applied to the second plaintiff for compensation. She contends
that s 54 authorises compensation to be paid in respect of a liability to an investor whenever incurred. If, contrary to that primary
submission, the liability must have been incurred after a particular date, then she contends that that date is 18 December 1986,
when the definition of investment and investment business came into force. She claims that s 54 does not require that the
person liable to the investor should have been an authorised person when the liability was incurred.
Two procedural points arise, namely whether these issues can or should be determined by originating summons as opposed
to judicial review and whether Mrs Kelsey can represent all investors whenever the liability to them was incurred.
In OReilly v Mackman [1982] 3 All ER 1124 at 1134, [1983] 2 AC 237 at 285 Lord Diplock, with whom Lord Fraser, Lord
Keith, Lord Bridge and Lord Brightman agreed, said:

it would in my view as a general rule be contrary to public policy, and as such an abuse of the process of the court,
to permit a person seeking to establish that a decision of a public authority infringed rights to which he was entitled to
protection under public law to proceed by way of an ordinary action and by this means to evade the provisions of Ord 53
for the protection of such authorities. My Lords, I have described this as a general rule; for, though it may normally be
appropriate to apply it by the summary process of striking out the action, there may be exceptions, particularly where the
invalidity of the decision arises as a collateral issue in a claim for infringement of a right of the plaintiff arising under
private law, or where none of the parties objects to the adoption of the procedure by writ or originating summons. Whether
there should be other exceptions should, in my view, at this stage in the development of procedural public law, be left to be
decided on a case to case basis

In this case the public authority, namely the plaintiffs, do not seek the protection of RSC Ord 53, but have themselves issued
the originating summons. Neither defendant objected to the procedure adopted by the plaintiffs, which is, in any event, warranted
by Ord 5, r 4(2). Accordingly, in my judgment, the procedure is not an abuse of the process.
The evidence shows that the rules of the compensation scheme limit the amount of compensation which may be paid to any
one investor to 48,000, and that the sum available in any one year for the payment of compensation is 100m. Since the scheme
came into effect, less than 5% of the sum available in each year has been paid in compensation. Thus, although in theory there
are different classes of investor in relation to the questions I have to determine, delineated by the period in which the liability to
them was incurred, there is no distinction in practice, for all eligible investors will be paid up to the limit 402 imposed by the
rules whatever the answer to the questions. Accordingly, in my judgment, these proceedings are properly constituted.
As is apparent from the originating summons, I am concerned only with the power conferred by s 54(1) in relation to
whether liabilities to investors, for which rules may provide compensation, must have been incurred within a particular period,
and, if so, which. This is a question of statutory construction, on which the published views of the plaintiffs, on which FIMBRA
sought to place some reliance, are irrelevant. Moreover, I am not directly concerned with whether any rule made by the
Securities and Investments Board is ultra vires, notwithstanding that it was FIMBRAs contention with regard to a particular rule
which prompted the plaintiffs to issue this originating summons.
Before I consider the rival contentions on the construction of s 54(1) it is convenient to deal with the question of
retrospectivity. FIMBRA contends that if the rules may provide for compensation in respect of liabilities to investors incurred
before the scheme became operative on 27 August 1988 for which their members can be made to contribute then the scheme
would be retrospective in operation. FIMBRA submits, relying on Lauri v Renad [1892] 3 Ch 402, that a statute should not be
construed so as to have a retrospective operation, unless its language is such as plainly to require it, but, even then, the
retrospective operation should be limited to that which the language of the statute renders necessary. For the test by which to
determine whether a statute is retrospective they rely on the advice of the Privy Council in Yew Bon Tew v Kenderaan Bas Mara
[1982] 3 All ER 833 at 836, [1983] 1 AC 553 at 558:
 A statute is retrospective if it takes away or impairs a vested right acquired under existing laws, or creates a new
obligation, or imposes a new duty, or attaches a new disability, in regard to events already past.

That test was applied by the House of Lords in Pearce v Secretary of State for Defence [1988] 2 All ER 348, [1988] AC 755
and Arnold v Central Electricity Generating Board [1987] 3 All ER 694, [1988] AC 228 and by the Court of Appeal in Lewis v
Lewis [1984] 2 All ER 497, [1984] Fam 79.
Counsel for Mrs Kelsey did not dispute the rules of construction, or the test for determining whether a statute has
retrospective operation, but claimed, by reference to other authorities, that s 54(1) could not be retrospective in operation as the
inability to satisfy claims in respect of liabilities whenever incurred must arise after the scheme became effective on 27 August
1988. They pointed to the fact that the passage in the advice of the Privy Council, which I have quoted, is itself a quotation from
Craies on Statute Law (7th edn, 1971) p 387, which was sufficient for the purposes of the case before the Privy Council, but that
the quotation from Craies was itself followed by a statement that

a statute is not properly called a retrospective statute because a part of the requisites for its action is drawn from a
time antecedent to its passing.

Reference is made in Craies to four authorities, on three of which counsel for Mrs Kelsey relied. The first is R v St Mary,
Whitechapel (Inhabitants) (1848) 12 QB 120, 116 ER 811. That case concerned s 2 of the Poor Removal Act 1846, which
provided that no Woman residing in any Parish with her Husband at the Time of his Death shall be removed from such Parish
for Twelve Calendar Months next after his death A widow, whose husband died before the passing of the 1846 Act, was
removed after the passing of that Act, but before the 12 months period had expired. The order was quashed. Lord Denman CJ
said (12 QB 120 at 127, 116 ER 811 at 814):
403

Was the pauper irremoveable by [the Poor Removal Act 1846] s 2, which enacted that no woman residing in any parish
with her husband at the time of his death shall be removed, nor shall any warrant be granted for her removal, from such
parish for twelve months next after his death if she so long continue a widow? It was said that the operation of the statute
was confined to persons who had become widows after the act passed, and that the presumption against a retrospective
statute being intended supported this construction: but we have before shewn that the statute is in its direct operation
prospective, as it relates to future removals only, and that it is not properly called a retrospective statute because a part of
the requisites for its action is drawn from time antecedent to its passing. The clause is general, to prevent all removals of
the widows described therein after the passing of the act; the description of the widow does not at all refer to the time when
she became widow: and we are therefore of opinion that the pauper was irremoveable at the time she was removed.

Thus, the test adopted was to consider whether the direct operation of the statute was prospective, even though some of the
conditions for its operation had occurred before the passing of the 1846 Act.
The second authority is Master Ladies Tailors Organisation v Minister of Labour and National Service [1950] 2 All ER 525.
That case concerned the Wholesale Mantle and Costume Wages Council (Great Britain) Wages Regulation (Holidays) Order
1949, SI 1949/1402, which came into force on 15 August 1949, whereby a worker who ceased to be employed after it became
effective became entitled to accrued holiday remuneration assessed by reference to successive periods of 12 months commencing
on 1 May 1948. It was contended that the order was ultra vires the enabling Act because it conferred on workers rights to holiday
remuneration in respect of employment before the date on which the order became effective and was, therefore, of retrospective
operation. Somervell LJ, after quoting the same passage from the judgment of Lord Denman CJ, said (at 528):

The statement I have quoted from LORD DENMAN, C.J., shows that not every matter which is retrospective in a
sense is retrospective in the sense in which I have to apply the words in the present case. I have come to the conclusion
that the effect of these provisions as to remuneration accruing, being, as I hold, to determine and limit the quantum of
prospective payments, do not make this order retrospective in the sense which has to be given to the word in this issue.
The claim, therefore, fails. Most of the cases dealing with retrospective legislation, some of which were cited to me by
counsel for the plaintiff are concerned with a different issue. It has, of course, been laid down in the clearest possible terms
that no statute or order is to be construed as having a retrospective operation unless such a construction appears very
clearly or by necessary and distinct implication in the Act. That most salutary principle does not assist in solving the
problem which I have so far been considering.

Thus, the liability to pay which arose after the order came into effect was prospective, notwithstanding that the amount was
determined by reference to events before that time.
The third authority is Re a solicitors clerk [1957] 3 All ER 617, [1957] 1 WLR 1219. In that case a solicitors clerk had
been convicted of larceny in 1953. By the Solicitors (Amendment) Act 1956 the Law Society was empowered to order that a
solicitors clerk who had been convicted of larceny should not be employed by 404 any other solicitor without the written
permission of the Law Society. The Law Society made such an order in 1957 in respect of a clerk who had been convicted in
1953. The clerk contended that the 1956 Act did not permit such a retrospective operation. This submission was rejected. Lord
Goddard CJ, said ([1957] 3 All ER 617 at 619, [1957] 1 WLR 1219 at 12221223):

In my opinion, however, this Act is not in truth retrospective. It enables an order to be made disqualifying a person
from acting as a solicitors clerk in the future and what happened in the past is the cause or reason for the making of the
order; but the order has no retrospective effect. It would be retrospective if the Act provided that anything done before the
Act came into force or before the order was made should be void or voidable or if a penalty were inflicted for having acted
in this or any other capacity before the Act came into force or before the order was made. This Act simply enables a
disqualification to be imposed for the future which in no way affects anything done by the appellant in the past.
Accordingly in our opinion the disciplinary committee had jurisdiction to make the order complained of and the appeal
fails.

Counsel for Mrs Kelsey also relied on Brindle v HW Smith (Cabinets) Ltd [1973] 1 All ER 230, [1972] 1 WLR 1653. In that
case the applicant was given notice before, but expiring after, the Industrial Relations Act 1971 came into force to terminate her
employment. She claimed to be entitled to compensation for unfair dismissal pursuant to the 1971 Act. The employer claimed
that such an entitlement would involve giving the 1971 Act a retrospective operation. This submission was rejected by Lord
Denning MR, who said ([1973] 1 All ER 230 at 232233, [1972] 1 WLR 1653 at 16581659):

For a time I was troubled by this illustration, but, on reflection, it seems to me that on 28th February 1972 the Act
would operate prospectively. It would operate on the dismissal which would take place on 8th March 1972. The Act is not
to be condemned as retrospective simply because some of the facts are drawn from the time before it came into
operation. In 1848 in R v St Mary, Whitechapel (Inhabitants) 12 QB 120 at 127, 116 ER 811 at 814, Lord Denman CJ said:
it is not properly called a retrospective statute because a part of the requisites for its action is drawn from time
 antecedent to its passing. That observation was applied by Somervell LJ in Master Ladies Tailors Organisation v
Minister of Labour and National Service [1950] 2 All ER 525 at 527. I hold therefore that this statute applies to notices
which straddle the Actnotices which are given before but due to expire after 28th February 1972.

Megaw LJ took a different view. He concluded that the 1971 Act changed the terms of the contract of employment and was,
therefore, of retrospective effect, but that there were clear and unambiguous words which authorised such a construction. Sir
Gordon Willmer agreed with everything that had been said by both Lord Denning MR and Megaw LJ.
I was also referred to Bennions Statutory Interpretation (1984) pp 448451.
By contrast, FIMBRA relied on Bradford Union Guardians v Wiltshire Clerk of the Peace (1868) LR 3 QB 604. That case
concerned a statute passed in 1840, whereby justices were authorised to order that the maintenance costs of a convicted prisoner
who became insane and was removed to an asylum in another county should be paid by the parish in which he was previously
settled. A particular prisoner who became insane was so removed in June 1864, and in 1868 the justices made an order relating to
his maintenance costs for the period between 4051864 and 1867. It was held by a majority that the 1840 Act did not authorise
such a retrospective order. Cockburn CJ said (at 616617):

I am of opinion we cannot so construe s 2 as to make it operate on past maintenance. The justices are to inquire into
the place of settlement, and having adjudged this, they are to make an order for the payment of the costs of inquiry, and of
the conveyance of the lunatic to the asylum, and such weekly sum for his maintenance as the justices think reasonable.
Prima facie this language is prospective, there is nothing which treats of past maintenance, and we start with the
proposition, that in all such cases the rate must be prospective and not retrospective, so that the expenses shall fall on the
ratepayers who are ratepayers at the moment of the expenses being incurred; whereas by doing what in effect would
amount to the same thing as making a retrospective rate, the expenses of past years are made to fall on the ratepayers of the
present year. That being a principle adopted long ago and long acted on, whenever the legislature has thought it expedient
to authorize the making of retrospective rates or orders, it has fixed the period as to which the rate or order may be
retrospectively made; but the effect of holding that the present section authorizes retrospective orders, unless we could find
some reasonable time to which to limit it, would be to allow it to be made with no period of limitation whatever; and it
might extend to a period even to ten years or more.

In concurring, Lush J said (at 621):

Prima facie, a rate cannot be made on the ratepayers of to-day to pay debts incurred five years ago; and on this
principle I cannot so interpret the statute as to enable this to be done by a retrospective order, unless there are clear words
indicating such an intention.

FIMBRA also sought to rely upon European Community law, but not only are these principles in substance the same, there
is in this case no relevant Community legislation, right or obligation to which the principles could be applicable.
In my judgment, the Bradford Union case was not concerned with the question of whether legislation is of retrospective
effect so as to attract the rule of construction, and was, in any event, dealing with a principle respecting the law of rating which
has no application to the case before me. The principle which, in my judgment, I should apply is that stated by Lord Denman CJ
in R v St Mary, Whitechapel (Inhabitants) (1848) 12 QB 120 at 127, 116 ER 811 at 814, and applied in all the subsequent cases to
which I have referred, namely is the direct operation of the statute prospective or retrospective? The operation to be considered is
that stated in Yew Bon Tew v Kenderaan Bas Mara [1982] 3 All ER 833, [1983] 1 AC 553, namely the creation of a new
obligation, the imposition of a new duty or the attachment of a new disability.
For the purpose of considering this question I will assume that the liability to an investor for which compensation may be
paid was incurred in 1984. The person who incurred the liability will remain subject to it, unless and until the Limitation Act
applies, or other circumstances occur to extinguish it. So long as that person remains able to satisfy his liabilities, no obligation,
duty or disability is cast on anyone else, and the investors right remains unimpaired. Section 54 only becomes applicable if the
person who incurred the liability becomes, or is likely to become, unable to satisfy claims in respect of any description of civil
liability incurred by him in connection with his investment business.
As is common ground, that event must occur after the compensation scheme has come into effect. On such a default the
investor would become entitled to 406 compensation, to which authorised persons would be liable to contribute. But the liability
to contribute can only arise on the default after the compensation scheme has come into operation. It is true that a condition of
liability to contribute and its quantum will depend on events occurring before the compensation scheme came into effect, as in all
the cases to which I have referred. But, in my judgment, the direct operation of s 54, on the assumption I have made, would not
be retrospective so as to attract the rule of construction to which I have referred.
For the plaintiffs and Mrs Kelsey it was submitted that, as s 54 is an enabling provision, the purpose of which is to be
implemented by rules, the jurisdiction thereby conferred should not be cut down by implications which are not necessary in the
strictest sense. For this purpose they relied on the speech of Lord Goff, in an admittedly different context, in Aiden Shipping Co
Ltd v Interbulk Ltd, The Vimeira [1986] 2 All ER 409 at 413, [1986] AC 965 at 975. That case concerned the discretionary power
to award costs conferred by s 51(1) of the Supreme Court Act 1981. Lord Goff said:

It is, I consider, important to remember that s 51(1) of the 1981 Act is concerned with the jurisdiction of the court to
make orders as to costs. Furthermore, it is not to be forgotten that the jurisdiction conferred by the subsection is expressed
to be subject to rules of court, as was the power conferred by s 5 of the 1890 Act. It is therefore open to the rule-making
authority (now the Supreme Court Rule Committee) to make rules which control the exercise of the courts jurisdiction
under s 51(1). In these circumstances, it is not surprising to find the jurisdiction conferred under s 51(1), like its
predecessors, to be expressed in wide terms. The subsection simply provides that the court shall have full power to
determine by whom the costs are to be paid. Such a provision is consistent with a policy under which jurisdiction to
exercise the relevant discretionary power is expressed in wide terms, thus ensuring that the court has, so far as possible,
freedom of action, leaving it to the rule-making authority to control the exercise of discretion (if it thinks it right to do so)
by the making of rules of court, and to the appellate courts to establish principles on which the discretionary power may,
within the framework of the statute and the applicable rules of court, be exercised. Such a policy appears to me, I must
confess, to be entirely sensible. It comes therefore as something of a surprise to discover that it has been suggested that
any limitation should be held to be implied into the statutory provision which confers the relevant jurisdiction. (Lord
Goffs emphasis.)

The plaintiffs and Mrs Kelsey also relied on the problems which would arise in practice if s 54(1) only permitted
compensation in cases where the liability was incurred during a particular period or after a particular time. In many cases, they
submit, it will be impossible for an investor to prove when the liability was incurred.
But FIMBRA does not primarily seek to establish any implied limitation. It relies on the express words of s 54(1). But it
does contend that Parliament cannot have intended that authorised persons should be liable to contribute to the scheme in order to
enable compensation to be paid to an investor in respect of a liability incurred by a person who was not an authorised person
when the liability was incurred, in respect of a transaction which was not investment business, as defined, when it was carried
out. The essential question is whether the liability for which the investor is to be entitled to compensation must be any
description of civil liability incurred by them etc (as described in the second part of the subsection) as FIMBRA contends, or
whether the words, in cases where and those 407 which follow, merely describe the occasion when the compensation scheme
was to operate, namely the inability to satisfy claims, without defining the categories of loss to be compensated, as Mrs Kelsey
contends.
FIMBRA relied on the decision of the Divisional Court in R v Secretary of State for Trade and Industry, ex p R [1989] 1 All
ER 647, [1989] 1 WLR 372. In that case the court was concerned with the power conferred by s 105 to investigate the affairs of
any person so far as relevant to any investment business which he is or was carrying on In May and June 1988 R was
required to produce documents dating from 1984. He did not dispute his obligation to do so if those documents related to
investment business carried on by him after 18 December 1986, when the definition of investment business came into force, but
he objected to producing documents relating to business carried on by him before that date which could not, on that account, be
recognised at the time as investment business. The question for the court was whether business carried out before 18 December
1986 could, or could not, be investment business within the meaning of the Financial Services Act 1986. The court concluded
that it could not for two reasons. The first and narrower reason was given by Mustill LJ, where he said ([1989] 1 All ER 647 at
650, [1989] 1 WLR 372 at 376):

One may now return to the Secretary of States theory of retrospective labelling. In order to decide whether any pre-
Act transaction had those characteristics which would have enabled it to rank as investment business if that concept had
then existed as part of English law, it would have been necessary to know two facts: first, whether the transactions
concerned investments of a type, and involved dealings of a type, described in Pt I of Sch 1; second, whether the dealing
was an excluded activity. Of these, the first fact was objectively ascertainable, its existence being independent of the
coming into force of the 1986 Act, and of anything done under the Act. But in many cases the second fact could not be
ascertained, for where the primary party dealt as principal it would be necessary to know whether the counter-party fell into
one of the three categories referred to in para 17(2)(a), and, as we have seen, these categories could not exist before the
mechanisms created by the 1986 Act were available and were utilized. So far as I can see, the only way to save the idea of
retrospective labelling is to hold either that the impossibility of identifying an excepted transaction meant that all pre-Act
dealings as principals were automatically excluded from investment business (in which case the category would become
larger on the appointed day), or were automatically included (in which case it would shrink). Neither reading conforms
with what the 1986 Act says, or with common sense. To my mind, s 105 just will not work if it is read as applying to pre-
Act transactions.

The second, and wider, reason was given by Mustill LJ in the following terms ([1989] 1 All ER 647 at 651, [1989] 1 WLR
372 at 377):

I do not, however, see any reason why Parliament should have given the Secretary of State powers to investigate
putative investment business before the Act, to underpin the supervision of a scheme and the application of sanctions to
enforce it, when the scheme only began to come into existence on the first of the appointed days.

FIMBRA relies on both reasons to support its contention. It claims that, until the definition of investment business became
operative on 18 December 1986, there could have been no investment business in connection with which the civil liability could
have been incurred, and, by parity of reasoning, until s 3 and Ch III came into operation on 29 April 1988, it could not be
ascertained whether the 408 person liable to the investor was an authorised person. FIMBRA points to the fact that s 54 comes
within Ch V, which deals with the conduct of investment business, which necessarily looks to the future, and should not,
therefore, be applicable to liabilities incurred in the past.
For Mrs Kelsey it was pointed out that the purpose of s 105 is different to that of s 54, and that several provisions contained
in Ch V are concerned with the consequences of events occurring before the 1986 Act came into force, notably s 49 dealing with
financial resources.
With one exception, I have not found the other provisions of the 1986 Act to be of any assistance. The exception is s 53(1),
which provides:

The Secretary of State may make rules concerning indemnity against any claim in respect of any description of civil
liability incurred by an authorised person in connection with his investment business.

That section has not yet been brought into force, but no party suggested that its terms could not be considered in relation to the
question of construction with which I am concerned. Section 53 is evidently seeking to require financial backing to satisfy any
claim as described. That description is substantially the same as the description used in s 54(1). Thus, one might expect s 54(1)
to cater for the consequences to the investor if there were a breach of the indemnity rules. But there are differences. In particular,
the liability under s 53 must, by its express terms, be incurred by an authorised person.
Counsel for Mrs Kelsey frankly accepted that s 54(1) requires that the investor must have a claim against the person who has
defaulted, but he submitted that that was necessarily implicit in the concept of compensation and was not a necessary condition
derived from the description of cases where compensation might be provided. He maintained that that part of the subsection
merely specified the occasions when the scheme is to operate, namely the default of the person who is, or was, an authorised
person.
It was submitted for FIMBRA that the second part of the subsection cannot be read as merely descriptive of the occasions
when the scheme is to operate. It was pointed out that an individual who was an authorised person carrying on investment
business might go bankrupt because of a debt unconnected with his business. In that event, no doubt he would be unable to
satisfy the liabilities referred to in s 54(1) either. But why should Parliament specify the latter default rather than inability to pay
debts if it was not intended to specify the qualification of a claimant for compensation? Unless the cases referred to set out such
qualifications, then the concept of the investor claimant would be deprived of meaning, he would not necessarily have a claim
against a person who is, or had been, an authorised person, and any such claim would not necessarily be in connection with an
investment business, for example the placing of money on deposit.
I prefer the submissions for FIMBRA. It seems to me that the words, in cases where are not the equivalent of the word
if. Had it been intended that the cases should refer merely to occasions when there was an inability to pay, then the word
when would have been used instead of the word where, and there would have been no reason to define the event by reference
to civil liabilities incurred in connection with investment businesses rather than inability to pay debts generally. Whilst I accept
that the concept of compensation necessarily involves a claim by an investor in respect of a liability to him incurred by another, it
is only by resorting to the later words that such other person can be confined to one who is, or has been, an authorised person.
There can be no reason why Parliament should have intended authorised persons to compensate investors for the failure of a 409
person who has never been an authorised person. Accordingly, in my judgment, s 54(1) does not authorise a scheme for
compensating investors for liabilities incurred at any time. Thus, I reject alternative (i) suggested by the originating summons.
The question then is which of the alternatives suggested in the originating summons is the right one? Given that the second
part of the subsection is not merely stating when the compensation scheme is to operate, but is also prescribing the conditions in
which the right to compensation may arise, then the liability to the investors for which compensation is sought must satisfy three
conditions. It must be a claim in respect of any description of civil liability, such liability must be incurred by persons who are,
or have been, authorised persons, and it must have been so incurred in connection with their investment businesses.
In relation to the third condition, it seems to me to be plain, for all the reasons given by the Divisional Court in R v
Secretary of State and Industry, ex p R [1989] 1 All ER 647, [1989] 1 WLR 372, that there could be no liability incurred in
connection with investment business until the definition of that term came into force on 18 December 1986.
For Mrs Kelsey it was submitted that the subsection does not require that the person incurring the liability should be an
authorised person at the time. It was suggested that that qualification was attached only to the description of the person unable to
satisfy the claims. The words them and their in the phrase, incurred by them in connection with their investment businesses
refer back to persons who are or have been authorised persons. But this does not support the argument for FIMBRA that the
liability must have been incurred at a time when the person was authorised, because this would give no effect to the words or
have been included in s 54(1), but notably not included in s 53(1). Accordingly, I reject alternative (iv).
Given that the default must occur after the scheme came into force, and my conclusion that in that case the subsection has no
retrospective operation, I can find no words in the subsection to warrant a conclusion that the liability in question should have
been incurred after the scheme came into force. The 1986 Act is so structured that it was evidently intended to come into force in
stages. Section 54 is an enabling provision in wide terms. In my judgment, it is not a necessary implication to restrict the power
to provide for compensation so as to cater only for cases where the liability was incurred after the scheme came into effect.
Accordingly, I reject alternative (iii).
On this basis, only alternative (v) remains. But if, as I have indicated, the liability must be incurred by a person who is, or
has been, an authorised person, there is a further alternative, namely 29 April 1988 when Ch III, which prescribes who may be an
authorised person, came into force. Counsel for FIMBRA suggested that this was the correct answer if I rejected, as I have, his
argument in support of alternative (iii). He argued that this submission was supported by parity of reasoning with R v Secretary
of State for Trade and Industry, ex p R, for, until Ch III came into operation, it could not be ascertained whether the person
incurring the liability is, or has been, an authorised person. In my judgment, the answer lies in the words, or have been. As I
have already held, these words show that the liability in question may be incurred at a time when the person incurring it is not an
authorised person. Thus, there is no temporal link between authorisation and incurring the liability. Although the word them
refers to persons who are, or have been, authorised, the subsection recognises that the liability may be incurred by an
unauthorised person. Thus, liabilities incurred after a person has ceased to be authorised are plainly included. Nothing is said
about liabilities incurred before authorisation. I do not think it would be right to 410 imply into the enabling subsection a
condition which would exclude them. I can see no reason why compensation for such liabilities should be excluded when the
subsection is not retrospective in operation but does require that the person should be authorised at some time. There is,
therefore, no necessity for any such implication.
For all these reasons, in my judgment the correct answer is alternative (v), and I will so declare.
The argument for each defendant recognised that claims in respect of any description of civil liability incurred by them in
connection with their investment businesses could include non-investment claims. The example was given of a computer expert
who supplied services for the investment business of an authorised person, through whom be also invested. At this point arose
whichever submission I accepted, it is not a point I need to decide, and I think it would be undesirable to express any view at all.
Likewise, there was reference in argument to the practical difficulties which would arise if the liability for which
compensation was sought had to be incurred after a particular date. Various solutions were canvassed, but whether any and, if so,
which of them might solve or mitigate the problems anticipated, is not a question for my decision and would, at the least, require
further argument directed to the provisions of s 4(2), which, because they are without prejudice to the generality of sub-s (1), did
not loom large in the argument before me.
Accordingly, I will make a declaration in respect of para 1 of the originating summons in sense (v), and I will consider with
counsel what (if any) representation orders to make under para 3.

Order accordingly.

Solicitors: A M Whittaker; C P Pinnell; A M Whittaker.

Hazel Hartman Barrister.

[1991] 4 All ER 411

Re St Peter and St Paul, Scrayingham

ECCLESIASTICAL

YORK CONSISTORY COURT

CHANCELLOR THOMAS CONINGSBY QC
9, 18 OCTOBER 1990

Ecclesiastical law Churchyard Boundary Dispute as to boundary Jurisdiction of consistory court Duty of court to
determine boundary Whether court should grant faculty for erection of fence on boundary Pastoral Measure 1983, s
56(2).Ecclesiastical law Consistory court Costs Petition for faculty Parties opponent maintaining opposition throughout
proceedings Parties opponent not appearing at hearing Court granting faculty Liability for costs Inter partes costs
Registry and court costs Costs of archdeacon as joined petitioner.

In February 1989 the petitioners sought a faculty for the erection of a fence around part of a churchyard, the purpose of the fence
being to mark the boundary between the churchyard and an adjoining cottage which was owned and occupied by the first and
second parties opponent respectively. The second party opponent claimed that the line of the proposed fence as shown in the
petition was on her side of the true boundary, which she contended was approximately the line of a 411 temporary fence which
had been erected by the churchwardens for the purpose of keeping sheep which grazed the churchyard from entering the cottages
garden. The evidence before the consistory court with respect to the boundary consisted of a conveyance in 1974 to the first
party opponents predecessor in title in which the land conveyed was identified by reference to a copy of the Ordnance Survey
map, which showed the boundary running through the centre of a hedge, an aerial photograph and oral evidence of one of the
churchwardens and of the first party opponents predecessor in title. The parties opponent actively opposed the petition from
shortly after the presentation of the petition and continued to be parties even though the solicitors who had represented them
during most of the course of the proceedings ceased to act for them and were removed from the record. Neither party opponent
appeared at the hearing nor were they represented at a viewing of the locus. The questions arose as to the consistory courts
jurisdiction in boundary disputes and as to costs.
Held (1) Since s 56(2)a of the Pastoral Measure 1983 provided that it was not lawful to dispose of any part of the site of a
church except in pursuance of powers under that Measure, it followed that the consistory court had no power, whether by faculty
or otherwise, to allow the alienation of the curtilage of a church, and since there was no doubt that the strip of land which was the
subject-matter of the dispute between the parties was part of the site of the church, the churchyard being a single churchyard
without any internal fences or boundaries, and since the purpose of the fence was to delineate the boundary, it followed that the
court had to ensure that the fence was erected on the correct legal boundary and not in such a position as might lead to
misunderstanding in the future as to the precise location of the boundary.
________________________________________
a Section 56(2), so far as material, is set out a p 416 b, post

(2) Since the consistory court had jurisdiction to determine the line of a boundary if it was necessary to do so in order for the
court to decide whether to grant a faculty which related to that boundary, and since the court was satisfied on the evidence that,
subject to a minor adjustment, the boundary was where it was shown in the amended petition, the court would grant the
petitioners a faculty for the erection of the fence they sought, (see p 415 b c h and p 417 a to d, post); Re St Clements, Leigh-on-
Sea [1988] 1 WLR 720 followed.
(3) Since the parties opponent had been made aware throughout the proceedings of the possible outcome in relation to costs
should their opposition be unsuccessful, since they had maintained active opposition throughout and had continued to be parties
notwithstanding the withdrawal of their solicitors and since it had been their opposition which had caused the petitioners to incur
legal costs in a matter in which a faculty could have been granted without much expenditure, the court would order that the
parties opponent be jointly and severally liable for the petitioners costs of the proceedings incurred after the parties opponent
lodged their notices of objection to the petition. However, since the primary liability in proceedings in the nature of a petition to
an authority having power either to grant or refuse that petition rested with the petitioning party, the court would follow the
normal practice of the consistory court of requiring the petitioners to accept primary responsibility for the registry and court
expenses, leaving them with an indemnity against the parties opponent (see p 417 h j and p 418 d to g, post).
Consideration of how liability for registry and court costs should be divided between churchwarden petitioners and the
archdeacon where the archdeacon has been joined as a petitioner (see p 418 h to p 420 c, post).
412

Notes
For faculties relating to churchyards, see 14 Halsburys Laws (4th edn) para 1315.
For costs of faculty proceedings, see ibid para 1328.
For the Pastoral Measure 1983, s 56, see 14 Halsburys Statutes (4th edn) 669.

Cases referred to in judgment

Davey v Harrow Corp [1957] 2 All ER 305, [1958] 1 QB 60, [1957] 2 WLR 941, CA.
Eastwood v Ashton [1915] AC 900, HL.
Fisher v Winch [1939] 2 All ER 144, [1939] 1 KB 666, CA.
Rouse v Gravelworks Ltd [1940] 1 All ER 26, [1940] 1 KB 489, CA.
St Clements, Leigh-on-Sea, Re [1988] 1 WLR 720, Con Ct.
St Martin le Grand, York, Re, Westminster Press Ltd v St Martin with St Helen, York (incumbent and parochial church council)
[1989] 2 All ER 711, [1990] Fam 63, [1989] 3 WLR 1207, Con Ct.

Petition for faculty

By a petition dated 26 February 1989 and amended in December 1989 John E Sherwood and Dennis R Sawyer, two of the
churchwardens of the parish of Scrayingham in the diocese of York, and the Rev Dr Kenneth Bailes, the rector of the parish,
sought (1) a faculty to remove a temporary fence within the churchyard and standing on the side of the garden of Church Cottage,
which was situated adjacent to the churchyard, (2) an order that the parties opponent, Welldac Investments Ltd, a company
registered in Jersey in the Channel Islands, and Mrs Barbara D Cadwell, who were respectively the owner and occupier of
Church Cottage, remove a garden shed/hut and its brick/concrete base so that no part of it was within the churchyard, (3) an order
and faculty that, in the event of the parties opponent not so removing the shed/hut and base, the petitioners be authorised to do so
and (4) a faculty to erect a fence around part of the churchyard of the church of St Peter and St Paul, Scrayingham. By an order
dated 3 August 1990 the Archdeacon of York, the Ven George Austin, was added as a petitioner representing the interests in the
proceedings of the Archbishop of York, in whom the incumbency of the parish was vested during the vacancy therein caused by
the departure of the Rev Dr Bailes from the group of parishes which included Scrayingham. The facts are set out in the
judgment.

John Bullimore for the petitioners.

The parties opponent did not appear.

At the conclusion of the argument and after viewing the locus the court announced that the petition would be granted for reasons
to be given later.

18 October 1990. The following judgment was delivered.

THE CHANCELLOR: By a petition dated 26 February 1989 the incumbent of the parish of Scrayingham, the Rev Dr K Bailes,
and the two churchwardens sought a faculty for the erection of a fence around part of the churchyard at the church of St Peter and
St Paul, Scrayingham. The purpose of the fence is to mark the boundary between the churchyard and a cottage known as Church
Cottage situated adjacent to the south-west corner of the churchyard. By amendment to the petition made in December 1989 the
line of the proposed fence was specified by reference to certain features on the ground and also by reference to a scale plan. The
garden of Church Cottage consists of a V-shaped area in front of the 413 cottage, with which the court is not concerned in these
proceedings, and a larger area at the rear which at first sight appears to be roughly rectangular, but which on my finding tapers
somewhat towards the rear boundary. The cottage is occupied by Mrs Barbara D Cadwell and she is a party opponent in the
proceedings, claiming that the line of the proposed fence as shown in the petitioners plan is on her side of the true boundary.
This happens to be approximately the line of an existing sheep net temporary fence which exists, but it is the petitioners case that
this has been erected by one of the churchwardens some distance on the churchyard side of the boundary, simply for the purpose
of keeping sheep (which graze the churchyard) from entering Mrs Cadwells garden, so that it does not represent the line of the
true boundary. It is evident that before the court can make a decision whether or not to give leave for the erection of a new fence
the court must resolve the issue as to where the true boundary lies, since it would not be proper for the court either to allow the
petitioners to put up the fence in the position for which they contend if in reality that position breaches the boundary or on the
other hand to allow the petitioners to put up the fence along the line contended for by Mrs Cadwell, since that would be to
delineate a boundary in a false position and might lead in the course of years to the loss of land forming part of the churchyard.
 At an early stage Mrs Cadwell stated that Church Cottage was not owned by her but was owned by a company called
Welldac Investments Ltd, registered in Jersey in the Channel Islands. A recent letter from solicitors acting for that company
indicates that all the shares in Welldac Investments Ltd are now owned by Robert L Cadwell, who is, or has been, the husband of
Mrs Cadwell. Welldac Investments Ltd are parties opponent to the petition and the amended petition. Both Mrs Cadwell and
Welldac Investments Ltd were represented in the proceedings by solicitors, Messrs Thorpe & Co, but in February 1990 these
solicitors ceased to act for Mrs Cadwell and were removed from the record by an order of the court dated 7 February 1990, and
they also ceased to act for Welldac Investments Ltd and an order was made by the registrar on 5 October 1990 declaring that they
had ceased to act as solicitors for the company. By an order of the court dated 3 August 1990 the Ven George Austin, the
Archdeacon of York, was granted leave to join as a petitioner in the proceedings and he thereafter became a petitioner and
supported the churchwardens in the presentation of their case. The addition of the archdeacon as a petitioner came about because
the Rev Dr Kenneth Bailes left the group of parishes which included Scrayingham and became incumbent of Bilborough in
January 1990. The incumbency of the group of parishes including Scrayingham was vacant at the time of the hearing and the
archdeacon represented the interests in the proceedings of the Archbishop of York in whom the incumbency is vested during the
vacancy.
The hearing took place on 9 October 1990. It commenced in the courtroom of York Minster, where counsel (Mr John
Bullimore) appeared for the petitioners. After a hearing lasting some three hours, during which documents were examined and
the oral evidence of four witnesses taken, the court adjourned to Scrayingham, where a view of the locus took place. Thereafter
the court reconvened in the chancel of Scrayingham church for further consideration, largely in relation to the form of order
which the court should make and to costs. The court announced at that stage its basic decision in relation to the matter of the
boundary and the erection of the fence and gave an indication that this written judgment would be provided in due course and that
certain issues with regard to costs would be dealt with in the written judgment. On the morning of 10 October five stakes were
planted in the ground to mark the line along which the new fence should be erected and this was done under supervision by the
court and in the presence of a 414 surveyor engaged by the petitioners, who took measurements so as to fix the position of the
stakes. No one attended the hearing or the view of the locus on behalf of Welldac Investments Ltd and Mrs Cadwell was also not
present. Church Cottage appeared to be unoccupied at the time of the visit to the locus.
The decision of the court announced at Scrayingham on the afternoon of 9 October 1990 was basically in line with the
petitioners case. Permission was given (and is confirmed by this judgment) for the erection of a fence along the line shown blue
on the plan (save for a minor adjustment at the point where the line passes the east gable end of Church Cottage). The line of the
fence authorised by the court is along the line of the true boundary between the churchyard and the land belonging to Church
Cottage. [Having then specified in detail where the line of the boundary was and the nature of the fence which was to be erected,
and referred to what the court had seen at the site inspection, the Chancellor proceeded to outline the documentary and oral
evidence that had been before the court. The Chancellor continued:]

Matters of law
The court is satisfied that the boundary on the east and north sides of Church Cottage follows the site of the former
hedgerows. These hedges, although overgrown in later years, were of long standing. It is reasonable to suppose that they were
there at the time of the preparation of the Ordnance Survey map in the early part of the nineteenth century. The evidence of Mr
Shannon, who had purchased Church Cottage in 1974, and of Mr Sawyer, one of the churchwardens, is to the effect that the
boundary ran along the line of the stems of the plants in the hedges, ie the mid-point of the hedges. Mr Bullimore referred the
court to a passage in Gale on Easements (15th edn, 1986) p 337 which says that where parcels on an Ordnance Survey map are
bounded by a hedge it is the invariable practice of the Ordnance Survey Office to show the boundary on the map as running
through the centre of the hedge, and that the court would take judicial notice of this (see Davey v Harrow Corp [1957] 2 All ER
305, [1958] 1 QB 60). Gale continues: Consequently, if parcels so bounded are conveyed by reference to the Ordnance Survey
map, their boundary will be in the centre of the hedge, and any presumption to the contrary will be rebutted (see Fisher v Winch
[1939] 2 All ER 144, [1939] 1 KB 666; Rouse v Gravelworks Ltd [1940] 1 All ER 26, [1940] 1 KB 489). In the present case the
land conveyed to Mr Shannon in May 1974 was identified by reference to the Ordnance Survey map. Although the plan attached
to the conveyance is a poor plan it is quite evidently a copy of the Ordnance Survey map of which a better copy appears in the
bundle. I conclude that the boundaries as shown on the latter map on the east and north sides of the cottage land represent the
centres of the hedges. Marrying this aspect of the matter with the evidence of Mr Shannon, the aerial photograph which he
produced and what the court itself saw at the site inspection, the court is fully satisfied that the conclusion which it has reached as
to the position where the new fence should be erected does properly represent the true line of the boundary between the two
properties.
There is of course no doubt that there is a duty on a parochial church council to provide proper fencing for a churchyard for
which it is responsible: see the Revised Canons Ecclesiastical, Canons F13 and F14 and the Opinions of the Legal Advisory
Commission of General Synod (6th edn, 1985) p 79. The parochial Church Councils (Powers) Measure 1956, s 4(1)(ii) imposes
upon Parochial church councils (in the place of churchwardens) the responsibility for the care and maintenance of churchyards.
In considering this case the court has been conscious of the necessity of ensuring 415 that the new fence is erected in such a
position as not to allow the loss of any land belonging to the church. The need for the court to be assiduous in the matter arises
from s 56 of the Pastoral Measure 1983, which declares that church land is not to be disposed of except under the special powers
of the Measure (which do not apply in the present case). Subsection (2) reads:

It shall not be lawful to sell, lease or otherwise dispose of any church or part of the site of any church
belonging or annexed to a church except in pursuance of powers under this Part or section 30.

There is no doubt that the strip of land at the rear of Church Cottage which has been the subject-matter of the dispute in
these proceedings is part of the site of Scrayingham church. The churchyard at Scrayingham is a single churchyard, without any
internal fences or boundaries. The distance between the corner of the church building and the nearest part of the cottage garden is
only 24 yards. The whole of the churchyard is curtilage of the church. It was in that circumstance that the court had to ask the
petitioners to reconsider the line of the fence as indicated in the unamended petition, following which the petitioners correctly
petitioned to erect the fence along the exact legal boundary as it had been prior to the encroachment by Mrs Cadwell. It is
necessary for the court to make it clear that the court does not have power, by faculty or otherwise, to allow the alienation of
curtilage so as to provide additional garden for an adjacent property. Where the purpose of a fence is to delineate the boundary,
as it undoubtedly is in the present case, the court must ensure that the fence is erected upon the boundary, and not in such a
position as might lead to misunderstanding in future as to the precise location of the boundary. Those are the circumstances in
which the court has considered it necessary to ensure that the fence in the present case is sited precisely over the correct legal
boundary.
Mr Bullimore referred me to the helpful decision of Chancellor Cameron QC in Re St Clements, Leigh-on-Sea [1988] 1
WLR 720. I adopt what the learned Chancellor said in relation to the importance of taking great care over the way in which the
land conveyed is being described (at 723). I also adopt what she says in relation to the circumstances in which the court can
admit extrinsic evidence with a view to ascertaining the extent of the land conveyed. In the present case the court has not been
provided with the actual conveyance between Mr and Mrs Shannon and Welldac Investments Ltd. The evidence from the
contract and draft conveyance which appear in the bundle is that the original intention was for the Shannons to convey to Mrs
Cadwell, so that the draft conveyance was prepared in that form. However, it is clear from the correspondence with Thorpe & Co
(and also from the evidence of Mr Shannon) that in the event the conveyance was made to Welldac Investments Ltd. Since I do
not have that conveyance, and any plan annexed to it, it has been necessary for me to go back to the conveyance to Mr and Mrs
Shannon in 1974 in order to find any conveyance with a description of the land and with a plan. The description of the land is
inadequate to determine the boundaries, since it merely describes the land as a parcel of land containing 775 square yards or
thereabouts which is for the purpose of identification only more particularly delineated on the plan attached hereto, that
being an extract from the early twentieth century Ordnance Survey map. As I have previously stated the map is insufficient to
delineate the boundaries. No measurements are given either in the conveyance to Mr Shannon or in the later contract for sale to
Mrs Cadwell. It is in those circumstances that, following the same course as Chancellor Cameron and the authority of Eastwood
v Ashton [1915] AC 900 at 913, I admitted extrinsic evidence, including the evidence of oral witnesses and the evidence which
can be gleaned from an inspection of the site, in order to establish the boundaries.
416
I am also following the same approach as Chancellor Cameron in accepting that the consistory court has jurisdiction to
determine the line of a boundary if it is necessary to do so in order for the court to decide whether or not to grant a faculty which
relates to that boundary. In the present case I could not deal with the petitioners application to erect the fence without first
deciding the line which that fence should follow. Chancellor Cameron followed the same course in relation to establishing
whether or not a fence which was the subject of a dispute in that case had been erected partly on church property. I have myself
in the past accepted jurisdiction in the consistory court in relation to a disputed pedestrian right of way over a churchyard: see Re
St Martin le Grand, York [1989] 2 All ER 711, [1990] Fam 63.
I therefore direct that a faculty do issue on the amended petition for the erection of a fence of the type shown in the bundle
and that it is to be erected upon the line of the boundary between Church Cottage and the churchyard of Scrayingham church,
which boundary is in the position which I have already stated in this judgment. The faculty is to specify the boundary by
reference to a copy of the petitioners plan and with a subsidiary plan (in a larger scale) showing the boundary along the side of
the east gable wall of Church Cottage, including the part of the boundary at the south-east corner of the cottage where the
irregularity occurs. I further direct that the fence is to be erected within three months of the issue of the written faculty and there
will be liberty to all parties to apply to me for any further directions which may be necessary as to the implementation of the
faculty. I do not make any order in relation to para 1 of the schedule to the amended petition (seeking permission to remove the
temporary fence of sheep netting) because I consider that no faculty is required to remove a fence which was erected only for
temporary purposes and which is of an insubstantial nature. I do not make any order in respect of paras 2 or 3 of the amended
schedule because the forms of order sought either are not within the jurisdiction of the consistory court or are in my view not
required. Accordingly the faculty will be granted pursuant to para 4 of the schedule, but subject to the modifications to which I
have already referred. The marked plan which will be attached to the faculty will be a version of that which appears in the
bundle, but with the slight modification necessary in relation to the line of the fence where it passes the east wall of the cottage
and where it meets the metal fence at the front of the churchyard. The large scale plan relating to this area should also be
attached to the faculty.
I come now to the question of costs and court fees. There are a number of considerations.
(a) Inter partes costs At the conclusion of the hearing Mr Bullimore asked for an order that each party opponent should be
directed to pay the legal costs and disbursements of the petitioner. The parties opponent have both been made aware throughout
these proceedings of the possible outcome in relation to costs should their opposition be unsuccessful. Both parties opponent
have maintained their opposition throughout and have continued to be parties, notwithstanding the withdrawal of their solicitors.
Their opposition has been active. Furthermore, it is their opposition which has brought about the incurring by the petitioners of
legal costs since, had there been no opposition, this is a matter in which a faculty could have been granted without a great deal of
work by lawyers and without the expense of witnesses and the attendance of a surveyor. I therefore make an order that the first
and second parties opponent be jointly and severally liable for the petitioners costs of the proceedings, save in respect of the
period prior to their notices of objection, these dates being 7 April 1989 in relation to Mrs Cadwell and 11 April 1989 in relation
to Welldac Investments Ltd. These costs will be taxed by the registrar if not agreed between the petitioners and the parties
opponent. 417The petitioners should submit their bill of costs to the parties opponent within three months of the date of the
faculty and thereafter to the registrar for taxation after a further month if agreement has not been reached within that time.
(b) Liability for the registrars fees and disbursements and for the Chancellors fees and disbursements Similar
considerations arise as to which of the parties has brought about the incurring of these items. The parties opponent have been
unsuccessful in their opposition and I have no doubt that they should be responsible for paying registry and court fees, costs and
expenses as from the date of their notices of objection.
(c) There is however a question of the form of the courts order. The court can either make an order directly against the first
and second parties opponent (in which case it would do so jointly and severally) or it can make an order that the petitioners are to
be primarily responsible to the registrar and to the court for these items, but that they are to have a right of indemnity against the
first and second parties opponent for all sums incurred after the dates of the notices of objection. Mr Bullimore has urged me to
make a direct order against the parties opponent, this being on the general grounds that it is their intervention in the proceedings
which has brought about these costs. While accepting the force of this argument it is also relevant to observe that the primary
liability in proceedings which are in the nature of a petition to an authority having power either to grant or refuse that petition
must rest with the petitioning party. This would be the basic position with regard to an application for planning permission, to
which faculty proceedings are somewhat analogous. Furthermore in the present case one of the parties opponent is a company
registered abroad and the other (Mrs Cadwell) is a person who has demonstrated a certain lack of objectivity in relation to the
proceedings, such that in these different ways the registrar of the court might experience great difficulty in seeking to enforce any
order which was made directly against the parties opponent. I believe that the court has an important duty to ensure the proper
remuneration of its registrar. In the present case his involvement has been very considerable because of the length of time (nearly
two years) with which he has been concerned in it. I am of course mindful that the expense being involved in the present
proceedings will be extremely difficult for the parochial church council of Scrayingham church to bear, since Scrayingham is
only a small hamlet and only some three families from the community are regular attenders at the church. Nevertheless I have
come to the conclusion that I must follow what has become the normal practice in the consistory court of requiring the petitioners
to accept primary responsibility for the registry and court expenses, leaving them with an indemnity against the parties opponent,
and I shall make an order in that form.
(d) The remaining question is how this liability for registry and court costs is to be divided as between the churchwarden
petitioners on the one hand and the Archdeacon of York on the other. Since the Archdeacon of York clearly became a petitioner
in the proceedings in order to assist the churchwardens in proceedings which were otherwise placing them under a great strain, it
seems entirely reasonable that the diocesan board of finance, on behalf of the diocese, should contribute. It needs to be
understood in the diocese that the interest in securing the settlement of disputes within individual parishes (which require the
intervention of the court) is not simply the interest of the parish but is also the interest of the diocese as a whole. If the faculty
jurisdiction were not available, and were not properly exercised, in order to deal with these disputes the diocese would be left
with problems in individual parishes, which in some cases could only be described as running sores, which in the end would be
to the detriment of the diocese. The present case involves the additional factor that it is hoped that 418 a new incumbent of the
team rectory is to be instituted within the next few months and it is clearly a matter of diocesan concern that these proceedings
should have been dealt with, in a conclusive way, prior to that institution. It is also relevant that the faculty jurisdiction
constitutes the Churchs own system for dealing with applications to alter listed buildings and it is a matter of diocesan concern
and interest that it should be properly exercised, and that the expenses involved in the administration of this system should be
properly met so as to ensure that persons of the necessary calibre are available to manage the system. This of course is a point of
general relevance to the diocesan interest in the faculty jurisdiction, and is not of particular application to the present case, where
the alteration sought is to a feature of the churchyard rather than to the church building itself.
The archdeacons contribution in the present case can only relate to the period during which he was a petitioner. This period
can conveniently be considered as running from the date of the courts direction on 3 August 1990 for the archdeacon to become
a party. In considering what proportion of the registry and court fees should be met by the archdeacon from that date the
following factors are relevant.
(a) Although the fees for the hearing will be a major item, a significant part of the registrars fees and disbursements will
relate to the period to 3 August 1990. The same is likely to be the case in respect of the Chancellor (although to a lesser extent).
I have already listed the various occasions when directions were given between December 1989 and August 1990. These
included the directions hearing in the minister courtroom in February 1990, the meeting in July 1990 and the directions which
followed that meeting. The archdeacon cannot be directed to contribute towards any of those matters.
(b) Because of the expected institution of a new rector this is a case in which it was of particular importance to the diocese
that the dispute should be settled. That means that a hearing should take place, since no other method of resolution could
succeed. Every effort had been made by the parish to settle the matter early on and at the Chancellors direction the meeting had
taken place in July.
(c) The main purpose of the archdeacon becoming involved in the proceedings was to relieve the parish. This must be
understood not only in relation to the pressure upon the churchwardens, but also in relation to the costs which were being
occasioned by the parochial church council. I must assume that the archdeacon, when expressing his willingness to be joined,
was fully aware of the costs implications, and also that he had the backing of the diocesan board of finance in becoming a party.
(d) These matters of court costs are not easy and have occasioned considerable concern to me as Chancellor. At the end of
the day I have to make what order I consider to be fair and right. In the present case I am very mindful of the fact that the
churchwardens of this small church have been faced with a very difficult legal and practical problem, partly at a time when they
have had no incumbent. The congregation of this church can only be described as minute. It is a situation in which they deserve
substantial support from the diocese. It is due to no fault on the part of the incumbent, churchwardens and parish church council
that they have been faced with the intransigence of the parties opponent. The two churchwardens who gave evidence before me
were clearly devoted and tireless workers on behalf of their church. It is not in the interests of the parish or group of parishes,
under its new incumbent, that Scrayingham should be left with a substantial indebtedness in respect of court fees.
Having regard to all these considerations my direction is that all the registry and court fees and disbursements as from 3
August 1990 shall be met by the 419 Archdeacon of York, who is entitled to be indemnified by the diocesan board of finance.
In relation to these items prior to 3 August 1990 there are no persons other than the churchwardens against whom I can
actually make any order. My direction therefore will be that these two petitioners will be liable for the registry and court fees and
disbursements from the date of the original petition until 2 August 1990. It is the courts hope and intention that these should be
recovered from the first and second parties opponent. If costs are incurred in such recovery then the petitioners will be entitled to
add such costs to what is due to them from the parties opponent. The parties opponent will each be jointly and severally liable.
In the event of the churchwarden petitioners failing to recover under their indemnity against the parties opponent they may have
liberty to apply to me for such further direction (if any) as I may be able to make to help them, but the position will depend upon
the state of arrangements within the diocese at that stage with regard to a proposed fund for the relief of parties incurring court
costs in faculty proceedings.
Finally there is a minor matter which Mr Bullimore mentioned to me. The churchwardens have asked how they should
proceed in the event of the shed not having been moved by the parties opponent by the time when the parish church council (or
churchwardens on its behalf) is ready to erect the fence. I have been asked to allow the shed to remain in situ on a temporary
basis, should that be necessary, and for the fence to be erected around it. I am willing to grant this permission, but limited to a
period of two years (with liberty to apply). The considerations are that the fence needs to be finally erected along its correct line
at as early a date as possible in order to reach finality in this dispute. On the other hand the consistory court does not, within
present legislation, have power to grant an injunction (including a mandatory order) against a party, so that it is not open to this
court simply to order the parties opponent to move the shed. Under the Care of Churches and Ecclesiastical Jurisdiction
Measure, which received the final approval of General Synod in July 1990 but has not yet been brought into effect, there will be
power to make such an order. There are also practical considerations in that if possible some agreement should be sought with
the parties opponent whereby an extension to the concrete base for the shed on the west side can be provided and the shed can
then be moved some four or five feet westwards, and time needs to be given to the parties to consider such an agreement. I will
therefore grant the temporary permission which has been asked for and if the matter remains unresolved towards the end of the
two-year period application should be made to me to see whether it would be appropriate for me to grant a mandatory injunction
under the new Measure.

Petition granted.

Solicitors: Harland & Co, York.

NP Metcalfe Esq Barrister.

420
[1991] 4 All ER 421

R v Spens
CRIMINAL; Corporate Crime: COMPANY; Shares

COURT OF APPEAL, CRIMINAL DIVISION

WATKINS LJ, LEONARD AND BLOFELD JJ
21, 22, 25 JANUARY 1991

Document Construction City Code on Take-overs and Mergers Whether construction of code a matter of law for judge or
matter of fact for jury.

The defendant, the managing director of a merchant bank (A), was alleged to have conspired with an employee of another
merchant bank (MG), which was retained by G plc during a take-over battle between G plc and another public company for D
plc, to induce holders of shares in D plc to enter into agreements to dispose of D plc shares in consideration for acquiring shares
in G plc by dishonestly concealing material facts relating to acts allegedly done by or on behalf of MG and A, including the fact
that MG had given an indemnity to A in respect of losses and expenses incurred by A. The defendant was charged with
conspiracy and false accounting. As part of its evidence to establish the charges the Crown intended to show that As conduct was
in breach of the City Code on Take-overs and Mergers and that material facts had been concealed from the Panel on Take-overs
and Mergers which administered the code. At a preparatory hearing before the trial the judge ruled that the interpretation of the
code was a matter of law to be decided by the judge rather than a matter of fact to be decided by the jury. The defendant appealed
against that ruling.

Held Although as a general rule the construction of documents was a matter of fact for the jury to decide, all forms of
legislation and binding agreements between parties were an exception to that rule and were required to be construed by the judge.
Since the City Code on Take-overs and Mergers bore a sufficient resemblance to legislation and was a form of consensual
agreement between affected parties on which inconsistent findings by juries on the meaning of the code would have disastrous
consequences, the interpretation of the code was a matter of law to be decided by the judge rather than a matter of fact to be
decided by the jury. The appeal would therefore be dismissed (see p 428 h to p 429 b, post).

Notes
For the City Take-over Code and the Panel on Take-overs and Mergers, see 7(1) Halsburys Laws (4th edn reissue) paras 1034
1040.

Cases referred to in judgment

British Airways Board v Taylor [1976] 1 All ER 65, [1976] 1 WLR 13, HL.
Brutus v Cozens [1972] 2 All ER 1297, [1973] AC 854, [1972] 3 WLR 521, HL.
Chatenay v Brazilian Submarine Telegraph Co Ltd [1891] 1 QB 79, [188690] All ER Rep 1135, CA.
DPP v Stonehouse [1977] 2 All ER 909, [1978] AC 55, [1977] 3 WLR 143, HL.
Life Insurance Co of Australia Ltd v Phillips (1925) 36 CLR 60, Aust HC.
Neilson v Harford (1841) 8 M & W 806, 151 ER 1266.
R v Clarksons Holidays Ltd (1972) 57 Cr App R 38, CA.
R v Coady (1882) 15 Cox CC 89, CCR.
R v Davison [1972] 3 All ER 1121, [1972] 1 WLR 1540, CA.
R v Ghosh [1982] 2 All ER 689, [1982] QB 1053, [1982] 3 WLR 110, CA.
421
R v Hammond (1985) 82 Cr App R 65, CA.
R v Panel on Take-overs and Mergers, ex p Datafin plc (Norton Opax plc intervening) [1987] 1 All ER 564, [1987] QB 815,
[1987] 2 WLR 699, CA.
R v Randell (1887) 57 LT 718, CCR.
R v Sunair Holidays Ltd [1973] 2 All ER 1233, [1973] 1 WLR 1105, CA.
Stephens v R (1978) 21 ALR 680, Aust HC; affg 18 ALR 245, Aust Fed Ct.

Interlocutory appeal
Lord Patrick Michael Rex Spens appealed by leave of the full court under s 9(11) of the Criminal Justice Act 1987 from the
ruling of Henry J in the Central Criminal Court sitting at Southwark on 30 November 1990 that the construction of the City Code
on Take-overs and Mergers was a matter of law for the judge. The facts are set out in the judgment of the court.

David Hood for Lord Spens.

J M Chadwick QC and Victor Temple for the Crown.

Cur adv vult

25 January 1991. The following judgment was delivered.

WATKINS LJ. This is an appeal from Henry J under s 9(11) of the Criminal Justice Act 1987. That states:

An appeal shall lie to the Court of Appeal from any order or ruling of a judge under subsection (3)( b) or (c) above, but
only with the leave of the judge or of the Court of Appeal.

This section deals specifically with what is called a preparatory hearing. The learned judge upon application to him refused
leave to appeal against his ruling. An application to us, following argument, for leave to appeal, was granted. We also directed
that we would give judgment in open court, having regard to the importance of this matter and the public interest in it. The
appeal is from a ruling of Henry J made on 30 November 1990 at a preparatory hearing under s 9, which, so far as further
relevant, states:

(1) At the preparatory hearing the judge may exercise any of the powers specified in this section
(3) He may determine (c) any other question of law relating to the case

It is asserted by learned counsel for the appellant that the ruling challenged should not have been made at all at a preparatory
hearing. We regard that point as unarguable and shall say no more of it other than that, in our judgment, the judge was not only
correct in law in deciding to make the ruling when he did but also in exercising properly, we think, his discretion in the
circumstances of the case so to do, and further, for reasons which later appear in this judgment, in relation to findings of fact.
The preparatory hearing relates to the second Guinness trial in which Lord Spens, who at material times was managing
director and chief executive of merchant bankers Henry Ansbacher & Co Ltd, is a defendant. He had previously been a director
of Morgan Grenfell. He is charged in two counts in the indictment at the forthcoming trial. In count 4 it is alleged that he
conspired with Roger Seelig in January 1986 and May 1986 to induce holders of shares in Distillers Co 422 plc to enter into an
agreement for disposing of the Distillers shares in consideration for acquiring shares in Guinness plc by the dishonest
concealment of material facts. Among those material facts are an indemnity alleged to have been given on behalf of Morgan
Grenfell in respect of losses and expenses incurred by Ansbacher, or its clients, and so on. By another count he is accused of
false accounting, that is to say concealing in accounts the activity complained about by the Crown.
Part of the evidence relied upon by the Crown in this respect, although this is not crucial to its burden to establish the
offences, is that the conduct relied upon in Ansbachers assistance to that company by purchase of Guinness shares in the
notorious Guinness take-over of Distillers, and thus defeating Argylls attempt to do so, was in breach of the City Code on Take-
overs and Mergers. There was, it is alleged, a failure to disclose to the Take-Over Panel material facts and skilful concealment of
them. The introduction to the code at the material timeit has very recently been amended in a number of respectsexplains its
purpose in the following way:
 The Code represents the collective opinion of those professionally involved in the field of take-overs on a range of
business standards. It is not concerned with the financial or commercial advantages or disadvantages of a take-over, which
are matters for the company and its shareholders, or with those wider questions which are the responsibility of the
Government, advised by the Monopolies and Mergers Commission. The Code has not, and does not seek to have, the force
of law, but those who wish to take advantage of the facilities of the securities markets in the United Kingdom should
conduct themselves in matters relating to take-overs according to the Code. Those who do not so conduct themselves
cannot expect to enjoy those facilities and may find that they are withheld. The responsibilities described herein apply
most directly to those who are actively engaged in all aspects of the securities markets, but they are also regarded by the
Panel as applying to directors of companies subject to the Code, to persons or groups of persons who seek to gain control
(as defined) of such companies, and to all professional advisers (insofar as they advise on the transactions in question),
even where they are not directly affiliated to the bodies named in section 1(a). Equally, where persons other than those
referred to above issue circulars to shareholders in connection with take-overs the Panel expects the highest standards of
care to be observed. The provisions of the Code fall into two categories. On the one hand, the Code enunciates general
principles of conduct to be observed in take-over transactions: these general principles are a codification of good standards
of commercial behaviour and should have an obvious and universal application. On the other hand, the Code lays down a
series of rules, some of which are no more than examples of the application of the general principles whilst others are rules
of procedure designed to govern specific forms of take-over.

Disciplinary proceedings are provided for in the code in this way:

If there appears to have been a material breach of the Code, the executive invites the person concerned to appear
before the Panel for a hearing. He is informed by letter of the nature of the alleged breach and of the matters which the
Director General will present. If any other matters are raised he is allowed to ask for an adjournment. If the Panel finds
that there has been a breach, it may have recourse to private reprimand or public censure or, in a more flagrant case, to
further action designed to deprive the offender temporarily or permanently of his ability to enjoy the facilities of the
securities markets. The Panel may refer certain aspects of a case to the 423 Department of Trade and Industry, The Stock
Exchange or other appropriate body. No reprimand, censure or further action will take place without the person concerned
having the opportunity to appeal to the Appeal Committee of the Panel.

There are also set out in the code provisions for making an appeal and the conduct of that appeal.
For further explanation of the role of the Panel on Take-overs and Mergers it is profitable to look at the judgment of Sir John
Donaldson MR in R v Panel on Take-overs and Mergers, ex p Datafin plc (Norton Opax plc intervening) [1987] 1 All ER 564,
[1987] QB 815.
It is right to say that in no instance in respect of the Guinness matter was there a finding under the code by the panel as a
result of an appearance or otherwise by any of the parties who are asserted to be, or to have been, in breach of any one of its
provisions. Counsel for Lord Spens maintains that that was a prerequisite to any consideration of the provisions of the code and
construction of them. We simply do not agree.
The provisions of the code have become well known in commercial and business circles and to bankers and stockbrokers
among others. A breach, or breaches, of it can obviously have very serious penalising effects on the transgressor in take-over
situations. The code was formulated and brought into effect with the agreement of all those likely to be affected by it at the time.
It is unlikely that any one engaged in taking over a company or business would be unaware of its provisions and its machinery,
the working of the panel especially. What construction any particular person so engaged places upon any one part of the code
might differ of course from that of another so engaged, but assistance is always available as regards that and much else from the
panels experienced staff.
During the course of the first Guinness trial the question of construction of the code was raised with the judge on behalf of
one of the defendants, Mr Parnes. It will be remembered that the indictment had been severed, hence the need for more than one
trial. The judge then ruled as follows:

(1) That the interpretation of the code is a matter of law for the court and not a matter for evidence; (2) in interpreting
the code, the court will approach that question in the manner set out in the panels general principle C1; that is to say, will
adopt a purposive approach towards its construction; (3) for the avoidance of doubt, before directing the jury as to how the
code should be construed, the court will entertain such submissions as counsel desire to make on that topic; (4) the
constitution, status and working of the code and the panel are matters of fact and susceptible in proof as such; (5) similarly,
previous inquiries to and decisions of the panel are matters of fact, and evidence may be given of them subject to the
normal rules as to relevance and admissibility; (6) a defendant may give evidence of and be cross-examined on his views as
to how he interpreted the code, those views going not to the issue of what the code means but to the issue of his honesty in
acting or omitting to act as he did; (7) any other question of relevance or admissibility can be determined as and when it
arises. Finally, as the questions of interpretation are questions for the court, there can be no objection to Mr Fraser [he was
a prospective witness in that case] giving the relevant evidence for the prosecution as they desire.

Mr Parnes has appealed against his conviction. His ground, inter alia, is this. The judge was wrong, it is contended, to hold
that the interpretation of the City Code on Take-overs and Mergers was a matter of law for the court. The effect of 424 the ruling
on day 25 was to improperly withdraw an issue of fact from the jury, namely the true meaning of rr 7 and 8 of the code.
It should be said that the judge did not direct the jury in accordance with his ruling, but it is maintained that it affected the
conduct of Mr Parness defence thereafter.
The ruling complained of in this appeal was expressed by the judge in these terms:

The application before me asserts that the proper construction of the code is a matter of fact for the jury, to be decided
by them on expert evidence. The code will inevitably play a part and a prominent part in this trial, though it is not central
to the question of guilt or innocence. The prosecution do not have to satisfy the jury that there has been a breach of the
code in order to obtain convictions. However, in considering the central question of the defendants honesty, the jury will
doubtless wish to consider whether or not the code has been complied with and, if not, whether such non-compliance might
be due to some factor not pointing to dishonesty, such as a belief, however mistaken, that the code had been complied with.
If the jury felt that this might be the case, then the code would cease to be of any importance in the case. In my judgment,
the proper construction of the code is a matter of law for the judge alone and not a matter for evidence. It is then for the
jury, having been properly directed as to the proper construction of the code, to decide if they find it necessary to do so in
the course of their deliberations whether or not the code covers or applies to the facts as they find them to be. In so ruling,
I am confident that that ruling is in no way inconsistent with the decision of the House of Lords in Brutus v Cozens [1972]
2 All ER 1297, [1973] AC 854.

In that case the House of Lords held that the word insulting in s 7 of the Race Relations Act 1965 must be given its
ordinary meaning and is not a question of law. Conduct which affronts other people and evidences a disrespect for their rights so
that it is likely to cause their resentment and give rise to protest from them is not necessarily insulting behaviour within the
meaning of the section. It can be noted from that and from the judgment of Lord Reid that what the House was concerned with
was the meaning of the single word insulting and not the construction of a phrase or phrases such as are found in the provisions
of the code. We can well understand how the judge came to observe that he did not consider ruling, as he did, that he was being
in any way inconsistent with that decision.
If the ruling of the judge is upheld here, it will obviously bear upon the second Guinness trial, which is soon due to
commence. In addition to Lord Spens, Mr Seelig is also a defendant and there are indications within our papers that he too takes
issue with the ruling.
Lord Spenss grounds of appeal, as articulated by his counsel, are (1) that the judge was wrong in law in ruling that the
proper construction of the code was a matter of law for him and not a matter of evidence. The proper construction of any
document is, it is said, a matter involving mixed questions of law and fact. The threshold question is whether a document is
capable of construction at all. This question is initially a question of fact. It follows that the ruling ought not to have been given
during the preparatory hearing stage of the trial in the absence of agreed facts or evidence.
(2) The code by its very nature is incapable of having a proper construction placed upon it by a judge in a criminal trial.
(3) As a matter of law the meaning of documents admitted to evidence in a criminal trial falls to be considered as evidence
by the jury. A judge in his 425 summing up may only direct a jury as to the legal effects of such facts as the jury may find.
In skeleton and supplemental skeleton arguments, counsel for Lord Spens has set out at length, but not unnecessarily, his
reasons for maintaining that the grounds of appeal are valid. He complains that if the judges ruling prevails, namely as indicated
by his direction to the jury in the first trial, there will be very unhappy consequences. It follows, he says, that Lord Spens would
be said to be guilty of an unlawful act in breaching the code and that would be synonymous with a direction that Lord Spens has
been dishonest by the ordinary standards of reasonable and honest people. The code, he says, must be equated by the jury, not the
judge, with ordinary standards. He referred to the assistance given in R v Ghosh [1982] 2 All ER 689 at 696, [1982] QB 1053 at
1064 by this court to judges for the purposes of directing juries on the issue of dishonesty. Lord Lane CJ said:

In determining whether the prosecution has proved that the defendant was acting dishonestly, a jury must first of all
decide whether according to the ordinary standards of reasonable and honest people what was done was dishonest. If it
was not dishonest by those standards, that is the end of the matter and the prosecution fails. If it was dishonest by those
standards, then the jury must consider whether the defendant himself must have realised that what he was doing was by
those standards dishonest.

The contention of Mr Hood with regard to that is that if the judge rules, as he says he is going to, with particular regard to
the provision affecting disclosure in relation to Ansbacher, and of course specifically with regard to Lord Spens, it would take
away from the jurys consideration the first limb of the direction in R v Ghosh. He also said that would have the further effect
that it would compel Lord Spens to give evidence, which would be to deny him his right. It should be the right of a defendant in
a criminal trial to decide freely of his own will whether to give evidence in his own defence or not. In that respect counsel refers
to R v Hamand (1985) 82 Cr App R 65. If the judge is right that it is for him to construe the effect of the provisions of the code,
then in our view the fact that his construction may have unfortunate consequences for the defendant may very well be
unavoidable. We do not accept, however, that the consequences predicted by counsel will necessarily, if at all, ensue from the
anticipated construction; especially do we not accept that Lord Spens will be compelled to give evidence. The core of the
offences charged is dishonesty and that is the Crowns essential task to establish, breach of code or not, as the judge observed in
rather different words.
The vital question is: is construction a matter for the judge and not a question of fact for the jury? Obviously, it is
contended on behalf of Lord Spens that it is a matter for the jury and that it would be wholly wrong and unjust for the judges
construction to prevail. We were referred to a series of cases by Mr Hood in support of that contention. He maintains that so far
as one can see from authorities which go back into the last century, certainly it has been a principle of English law that the
construction of ordinary documents is a matter for the jury involving findings of fact. He brought our attention to what appears
in Chatenay v Brazilian Submarine Telegraph Co Ltd [1891] 1 QB 79 at 85, [188690] All ER Rep 1135 at 11371138, where
Lindley LJ stated:

The expression construction, as applied to a document includes two things: first, the meaning of the words; and,
secondly, their legal effect, or the effect which is to be given to them.

So Mr Hood submitted, applying those principle to a criminal trial, the first is plainly a matter for the jury.
426
He then brought our attention to a number of cases which dealt with holiday brochures. Some of those were referred to in
British Airways Board v Taylor [1976] 1 All ER 65, [1976] 1 WLR 13. That was a case involving an alleged breach of s 14(1) of
the Trade Descriptions Act 1968, as indeed did the other so-called holiday brochure cases which we had to examine.
The indication from that case plainly is that the House of Lords held that, with regard to the relevant documents there,
construction was a matter of fact for the jury. But essentially what counsel wanted us to look at was what was said by Lord
Simon. It was this ([1976] 1 All ER 65 at 72, [1976] 1 WLR 13 at 22):

My Lords, in my respectful view the principles of law applicable to the question certified for your Lordships
consideration were stated cogently and accurately by MacKenna J giving the judgment of the Court of Appeal in R v
Sunair Holidays Ltd [1973] 2 All ER 1233 at 1236, [1973] 1 WLR 1105 at 1109. The certified question of law cannot
therefore be answered in the abstract. The issue in each case is what the relevant statement (in the instant case the letter of
14th August 1973) in all its circumstances reasonably meant to its recipient.

One observes that what the House was concerned with there was not a formal document, contract, agreement or anything
like that but a letter giving some indication to do with the booking of a flight. What was said in R v Sunair Holidays Ltd appears
from the report of that case. MacKenna J gave the judgment of the court. There again the allegation was that there had been an
offence under the Trade Descriptions Act 1968. One of the questions was whether it was for the jury to construe a document in
order to decide whether statements in it relate to the present or the future. In the course of his judgment the judge, having
examined previous cases, including R v Clarksons Holidays Ltd (1972) 57 Cr App R 38, another holiday brochure case, came to
the conclusion that construction of a holiday brochure was a matter for the jury and approved the direction of the trial judge as to
that.
R v Clarksons Holidays Ltd was, as I have already indicated, referred to and so was R v Coady (1882) 15 Cox CC 89 and R
v Randell (1877) 57 LT 718. Moreover, our attention was drawn to R v Davison [1972] 3 All ER 1121, [1972] 1 WLR 1540, a
case involving house-to-house collections.
Mr Hood referred incidentally also to the Datafin plc case and to certain observations of Sir John Donaldson MR to which I
have already made reference in another connection, and to DPP v Stonehouse [1977] 2 All ER 909, [1978] AC 55. He submitted
that the broad sweep of all those authorities demonstrates that, outside legislation, the general principle is that it is for the jury as
a matter of fact to construe a document which is the foundation of either the whole of the Crowns case in bringing a charge
against a defendant or, at any rate, an essential part of a constituent of the offence.
 He poured scorn on Australian cases. Sensing that the Crown here, as indeed it did through Mr Chadwick QC, would rely
upon Australian cases, he maintained that they were wrongly decided. It was in fact one case in two different appellate courts,
the Federal Court and the High Court. They were wrongly decided in both places, he said, and, if he was not right about that,
they are wholly irrelevant and cannot possibly bear upon our considerations with any effect whatsoever.
Mr Chadwick in response maintained that the holiday brochure cases come into a category of their own and fall within the
general principle. The present case does not. He referred to the Australian case I have mentioned, and we have examined the
reports of it: Stephens v R (1977) 18 ALR 245; affd (1978) 21 ALR 680.
Firstly, consideration was given to the case in the Federal Court of Australia in 427 Queensland. There is was held that in a
jury trial, civil or criminal, it is for the judge to determine the proper construction of a written document, that is to say the effect
of the words used. Reference was made there to another Australian case, Life Insurance Co of Australia Ltd v Phillips (1925) 36
CLR 60 at 78, for that proposition.
When the matter went further to the High Court of Australia the court consisted of Barwick CJ, Gibbs, Stephen, Jacobs and
Murphy JJ. One finds in the judgments a very careful analysis of and agreement upon the principle involved, especially in the
judgment of Barwick CJ and in another case referred to in the court below, which was brought to our attention by counsel,
Neilson v Harford (1841) 8 M & W 806, 151 ER 1266. In that case it was a patent which had to be construed. In the course of
giving judgmentand there had been a great deal of argument by the Attorney General of the day and othersParke B stated (8
M & W 806 at 823, 151 ER 1266 at 1273):

Then we come to the question itself, which depends on the proper construction to be put on the specification. It was
contended that of this construction the jury were to judge. We are clearly of a different opinion. The construction of all
written instruments belongs to the Court alone, whose duty it is to construe all such instruments, as soon as the true
meaning of the words in which they are couched, and the surrounding circumstances, if any, have been ascertained as facts
by the jury: and it is the duty of the jury to take the construction from the Court, either absolutely, if there be no words to
be construed as words of art, or phrases used in commerce, and no surrounding circumstances to be ascertained; or
conditionally, when those words or circumstances are necessarily referred to them. Unless this were so, there would be no
certainty in the law; for a misconstruction by the Court is the proper subject, by means of a bill of exceptions, of redress in
a Court of Error; but a misconstruction by the jury cannot be set right at all effectually.

Mr Chadwick relies upon that, and its application in the Australian cases, to support his argument, which broadly speaking is
this. Whilst it is right to say that there is a wide species of documents which come before the court in a criminal trial which
simply have to be regarded by the jury, and the jury alone, for the meaning of any words or phrases contained within those
documents, there are a large number of other kinds of documents which cannot possibly be the subject of findings by a jury for
the purpose of construing the meaning and effect of any particular provision within them. These must, of course, include Acts of
Parliament, local government legislation and matters of that kind and some documents which have a binding effect by agreement
between parties and so on.
Having looked at the case law presented to us by counsel, and of course considered the extremely helpful arguments which
they presented to us orally and in their cogently expressed skeleton arguments, we have come to this conclusion. We agree that
the construction of documents in the general sense is a matter of fact for determination by the jury. From that generality there
must of course be excluded binding agreements between one party and another and all forms of parliamentary and local
government legislation, in respect of which the process of construction by the judge is indispensable. Mr Hood does not seek to
say otherwise. We agree with Mr Chadwick, for the reasons he gave, that the holiday cases are very much in a category of their
own. We cannot possibly accept that Stephens v R in Australia is wrongly decided. The material opinions expressed in it as to
the principle seem wholly consistent with the principle recognised here.
As to the present case, our view is that the code sufficiently resembles legislation as to be likewise regarded as demanding
construction of its provisions by a judge. 428Moreover, the code is a form of consensual agreement between affected parties
with penal consequences. A further and almost overriding consideration is that if the judges construction were not the governing
influence the inevitable danger of inconsistency in juries finding on the meaning of the code would arise, with possibly disastrous
consequences. The very policy of the law militates, in our opinion, against that result. We think the judges ruling is correct.
Therefore, this appeal is dismissed.

Solicitors: Registrar of Criminal Appeals; Serious Fraud Office

Appeal dismissed.

Kate OHanlen Barrister.

[1991] 4 All ER 429

R v Seelig and another

CRIMINAL; Corporate Crime

COURT OF APPEAL (CRIMINAL DIVISION)

WATKINS LJ, ALLIOTT AND CRESSWELL JJ
25, 26, 27 MARCH, 2 MAY 1991

Criminal law Inducement to invest money Fraud Evidence Statements made to inspectors appointed by Secretary of State
to investigate companys affairs Persons interviewed by inspectors subsequently charged with criminal offences Interviews
containing self-incriminating material Whether evidence of interviews admissible at trial Prevention of Fraud Investments
Act 1958, s 13(1)(a)(i) Police and Criminal Evidence Act 1984, ss 67(9) Companies Act 1985, ss 432, 434, 436

The first defendant was employed by the merchant bank (MG) retained by G plc during a take-over battle between G plc and
another public company for D plc. The second defendant was employed by another merchant bank (A) at the time. The
defendants were alleged to have induced holders of shares in D plc to enter into agreements to dispose of D plc shares in
consideration for acquiring shares in G plc by dishonestly concealing material facts relating to acts allegedly done by or on behalf
of MG and A, including the payment by G plc to A of 7,614,68210 to induce A to retain G plc shares registered then or
subsequently in the name of another company. The defendants were jointly charged with conspiring to contravene s 13(1)( a)(i)a
of the Prevention of Fraud (Investments) Act 1958. The first defendant was also charged with two counts of false accounting and
a count of fraudulently attempting to induce the disposal and acquisition of securities. The second defendant was also charged
with false accounting. Prior to being charged the defendants were interviewed by inspectors appointed under ss 432 b of the
Companies Act 1985 to inquire into the affairs of G plc and the Crown proposed at the trial of the defendants to use some of their
answers to questions put to them by the inspectors. Under s 434 c of the 1985 Act officers and agents of a company being
investigated by inspectors appointed under s 432 were required 429 to produce all documents relating to the company and to
attend before the inspectors for examination. Under s 436 d obstruction of inspectors and failure to comply with the requirements
of s 434 could be treated by the court as a contempt. It was not the normal practice for inspectors to caution persons appearing
before them or to advise them that questions which might incriminate the witness need not be answered. At a preparatory hearing
before the trial the defendants submitted to the trial judge that the evidence given by them to the inspectors should be excluded at
the trial on the ground of unfairness because the inspectors had conspired with the prosecution to examine the defendants not
with a view to investigating the affairs of G plc but to obtain evidence and confessions without administering a caution for use in
the prosecution of the defendants and that the inspectors had failed to conduct the examination in accordance with the Police and
Criminal Evidence Act 1984 and the codes of practice for questioning witnesses made under that Act. The judge ruled that the
evidence was admissible. The defendants appealed.
________________________________________
a (Section 13(1), so far as material, provided: Any person who, by any statement, promise or forecast which he knows to be misleading,
false or deceptive, or by any dishonest concealment of material facts induces or attempts to induce another person(a) to enter into or
offer to enter into(i) any agreement for, or with a view to, acquiring, disposing of, subscribing for or underwriting securities shall be
guilty of an offence )
b Section 432, so far as material, is set out at p 432 e f, post
c Section 434 is set out at p 434 c to h, post
d Section 436 is set out at p 434 j to p 435 a, post

Held Admissions made to Department of Trade inspectors conducting an investigation of a companys affairs pursuant to s 432
of the 1985 Act were admissible as evidence in criminal proceedings against the person making the admissions even though they
might be self-incriminating and notwithstanding that the inspectors were not obliged to caution him before requiring him to give
evidence and produce documents under s 434 or that a refusal to answer the inspectors questions might result in the person being
committed for contempt under s 436, since Department of Trade inspectors were not Persons charged with the duty of
investigating offences or charging offenders within s 67(9) e of the 1984 Act and therefore the provisions of that Act and the
codes of practice did not apply to an examination conducted by the inspectors. Furthermore, a witnesss duty under s 434(2) to
provide all the assistance which he was reasonably able to provide did not mean that it would be unreasonable to give answers
which were self-incriminating and since Parliament had provided in s 434 of the 1985 Act that a witness was under a duty on pain
of contempt to answer the inspectors questions even though the answers might be self-incriminating and that the answers might
be used against the witness in criminal proceedings it was not unfair to admit evidence or a confession made to inspectors. The
appeal would therefore be dismissed (see p 436 c to g, p 437 h to p 438 c, p 439 c d, p 440 e and p 442 b to d, post).
________________________________________
e Section 67(9) is set out at p 435 f, post

Notes
For evidence of confessions, see 11(2) Halsburys Laws (4th edn reissue) paras 11241131, and for cases on the subject, see 14(2)
Digest (Reissue) 549596, 44944840.
For the investigation of a companys affairs by inspectors appointed by the Secretary of State, see 7(2) Halsburys Laws (4th
edn reissue) paras 12211226, and for cases on the subject, see 10(1) Digest (2nd reissue) 254259, 80508062.
For the Police and Criminal Evidence Act 1984, s 67, see 12 Halsburys Statutes (4th edn) (1989 reissue) 910.
For the Companies Act 1985, ss 432, 434, 436, see 8 Halsburys Statutes (4th edn) (1991 reissue) 504, 506, 507.
As from 29 April 1988 s 13 of the Prevention of Fraud (Investments) Act 1958, was replaced by s 47 of the Financial
Services Act 1986. For s 47 of the 1986 Act, see 30 Halsburys Statutes (4th edn) (1991 reissue) 211.
430

Cases referred to in judgment

Customs and Excise Comrs v Harz [1967] 1 All ER 177, [1967] 1 AC 760, [1967] 2 WLR 297, HL.
Lam Chi-ming v R [1991] 3 All ER 172, [1991] 2 AC 212, [1991] 2 WLR 1082, PC.
London and County Securities Ltd v Nicholson [1980] 3 All ER 861, [1980] 1 WLR 948.
R v Director of Serious Fraud Office, ex p Saunders (1988) 138 NLJ 243, DC.
R v Fulling [1987] 2 All ER 65, [1987] QB 426, [1987] 2 WLR 923, CA.
R v Harris (Richard) [1970] 3 All ER 746, [1970] 1 WLR 1252, CCC.
R v Twaites (1990) 92 Cr App R 106, CA.

Cases also cited

Atherton, Re [1912] 2 KB 251.
Bank of England v Riley (1990) Times, 1 November, CA.
Maxwell v Dept of Trade and Industry [1974] 2 All ER 122, [1974] QB 523, CA.
Paget, Re, ex p Official Receiver [1927] 2 Ch 85, [1927] All ER Rep 465, CA.
Pergamon Press Ltd, Re [1970] 3 All ER 535, [1971] Ch 388, CA.
R v Erdheim [1896] 2 QB 260, [18959] All ER Rep 610, CCR.
R v Scott (1856) Dears & B 47, 169 ER 909, CCR.
R v Walsh (1989) 91 Cr App R 161, CA.
Rees v Kratzmann (1965) 114 CLR 63, Aust HC.
Ridge v Baldwin [1963] 2 All ER 66, [1964] AC 40, HL.

Application for leave to appeal

Roger Hugh Knight Seelig and Lord Patrick Michael Rex Spens applied under s 9(11) of the Criminal Justice Act 1987 for leave
to appeal against rulings made by Henry J in the Central Criminal Court at Southwark on 14 December 1990 and 7 February
1991 during a hearing held under s 9 of the 1987 Act preparatory to their trial on charges of conspiracy to contravene the
provisions of s 13(1)(a)(i) of the Prevention of Fraud (Investments) Act 1958 and charges of false accounting and fraudulently
attempting to induce the disposal and acquisition of securities. The rulings appealed against were to the effect that the contents of
interviews conducted by inspectors appointed by the Secretary of State for Trade and Industry to investigate the takeover of the
Distillers Co plc by Guinness plc were admissible in evidence at their trial. The facts are set out in the judgment of the court.
Mr Seelig appeared in person.
David Hood (the Registrar of Criminal Appeals) for Lord Spens.
J M Chadwick QC, Elizabeth Gloster QC, Victor Temple and Richard Horwell for the Crown.

Cur adv vultdelivered.

2 May 1991. The following judgment of the Court was delivered.

WATKINS LJ: Mr Seelig and Lord Spens are soon to be tried on indictment at the Central Criminal Court, sitting at Southwark,
in the second Guinness trial. In the fourth count they are jointly charged with conspiring to contravene the provisions of s 13(1)
(a)(i) of the Prevention of Fraud (Investments) Act 1958 by inducing holders of shares in Distillers Co plc to enter into
agreements for disposing of Distillers shares in consideration for acquiring shares in Guinness plc by the dishonest concealment
of material facts which related to acts allegedly done by or on behalf of Morgan Grenfell & Co Ltd, Mr Seeligs employers, and
431 Henry Ansbacher & Co Ltd, Lord Spenss employers, which included the payment by Guinness to Ansbacher of
7,614,68210 induce Ansbacher to retain Guiness shares registered then or subsequently in the name of another company.
Mr Seelig is also charged, in two counts, with false accounting and, in one other, with fraudulently attempting to induce the
disposal and acquisition of securities. Lord Spens is also charged, in one count, with false accounting. Mr Seelig is also destined
to be a defendant, charged with various forms of dishonesty and fraud along with David Lionel Mayhew, in a third Guinness
trial. The second and third trials arise from the severance of the main indictment upon which Messrs Saunders, Ronson, Parnes
and Lyons have been tried and convicted in the first Guinness trial.
Henry J, using the power provided by s 7 of the Criminal Justice Act 1987, ordered a preparatory hearing of the second trial
(he had, of course, presided over the first trial), during which he had cause to rule on the admissibility of evidence, relied upon by
the Crown, which emanated from the testimonies of both Mr Seelig and Lord Spens to inspectors (Mr Donaldson QC and Mr
Watt) appointed under ss 432 and 442 in Pt XIV of the Companies Act 1985 by the Secretary of State for Trade and Industry to
inquire into what has become well known as the Guinness affair.
Section 432, so far as material, provides as follows:

(1) The Secretary of State shall appoint one or more competent inspectors to investigate the affairs of a company and
report on them in such manner as he directs, if the court by order declares that its affairs ought to be so investigated.
(2) The Secretary of State may make such an appointment if it appears to him that there are circumstances suggesting
(c) that persons concerned with the companys formation or the management of its affairs have in connection therewith
been guilty of fraud, misfeasance or other misconduct towards it or towards its members .

The inspectors letter of appointment dated 27 November 1986 called upon them

(a) to investigate the affairs of Guinness Plc (the company) and to report thereon in such manner as the Secretary of
State may direct; and (b) to investigate and report on the membership of the company and otherwise with respect to the
company for the purpose of determining the true persons who are or have been financially interested in the success or
failure (real or apparent) of the company or able to control or materially to influence its policy and to do so with special
reference to whether any such persons are or were parties to any agreement to which section 204 of the [1985] Act applies
or to any agreement or arrangement relating to the exercise of any rights conferred by the holding of shares in the
company.

Section 204 relates, inter alia, to the formation of concert parties, which are very much of concern to the Panel on Take-
overs and Mergers.
In their interim report the inspectors stated:

The formal terms of our appointment were widely drawn. Less formally, our brief was more sharply focussed: the
Department of Trade and Industry (DTI) had reason to believe that there might have been malpractice by the company
and its advisers during the companys bid for the Distillers Company Plc (Distillers) in the early part of 1986, including
possible undisclosed concert parties and breaches of the provisions of section 151 of 432 the Act relating to financial
assistance for the purchase of the companys own shares. These are matters regulated by complex and technical sections of
the Act, while the conduct of listed companies and advisers in takeovers must have regard to the rules of the Stock
Exchange and particularly to the City Code on Takeovers and Mergers (the City Code) issued by the Panel on Takeovers
and Mergers (the Takeover Panel).)

Section 151 of the 1985 Act states:

(1) Subject to the following provisions of this Chapter, where a person is acquiring or is proposing to acquire shares in
a company, it is not lawful for the company or any of its subsidiaries to give financial assistance directly or indirectly for
the purpose of that acquisition before or at the same time as the acquisition takes place.
(2) Subject to those provisions, where a person has acquired shares in a company and any liability has been incurred
(by that or any other person), for the purpose of that acquisition, it is not lawful for the company or any of its subsidiaries
to give financial assistance directly or indirectly for the purpose of reducing or discharging the liability so incurred.
(3) If a company acts in contravention of this section, it is liable to a fine, and every officer of it who is in default is
liable to imprisonment or a fine, or both.

On 29 January 1987 the inspectors were required, in a letter from the DTI, as follows:

pursuant to section 437(1A) of the 1985 Companies Act, to provide the Secretary of State with any information
you have relating to possible criminal offences, and in particular to provide key documents and transcripts of evidence
given to you.

Section 437(1A) states:

Any persons who have been appointed under section 431 or 432 may at any time and, if the Secretary of State directs
them to do so, shall inform him of any matters coming to their knowledge as a result of their investigations.

The inspectors complied with that requirement regularly over the period January to September 1987. During that time if not
afterwards, as Henry J said in a ruling he gave as to abuse of process on day 19 and summarised on day 31:

The case is put in two ways. First, bad faith is alleged against the inspectors and the prosecuting authority; second, it
is submitted that the process itself is unfair, so that no criminal trial can be based on it. The allegations by Mr Seelig are of
 a conspiracy between the inspectors, the DTI and the prosecuting authority and the police that the inspectors should use
their considerable statutory powers, not for the purposes for which those powers were given, namely to investigate the
affairs of Guinness and report thereon, but illegitimately to build a criminal case against Mr Seelig. The suggestion is that
the inspectors danced to the prosecutions tune. The nature of the conspiracy alleged is that the prosecution instructed the
inspectors to interview Mr Seelig along lines of inquiry they suggested at times of the prosecutions choice, the importance
of the timing being that it had to be pre-charge as customarily the inspectors would not interview a defendant after he was
charged. The suggestion is that the prosecution deliberately delayed charging while requiring the inspectors to continue
and conclude their interviews before charge. It is suggested that the inspectors were 433 questioning Mr Seelig not for the
legitimate ends of their statutory function of inquiry and reporting into the affairs of Guinness plc, but deliberately set out
to trap them into a confession at a time when, if questioned by police, he would have had to have been cautioned, and if
cautioned would have relied on his right to silence. That is the conspiracy alleged.

That is a position from which, it seems to us, Mr Seelig has not retreated although it has not been necessary for him wholly
to maintain it for the purpose of his submissions to us, which were essentially directed to asserting that Henry J was wrong to
rule, regardless even of the terms of s 434 of the 1985 Act, that the evidence which he gave to the inspectors was admissible in
his trial.
Section 434 now provides:

Production of documents and evidence to inspectors.(1) When inspectors are appointed under section 431 or 432, it
is the duty of all officers and agents of the company, and of all officers and agents of any other body corporate whose
affairs are investigated under section 433(1)(a) to produce to the inspectors all documents of or relating to the company
or, as the case may be, the other body corporate which are in their custody or power, (b) to attend before the inspectors
when required to do so, and (c) otherwise to give the inspectors all assistance in connection with the investigation which
they are reasonably able to give.
(2) If the inspectors consider that an officer or agent of the company or other body corporate, or any other person, is or
may be in possession of information relating to a matter which they believe to be relevant to the investigation, they may
require him(a) to produce to them any documents in his custody or power relating to that matter, (b) to attend before
them, and (c) otherwise to give them all assistance in connection with the investigation which he is reasonably able to give;
and it is that persons duty to comply with the requirement.
(3) An inspector may for the purposes of the investigation examine any person on oath, and may administer an oath
accordingly.
(4) In this section a reference to officers or to agents includes past, as well as present, officers or agents (as the case
may be); and agents, in relation to a company or other body corporate, includes its bankers and solicitors and persons
employed by it as auditors, whether these persons are or are not officers of the company or other body corporate.
(5) An answer given by a person to a question put to him in exercise of powers conferred by this section (whether as it
has effect in relation to an investigation under any of sections 431 to 433, or as applied by any other section in this Part)
may be used in evidence against him.
(6) In this section documents includes information recorded in any form; and, in relation to information recorded
otherwise than in legible form, the power to require its production includes power to require the production of a copy of the
information in legible form.

If a person obstructs inspectors by, for example, refusing to answer their proper questions serious consequences can ensue.
Section 436 now states:

Obstruction of inspectors treated as contempt of court.(1) If any person(a) fails to comply with section 434(1)(a)
or (c), (b) refuses to comply with a requirement under section 434(1)(b) or (2), or (c) refuses to answer any question put to
him by the inspectors for the purposes of the investigation, the inspectors may certify that fact in writing to the court.
(3) The court may thereupon enquire into the case; and, after hearing any 434 witnesses who may be produced against
or on behalf of the alleged offender and after hearing any statement which may be offered in defence, the court may punish
the offender in like manner as if he had been guilty of contempt of the court.

Notwithstanding the possible application of s 436 the inspectors are not, so it was submitted on behalf of the Crown, called
upon to caution a witness in any way or to advise him to the effect that he need not answer a question if he thinks that would tend
to incriminate him. It is, so we were told, never done in DTI inquiries.
The Crown intends to use some of the answers to questions put to them by the inspectors of both Mr Seelig and Lord Spens
in presenting its case against them to the jury and resists, through its counsel Mr Chadwick QC, the attempt by Mr Seelig and
Lord Spens to have that evidence excluded by the court on the ground of unfairness. Mr Chadwick said that whilst having to do
so would lengthen the trial he could prove by other evidence that which he seeks to prove by the evidence given to the inspectors.
Nevertheless, he plainly, we think, sets much store by gaining the admission of the last-mentioned evidence because, he contends,
it amounts to confessions by both applications.
On the assumption that the effect of s 434(5) is to make evidence given to inspectors prima facie admissible in a criminal
trial against the giver of it, regard must, of course, be paid to certain provisions of the Police and Criminal Evidence Act 1984 in
order to tell whether there may be obstacles arising from the provisions of that Act in the way of such evidence being led by the
Crown.
That assumption, it must here be said, must lie easily with Pt VI of the 1984 Act, which makes provision for the issue and
implementation of the codes of practice, reference to which is constantly being made in criminal trials. It was argued before us
by Mr Seelig but not by Mr Hood, counsel for Lord Spens, that the codes apply to DTI inquiries because the inspectors are, in
reality, under a duty to investigate offences and s 67(9) states:

Persons other than police officers who are charged with the duty of investigating offences or charging offenders shall
in the discharge of that duty have regard to any relevant provision of such a code.

That being so it was submitted to us by them, as it was by both Mr Seelig and Mr Hood before Henry J, that the inspectors
were advised to caution witnesses and to advise them that they need not testify if they thought to do so might incriminate them.
Mr Chadwicks response to that was that to impose such an obligation upon inspectors would render their inquiries useless
because vulnerable witnesses would, in the exercise of a right, refuse to answer questions.
The obstacles in the way, possibly, of the Crown succeeding in gaining admission of evidence given to the inspector are to
be found in ss 76, 78 and 82 of the 1984 Act. These sections, so far as material, state:

76.(1) In any proceedings a confession made by an accused person may be given in evidence against him in so far as
it is relevant to any matter in issue in the proceedings and is not excluded by the court in pursuance of this section.
(2) If, in any proceedings where the prosecution proposes to give in evidence a confession made by an accused person,
it is represented to the court that the confession was or may have been obtained(a) by oppression of the person who
 made it; or (b) in consequence of anything said or done which was likely, in the circumstances existing at the time, to
render unreliable any confession which might be made by him in consequence 435 thereof, the court shall not allow the
confession to be given in evidence against him except in so far as the prosecution proves to the court beyond reasonable
doubt that the confession (notwithstanding that it may be true) was not obtained as aforesaid
78.(1) In any proceedings the court may refuse to allow evidence on which the prosecution proposes to rely to be
given if it appears to the court that, having regard to all the circumstances, including the circumstances in which the
evidence was obtained, the admission of the evidence would have such an adverse effect on the fairness of the proceedings
that the court ought not to admit it
82 (3) Nothing in this Part of this Act shall prejudice any power of a court to exclude evidence (whether by
preventing questions from being put or otherwise) at its discretion.

On the facts of this case, which include the fact that neither Mr Seelig nor Lord Spens was interviewed by the inspectors
after being charged with criminal offences, it is not easy to see how s 76(1) and s 76(2)( a) and (b) could come into play, there
being, we think, no oppression of the applicants according to the meaning of that word as used in the 1984 Act, unless, possibly,
as seemed to be suggested to us, sub-s (2)(b) can be read so as to include that which was not but which should have been said as a
warning by the inspectors, namely that evidence given to them could be used in criminal proceedings and a failure to give
evidence might invoke contempt proceedings. Furthermore, there was the lack of a caution. According to Mr Seelig if he had
appreciated all that he would have risked contempt proceedings rather than provide answers which might incriminate him.
This is as good a moment as any for us to say how we view the contentions of Mr Seelig and Lord Spens that they were not
acquainted with those sections of the 1985 Act which have the effect of leaving them exposed to giving incriminating answers
and their evidence to be given in criminal proceedings against them. We should find it very surprising indeed if that were so.
These applicants are two very intelligent and sophisticated businessmen steeped in the ways of commerce and with high
reputations in the City of London for their expertise. They had legal advise too. Lord Spens claimed he was not thus protected
when giving evidence to the inspectors but the solicitor to Ansbacher was there and doubtless ready, if necessary, to advise Lord
Spens about the relevant sections of the 1985 Act. We are unable to accept that the applicants were penalised by being in
ignorance of the possible consequences of their giving evidence which, of course, they had to do or risk being in contempt.
Henry J has ruled upon the issues involved in this application on several occasions. He did so in the first Guinness trial at
the behest of Mr Parnes. He made certain findings on that case, which he repeated and applied in his rulings on days 19 and 31.
They were as follows: (1) under the Companies Act 1985 agents of the company (under s 434(1)) and those who may be in
possession of information concerning the companys affairs (under s 434(2)) are, if called on by the inspectors, required to give
the inspectors all assistance that they were reasonably able to give; (2) that obligation extends to being under a legal duty to
answer the questions put; (3) refusal to answer is obstruction of the inspectors and, if certified as such by them, such obstruction
can be punished by the High Court as a contempt (s 436); (4) the witness is not relieved of his statutory duty to answer by any
evidential privilege against self-incrimination and his answers may be used in evidence against him, including criminal
proceedings (s 434(5)); (5) the inspectors are not within the statutory definition of s 67(9) of the Police and 436 Criminal
Evidence Act 1984, that is to say, as they are not charged with the duty of investigating offences or charging offenders, they are
therefore not bound by the Police and Criminal Evidence Act codes, and, in particular, not bound in relation to the caution; (6)
however, the inspectors are under an overall obligation to be found within the context of their statutory duty to inquire and report
into the affairs of the company; their responsibility is to the fairness of the inquiry; (7) it is the trial judges responsibility as to the
fairness of the criminal proceedings and the admission of the evidence into that trial, having regard to ss 76, 78 and 82(3).
It is the ruling on day 31 which incorporated that given on day 19 which is now challenged and in respect of which Mr
Seelig and Lord Spens, having been refused leave by Henry J, now seek from us leave to appeal under s 9(11) of the Criminal
Justice Act 1987.
Mr Seelig, who was unrepresented and allowed to address the court himself, did so most lucidly having collected a quite
astonishing array of authorities. He should not take it to be an intended discourtesy that we have not found it necessary to make
much reference to them in this judgment.
Mr Hood in his Synopsis of Material Facts states:

for the purpose of the determination of this application, the following facts and propositions of law are accepted:
(i) the inspectors were lawfully appointed; (ii) the interviews of the applicant were conducted wholly within the power of
the inspectors and for the purposes for which the inspectors were appointed; (iii) that the transcripts of the interviews were
lawfully passed to the Director of Public Prosecutions and Serious Fraud Office; and (iv) that the evidence given before the
inspectors is prima facie admissible in criminal proceedings.

Thus, the submissions of Mr Hood were devoted exclusively to attempting to persuade us that Henry J had wrongly
exercised his direction under ss 78 and 82(3).
Mr Seelig was entirely uninhibited. He has taken every conceivable point open to him including insisting that the
proceedings before the inspectors were grossly unfair. Henry J roundly rejected that complaint and we see no reason why he
should not have done so. Mr Seelig, to a somewhat greater extent than Lord Spens, was in the hands of capable lawyers during
all the interviews affecting him. As we have already indicated the allegation, or complaint, that he and Lord Spens were under
some kind of disability during their interviews is not, in our view, borne out, no matter how one views the conduct of the
inspectors during interviews. At no time did Mr Seelig object to answering questions.
The first real point which arises is whether, correctly construed, s 434(5) has the effect of causing answers to the inspectors
to be evidence against him who gave them in a criminal trial. In his ruling on day 19 Henry J traversed relevant authority on this
point and other statutes containing a similar formula to that in sub-s (5). He quoted extensively from the speech of Lord Reid in
Customs and Excise Comrs v Harz [1967] 1 All ER 177 at 181, [1967] 1 AC 760 at 816, a customs and excise case, ending with
this observation:

Although I need not decide the point, it seems to me to be reasonably clear that incriminating answers to a proper
demand under this section must be admissible if the statutory provision is to achieve its obvious purpose.

The judge also referred to observations of MacKenna J in R v Harris (Richard) [1970] 3 All ER 746, [1970] 1 WLR 1252
and of Browne-Wilkinson J in London 437 and County Securities Ltd v Nicholson [1980] 3 All ER 861 at 865866, [1980] 1
WLR 948 at 953 and further to company law legislation in Australia before stating conclusions on day 19 which, in our opinion,
cannot be faulted:

(1) The witness is obliged at law to answer the question. (2) In asking a question the inspectors concern is whether it
is fair, in the context of their inquiry, to ask the question. As to whether it is fair to allow the answer to be given in
evidence in a criminal trial, that is not the inspectors concern, but the trial judges concern. (3) The witnesss answer may
be used against him in criminal proceedings, ie they are ex hypothesi answers to questions the answers to which might tend
to incriminate him, subject, that is, to the provisions of the Police and Criminal Evidence Act 1984. (4) That he is under a
duty to answer, even though his answers may tend to incriminate him (5) However, the inspectors cannot compel an
 answer, they could only certify as obstruction any refusal to answer and refer it to the High Court, who can punish as a
contempt.

The second point upon which Mr Seelig dwelt at some length, both in writing and orally, was that the inspectors fell within s
67(9) of the 1984 Act. The question is: are they charged with the duty of investigating offences within the meaning of s 67(9)?
Henry J gave a ruling on this question during the first Guinness trial on 21 November 1989. He stated as follows:

The question therefore is: are inspectors charged with the duty of investigating offences within the meaning of the
1984 Act? In my judgment they are plainly not. When one looks at the obligation on them under the Companies Act 1985
their obligation is to investigate the affairs of the company and to report. In the course of such investigation criminal
offences will often emerge, but the fact that they do does not alter the duty of the inspectors. Their duty is to investigate
the affairs of the company and to ascertain the facts; they are not conducting a trial of those investigated. It is for others to
investigate any criminal offences that may be uncovered by the inspectors. The inspectors may be required by the
Secretary of State to provide under s 437(1)(a) material which might point to the commission of crime, but it is not for
them to investigate whether that material constitute offences as such. Parliament, when setting out the duties of inspectors
in the 1985 Act, which was after the Police and Criminal Evidence Act 1984, in my judgment chose their words carefully,
and therefore the codes do not apply. If the codes did apply it would be extremely difficult to apply them. That difficulty
is shown by the form of the caution which the defence submit to me the inspectors are bound to deliver, and that would be
in the form: You do not have to say anything unless you wish to do so. Anything you may say may be given in evidence
against you. If you refuse to say anything we may certify your refusal to the High Court, who may punish you for
contempt.

That is a ruling which Henry J has maintained in the face of persistent submissions by Mr Seelig which, in particular, assert
that he is plainly wrong. Mr Seelig referred to R v Harris (Richard) [1970] 3 All ER 746 at 751, [1970] 1 WLR 1252 at 1257,
where MacKenna J said with reference to the predecessor in the Companies Act 1948 of s 432 of the 1985 Act that it shows at
least one of the purposes of this part of the Act is to facilitate the detection and punishment of fraud. That Mr Seelig argued is
still so.
He also referred to R v Twaites (1990) 92 Cr App R 106 and R v Director of 438 Serious Fraud Office, ex p Saunders (1988)
138 NLJ 243, in which case Watkins LJ presided and McNeill J stated in giving the judgment of the court (at 243244):

persons other than police officers, which must include the Serious Fraud Office, charged with the duty of
investigating offences are required to have regard to any relevant provision of the Code when discharging their duty.
Accordingly, inter alia, they are required to have regard to the Code of Practice as to questioning: the conduct of
interviews including requirement to caution

Mr Seelig brought our attention to a number of bodies which have an investigative function and which are subject to s 67(9),
including the Ministry of Agriculture, Fisheries and Food, customs and excise officers, a store detective and so on.
Our view is, however, that whether a body or a person conducting some kind of inquiry is subject to s 67(9) is a question of
fact in each case. It is, in our view, quite impossible to give a generalised answer to the question arising out of sub-s (9). We take
Henry J to have found as a fact that the inspectors in the present case were not investigating offences. Upon all the evidence
before him it was a conclusion at which we think he could justifiably arrive. We do not therefore agree that his finding in this
respect was wrong. We accept the written and oral submissions of Mr Chadwick on this point. They serve to lend full support to
the judges view.
The third point relates to s 76. Here again Mr Seelig contends that the judge has misdirected himself and reached a wrong
conclusion. On day 31 Henry J stated among other things:

I come now to deal with s 76(2)(a) oppression alleged. Mr Hood does not rely on deliberate impropriety on the part of
the inspectors He submitsand I agree with his submissionthat the fact that there was no deliberate impropriety on
their part is not necessarily fatal to his application; it does not mean that no finding of oppression is possible. But, as Lord
Lane CJ said in R v Fulling [1987] 2 All ER 65 at 69, [1987] QB 426 at 432 such cases will be rare. The question is: is
this one of them? At this point, it is necessary to consider a point of construction. Mr Hood points out that under s 434(2)
the duty is to give the inspectors all assistance which the witness is reasonably able to give; and it is put simply that it is
unreasonable to ask him to incriminate himself. Now, this is a statutory construction that I have already rejected. The
adverb, in my judgment, deals with the witnesss ability to answer questions or provide documents. It relates to what
would usually be practical matters. It does not bring in the evidential privilege against self-incrimination. The position
then is, as it seems to me, that, as the scheme envisaged by the Act was followed, it is difficultas I said in my abuse of
process rulingto see how Parliament has sanctioned what can properly be described as oppressive As Mr Chadwick
rightly submits, in my judgment, it cannot be oppressive for the inspectors to question, at any rate, someone as intelligent
and sophisticated as an experienced merchant banker like Lord Spens without explaining the full import of Pt XIV of the
Companies Act 1985, which was there for Lord Spens to read himself and/or to take advice on. It seems to me that the
giving of such constructional advice is not a duty passed on [to] the inspectors; and this would seem to me so, whether or
not the witness had his lawyer present. It was for Lord Spens to decide whether and what advice to take. The inspectors
duty was to ask the questions they 439 needed to ask in the course of their inquiry, and, if and when there was refusal to
answer, to consider whether to certify that refusal to the High Court. Now, that decisionwhether to certifywould
doubtless turn on how central the answer was to their inquiry. But it is not for them to be concerned as to whether a
truthful answer might incriminate a witness. If that were the case, their inquiries would be severely curtailed, and the
statutory purpose for which they were appointed, to some extent, defeated. So, in my judgment, the attempt to exclude this
evidence under s 76(2)(a) fails. I come now to s 76(2)(b). Here, Mr Hood relies on essentially the same matters as
[earlier], and states that, as Lord Spens was not warned or cautioned, that was likely to render his confession unreliable.
Now, here we have a situation where Parliament has imposed on those called to assist the obligation to answer questions
and to answer them truthfully. As Mr Chadwick has pointed out, it is not too cynical to assume that the likely consequence
of the warning suggested as being appropriate would be either that the witness would be more guarded, more evasive and
less frank, or that he would refuse to answer altogether and risk punishment for contempt. However that is, I do not see
how the failure to give such a warning is likely to render answers freely given unreliable. Therefore, the application under
s 76(2)(b) fails.

In this respect Mr Seelig places himself in much the same position as Lord Spens and basically made the like submissions to
those which had been made by Mr Hood. However, we have no doubt that, for the reason he gave, the judge was entirely right to
find that no case had been made out for the exclusion of evidence under s 76(2).
That leaves ss 78(1) and 82(3)the judges discretion. The judge, in this respect, asked himself the question:
 Is the fairness of these proceedings threatened by the admission of questions put under a statutory regime designed to
discover the facts in a company fraud to the companys merchant banker before it was considered appropriate to charge
him in a case where neither the decision to charge him nor his actual charging had been wrongly delayed?

The submission of Mr Seelig and Mr Hood, briefly stated, amounted to the assertion that the judge had clearly misdirected
himself in this important and vital respect. He failed, it was submitted, to take any, or any sufficient, account of the unfortunate
fact that, through legislation, the applicants were forced to make confessions, if that is what they can rightly be called. They
would not have dreamt of making them, so they say, had the provisions of the 1984 Act applied to them when they were
interviewed. Seeing that the 1985 Act may have left the judge with no alternative than to say that the confessions were, prima
facie, admissible, Mr Seelig argued that the unfairness of the way in which the confessions came into existence and Parliaments
decision to make such confessions admissible in criminal proceedings demonstrated that s 78 is the only and the ideal provision
enabling a judge to redress that unfairness by excluding such evidence in the interests of justice.
Since we heard those submissions the report of the Judicial Committee of the Privy Council in Lam Chi-ming v R [1991] 3
All ER 172, [1991] 2 AC 212, on appeal from the Court of Appeal of Hong Kong, has come to our notice. In the course of, on 27
March 1991, giving the reasons of the Privy Council for allowing the appeal, Lord Griffiths stated ([1991] 3 All ER 172 at 179,
[1991] 2 AC 212 at 222):
440

But it is surely just as reprehensible to use improper means to force a man to give information that will reveal he has
knowledge that will ensure his conviction as it is to force him to make a full confession. In either case a man is being
forced into a course of action that will result in his conviction: he is being forced to incriminate himself. The privilege
against self-incrimination is deep rooted in English law and it would make a grave inroad upon it if the police were to
believe that if they improperly extracted admissions from an accused which were subsequently shown to be true they could
use those admissions against the accused for the purpose of obtaining a conviction. It is better by far to allow a few guilty
men to escape conviction than to compromise the standards of a free society.

Here, of course, Henry J has found that no improper means were used to force the applicants to give evidence which could
serve to incriminate them. Nevertheless, the privilege against self-incrimination must, of course, unless there is good reason to
the contrary, be upheld. That is something of which Henry J did not need to be reminded.
In explaining his reasons for rejecting the submissions made to him that he should use his discretion under these two
subsections of the 1984 Act to exclude the confessions he described very compellingly, in our view, and with considerable care
the way in which he did that. On day 19 he said:

I have no difficulty in accepting that in the investigation of the role of Guinness plc and its servants and agents in the
Distillers takeover, Mr Seelig, as Guinnesss leading merchant banker was, because he was subject to the inquisitorial
process that I have outlined, worse placed than the average man questioned as to crime because, of course, that individual
can simply refuse to assist the police with their inquiries and Mr Seelig could not have refused to assist the inspectors
without running the risks that I have already indicated. That, however, is only the starting point for the investigation into
the question of fairness. It is not a conclusive answer to that question. It is not for four reasons. First, because of the
public importance which Parliament attaches to the investigation and punishment of company fraud, and the importance
that it attaches to getting the truth in such matters. Second, because those likely to be questioned under that statutory
regime are those whose responsibilities under the Companies Act 1985 and at common law in relation to shareholders
funds and the integrity of the market are reflected in the privileged position they have. It is not asking too much, in my
judgment, to impose limits on their civil rights, as Parliament has done by an obligation to answer questions in
circumstances where those answers may be used in criminal proceedings against them. Third, general protection is
designed to be wide enough to protect the weak, the inarticulate and the suggestible from having to answer in the strange
and hostile environment of a police station but is less obviously needed to protect those likely to be major witnesses in a s
432 investigation, who will usually be intelligent, sophisticated, self-confident and articulate, usually accompanied by
lawyers, giving evidence by prior appointment in an environment not so foreign to them. Fourthly, and fundamentally, the
fact that they are treated less favourably than the average man accused of crime is because the legislature has decided that
they should, and as I have said, a review of the history of the legislation and the authorities concerning it show that that is
no accident, no unintended legislative muddle. Bearing all those matters in mind, it seems to me that in these cases on
these facts that the admission in the evidence of 441 material obtained under the inquisitorial process before a defendant is
charged does not have such adverse effect on the fairness of the proceedings that the court should exclude it. It will usually
be different once the defendant is charged, for a charge usually marks the end of the investigative process and the
beginning of the accusatorial process. Accordingly I do not think it right to exclude the DTI interviews of these
defendants.

We detect no flaw in the judges reasons for exercising his discretion in the way he did. It would have been open to him
even if he had found that the inspectors were charged with the duty of investigating offences and there had been consequently a
breach of some part of the code to exercise his discretion so as to admit the confessions. But such a decision did not confront
him.
The present case is, as we have said, concerned with extremely astute, professional men who have been advised at one time
or another by very experienced City solicitors. There was, in our judgment, sound reason for admitting the so-called confessions
having regard to the relevant legislation which Parliament has deliberately enacted, albeit that that may appear to tend towards
unfairness especially when set against the relevant provisions in the 1984 Act.
However that may be, having carefully considered the submissions of Mr Seelig and Mr Hood, we feel compelled to regard
Henry J as having decided the various points in issue correctly and exercised his discretion in a manner which is not open to valid
criticism.
Leave to appeal is, as we have said previously in merely announcing our decision, granted. We treat the hearing of the
applications as the hearing of the appeals. Those appeals, for the reasons we have given, we dismiss.

Applications for leave to appeal granted. Appeals dismissed.

20 May. The court refused leave to appeal to the House of Lords but certified, under s 33(2) of the Criminal Appeal Act 1968,
that the following points of law of general public importance were involved in the decision: (1) is the question whether
inspectors appointed under s 432 or s 442 of the Companies Act 1985 are persons charged with the duty of investigating offences
for the purposes of s 67(9) of the Police and Criminal Evidence Act 1984 a question of fact or a question of law, and if a question
of law are they so charged? (2) are such inspectors required to administer a caution when they have grounds to suspect that a
person, whom they are interviewing or are about to interview, may have committed a crime? (3) whether, in exercising his
discretion under s 78 of the 1984 Act, a judge is required to assume that the admission of evidence obtained by inspectors in the
proper exercise of their powers under the 1985 Act will, in the event of what would be a substantial breach of the code of practice
under s 66 of the 1984 Act, if it applied, have such an adverse effect on the fairness of the proceedings that, prima facie, the court
ought not to admit it.

4 July. The Appeal Committee of the House of Lords (Lord Keith of Kinkel, Lord Templeman and Lord Ackner) refused leave to
appeal.

Solicitors: Registrar of Criminal Appeals; Serious Fraud Office.

Kate OHanlon Barrister.

442
[1991] 4 All ER 443

New Zealand Stock Exchange v Inland Revenue Commissioner

National Bank of New Zealand Ltd v Inland Revenue Commissioner
TAXATION; Income Tax: COMMONWEALTH; Commonwealth Countries

PRIVY COUNCIL
LORD KEITH OF KINKEL, LORD BRANDON OF OAKBROOK, LORD TEMPLEMAN, LORD OLIVER OF AYLMERTON AND SIR ROBERT MEGARRY
10, 11 JUNE, 1 JULY 1991

New Zealand Income tax Information Information relevant to enforcement of Inland Revenue Acts Notice to sharebrokers
and bankers requiring information disclosing names of possible taxpayers Whether commissioner having power to require
information relating to unidentified taxpayers Whether commissioners request unreasonable or an abuse of power Inland
Revenue Department Act 1974(NZ), s 17(1) Bill of Rights Act 1990(NZ), s 21.

Under s 17a of the New Zealand Inland Revenue Department Act 1974 the Commissioner of Inland Revenue was authorised to
require any person to furnish him with any information and produce for inspection any books and documents which he
considered necessary or relevant for the administration or enforcement of the Revenue Acts. In order to ascertain whether
taxable income had been generated from trading in shares or commercial bills and to identify the relevant taxpayers the
commissioner issued notices under s 17 of the 1974 Act requiring specified sharebrokers who were members of the plaintiff stock
exchange to produce a list of their largest clients and to provide particulars of transactions conducted by those clients and also
required the plaintiff bank and other banks to identify investors in commercial bills and to give details of each investment, cost
and realisation. The plaintiffs brought actions against the commissioner seeking declaratory orders in relation to the exercise of
the powers conferred on the commissioner by s 17 of the 1974 Act. The judge granted a declaration as against the commissioner
that s 17(1) only authorised him to require information about a specified taxpayer whose tax affairs were under investigation and
that therefore the plaintiffs were not obliged to supply the information sought. The Court of Appeal of New Zealand reversed the
judges decision. The plaintiffs appealed to the Privy Council, contending (i) that the commissioners right under s 17 to require
information was limited to cases where he had a specified taxpayer in mind, since he was seeking information which was
confidential and was imposing on sharebrokers and bankers an onerous burden of research and report, and (ii) that the notices
were unreasonable and by reason of being onerous and expensive to obey were contrary to s 21 b of the New Zealand Bill of
Rights 1990, which provided that everyone had the right to be secure against unreasonable search or seizure, whether of the
person, property, correspondence or otherwise.
________________________________________
a Section 17, so far as material, is set out at p 446 c d, post
b Section 21 is set out at p 448 g, post

Held (1) The commissioners power under s 17 of the 1974 Act to require information was not limited to cases where he had a
specified taxpayer in mind because the power was expressed in the widest terms and there were no policy 443 reasons for
implying such a limitation, since, although the commissioner was seeking confidential information, that confidentiality had to be
broken whether or not the taxpayer was identified if the commissioner was to obtain the information to enable him to carry out
his statutory function of assessing and collecting tax, and the secrecy and confidentiality of such information was sufficiently
protected by the secrecy obligation imposed on the commissioner by other provisions of the 1974 Act. Moreover, the search
involved in an application under s 17 could not be said to be unreasonable for the purposes of s 21 of the 1990 Act having regard
to the secrecy provisions of the 1974 Act and the fact that the commissioner was under a duty to ensure that the assessable
income of every taxpayer was assessed and that the tax was paid (see p 446 j to p 447 f and p 448 h j, post).
(2) Furthermore, although the court was entitled to intervene if it was satisfied that in making a particular requirement the
commissioner had exceeded or abused his powers, the particulars sought by the commissioner did not go substantially beyond
what was required for the purposes of enabling him to carry out his statutory function and duty to ensure that the assessable
income of every taxpayer was assessed and that the tax was paid, since the sharebrokers and bankers undoubtedly had or ought to
have had the information requested. It followed that the commissioner was entitled to require information concerning a class of
unidentified possible taxpayers. The appeal would be therefore dismissed (see p 449 b f to j, post); Clinch v IRC [1973] 1 All ER
977 applied.

Notes
For the power to require information, see 23 Halsburys Laws (4th edn) paras 16231637.
Provision for the production of accounts, books and other information to a tax inspector or the Board of Inland Revenue in
the United Kingdom is made by ss 20 and 21 of the Taxes Management Act 1970. For ss 20 and 21 of the 1970 Act, see 42
Halsburys Statutes (4th edn) 286292.

Cases referred to in judgment

Associated Provincial Picture Houses Ltd v Wednesbury Corp [1947] 2 All ER 680, [1948] 1 KB 233, CA.
Bullivant v A-G for Victoria [1901] AC 196, [19003] All ER Rep 812, HL.
Canadian Bank of Commerce v A-G of Canada [1962] SCR 729, Can SC.
Clinch v IRC [1973] 1 All ER 977, [1974] QB 76, [1973] 2 WLR 862.
IR Comr v West-Walker [1954] NZLR 191, NZ CA.
Federal Comr of Taxation v Australia and New Zealand Banking Group Ltd (1979) 143 CLR 499, Aust HC.
R v McKinlay Transport Ltd (1990) 68 DLR (4th) 568, Can SC.
Richardson (James) & Sons Ltd and Minister of National Revenue, Re (A-G of Alberta intervening) (1984) 9 DLR (4th) 1, Can
SC.

Consolidated appeals
The plaintiffs, the New Zealand Stock Exchange and the National Bank of New Zealand, in two actions brought by them against
the New Zealand Commissioner of Inland Revenue, the defendant, appealed with final leave of the Court of Appeal of New
Zealand (Richardson, Casey and Jeffries JJ) granted on 7 December 1990 from the decision of the Court of Appeal (Richardson,
Somers, Casey, Bisson and Hardie Boys JJ) ([1990] 3 NZLR 333) on 26 July 1990 allowing the appeal of the commissioner from
the judgment of Jeffries J in the High Court of New Zealand sitting at Wellington ([1990] 2 NZLR 120) on 8 March 1990
whereby he declared that demands made by the commissioner on the plaintiffs for information in two 444 notices under s 17 of
the Inland Revenue Department Act 1974 were not within the section and accordingly that the plaintiffs were not obliged to
provide the information sought. The appeals were consolidated by order of the Court of Appeal of New Zealand dated 7
December 1990. The facts are set out in the judgment of the Board.

G P Barton QC, R A Dobson and R J Cullen (all of the New Zealand Bar) for the plaintiffs.
The Solicitor General of New Zealand (J J McGrath QC), G D Pearson and Angela Satterthwaite (both of the New Zealand Bar)
with him for the commissioner.

1 July 1991. The following judgments were delivered.

LORD TEMPLEMAN. By s 9 of the New Zealand Income Tax Act 1976, as amended, a taxpayer, defined by s 2 as a person
chargeable with income tax, shall for the purposes of the assessment and levy of income tax furnish to the respondent
commissioner in each year a return or returns in the prescribed form or forms setting forth a complete statement of all the
assessable income derived by him during the preceding year together with such other particulars as may be prescribed.
Assessable income is defined by s 2 of the 1976 Act as income of any kind which is not exempted from income tax.
By s 19(1) of the 1976 Act:

From the returns made and from any other information in his possession the Commissioner shall in and for every
year, and from time to time and at any time thereafter as may be necessary, make assessments in respect of every taxpayer
of the amount on which tax is payable and of the amount of that tax.

By s 21:

If any person makes default in furnishing any return, or if the Commissioner is not satisfied with the return made by
any person, or if the Commissioner has reason to suppose that any person, although he has not made a return, is a taxpayer,
he may make an assessment of the amount on which in his judgment tax ought to be levied and of the amount of that tax,
and that person shall be liable to pay the tax so assessed, save in so far as he establishes on objection that the assessment is
excessive or that he is not chargeable with tax.

By s 27, except in proceedings on objection to an assessment under the 1976 Act:

No assessment made by the Commissioner shall be disputed in any Court or in any proceedings and every such
assessment and all the particulars thereof shall be conclusively deemed and taken to be correct, and the liability of the
person so assessed shall be determined accordingly.

By s 34(3):

Where, in relation to a person being a taxpayer and to any assessment the tax assessed in which has become due and
payable, any amount of deferrable tax is unpaid and any amount of tax that is not deferrable tax is unpaid, each such
amount of unpaid tax may be recovered by the Commissioner as a separate debt arising from a separate cause of action.
445

By ss 38 and 39 income tax shall be payable by every person on all income derived by him during the year for which the tax
is payable and shall be assessed and levied on the taxable income of every taxpayer at such rate or rates as may be fixed from
time to time.
Thus income tax at a stipulated rate is levied for the benefit of the community on the assessable income of every taxpayer
and it is the duty of the commissioner to see that such income is assessed to tax and that the tax is paid.
By accident or design, a taxpayer may default in his obligation to furnish a return or to disclose all his assessable income. In
order to discharge his duty of assessing and recovering tax on all taxable income the commissioner must discover the names of
taxpayers and the respective sources and amounts of their assessable income. By s 17(1) of the Inland Revenue Department Act
1974:

Every person shall, when required by the Commissioner furnish in writing any information and produce for
inspection any books and documents which the Commissioner considers necessary or relevant for any purpose relating
to the administration or enforcement of any of the Inland Revenue Acts.

By s 2 of and Sch 1 to the 1974 Act the Inland Revenue Acts mentioned in s 17(1) include the 1976 Act.
If a person trades or deals in shares or commercial bills, profits thereby generated may constitute taxable income. In order
to determine whether taxable income had been generated and to discover the relevant taxpayers, the commissioner required
information which would disclose to him names of taxpayers who had bought and sold shares or bills and which would disclose
sufficient detail to enable the commissioner to assess those taxpayers in respect of assessable income generated by dealings in
shares and commercial bills. Under s 17 of the 1974 Act the commissioner therefore required some members of the Stock
Exchange to produce a list of their largest clients and details of their purchase and sale of shares. The commissioner also required
the National Bank of New Zealand and some other banks to produce the names and details of bank customers who had bought
and sold or obtained the fruits of commercial bills.
In these proceedings the plaintiffs, the New Zealand Stock Exchange (acting in the interests of its members) and the
National Bank of New Zealand (acting in the interests of the banks generally), sought and obtained from Jeffries J a declaration
against the commissioner (see [1990] 2 NZLR 120). As it emerged, the real issue was whether under s 17 of the 1974 Act the
commissioner had any power to require information except in respect of a named individual whose tax affairs were under
investigation. The Court of Appeal (Richardson, Somers, Casey, Bisson and Hardie Boys JJ) quashed the order of Jeffries J (see
[1990] 3 NZLR 333). The plaintiffs now appeal to Her Majesty in Council.
Their Lordships would be content to adopt the comprehensive judgment of the Court of Appeal which was delivered by
Richardson J but, in deference to the full and careful argument advanced before the Board by Mr Barton QC on behalf of the
plaintiffs, they will deal fully with the arguments put forward.
As Richardson J pointed out, s 17 is expressed in the widest terms. The plaintiffs seek to imply in s 17 a limitation whereby
the commissioner may only require information

Where the Commissioner has a specified taxpayer in mind in respect of whom there is a serious question in mind as to
the tax liability of that taxpayer.

It is impossible to insert that limitation as a matter of statutory construction. The limitation could only be inserted as a
matter of policy by a process of judicial 446 legislation on the grounds that Parliament could not have intended to confer on the
commissioner a power so wide as not to be subject to such a limitation.
Two reasons are suggested for the insertion of the proposed limitation: first, that the commissioner is seeking information
which is confidential and, second, that the commissioner is imposing on sharebrokers and bankers an onerous burden of research
and report.
If the commissioner, exercising his undoubted powers under s 17(1) of the 1974 Act, requires the bankers of a specified
taxpayer under investigation to produce information about that taxpayers activities, then the confidentiality which attaches to the
relationship between banker and customer must be broken. The whole rationale of taxation would break down and the whole
burden of taxation would fall only on diligent and honest taxpayers if the commissioner had no power to obtain confidential
information about taxpayers who may be negligent or dishonest. In recognition of the fact that confidential information cannot
be concealed from the commissioner, the 1974 Act imposes stringent restrictions on the commissioner. Section 13 requires every
officer of the Revenue to maintain and aid in maintaining the secrecy of all matters relating to the 1976 Act and other taxing
statutes and requires every officer of the Department of Inland Revenue to make a statutory declaration of fidelity and secrecy.
There are other provisions which are designed to secure and do secure the secrecy of information obtained by the commissioner
about the affairs of every taxpayer. There is no distinction between the secrecy and confidentiality which attach to an identified
taxpayer and a non-identified taxpayer. Confidentiality must be broken if the commissioner is to obtain the information to enable
him to carry out his statutory functions of assessing and collecting tax. Every taxpayer is protected by the secrecy obligation
imposed on the commissioner. If the plaintiffs argument is correct, confidentiality does not assist the taxpayer who makes an
honest return of his income or the dishonest taxpayer who is under investigation by the commissioner but assists the dishonest
taxpayer who conceals both his identity and his liability to tax from the commissioner.
The plaintiffs relied on the decision of the Court of Appeal in IR Comr v West-Walker [1954] NZLR 191. In that case the
commissioner sought information about a taxpayer from his solicitor and the court held that the solicitor was entitled to withhold
information to which the common law legal professional privilege attached. The commissioner was entitled to ask but the
solicitor was entitled to decline to answer without the consent of his client. In the present case the applicants deny the right of the
commissioner to ask for the required information. Under the common law, but not under other systems of law, legal professional
privilege forms a defence to a claim for information because as Fair J, citing the Earl of Halsbury LC in Bullivant v A-G for
Victoria [1901] AC 196 at 200201, [19003] All ER Rep 812 at 813, said in the West-Walker case [1954] NZLR 191 at 204:

for the perfect administration of justice, and for the protection of the confidence which exists between a solicitor
and his client, it has been established as a principle of public policy that those confidential communications shall not be
subject to production. (Fair Js emphasis.)

The court in the West-Walker case held that, in the absence of any express provision in the Income Tax Acts abrogating the
principle of legal professional privilege, that principle excused the solicitor from supplying privileged information to the
commissioner. That case is of no assistance in the present case where it is manifest and is conceded that the principle of
confidentiality was abrogated by s 17 of the 1974 Act.
The plaintiffs referred to Australian authorities. None of those authorities dealt 447 directly with the present point at issue
and all concerned statutory provisions in forms different to that of the New Zealand Act. In Federal Comr of Taxation v
Australia and New Zealand Banking Group Ltd (1979) 143 CLR 499 the High Court of Australia dealt with the power conferred
by statute on the commissioner to require any person to attend and give evidence

concerning his or any other persons income or assessment, and may require him to produce all books, documents and
other papers whatever in his custody or under his control relating thereto.

Mason J said (at 536):

It is the function of the Commissioner to ascertain the taxpayers taxable income. To ascertain this he may need to
make wide-ranging inquiries, and to make them long before any issue of fact arises between him and the taxpayer. Such an
issue will in general, if not always, only arise after the process of assessment has been completed. It is to the process of
investigation before assessment that s. 264 is principally, if not exclusively, directed.

The plaintiffs also relied on the Canadian case of Re James Richardson & Sons Ltd and Minister of National Revenue (A-G
of Alberta intervening) (1984) 9 DLR (4th) 1. In that case Wilson J, giving the judgment of the Supreme Court of Canada, held
that a general power conferred on the Minister of National Revenue by s 231 of the taxing statute to require from any person any
information for any purposes related to the administration or enforcement of the Act only enabled the minister to require
information concerning a specified taxpayer. But in that case s 221 of the Act expressly authorised the making of regulations
requiring any class of persons to make information returns respecting any class of information required in connection with
assessments under this Act. The court held that the express power in s 221, a power which had not been exercised, limited the
general power conferred by s 231. If the minister wished to seek information regarding a class of persons then he must obtain a
regulation under s 221. Wilson J also relied on the earlier Canadian decision of Canadian Bank of Commerce v A-G of Canada
[1962] SCR 729 but in that case the minister asked for information concerning a particular alleged taxpayer. That case is of no
assistance in deciding whether in the present case the commissioner is entitled to information concerning a class of possible
taxpayers.
Counsel for the plaintiffs sought to pray in aid the New Zealand Bill of Rights Act 1990, which affirmed, inter alia, in s 21
that:

Everyone has the right to be secure against unreasonable search or seizure, whether of the person, property, or
correspondence or otherwise.

Their Lordships are content to assume that in the present case the commissioner is seeking to search the property or
correspondence of taxpayers. Having regard to the secrecy provisions of the 1974 Act and to the fact that in the interests of the
community the commissioner is charged with ensuring that the assessable income of every taxpayer is assessed and the tax paid,
the search involved in the application of s 17 of the 1974 Act cannot be said to be unreasonable. A similar conclusion was
reached by the Supreme Court of Canada in R v McKinlay Transport Ltd (1990) 68 DLR (4th) 568 under the Canadian Charter of
Rights and Freedoms. In that case there was an elaborate consideration of different expectations of privacy in different contexts
(at 580) but their Lordships are content simply to decide that the exercise of the powers conferred on the commissioner by s 17 of
the 1974 Act is not, for the purposes of s 21 of the New Zealand Bill of Rights Act 1990, unreasonable.
448
The plaintiffs also contended that in the present case the commissioner had exceeded or abused the powers conferred on him
by s 17 of the 1974 Act by making demands on sharebrokers and bankers which were onerous and expensive to obey. In the case
of sharebrokers they were asked to supply lists of their largest clients together with details of their share dealings through the
sharebroker. Bankers were asked to identify investors with them in commercial bills and to give details of each investment, cost
and realisation. One sharebroker complained that he was asked for information over a 12month period and that he only had
information over an 11month period because of a merger which had taken place. There is no doubt that sharebrokers and
bankers have or ought to have the information which the commissioner has requested. The commissioner has demonstrated that
he is prepared to modify his requirements to meet any particular genuine difficulty.
In Clinch v IRC [1973] 1 All ER 977, [1974] QB 76 the British Commissioners of Inland Revenue sought information which
was described by the recipient as a fishing or snooping exercise. Similar complaints were made in the present case. In Clinch
v IRC [1973] 1 All ER 977 at 985986, [1974] QB 76 at 87 Ackner J was unmoved by this emotive language but had no doubt
that if the particulars sought went substantially beyond that which was required for the purposes of enabling the commissioners to
carry out their statutory functions

so that they could be properly described as unduly oppressive or burdensome a court would be entitled to intervene
One of the vital functions of the courts is to protect the individual from any abuse of power by the executive, a function
which nowadays grows more and more important as governmental interference increases

(See [1973] 1 All ER 977 at 989, [1974] QB 76 at 92.)

Of course in New Zealand every sharebroker or banker will understandably resent the receipt of a notice from the
commissioner requiring information about the clients of the sharebroker or the banker. Every sharebroker or banker will resent
the time and expense incurred in complying with the notice. But the commissioner must carry out his functions of ensuring that
assessable income is assessed and that the relevant tax is paid. Section 17 of the 1974 Act requires information to be produced
which the commissioner considers necessary or relevant. There is nothing in the point that the commissioner wisely did not
require every sharebroker and every banker to disclose information about all his clients and customers.
The court can only interfere if satisfied that in making a particular requirement the commissioner exceeded or abused his
powers (see Associated Provincial Picture Houses Ltd v Wednesbury Corp [1947] 2 All ER 680, [1948] 1 KB 223 and Clinch v
IRC [1973] 1 All ER 977, [1974] QB 76). In the present case the Court of Appeal decided that as a matter of principle and
construction that the commissioner was entitled to require information concerning a class of unidentified possible taxpayers. The
court declined to speculate on the circumstance which might lead to interference by way of judicial review. Their Lordships
agree with the Court of Appeal and find nothing in the evidence deduced in the present case which could justify judicial review.
Their Lordships will humbly advise Her Majesty that this appeal ought to be dismissed. The plaintiffs must pay the costs of
the commissioner before the Board.

Appeal dismissed.

Solicitors: Simmons & Simmons; Allen & Overy.

Mary Rose Plummer Barrister.

449
[1991] 4 All ER 450

Hines v Birkbeck College and another (No 2)

EDUCATION: EQUITY

COURT OF APPEAL, CIVIL DIVISION

NOURSE, BALCOMBE AND MCCOWAN LJJ
19, 20, 21 MARCH, 24 MAY 1991

Estoppel Res judicata Decision on jurisdiction No decision on subject matter of dispute Court deciding it had no
jurisdiction to hear dispute between parties Court not determining dispute on merits Subsequent legislation conferring
jurisdiction on court Plaintiff commencing second action Whether plaintiff estopped from bringing second action on ground
of res judicata.

University Academic staff Dismissal Jurisdiction Withdrawal of title and status Whether college and university entitled
to refer to visitor disputes relating to termination of appointment or employment of academic staff Education Reform Act 1988,
s 206.

In 1985 the plaintiff, a professor of economics at one of the colleges of the University of London, issued a writ claiming that the
college had wrongfully dismissed him and that the university thereafter had acted unlawfully in withdrawing his title and status
of professor of economics. The judge struck out the plaintiffs claim on the ground that the subject mattter of the proceedings
was exclusively within the jurisdiction of the visitor. The plaintiff was ordered to pay both the colleges and the universitys costs
of the action. He did not refer the dispute to the visitor. On 29 July 1988 s 206(1) a of the Education Reform Act 1988 came into
force giving the court jurisdiction over disputes concerning the appointment or employment or the termination of the appointment
or employment of a member of a universitys academic staff. On 29 June 1989 the plaintiff issued a second writ in identical
terms to the first alleging wrongful dismissal. The college and the university applied to strike out the second action on the ground
of res judicata and, alternatively, sought an order that all further proceedings be stayed until the plaintiff had paid into court the
unpaid costs in the first action. The judge struck out the action as against both defendants on the ground of res judicata but
further held that if he had allowed the action to proceed not only the plaintiff but also the college and the university would be at
liberty to refer a dispute to the visitor under s 206(2) of the 1988 Act and that the defendants would have been entitled to a stay
until the plaintiff paid into court the costs ordered to be paid in the first action. The plaintiff appealed, contending, inter alia, that
s 206(2), which provided that the visitors jurisdiction was not excluded in respect of any dispute relating to the appointment or
employment or the determination of the appointment or employment of a member of a universitys academic staff which was
referred to the visitor before the section had effect with respect to that university, had the effect that, although the university could
refer disputes to the visitor concerning the appointment or employment of members of its academic staff, only the member
himself could refer a dispute concerning the termination of his appointment or employment to the visitor.
________________________________________
a Section 206, so far as material, is set out at p 455 c d, post

Held (1) Where an action was dismissed on the sole ground that the particular court had no jurisdiction there was no decision
on the matter in controversy estopping the plaintiff from suing again in a court which did have jurisdiction. Since the judge in the
first action had decided only that at that date the court had no jurisdiction to hear the dispute and not that the court did not have
jurisdiction at any time after s 206 of the 1988 Act came into force nor any of the issues raised in that action, the plaintiff was not
estopped on the ground of res judicata either 450 from asserting that the court now had jurisdiction or from suing again in that
court (see p 455 g to p 456 f and p 458 d, post).
(2) However, on the true construction of s 206(2), under which any dispute relating to the appointment or employment or
the termination of the appointment or employment of a member of a universitys academic staff could be referred to the visitor
before the section had effect with respect to that university, both the college and university, as well as the plaintiff, were entitled
to refer the dispute concerning the termination of the plaintiffs appointment or employment to the visitor and, if they did so, the
proceedings would be stayed in favour of the visitors jurisdiction (see p 456 g to p 457 b and p 458 d, post); Pearce v University
of Aston in Birmingham (No 1) [1991] 2 All ER 461 applied.
(3) Furthermore, a stay would be granted until the plaintiff paid into court the costs which he had been ordered to pay in the
first action and which were still unpaid (see p 458 a to d, post; MCabe v Bank of Ireland (1889) 14 App Cas 413 applied.

Notes
For the doctrine of res judicata and estoppel, see 16 Halsburys Laws (4th edn) paras 15251535, and for cases on the subject, see
21 Digest (Reissue) 5662, 368390.
For the visitors power to hear university disputes and the exclusion of the visitors jurisdiction, see 15 Halsburys Laws (4th
edn) paras 260261, and for cases on the subject, see 19 Digest (Reissue) 570571, 42624265.
For the stay of proceedings until the costs in earlier proceedings have been paid, see 37 Halsburys Laws (4th edn) paras
441442, and for cases on the subject, see 37(3) Digest (Reissue) 334336, 49845000.
For the Education Reform Act 1988, s 206, see 15 Halsburys Statutes (4th edn) (1990 reissue) 649.

Cases referred to in judgments

Arnold v National Westminster Bank plc [1991] 3 All ER 41, [1991] 2 AC 93, [1991] 2 WLR 1177, HL; affg [1990] 1 All ER 529,
[1990] Ch 573, [1990] 2 WLR 304, CA; affg [1988] 3 All ER 977, [1989] Ch 63, [1988] 3 WLR 1229.
Carl-Zeiss-Stiftung v Rayner & Keeler Ltd (No 2) [1966] 2 All ER 536, [1967] 1 AC 853, [1966] 3 WLR 125, HL.
Hines v Birkbeck College [1985] 3 All ER 156, [1986] Ch 524, [1986] 2 WLR 97; appeal dismissed [1987] 3 All ER 1040n,
[1987] Ch 457n, [1987] 3 WLR 1133n, CA.
MCabe v Bank of Ireland (1889) 14 App Cas 413, HL.
Martin v Earl Beauchamp (1883) 25 Ch D 12, CA.
Morton v Palmer (1882) 9 QBD 89, DC.
Pearce v University of Aston in Birmingham (No 1) [1991] 2 All ER 461, CA.
R v Middlessex Justices, ex p Bond [1933] 2 KB 1, [1933] All ER Rep 394, CA.
Thoday v Thoday [1964] 1 All ER 341, [1964] P 181, [1964] 2 WLR 371, CA.
Thomas v University of Bradford [1987] 1 All ER 834, [1987] AC 795, [1987] 2 WLR 677, HL.
Thomas v University of Bradford (No 2) (15 June 1990, unreported), Ch D.
Wickham, Re, Marony v Taylor (1887) 35 Ch D 272, CA.

Cases also cited or referred to in skeleton arguments

Allnut v Mills (1925) 42 TLR 68.
Ayscough v Sheed Thomson & Co (1924) 93 LJKB 924, HL.
Behrens v Sieveking (1837) 2 My & Cr 602, 40 ER 769, LC.
Bradshaw v McMullan [1920] 2 IR 412, HL.
Eastwood and Holt v Studer (1926) 31 Com Cas 251.
451
Fidelitas Shipping Co Ltd v V/O Exportchleb [1965] 2 All ER 4, [1966] 1 QB 630, CA.
Graham v Sutton Carden & Co (No 2) [1897] 2 Ch 367, CA.
Henderson v Henderson (1843) 3 Hare 100, [184360] All ER Rep 378, 67 ER 313, V-C.
Howlett v Tarte (1861) 10 CBNS 813, 142 ER 673.
Huntly (Marchioness) v Gaskell [1905] 2 Ch 656, [19047] All ER Rep 625, CA.
Ideal General Supply Co Ltd v Edelson [1957] RPC 252.
Jackson v Spittall (1870) LR 5 CP 542.
Killing v Killing (1821) 6 Madd 68, 56 ER 1016.
King v Hoare (1844) 13 M & W 494, 153 ER 206.
Langmead v Maple (1865) 18 CBNS 255, 144 ER 441.
Lockyer v Ferryman (1877) 2 App Cas 519, HL.
May, Re (1885) 28 Ch D 516, CA.
Mekhanik Evgrafov, The (No 2) [1988] 1 Lloyds Rep 330.
Mills v Cooper [1967] 2 All ER 100, [1967] 2 QB 459, DC.
New Brunswick Rly Co v British and French Trust Corp Ltd [1938] 4 All ER 747, [1939] AC 1, HL.
Outram v Morewood (1803) 3 East 346, [180313] All ER Rep 774, 102 ER 630.
Overstone Ltd v Shipway [1962] 1 All ER 52, [1962] 1 WLR 117, CA.
Payne, Re, Randle v Payne (1883) 23 Ch D 288, Ca.
Phosphate Sewage Co Ltd v Molleson (1879) 4 App Cas 801, HL.
Pinnock Bros v Lewis & Peat Ltd [1923] 1 KB 690.
Property and Reversionary Investment Corp Ltd v Templar [1978] 2 All ER 433, [1977] 1 WLR 1223, CA.
Read v Brown (1888) 22 QBD 128, CA.
Secretary of State for Employment v Banks [1983] ICR 48, EAT.
Spens v IRC [1970] 3 All ER 295, [1970] 1 WLR 1173.
Stevens v Tillett, Norwich Election Petition (1870) LR 6 CP 147.
Tak Ming Co Ltd v Yee Sang Metal Supplies Co [1973] 1 All ER 569, [1973] 1 WLR 300, PC.
Thames Investment and Securities plc v Benjamin [1984] 3 All ER 393, [1984] 1 WLR 1381.
Williams & Humbert Ltd v W & H Trade Marks (Jersey) Ltd [1986] 1 All ER 129, [1086] AC 368, HL.

Interlocutory appeal
The plaintiff, Albert Gregorio Hines, appealed from the judgment of Mervyn Davies J given on 30 March 1990 striking out the
plaintiffs action commenced by writ dated 29 June 1989 against the defendants, Birkbeck College and the University Of
London, seeking as against the college (i) a declaration that the colleges decision to dismiss him forthwith if he did not resign
from his appointment to the chair of economics at the college within seven days from 30 June 1983 and its subsequent dismissal
of him were ultra vires, null and void, (ii) the payment of his salary and emoluments from the date of his purported dismissal and
(iii) damages from breach of contract, and as against the university an injunction restraining it from divesting the plaintiff of his
title of professor of economics or his status as an appointed teacher of the university. The judge struck out the action on the
grounds that the action was res judicata, the issues raised by the plaintiffs claim having been adjudicated upon by Hoffmann J on
8 July 1985 when he decided that the court had no jurisdiction to hear an action brought by the plaintiff against the college and
the university by writ dated 17 May 1985 in identical terms to his writ dated 29 June 1989 (see [1985] 3 All ER 156, [1986] Ch
524). By a respondents notice the university contended that the decision of Mervyn Davies J ought to be affirmed on the
additional ground 452 that the action disclosed no reasonable cause of action against it and was frivolous and vexatious and an
abuse of the process of the court. The facts are set out in the judgment of Nourse LJ.

The plaintiff appeared in person.

James Munby QC for the college.
Paul Smith for the university.

Cur adv vult

24 May 1991. The following judgments were delivered.

NOURSE LJ. In Hines v Birkbeck College [1985] 3 All ER 156, [1986] Ch 524 Hoffmann J struck out the plaintiffs action
against the college and the University of London on the ground that the subject matter of the proceedings was within the
exclusive jurisdiction of the visitor. That decision was approved by the House of Lords in Thomas v University of Bradford
[1987] 1 All ER 834, [1987] AC 795 and the plaintiffs appeal against the order of Hoffmann J was subsequently dismissed (see
[1987] 3 All ER 1040, [1987] Ch 457). The plaintiff did not refer the dispute to the visitor. On 29 July 1988 there came into
force s 206 of the Education Reform Act 1988, which has given to the court an initial jurisdiction over a dispute of this kind: see
Pearce v University of Aston in Birmingham (No 1) [1991] 2 All ER 461. The plaintiff has since commenced a second and
seemingly identical action against the college and the university. The main question which now arises is whether, as Mervyn
Davies J has held, he is prevented from prosecuting it by reason of the doctrine of res judicata.
It is unnecessary to repeat the earlier history of the matter, which is fully set out in the judgment of Hoffman J in the first
action. Shortly stated, the plaintiff claims that in July 1983 the college wrongfully dismissed him from the post to which he had
been appointed in November 1971 and that the university thereafter acted unlawfully in withdrawing his title and status of
professor of economics.
The writ in the second action indorsed with a statement of claim was issued on 29 June 1989, less than six years after the
alleged wrongful dismissal. The college then issued a summons to strike it out, primarily on the ground of res judicata, and a
further summons seeking, in the alternative, an order that all further proceedings be stayed until the plaintiff had paid the costs he
had been ordered to pay to the college in the first action. The university issued a single summons seeking relief similar to that
sought by the college.
The three summonses were adjourned to the judge. In due course they were heard by Mervyn Davies J. On 30 March 1990
he made an order striking out the action as against both defendants on the ground of res judicata. In his judgment he dealt also
with two further questions which would have arisen if he had allowed the action to proceed. He held that not only the plaintiff
but also college and the university were at liberty to refer a dispute to the visitor under s 206(2) of the 1988 Act. He also held
that each defendant would have been entitled to a stay until sums of 6,000 and 7,500 had been paid into court in respect of the
costs which the plaintiff had been ordered to pay to the college and the university respectively in the first action. The plaintiff has
appealed against the judges decision of all three questions.
The hearing in this court started at 2 pm on 19 March 1991. At the end of that afternoon the plaintiff, who has appeared in
person in both courts, was still addressing us on the main question of res judicata. On the morning of 20 March we told him that
we had formed a preliminary view of that question favourable to him. He agreed to our proposal that he should take it no further
until after we 453 had heard the arguments of counsel for the defendants. Having heard the plaintiffs arguments on the second
and third questions we informed counsel for the defendants that we did not wish to hear them on either of those questions.
Having then heard their arguments on the main question we informed the plaintiff that we did not wish to hear him in reply on
that question. On 21 March judgment was reserved.
Shortly afterwards it came to our notice that on 15 June 1990 in Thomas v University of Bradford (No 2) (unreported)
Hoffmann J had decided a question which appeared to be identical to the main question raised on this appeal. He had held that
there was no res judicata. He had not been referred to Mervyn Davies Js decision and we had not been referred to Hoffmann Js
decision. We informed counsel for the defendants of this development. On 12 April they supplied us with copies of the transcript
of Hoffmann Js judgment. They did not request s further oral hearing. They were content to make brief further submissions in
writing. Since Hoffmann Js decision was clearly in the plaintiffs favour, no further argument on his part was necessary. On 25
April the House of Lords delivered judgment in Arnold v National Westminster Bank plc [1991] 3 All ER 41, [1991] 2 AC 93, a
case in which the judgments both of this court ([1990] 1 All ER 529, [1990] Ch 573) and of Sir Nicholas Browne-Wilkinson V-C
at first instance ([1988] 3 All ER 977, [1989] Ch 63) had been referred to at some length in the argument of Mr Munby QC for
the college. He subsequently informed us that there was nothing in their Lordships speeches which required him to ask for the
opportunity to address further argument to the court.
I now consider the main question of res judicata. It was pointed out by Diplock LJ in Thoday v Thoday [1964] 1 All ER 341
at 352, [1964] P 181 at 197-198 that estoppel per rem judicatam was a generic term which in modern law included two species,
namely cause of action estoppel and issue estoppel. The foundation of Mr Manbys argument on the main question, which
was adopted by Mr Smith on behalf of the university, was that the species of estoppel which had barred the plaintiffs second
action was cause of action estoppel.
Shortly stated, the decision of Mervyn Davies J was to this effect. He assumed, rather than decided, that he was concerned
with cause of action estoppel and not with issue estoppel. That distinction has since become well recognised in the authorites.
Relying on the statement of the general principle made in the speech of Lord Reid in Carl-Zeiss-Stiftung v Rayner & Keeler Ltd
(No 2) [1966] 2 All ER 536 at 550, [1967] 1 AC 853 at 909, he recognised that before the estoppel could arise the judgment in the
first action must have been a final judgment and that there must be identity both of parties and of subject matter in the first and
second actions. Clearly there was an identity of parties. Having considered the other two points, he held that there was an
identity of subject matter and that the judgment in the first action was a final judgment for the purposes of the doctrine of res
judicata. Next he asked himself whether the 1988 Act had operated so as to lift the bar of the estoppel. In answering that
question in the negative, he relied on the judgments at first instance and in this court in Arnold v National Westminster Bank plc,
from which I need refer only to those words of Sir Nicolas Browne-Wilkinson VC ([1988] 3 All ER 977 at 982, [1989] Ch 63 at
69):

So far as cause of action estoppel is concerned, the rule is absolute: you cannot sue twice for the same relief based on
the same cause of action even if new facts or law have subsequently come to light.

He also referred to R v Middlesex Justices, ex p Bond [1933] 2 KB 1, [1933] All ER Rep 394, which is authority for the
proposition that a dismissal for want of jurisdiction gives rise to a res judicata precluding the plaintiff from reviving his 454 claim
before the tribunal which has already denied jurisdiction; as to this, see further below.
In dealing with the main question in this court, the plaintiff submitted that the judges decision was wrong at every point.
By the end of the first afternoon he had wholly failed to satisfy me, absent the Education Reform Act 1988, that the judges
decision would have been wrong in any respect. However since he did not complete his argument on the main question, I do not
express a final view to that effect. On the other hand, I am satisfied, contrary to the view of the judge, that the effect of the 1988
Act has been to lift the bar of the estoppel.
So far as material, s 206 of the 1988 Act is in these terms:

(1) The visitor of a qualifying institution shall not have jurisdiction in respect of any dispute relating to a member of
the academic staff which concerns his appointment or employment or the termination of his appointment or employment.
(2) Subsection (1) above does not apply in relation to any dispute which is referred to the visitor of a qualifying
instititon before(a) the relevant date; or (b) the date on which this section comes into force; whichever is the later
(4) In this section(a) the relevant date, in relation to a qualifying institution, means the date on which the statutes
of the institution include such provision as is mentioned in section 203(1)(d) and (e) of this Act

It is agreed that the relevant date has not yet occurred. By virtue of s 236(1) of the 1988 Act, s 206 came into force on the
passing therof, namely on 29 July 1988.
In Pearce v University of Aston in Birmingham (No 1) [1991] 2 All ER 461 it was held that s 206(1), by excluding the
jurisdiction of the visitor in respect of any dispute of the two categories there mentioned, and subject to the exceptions for which
provision is made by sub-ss (2) and (3), gave jurisdiction to the court in respect of any such dispute. And so the court, which
before 29 July 1988 had no jurisdiction to entertain the plaintiffs action, now has jurisdiction to do so. Did Hoffmann Js
dismissal of the first action for want of jurisdiction before 29 July 1988 give rise to a res judicata precluding the plaintiff from
bringing the second action before a tribunal, admittedly the same tribunal, which after that date has jurisdiction to entertain it?
The answer to that question is to be found in a passage in Spencer Bower and Turner Res Judicata (2nd edn, 1969) pp 52-53:

where an action has been dismissed on the sole ground that the particular court had no jurisdiction, there is no
decision of the question in controversy, such as to estop the plaintiff from suing again in any court which has jurisdiction to
entertain the suit; but such a dismissal, while it will allow the disappointed party to prosecute his claim in a court having
jurisdiction, will preclude him from reviving his claim before the tribunal which has formally refused jurisdiction.

The authority cited for the second of those propositions is R v Middlesex Justices, ex p Bond [1933] 2 KB 1, [1933] All ER Rep
394. If, as the judge evidently took it, and as Mr Munby would have us take it took, you take that proposition literally, it applies
precisely to this case. The court was and is the same tribunal both before and after 29 July 1988. But before you can say that
there is a res judicata you must identify the res upon which an adjudication has been made. What did Hoffmann J decide? Only
that before 29 July 1988 the court did not have jurisdiction. He did not decide that the court did not have jurisdiction after that
455 date. Nor did he decide any of the issues raised in the first action. How then can the plaintiff be estopped from asserting that
the court does now have jurisdiction or, by virtue of the first of Spencer Bower and Turners propositions, from suing again in
that court?
Mr Munbys submissions having failed to answer that question, I was, at the close of the argument, more or less confident
that there was no estoppel here at all, so that questions whether it was cause of action estoppel or issue estoppel and, if the latter,
whether the change in the law effected by the 1988 Act amounted to special or exceptional circumstances which would prevent
the operation of the estoppel (see now the decision of the House of Lords in Arnold v National Westminster Bank plc [1991] 3 All
ER 41, [1991] 2 AC 93), would not arise. I was therefore much encouraged to find that the same view had been expressed by
Hoffmann J himself in Thomas v University of Bradford (No 2) (15 June 1990, unreported), where an application to strike out a
second action was made in circumstances identical to those of this case.
In giving judgment Hoffmann J said:

The question which this motion raises is a very short one and depends, in my judgment, on examining what exactly the
House of Lords decided. It did not, in my view, decide that the facts alleged by Miss Thomas in her writ would not
constitute a cause of action at common law. The only decision was that as at the date of the writ the ordinary courts had no
jurisdiction to entertain her complaint. Accordingly, there has been no determination of her dispute on the merits which
would prevent her from commencing proceedings before any court which did have jurisdiction.

In their further written submissions counsel for the defendants submitted that Hoffmann J was wrong, that his judgment was very
brief and that it did not appear to have been based on any very elaborate argument or extensive citation of authority. They
referred again to R v Middlesex Justices, ex p Bond [1933] 2 KB 1, [1933] All ER Rep 394. For the reasons I have given, I
respectfully think that Hoffmann Js decision was entirely correct and I would therefore decide the main question in favour of the
plaintiff. I should record that in a respondents notice the university contended that Mervyn Davies Js decision should be
affirmed on the additional ground that the second action was frivolous and vexatious and an abuse of the process of the court.
That contention was abandoned at the hearing.
I now turn to the second question, which depends upon the true construction of the words any dispute which is referred to
the visitor in s 206(2) of the 1988 Act. The plaintiff, while accepting that the college or the university has the right to refer a
dispute, concerning the appointment or employment of a member of the academic staff, submits that it is only the member
himself who may refer a dispute concerning the termination of his appointment or employment. The plaintiff put this submission
in a number of different ways, which included an argument based on the combined effect of s 206(1), (2) and (4)( a) and s 203(1)
(d)(e).
The short answer to this submission is that the point is practically concluded against the plaintiff by the decision of this court
in Pearce v University of Aston in Birmingham (No 1) [1991] 2 All ER 461, where an injunction to restrain the university from
proceeding further with proposals to dismiss 12 members of the academic staff was refused, but only because the court had been
informed that the university proposed to refer the dispute to the visitor. Accordingly, one of the points which was there assumed,
if not actually decided, was that the university was entitled to make a reference under s 206(2). The plaintiff sought to distinguish
that decision by pointing out that no notices of dismissal had there been given. That is correct, but the dispute was still one
which concerns the termination 456 of his appointment or employment within the second category of disputes mentioned in
s 206(1).
It is also true that the submission which has been made by the plaintiff here was not made by the plaintiffs in Pearces case.
However, having taken full account of the arguments which the plaintiff has put before us, both orally and in writing, I would in
any event decide this question against him. I see no good reason for restricting the effect of the unrestricted words in s 206(2). I
would therefore affirm the judges decision of the second question.
In regard to the third question, the factual position, as stated by Mervyn Davies J, was that the university had taxed its costs
of the first action in May 1988 in the sum of 9,54871 and the college in September 1988 in the sum of 7,80552 so that the
total sum owing amounted to 17,35423. However, the plaintiff did not attend the taxations and on 13 December 1989 he
obtained an order setting aside the taxation certificates. When the matter was before the judge the hearing of the plaintiffs
objections to the certificates had not been completed, so that the precise sums owing were unknown. On 10 August 1990 the
costs were finally certified at 6,48580 in the case of the college and 8,23698 in the case of the university, as against the sums
of 6,000 and 7,500 respectively which the judge would have ordered to be paid into court as the condition for the cesser of the
stay. This development meant that it was no longer open to the plaintiff to argue in this court that there was no basis for ordering
a stay of the second action until the costs of the first action had been taxed.
The authorities referred to by the judge included Morton v Palmer (1882) 9 QBD 89, Martin v Earl Beauchamp (1883) 25
Ch D 12, Re Wickham, Marony v Taylor (1887) 35 Ch D 272 and MCabe v Bank of Ireland (1889) 14 App Cas 413. The second
and fourth of these were cases where the plaintiff, having failed in one action, brought a second action for the same matter. In
MCabes case Lord Herschell said (at 415):

The only question remaining is whether the order was right in so far as it stayed the proceedings in the second action
until the costs in the first action had been paid. Now, my Lords, I find that it was laid down in a recent case in the Court of
Appeal, Martin v. Earl Beauchamp (25 Ch D 12 at 15), that the rule is established that where a plaintiff having failed in
one action commences a second action for the same matter the second action must be stayed until the costs of the first
action have been paid; and even although the actions were not between precisely the same parties or persons suing in the
same capacity, the case was held to be within the rule inasmuch as the plaintiff there was suing substantially by virtue of
the same alleged title.

Having cited that passage from Lord Herschells speech, Mervyn Davies J said:

In the light of MCabe v Bank of Ireland I conclude that when a plaintiff is ordered to pay the costs of an action and
then brings a second action against the same defendant concerning the same subject matter then, on application by the
defendant for a stay, the stay will be ordered as of course, unless no doubt there are some wholly exceptional
circumstances. I certainly see no exceptional circumstances in this case, so that it is appropriate to order a stay.

Before this court the plaintiff sought to argue for a less stringent rule, for which purpose he relied mainly on Morton v
Palmer and Re Wickham. However, each of those cases was concerned with the question whether a stay should be granted until
the payment of costs which had been ordered to be paid in the same action. I can well see that a different rule may apply where
there has been no final disposal of the action. That is not a state of affairs with which we are here concerned. 457MCabes case
is clear and binding authority for the rule to be applied where an action has been finally disposed of and the costs of it have not
been paid. In my view the judge correctly extracted the principle of that decision and it cannot be said that he erred in applying it
to the present case. I would therefore affirm his decision of the third question.
In the result I would not strike out the second action at this stage. To that extent I would allow the plaintiffs appeal. As at
present advised, I would order that all further proceedings in the second action be stayed, as against the college until after the
plaintiff shall have paid it the sum of 6,48580 and as against the university until after the plaintiff shall have paid it the sum of
8,23698, in each case together with interest at the appropriate rate from whatever are the appropriate dates until the date of
payment. I would give each defendant liberty to apply below if and when the action is no longer stayed as against that defendant.
The precise terms of the order will be a matter for discussion with the parties after judgment has been delivered.

BALCOMBE LJ. I agree.

MCCOWAN LJ. I also agree.

Appeal allowed in part. Order of Mervyn Davies J varied. Further proceedings stayed. No order for costs in the Court of
Appeal. Leave to appeal to the House of Lords refused.

25 July. The Appeal Committee of the House of Lords (Lord Bridge of Harwich, Lord Ackner and Lord Jauncey of Tullichettle)
refused leave to appeal.

Solicitors: Dawson & Co; Clifford Chance.

Raina Levy Barrister.

[1991] 4 All ER 458

Alltrans Inc v Interdom Holdings Ltd (Johnson Stevens Agencies Ltd and
others, third parties)
CIVIL PROCEDURE

COURT OF APPEAL (CIVIL DIVISION)

PURCHAS, NOURSE AND LEGGATT LJJ
29, 30 JANUARY 1991

Practice Pre-trial or post-judgment relief Mareva injunction Third party commencing proceedings in the Netherlands
against plaintiffs Whether court having jurisdiction to grant Mareva injunction in aid of Dutch proceedings Civil Jurisdiction
and Judgments Act 1982, s 25, Sch 1, art 24.
The plaintiff, TFL, operated a container ship service between the east coast of the United States of America and Europe
appointing a Dutch company, TNT, as its general agents. By a further agency agreement, which was governed by Dutch law, TFL
and TNT in turn appointed a company, JSA, to perform the functions of port agent for the shipping line, for which service it was
to be paid commissions on net freight collected. By a subsequent agreement which was governed by English law the defendant,
I, guaranteed unconditionally and irrevocably payment to TFL of all freights and other moneys due, owing or incurred to TFL
from or by JSA under the terms of the further agency agreement. In 1985 TFL terminated 458 JSAs agency and claimed the net
freights held by JSA at that point, which amounted to 605,26067. JSA failed to pay the sum due, with the result that TFL
commenced proceedings in England against I under the guarantee to recover the 605,26067 on the basis that it represented
money due from JSA to TFL under the further agency agreement and asserted that the sum claimed had been withheld by JSA as
security for cross-claims in the nature of set-offs. The deputy judge awarded TFL the amount claimed, but subject to a Mareva
injunction granted in aid of JSAs action against TFL and TNT in parallel proceedings commenced in the Netherlands in February
1986. TFL appealed, contending that the court had no jurisdiction to grant Mareva relief in aid of the Dutch proceedings on the
ground that s 25a of the Civil Jurisdiction and Judgments Act 1982, which enabled the English courts to give effect to art 24 b of
the Convention on Jurisdiction and the Enforcement of Judgments in Civil and Commercial Matters 1968 (which had the force of
law in the United Kingdom by virtue of s 2(1) c of the 1982 Act and was set out in Sch 1 to the Act) by providing interim relief in
aid of substantive proceedings already commenced or about to be commenced in other convention country, only applied to
proceedings to which art 24 itself applied and since the effect of art 34(1) d of the Accession Convention was that as between the
United Kingdom and other convention countries art 24 only applied to proceedings commenced after the entry into force of the
Accession Convention in the state in which the proceedings were commenced, as far as the United Kingdom was concerned, art
24 had no application to proceedings commenced in the Netherlands before 1 November 1986, the date when the Accession
Convention came into effect there.
________________________________________
a Section 25, so far as material, is set out at p 464 b to e, post
b Article 24 is set out at p 464 h j, post
c Section 2, so far as material, is set out, p 463 g h, post
d Article 34, so far as material, is set out at p 464 j to 465 c, post

Held On its true construction s 25 of the 1982 Act conferred jurisdiction on the English courts to grant interim relief including a
Mareva injunction in aid of proceedings which had been commenced in a convention country other than the United Kingdom
without any limit to the retrospective operation of the power. There was nothing in the 1968 convention or the Accession
Convention to prevent s 25 from having a wider effect than was required to implement art 24 of the 1968 convention, since s 25
and not art 24 was the source of the English courts jurisdiction to grant interim relief and it was clear that by s 25 the United
Kingdom had taken the opportunity afforded by having to meet the requirements of art 24 to provide the English courts with a
wider jurisdiction to grant interim relief in foreign proceedings than it was compelled to do by art 24, as was evidenced by s 25(1)
(b), which expressly provided that it was not a precondition to the existence of the jurisdiction to grant interim relief that the 1968
convention had effect in relation to the substantive proceedings, and by s 25(3), which contemplated a jurisdiction extended by
Orders in Council to give interim relief in aid of a much wider class of foreign proceedings. Moreover, the effect of art 24 of the
1968 Convention and art 34(1) of the Accession Convention was merely to require each convention country to make available
such provisional and protective measures as its own courts would afford if seised of the substantive action without placing any
express limitation on the proceedings in respect of which a convention country might provide protective measures and art 34(3)
itself provided that the provisions of the 1968 convention relating to the recognition and enforcement of judgments applied to
cases where proceedings were commenced before the entry into force of the Accession Convention between the convention
countries but 459 where judgment was given afterwards, provided that the proceedings would have been within the convention if
they had been started later. Accordingly, the limited reading of s 25 advanced by TFL would be rejected and the Mareva
injunction made in aid of the Dutch proceedings would be left in place. The appeal would therefore be dismissed (see p 467 b to
f and p 469 f to p 470 d f, post).

Notes
For Mareva injunctions, see 37 Halsburys Laws (4th edn) para 362, and for cases on the subject, see 37(2) Digest (Reissue) 474
476, 29472962.
For the Civil Jurisdiction and Judgments Act 1982, ss 2, ss 25, Sch 1, art 24, see 11 Halsburys Statutes (4th edn) (1991
reissue) 1116, 1149, and for art 34 of the Accession Convention, see 22 Halsburys Statutes (4th edn) 394.

Cases referred to in judgments

Babanaft International Co SA v Bassatne [1989] 1 All ER 433, [1990] Ch 13, [1989] 2 WLR 232, CA.
Garland v British Rail Engineering Ltd [1982] 2 All ER 402, [1983] 2 AC 751, [1982] 2 WLR 918, HL.
Haiti (Republic) v Duvalier [1989] 1 All ER 456, [1990] 1 QB 202, [1989] 2 WLR 261, CA.
Harrods (Buenos Aires) Ltd, Re [1991] 4 All ER 334, [1991] 3 WLR 397, CA.
Hollandia, The [1982] 3 All ER 1141, [1983] 1 AC 565, [1982] 3 WLR 1111, HL.
Siskina (cargo owners) v Distos Cia Naviera SA, The Siskina [1977] 3 All ER 803, [1979] AC 210, [1977] 3 WLR 818, HL.

Cases also cited or referred to in skeleton arguments

A-G v Vernazza [1960] 3 All ER 97, [1960] AC 965, HL.
Arkwright Mutual Insurance Co v Bryanston Insurance Co Ltd [1990] 2 All ER 335, [1990] 2 QB 649.
Berisford (S & W) plc v New Hampshire Insurance Co [1990] 2 All ER 321, [1990] 2 QB 631.
Deichland, The [1989] 2 All ER 1066, [1990] 1 QB 361, CA.
Quilter v Mapleson (1882) 9 QBD 672, CA.
Tracomin SA v Sudan Oil Seeds Co Ltd (No 1) [1983] 3 All ER 137, [1983] 1 WLR 1026, CA.
X v Y [1989] 3 All ER 689, [1990] 1 QB 220.

Interlocutory Appeal
The plaintiffs, Alltrans Inc, a Delaware Corporation formerly known as Trans Freight Lines Inc of Secaucus, New Jersey (USA)
(TFL), appealed from the order of Mr Piers Ashworth QC sitting as a deputy judge of the High Court in the Queens Bench
Division on 21 December 1989 and a variation of that order made by Otton J on 27 April 1990 granting the first third party,
Johnson Stevens Agencies Ltd (JSA), a Mareva injunction in aid of proceedings commenced against the plaintiffs in the
Netherlands on 12 February 1986. The facts are set out in the judgment of Leggatt LJ.

Richard Spearman for TFL.

Victor Lyon for JSA.
30 January 1991. The following judgments were delivered.

LEGGATT LJ. (giving the first judgment at the invitation of Purchas LJ). Before the court is an appeal by the plaintiffs in the
action, Alltrans Inc, formally known 460 as Trans Freight Lines Inc (to which I shall refer as TFL), against the grant of a
Mareva injunction issued on 21 December 1989 pursuant to the order of Mr Piers Ashworth QC (sitting as a deputy judge of the
High Court) and a variation of that injunction made pursuant to the order of Otton J on 27 April 1990. TFL seek both the
discharge of those orders and consequential orders in their favour as to costs. The main issue in the appeal is whether the deputy
judge had jurisdiction to order the injunction in aid of parallel Dutch proceedings that have not yet been concluded. TFL have
not maintained such other grounds of appeal as were referred to in their notices of appeal. Attention has primarily been focused
upon the order of the deputy judge since that of Otton J was contingent upon it, and before the judge, as before the deputy judge,
the time available did not permit either of them any detailed consideration of the issue of jurisdiction.
In order to understand the context in which the Mareva injunction was sought and granted, it is necessary to summarise as
briefly as possible the background of the litigation both in this country and in Holland. In doing so, I am greatly assisted by the
outline of the proceedings appended to Mr Spearmans skeleton argument, and for present purposes I propose to borrow from it
almost verbatim.
TFL operated a container ship service between the east coast of the United States and Europe. By an agreement of 29 June
1976 TFL appointed a Dutch company, called TNT International Transport BV (to which I shall refer as TNT), as TFLs general
agents for the operation of that shipping line. By a further agency agreement of 1 September 1977, which was governed by
Dutch law, TFL and TNT in turn appointed Johnsons Stevens Agencies Ltd (which I shall call JSA) to perform the functions of
a port agent for that shipping line. For that service JSA was paid commissions on net freight collected. JSA had a related
company called Interdom Holdings Ltd (to which I shall refer as Interdom). Interdom are the defendants in the action.
By a guarantee of 6 April 1978, which was governed by English law, Interdom guaranteed unconditionally and irrevocably
payment to TFL of all freights and other moneys due owing or incurred to [TFL from or by JSA] under the terms of the
Further Agency Agreement. A clause of the guarantee provided:

Any statement of account purporting to show the amount due from [JSA] under the terms of the Further Agency
Agreement signed as correct by any duly authorised officer of [TFL] and certified by the auditors of T.N.T. shall be
conclusive evidence as against [Interdom] of the amount so due.

Interdom were induced to maintain their guarantee, at least in part, by undertakings given by JSA and the individual third parties
to the action which were given by letter dated 18 November 1985.
Oral and written notice of the termination of JSAs agency was given in May 1985. The net freights held by JSA on
termination amounted to 721,658, a sum which was later reduced to 605,26067 as a result of disbursements claimed by JSA
and other sums due to TFL. None of the total sum due was held by JSA.
The action in England consisted of a claim by TFL against Interdom under the guarantee to recover the sum of 605,26067
on the footing that it represented money due from JSA to TFL under the further agency agreement. TFL contended that the sum
claimed had always been indisputably due subject only to cross-claims in the nature of set-offs, and also that the sum had only
been withheld by JSA as security for those cross-claims. TFL relied upon a telex message from one of JSAs directors to their
Dutch lawyers in which it was said that they ceased to be TFLs agents at the end of August 1985, and that thereafter they had
withheld payment of the sum of 605,26067 because they wanted to ensure that if they were awarded damages against TNT in
the Dutch court they would as least have that sum by way of insurance in case TNT turned out not to be good for the 461 money.
TFL also relied upon the fact that Interdom obtained 600,000 from JSA which TFL argued was covered by a trust provision in
the guarantee.
In the English proceedings TFL sought summary judgment under RSC Ord 14. Interdom, on its side, sought summary
judgment against JSA and also the individual third parties to whom I have referred. When the matter came before the deputy
master he gave leave to defend conditional on the sum of 605,26067 being brought into court. On appeal Sir Neil Lawson
varied the masters order by adding an order that the sum in court was not to be paid out without specific order of the court. That
addition was made at the instigation of JSA, who feared that the money might not be available to satisfy their claims in the Dutch
proceedings (to which I shall shortly refer) if TFL were successful in obtaining judgment against Interdom in this country before
the Dutch proceedings had been concluded, because the moneys in court here would then be paid out in satisfaction of the
judgment. In response Interdom relied upon a number of detailed defences, including the assertion that there was no privity of
contract between TFL and JSA under the further agency agreement, that there was no consideration for the reason that there was
past consideration and so forth. On 21 December 1989 the deputy judge made the order for the Mareva injunction to which I
have earlier referred.
On 8 January 1990 Interdom amended their pleadings in such a way as to abandon all those detailed defences which I have
mentioned. Instead they argued that the payment that was made to TFL in accordance with the order of 21 December 1989 had
the effect of satisfying JSAs obligations under the further agency agreement and extinguishing TFLs cause of action against
Interdom. Interdom also argued that TFL could not recover interest against Interdom at any rate higher than that to which they
would be entitled under Dutch law.
The hearing of the action in England occurred between 11 and 16 January 1990 before Otton J who gave a reserved
judgment on 27 March 1990 in which he gave judgment for TFL for 605,26067 together with interest at 1% over base rate.
The proceedings in Holland had meanwhile been proceeding, though with less celerity. On 12 February 1986 JSA began
proceedings against TFL and TNT in Holland, and those companies in their turn made cross-claims in those proceedings against
JSA.
On 18 June 1987 the court at first instance in Rotterdam gave a judgment, against which both sides appealed. On 24
February 1989 the district court in Rotterdam held that there was privity of contract between TFL and JSA under the further
agency agreement, that TFL had proved its claim against JSA under that agreement in the sum of 605,26067, and the court
accepted that TFL was entitled to claim interest upon that sum. The court also upheld the rejection by the court below of JSAs
claim to assert a set-off, but rejected the right for which JSA contended of retention, holding that TFLs judgment against JSA was
enforceable without a stay. The district court also ordered that security should be provided by TFL for the amount of the
judgment against JSA so as to cover the risk that JSA paid over that amount but were then successful in reversing the district
courts judgment on any appeal that might be made.
There was an appeal and cross-appeal against the decision of the district court, but only in unimportant respects, rendered
wholly insignificant by the withdrawal of those appeals in consequence of an undertaking given by JSA to the deputy judge on 21
December 1989. We are told that the trial of JSAs claim in Holland is now fixed for hearing on 11 March 1991.
In the Dutch proceedings TFL have therefore signed judgment against JSA for the amount of the principal debt together with
interest. In the English proceedings 462 TFL have recovered judgment against Interdom for the amount due under the guarantee
with interest, but are subject to the Mareva injunction granted by the deputy judge in aid of JSAs counterclaim in the Dutch
proceedings. Because Otton J varied that order the appeals to this court are in form against both orders, but TFL accept that if
they are to succeed they must show that the deputy judge lacked jurisdiction to order the injunction both under art 24 of the
Convention on Jurisdiction and the Enforcement of Judgments in Civil and Commercial Matters (Brussels, 27 September 1968;
EC 46 (1978); Cmnd 7395) and under s 25 of the Civil Jurisdiction and Judgments Act 1982.
 It is convenient at this stage to set out the relevant statutory provisions, all of which are contained in or are scheduled to the
1982 Act.
Section 1(1), relating to the interpretation of references to the conventions in contracting states, provides, so far as material:

the 1968 Convention means the Convention on jurisdiction and the enforcement of judgments in civil and
commercial matters (including the Protocol annexed to that Convention), signed at Brussels on 27th September 1968
the Accession Convention means the Convention on the accession to the 1968 Convention and the 1971 Protocol of
Denmark, the Republic of Ireland, and the United Kingdom, signed at Luxembourg on 9th October 1978
the Conventions means the 1968 Convention, the 1971 Protocol and the Accession Convention.

I shall likewise refer to those conventions in the same terms.

Subsection (3) of s 1 reads:

In this Act Contracting State means(a) one of the original parties to the 1968 Convention (Belgium, the Federal
Republic of Germany, France, Italy, Luxembourg and the Netherlands); or (b) one of the parties acceding to that
Convention under the Accession Convention (Denmark, the Republic of Ireland and the United Kingdom), being a state in
respect of which the Accession Convention has entered into force in accordance with Article 39 of that Convention.

Section 2 of the 1982 Act provides that the conventions are to have the force of law. It says:

(1) The Conventions shall have the force of law in the United Kingdom, and judicial notice shall be taken of them.
(2) For convenience of reference there are set out in Schedules 1, 2 and 3 respectively the English texts of( a) the
1968 Convention as amended by Titles II and III of the Accession Convention; (b) the 1971 Protocol as amended (c)
Titles V and VI of the Accession Convention (transitional and final provisions), being texts prepared from the authentic
English texts referred to in Articles 37 and 41 of the Accession Convention.

I mention in passing that Mr Spearman underlines by reference to a dictum of Lord Diplock in The Hollandia [1982] 3 All
ER 1141 at 1145, [1983] 1 AC 565 at 572 the fact that provisions such as s 2(1) are to be treated as if they were part of directly
enacted statute law.
Section 3 of the 1982 Act in relation to interpretation of the convention says by sub-s (3):

Without prejudice to the generality of subsection (1) [which refers to decisions of the European court], the following
reports namely(a) the 463 reports by Mr. P. Jenard on the 1968 Convention and (b) the report by Professor Peter
Schlosser on the Accession Convention, may be considered in ascertaining the meaning or effect of any provision of the
Conventions and shall be given such weight as is appropriate in the circumstances.

Section 25 (which is at the heart of this appeal) refers, as the sidenote indicates, to: Interim relief in England and Wales and
Northern Ireland in the absence of substantive proceedings. It provides, so far as material:

(1) The High Court in England and Wales or Northern Ireland shall have power to grant interim relief where( a)
proceedings have been or are to be commenced in a Contracting State other than the United Kingdom or in a part of the
United Kingdom other than that in which the High Court in question exercises jurisdiction; and (b) they are or will be
proceedings whose subject-matter is within the scope of the 1968 Convention as determined by Article 1 (whether or not
the Convention has effect in relation to the proceedings).
(2) On an application for any interim relief under subsection (1) the court may refuse to grant that relief if, in the
opinion of the court, the fact that the court has no jurisdiction apart from this section in relation to the subject-matter of the
proceedings in question makes it inexpedient for the court to grant it
(7) In this section interim relief, in relation to the High Court in England and Wales or Northern Ireland, means
interim relief of any kind which that court has power to grant in proceedings relating to matters within its jurisdiction, other
than(a) a warrant for the arrest of property; or (b) provision for obtaining evidence.

I pass then to Sch 1, relating to the 1968 Convention, art 1 of which provides:

This Convention shall apply in civil and commercial matters whatever the nature of the court or tribunal. It shall not
extend, in particular, to revenue, customs or administrative matters. The Convention shall not apply to:
(1) the status or legal capacity of natural persons, rights in property arising out of a matrimonial relationship, wills and
succession;
(2) bankruptcy, proceedings relating to the winding up of insolvent companies or other legal persons, judicial
arrangements, compositions and analogous proceedings;
(3) social security;
(4) arbitration.

It may be noted in passing that Title II is concerned with jurisdiction. Contained in that title is section 9 relating to
provisional, including protective, measures. The first article is art 24, which reads as follows:

Application may be made to the courts of a Contracting State for such provisional, including protective, measures as
may be available under the law of that State, even if, under this Convention, the courts of another Contracting State have
jurisdiction as to the substance of the matter.

Title III which then follows is concerned with recognition and enforcement.
When one comes to Sch 3 to the 1982 Act the first provision of Title V of the Accession Convention relating to transitional
provisions is art 34, which, so far as material, reads thus:

(1) The 1968 Convention and the 1971 Protocol, with the amendments made by this Convention, shall apply only to
legal proceedings instituted and 464 to authentic instruments formally drawn up or registered after the entry into force of
this Convention in the State of origin and, where recognition or enforcement of a judgment or authentic instrument is
sought, in the State addressed
(3) Moreover, as between the six Contracting States to the 1968 Convention and the three States mentioned in Article 1
of this Convention, and as between those three States, judgments given after the date of entry into force of this Convention
between the State of origin and the State addressed in proceedings instituted before that date shall also be recognised and
enforced in accordance with the provisions of Title III of the 1968 Convention as amended if jurisdiction was founded upon
rules which accorded with the provisions of Title II, as amended, or with provisions of a convention concluded between the
State of origin and the State addressed which was in force when the proceedings were instituted.
 The only other provision of the 1982 Act which it is necessary to notice is Pt II of Sch 13, which says with reference to s 16
and Sch 4 that those provisions shall not apply to any proceedings begun before the commencement of that section.
In relation to the statutory provisions, the salient dates are these three: on 18 February 1986 JSAs action was commenced
against TFL in Rotterdam; on 1 November the Accession Convention amending the 1968 convention came into force in the
Netherlands; on 1 January 1987 s 25 of the 1982 Act came into force and the Accession Convention came into force as between
the United Kingdom and the Netherlands.
The deputy judge held as to the Mareva injunction: (1) that JSA had a good arguable case in Holland against TFL; and (2)
that there would be a serious risk that, if the order were not made, the sum of 605,000 then in court would disappear long before
JSA obtained judgment in Holland. Against these findings there is no appeal.
About the jurisdiction of the court to grant the relief sought by way of injunction, the deputy judge said:

Article 24 of the Brussels Convention was incorporated into the law of this country by the [1982 Act] with effect from
1 January 1987.

He then read art 54 of the convention and said:

There is a note, however, that this applied only to the original contracting states. The United Kingdoms position is
governed by art 34 of the Accession Convention [which he read and then continued:] The state of origin must equate to
Holland which was a party long before the proceedings commenced there. But enforcement of a judgment is not sought in
this application. Mareva injunctions are procedural matters in aid of enforcement. Section 2 of the 1982 Act provides that
the convention shall have judicial force at least from 1 January 1987. It is clear from Sch 13 to the 1982 Act that many
sections, eg s 19, apply to judgments. The inference is that provisions such as art 24 shall apply to applications made after
1 January 1987, even in actions commenced before that date. No authorities have been cited to me or detailed argument
presented but I consider that I am not barred from making the order sought by the fact that proceedings were commenced
before the convention came into force in the United Kingdom.

Mr Lyon accepts that the decision of the deputy judge cannot be supported on the grounds given in his judgment, because
the Dutch proceedings were begun before the 1968 convention was amended by the Accession Convention.
465
The issue is whether or not s 25 of the 1982 Act conferred jurisdiction on the English High Court to grant interim relief in
aid of the Dutch proceedings. The power to grant interim relief plainly includes a Mareva injunction. In the language of sub-s
(1)(a) of s 25 proceedings have been commenced in a Contracting State, that is in the Netherlands; and in the language of
para (b) they are proceedings whose subject-matter is within the scope of the 1968 Convention as determined by Article 1,
since they involve a commercial matter, not exempted from the scope of that article.
For TFL Mr Spearman first submits that s 25(1) was enacted to enable the English courts to exercise the powers contained in
art 24 of the 1968 Convention (as amended) and to override the decision in The Siskina [1977] 3 All ER 803, [1979] AC 210 in
the cases to which the section applies. The submission is succinctly supported by the comment of Kerr LJ in Babanaft
International Co SA v Bassatne [1989] 1 All ER 433 at 442, [1990] Ch 13 at 30 when he said:

Without legislation this provision [art 24] could not have been used by our courts to grant, for instance, Mareva
injunctions over assets situated in this country in aid of substantive proceedings pending in other EEC jurisdictions. To do
so would have been contrary to the decision of the House of Lords in Siskina (cargo owners) v Distos Cia, The Siskina
[1977] 3 All ER 803, [1979] AC 210. This had held that, unless our courts were properly seised of the substance of an
action, there was no jurisdiction to grant a Mareva injunction over assets in this country in aid of proceedings abroad. The
reversal of The Siskina and adherence to art 24 was achieved by s 25 of the 1982 Act.

But it is to be noted that there is no suggestion in that or in any other passage upon which Mr Spearman has relied that those
were, or can be shown to have been, the only purposes for which s 25 was enacted.
In furtherance of his main theme, Mr Spearman set up arguments designed to show that, although s 25 extends to
proceedings not covered by the conventions, in relation to those which are the section should be treated as circumscribed by the
conventions. In essence, TFL contend that because one of the main purposes of s 25 was to enable the English courts to give
effect to art 24 by providing interim relief in aid of substantive proceedings in contracting states, it should not in such countries
be construed as doing more than that. Since the section admittedly applies to extraneous proceedings, I can see no logical reason
for expecting the scope of the section to be thus confined when it is applied to convention proceedings. But I must refer briefly
to each of the arguments relied on in support of his theme.
Orally before this court Mr Spearman deployed four main arguments. First, he relied on Re Harrods (Buenos Aires) Ltd
[1991] 4 All ER 334, [1991] 3 WLR 397. He contended that the case demands uniformity of jurisdiction in contracting states. I
do not so read it. The Lords Justices in that case made a number of comments in the course of their judgments which were
directed to the circumstances of the particular case before them and not intended, as I apprehend, to be wider in scope than
necessary. In that case there were two Swiss shareholders in a company which, though registered in England, had always carried
on business in Argentina. The minority shareholder brought a petition under the Companies Act 1985 and the Insolvency Act
1986 alleging that the affairs of the company had been conducted in a manner unfairly prejudicial to that shareholder. The issue
was whether the 1986 convention deprived the English court of jurisdiction to stay the petition on the ground of forum non
conveniens, since the company was domiciled here as well as in Argentina. The Court of Appeal held in these 466 circumstances
that the exercise of that discretionary power, when the preferred forum was the court of a non-contracting state, was not
inconsistent with the 1968 convention. So far from insisting on uniformity of jurisdiction, the court, since it was not precluded
by the 1968 convention from applying the peculiarly English principle of forum non conveniens, regarded itself as entitled to do
so.
Secondly, Mr Spearman relied on art 34(1) as excluding legal proceedings brought before the coming into force of the 1968
convention. But although art 34(1) does indeed require the United Kingdom to provide interim measures, it does not, in my
judgment, inhibit the United Kingdom from providing interim measures in relation to earlier proceedings. By force of art 34(3)
the provisions of the convention relating to the enforcement of judgments do apply to cases where proceedings were commenced
before the entry into force of the Accession Convention between the contracting states, but where judgment is given afterwards,
provided that the proceedings would have been within the convention if they had been started later. There is, therefore, nothing
in the conventions which requires s 25 to be limited in the way for which Mr Spearman contends.
Thirdly, although he argues that s 25 would not be expected to have a wider effect than is required to implement the 1968
convention, there are several respects in which it indisputably did have such an effect. The section applies to proceedings that are
purely domestic. It does not depend, as does the 1968 convention, on proceedings involving international obligations, or on the
domicile of the defendant in a contracting state: see OMalley and Layton on European Civil Practice (1989) p 1012, para 43.06.
So Parliament has, in Mr Lyons word improved on art 24 in the sense of giving the court by s 25 wider powers to grant relief
than is required by art 24. That is made express by the words in brackets at the end of s 25(1)(b) of the 1982 Act (whether or not
the Convention has effect in relation to the proceedings). As Mr Lyon observes, the parenthesis does not begin with the words
but only if. Although Mr Spearman does not in fact ask the court to read the section so restrictively, it identifies his difficulty,
because he has to acknowledge that the section is in some respects wider than art 24 but then to contend that it is, however, not so
much wider as will give it the effect which Parliament appears, from the language used, to have intended.
Mr Spearmans fourth main argument was that s 25 should be construed as fulfilling the obligations of the United Kingdom
imposed by art 24. He contended that the effect of reading into s 25(1) the definition of Contracting State in s 1(3)
demonstrated that it is only to proceedings that have been commenced after a contracting state has become a state in respect of
which the Accession Convention has entered into force that s 25(1) applies. Elaborated in this way, the material part of s 25
would read:

(a) Proceedings have been commenced in [the Netherlands, being a state in respect of which the Accession
Convention has entered into force]

For my part I cannot see that this process produces any such result as Mr Spearman contends for: it simply requires that the
Netherlands should be such a state when the power to grant interim relief is exercised. Nor does the use of the term contracting
state wed the section to the 1968 convention without the opportunity of extending further the scope of the section. The reality is,
in my judgment, best presented by the Jenard report ((1979) OJ C59, p 1 at p 42) when it says of art 24, in a passage conveniently
set out in OMalley and Layton on European Civil Practice (1989) para A1.185, pp 16151616:

In each State, application may therefore be made to the competent courts for provisional or protective measures to be
imposed or suspended, or for 467 rulings on the validity of such measures, without regard to the rules of jurisdiction laid
down in the Convention.

As regards the measures which may be taken, reference should be made to the internal law of the country concerned.
It is with the second of those sentences that the court is most concerned because, when that enjoinder is carried out, Mr
Spearmans arguments begin to founder.
He relied separately and, so to say, by incorporation on further arguments specified in his skeleton argument. In justice to
them I shall consider them separately, although inevitably some of them overlapped with those of his oral arguments that I have
already considered.
Mr Spearman relied on the comment of Kerr LJ elsewhere in the Babanaft case [1989] 1 All ER 433 at 442, [1990] Ch 13 at
29 that the main reason for the importance of the 1968 convention in the context with which the Court of Appeal was concerned

lies in the fact that it contains the most extensive code evidencing international reciprocity in the recognition and
enforcement of judgments and orders issued in foreign jurisdictions, and that it includes art 24 dealing with provisional and
protective measures.

The context with which the court was there concerned was equivalent in the present case to recognition and enforcement by the
Dutch court of the orders now appealed from. The comment goes no further than to raise the expectation that on the basis of
reciprocity the Dutch court would recognise and enforce those orders.
Secondly, Mr Spearman submitted that s 25 ought not to be construed as being in conflict with the powers under the
convention, circumscribed as they are by art 34(1). But the fact that that is the effect of the convention constitutes no warrant for
construing the powers given by s 25 as similarly circumscribed nor for regarding them, because they are expressed to be more
extensive, as in conflict with the convention.
Thirdly, Mr Spearman observed that the conventions are so framed that they do not apply to the Dutch proceedings. To that
the short answer is that s 25 is not so framed that it does not.
Fourthly, Mr Spearman submitted that art 24 is designed to achieve harmonisation of jurisdiction even if not of remedies.
For that he cited the dictum of Staughton LJ in Republic of Haiti v Duvalier [1989] 1 All ER 456 at 463, [1990] 1 QB 202 at 213.
But what his Lordship meant is plain from what he said:

it seems to me that the convention requires each contracting state to make available, in aid of the courts of another
contracting state, such provisional and protective measures as its own domestic law would afford if its courts were trying
the substantive action. That would be harmonization of jurisdiction, although not of remedies. (Staughton LJs emphasis.)

That suggests that it is for each contracting state to provide in aid of another contracting state such remedies as would be
available if its court was trying the substance of the case: that is not to say that the court is to provide no wider remedy than the
court of the other contracting state would provide.
Fifthly, in submitted that s 25 should be construed as intended to carry out the international obligations of the United
Kingdom under the conventions, Mr Spearman cited Garland v British Rail Engineering Ltd [1982] 2 All ER 402 at 415, [1983]
2 AC 751 at 771 in which Lord Diplock did indeed observe that the relevant provision should be construed as intended to carry
out the obligation 468 and not to be inconsistent with it. Article 25 carries out the obligation: that the section is wider in effect
does not render it inconsistent.
Sixthly, Mr Spearman submitted that it is a surprising and undesirable result, which overrides the scheme and spirit of the
conventions, if s 25 applies to proceedings commenced before the conventions came into force. For my part, I see nothing
inconsistent, or at variance, with the conventions in making the section available in aid of earlier proceedings than those to which
it would have to apply if the expectations of art 24 were to be fulfilled.
Finally, Mr Spearman relied on the remark in OMalley and Layton on European Civil Practice para 43.06, p 1012 in which,
in the passage to which I have already alluded, they say:

Because the section is expressed to apply whether or not the Convention applies to the proceedings, the jurisdiction to
grant interim relief is not dependent on the proceedings having an international character, nor on the defendant being
domiciled in a Contracting State.

Mr Spearman argued that it is only in these respects that s 25 is not co-extensive with s 2 and art 24. But again, there is no
suggestion that these are the only respects in which the jurisdiction is not limited in the way that it would have been had the
convention applied. In summary, the fact that jurisdictions are intended to be harmonised (in so far as they are), does not mean
that there must be uniformity of remedy: it means that the courts of each contracting state should provide the same interim relief
in aid of the courts of other contracting states as they would provide in exercise of their own jurisdiction when dealing with the
substantive dispute. The clear words of s 25 should therefore not be read as diminished in the way contended for by Mr
Spearman.
Since the source of the English courts jurisdiction is not art 24 but s 25, there is no reason why it should not be wider than
the article would confer. That it is wider is plain from the concluding words of s 25(1) (which I have earlier read) as well as from
the scope of the prospective extensions of jurisdiction by Order in Council contemplated by s 25(3). There is also force in Mr
Lyons submission that if TFLs argument were correct, they would be enabled to avoid enforcement of a Dutch judgment by
making away with the substantial sum in court, notwithstanding the intention manifested by art 34(3) of the Accession
Convention that judgments given after it comes into force should be enforceable in proceedings instituted before that date.
I accept Mr Lyons submissions that it is clear from the language of s 25(1) (using the words have been commenced) that it
applies to proceedings already under way when the section comes into force. By necessary implication from Sch 13, Pt II, which
says that certain provisions (not including s 25) do not apply to proceedings commenced before those provisions came into force,
it follows that the remaining provisions do apply to proceedings commenced before the remaining provisions came into force,
although Mr Spearman submits that that relates back no further than to the coming into force of the Accession Convention in
relation to the Netherlands on 1 November 1986. There is in any event a presumption that provisions concerned with new
remedies are to be regarded as matters of procedure, and so are to be construed as retrospective unless Parliament has shown a
clear intention to the contrary. No such intention has been shown here, and I do not regard the relevant provisions as so
exclusively concerned with jurisdiction as would make that principle inapplicable.
In my judgment the deputy judge had jurisdiction to make the order that he did, albeit for reasons other than those upon
which he relied. I would therefore dismiss the appeal, and leave in place the Mareva injunction made by him as 469 varied by
Otton J. The result is not unjust: it will merely relieve TFL pro tanto of any temptation to put it out of their power to meet any
judgment of the Dutch court that may be given against them later this year.

NOURSE LJ. I agree that the appeal must be dismissed for the reasons given in the judgment of Leggatt LJ. The words of s
25(1) of the Civil Jurisdiction and Judgment Act 1982 being clear and unambiguous in themselves and their operation not being
restricted on any of the grounds relied upon by Mr Spearman, there can be no doubt that that provision conferred power to grant
the Mareva injunction in support of the Dutch proceedings which was granted by the learned deputy judge and later varied by
Otton J.

PURCHAS LJ. I also agree that this appeal should be dismissed for the reasons given in the judgments already delivered. The
wording of s 25 of the Civil jurisdiction and Judgments Act 1982, as relevant to this appeal, gave power to the High Court to
grant interim relief in the case of proceedings which had been commenced in a contracting state other than the United Kingdom
without any limit to the retrospective operation of the power.
It has been submitted that the section should be read to include a limiting provision in terms such as but not to legal
proceedings instituted before the accession of the United Kingdom. The bases for this contention were the provision of art 34 of
the Convention on Jurisdiction and the Enforcement of Judgments in Civil and Commercial Matters (Brussels, 27 September
1968; EC 46 (1978); Cmnd 7395) (to which reference has already been made) which, by virtue of s 2(1) of the 1982 Act, have the
force of law in the United Kingdom. The provisions of that article which limit the application of the convention to proceedings
instituted after accession justify by way of implication, in the wording of s 25, the additional limitation to which I have referred.
I see no reason to read the provisions of the article of the convention other than dealing with the application of the
convention itself and in no way purporting to limit the powers of the governments of the contracting states from assuming powers
in relation to proceedings instituted before their accession. As has been said already, the wording of s 25 of the Act is totally
clear, and I see no reason in any way to qualify it in the way that the appellants sought so to do in this appeal.

Appeal dismissed.

Solicitors: Taylor Joynson Garrett; Stilgoes.

Celia Fox Barrister.

470
[1991] 4 All ER 471

Record v Bell
LAND; Sale of Land

CHANCERY DIVISION
JUDGE PAUL BAKER QC SITTING AS A JUDGE OF THE HIGH COURT
3, 4, 5 OCTOBER 1990

Sale of land Contract Form of contract Necessity for writing Incorporation of terms Agreement for sale of land Prior
to exchange of contracts parties agreeing by letter that exchange subject to vendor showing good title Purchaser failing to pay
on completion Vendor seeking specific performance of contract Whether letter part of original contract Whether letter a
collateral contract outside statutory provisions governing sale of land Whether collateral contract enforceable by specific
performance Law of Property (Miscellaneous Provisions) Act 1989, s 2.

In May 1990 the vendor and the purchaser entered into an agreement in writing for the sale of a residential property for 13m.
Contemporaneously the parties entered into a separate contract for the sale of chattels which were part of the contents of the
house. The completion date for both contracts was 31 July 1990. The day before contracts were to be exchanged the vendors
solicitor wrote to the purchasers solicitor informing him that he was awaiting the original office copy entries from the Land
Registry showing the vendor as registered owner of the property. The purchasers solicitor wrote to the vendors solicitor stating
that the contract for the sale was made conditional on the office copies showing the vendor as the registered owner and that the
letter setting out that condition was to be attached to the contract of sale. Subsequently the office copies became available
showing that the vendor was the registered proprietor of the property. The purchaser failed to complete on the completion date.
The vendor brought an action for specific performance and sought summary judgment. The purchaser sought leave to defend,
contending, inter alia, that the contract for the sale of the house did not comply with s 2(1) a of the Law of Property
(Miscellaneous Provisions) Act 1989, which provided that a contract for the sale or other disposition of land can only be made in
writing and only by incorporating all the terms which the parties have expressly agreed in one document.
________________________________________
a Section 2, so far as material, is set out at p 476 j, post

Held Under s 2 of the 1989 Act a contract for the sale of land had to be in writing rather than merely evidenced in writing, had
to contain all the terms expressly agreed and all of those terms had to be set out in the contract or incorporated in it by reference
to some other document which had to be signed by or on behalf of each party. Accordingly, although a letter of variation or a
letter of additional terms which was signed by both parties but which was not itself a contract for sale could be a variation of the
original contract after it had been exchanged, it could not be part of the original contract without there being some reference to it
contained in the contract for sale. Furthermore, where there was more than one contract, the terms had to be expressly
incorporated in each of them. On the facts, there was no reference in the contracts for sale to the supplementary term relating to
office copies, and although the purchasers letter had been physically attached to the purchasers part of the contract there had
been no similar attachment of the other partys letter to the other part of the contract, with the result that the letters did not satisfy
the requirements of s 2. However, since the vendors letter was an offer of a warranty by the vendors solicitor to the 471
purchasers solicitor as to the state of the title to induce him to exchange and that offer had been accepted by exchanging
contracts, there was in the circumstances a collateral contract in respect of which specific performance could be ordered.
Furthermore, where there was contract for the sale of a house and chattels in it with the furnishings in situ specific performance
of the sale of the house could include specific performance of the sale of the furnishings notwithstanding that they were the
subject of a separate contract. Accordingly, specific performance would be ordered of both contracts (see p 477 a b f to p 478 b,
p 479 h j and p 480 c to e, post).
De Lassalle v Guildford [19003] All ER Rep 495 applied.

Notes
For the necessity for a memorandum of a contract for the sale of land, see 42 Halsburys Laws (4th edn) paras 2734, and for
cases on the subject, see 40 Digest (Reissue) 4156, 163298.

Cases referred to in judgment

City and Westminster Properties (1934) Ltd v Mudd [1958] 2 All ER 733, [1959] Ch 129, [1958] 3 WLR 312.
Crosse v Gardner (1688) Carth 90, 90 ER 656.
De Lassalle v Guildford [1901] 2 KB 215, [19003] All ER Rep 495, CA.
Medina v Stoughton (1700) 1 Salk 210, 91 ER 188.
Nutbrown v Thornton (1804) 10 Ves 159, 32 ER 805.
Pasley v Freeman (1789) 3 Term Rep 51, [17751802] All ER Rep 31, 100 ER 450.

Adjourned summons
The plaintiff, Anthony Record, applied under RSC Ord 86 for summary judgment, seeking specific performance of contracts for
sale of the premises and chattels situated at 6 Smith Square, London SW1, made between the plaintiff and the defendant, Andrew
Bell. The summons was heard and judgment was given in chambers. The case is reported by permission of Judge Paul Baker
QC. The facts are set out in the judgment

Richard Ritchie for the plaintiff.

David Halpern for the defendant.

5 October 1990. The following judgments were delivered.

JUDGE PAUL BAKER QC. I have before me an application for summary judgment under RSC Ord 86. It is a vendors action
for specific performance and the terms of the contracts are as follows. On 31 May 1990 there was an agreement in writing for the
sale of a residential property at 6 Smith Square, London SW1 for the price of 1,300,000. Contemporaneously there was a
separate contract for the sale of a collection of chattels which were part of the contents of the house. The sale price for those was
171,235. The chattels are set forth in a long schedule attached to the agreement. The completion date expressed in both
contracts was 31 July 1990. I shall return to the contracts shortly.
Later in the year, on 13 June, there was an oral agreement between the plaintiff vendor and the defendant purchaser for the
sale of further chattels, of which there is a list in evidence. The price for those was 46,400.
On 28 June there was a variation in writing agreed to and signed by the parties or their solicitors for varying the completion
date to 13 August.
Finally on 20 July the plaintiff alleges, but the defendant denies, that there was an oral agreement for the sale of a further
item, a piano, in the sum of 4,000.
472
Except as regards that last item, very small in the context of the whole transaction, there is no dispute as to the making of
those agreements. Furthermore, as regards the real property, the title has been accepted. The completion date has, however,
passed without the defendant coming forward and paying for the property and the chattels. The reason for that can be found in an
attendance note of the plaintiffs solicitor on 28 August 1990 to be found in an exhibit to Mr Bernss affidavit, Mr Berns being
the solicitor acting for the plaintiff. The attendance note is, in fact, I think by one of Mr Bernss assistants or colleagues in the
office whose initials are JWW. It reads as follows:

JWW speaking to Mr. Offenbach [who is the solicitor acting for the defendant purchaser] and explaining that his client
was contemplating an application under Order 86 for a Summary Judgment. Mr. Offenbach said that he hoped that JWW
would not make the litigation too lively since he was hopeful that his client would be able to complete the contract, and
hoped to know by the end of the week whether this was going to be possible or not. He said that his clients difficulties had
principally stemmed from the incidents in Kuwait since his client had traded in the Middle East and also in Tokyo, and the
stock exchange had been very badly hit by the prospect of war in the Persian Gulf. He seemed to be suggesting that it
would be war in the Gulf that would render his clients ability to complete the contract untenable.

In opening his submissions to me on behalf of the defendant Mr Halpern stated that it was right that that was the reason for
the failure to complete on the part of the defendant. When such a statement is put before the court, one scrutinises with some
care the reasons why it is said that the contract is not enforceable. Two such reasons have been put before me either one of which
would suffice if it were established, or, rather, if I was persuaded that there was a serious issue involved in either of them it would
be my duty then to give leave to defend.
The first is, says Mr Halpern, that the contract was tainted with illegality and so not enforceable. The second is that the
contract for the sale of the house, not the other contracts, does not comply with the Law of Property (Miscellaneous Provisions)
Act 1989, s 2.
[His Lordship considered the illegality issue and held that there was no illegal purpose on the part of the purchaser. His
Lordship rejected that ground for giving leave to defend and continued:]
The other ground for giving leave to defend is that the contract does comply with the terms of s 2 of the Law of Property
(Miscellaneous Provisions) Act 1989. It is a point of some general importance arising under a new statute which has made very
substantial changes in the law relating to contracts for the sale of land. The particular area I am concerned with is where a
contract in two parts has been duly signed by the respective parties and is awaiting exchange. Then some term is orally agreed
immediately prior to exchange and confirmed by the exchange of letters. Is the statute satisfied? That, as I see it, is a very
common situation, especially where there is some pressure to get contracts exchanged, as there frequently is, and one often finds
that at exchange not all the loose ends are tidied up and it is necessary to have some last minute adjustment of the contract which
takes the form of side letters. I am most indebted to both counsel for interesting arguments on this section. I will now go into the
facts relating to this in some detail before I come to the law.
I can take them from the bundle of correspondence which Mr Berns put in during the course of the hearing which led up to
the exchange of contracts and, of course, the contract itself. I can start with the first involvement of the parties 473solicitors.
The plaintiffs (vendors) solicitors are the firm of Piper Smith & Basham. On the defendants side, the purchaser, it is a Mr
Offenbach of Offenbach & Co In the opening letter of 22 May which Mr Berns (of Piper Smith & Basham) wrote to his
opposite number he has a paragraph which says:

We understand that your client will be contacting our client in relation to the possible acquisition of furniture and other
effects, and once the figures in respect of those items are agreed we shall let you have a separate cheque in regard to the
same and we will complete the contract price. Our client, however, wishes to keep the property cost and any contents cost
separate and we have, therefore, not included any reference to the same in the sale of the contract.

He enclosed the draft contract, which was in the National Conditions of Sale (20th edn) printed form, and he also enclosed:

Copy entries on the charge Certificate when our client purchased. We are awaiting up-to-date office copy entries and
will let you have these as soon as the same come to hand.

There are the standard preliminary inquiries which I need not deal with. He says:

I look forward to hearing from you in very early course together with any additional inquiries.

The copy entries which were enclosed with that letter showed that at the time when Mr Record purchased the property,
which I think would be about two years earlier in 1988, the original vendors were Lord and Lady Sandford. They are shown as
proprietors on the proprietorship register. In the charges register there are two items relating to covenants. The first is that the
property is subject to such restrictive covenants as may have been imposed before 1 January 1909 which are still existing and
capable of being enforced, so that would be those existing before the title was registered. Secondly, there was a transfer of land
in the title dated 10 December 1986 from the City of Westminster to Lord and Lady Sandford which contained restrictive
covenants. The only other item related to a charge in favour of a bank which was, of course, paid off when Mr Record purchased.
On 29 May Messrs Offenbachs returned the contracts:

We enclose a copy of the contract revised as at todays date, details of the purchaser will follow but it is likely to be a
company.

Then Mr Berns wrote to Mr Offenbach on 30 May, only one day before the exchange of contracts (which ultimately did take
place), saying:

I enclose herewith an office copy of the transfer received from the Land Registry today and am awaiting original office
copy entries which I shall let you have as soon as they are available.

I do not think I need read more of this for the present purposes. The transfer, which was the 1986 transfer already mentioned,
shows among other things the pavements round the two street frontages of the property. Those pavements are shown coloured
yellow on the plan. They are shown in that distinctive way to indicate that the subsoil only of that land was part of the sold
property. That transfer, with its restrictive covenants, was furnished to the purchasers solicitors, but so far Mr Berns had not
been able to get hold of the subsisting entries in the 474 Land Registry. He did not have up-to-date office copies of the register
showing the plaintiff as registered owner and whatever other entries were there, nor did he have the charge certificate which was
in the hands of Mr Records mortgagee, the Midland Bank. He was still waiting for it to be sent to him by the bank.
To understand what follows I must turn to condition H of the special conditions of the contract of sale, and that reads as
follows:

The property is sold subject to the covenants and conditions contained or referred to in the Property and Charges
Register of the title (save for financial charges) and the Purchaser shall be deemed to purchase with full knowledge thereof
and shall not raise any objection or requisition with regard thereto.

The problem was that in the light of the information which had been furnished to him up to that point, the defendant purchaser
would be accepting that he had knowledge of the up-to-date entries when, in fact, the plaintiff vendor had not been able to supply
them. He could only supply them as at the time when he purchased it some two years previously.
I turn to Mr Bernss affidavit to see what happened in relation to that matter. It says:

The Defendant instructed David Offenbach of Messrs. Offenbach and Co. who proceeded with their investigation of
title in the usual way. By virtue of the urgency with which the matter proceeded, I was unable to deduce the registered title
to Mr. Offenbach, showing Mr. Record as registered proprietor, prior to exchange of written contracts which is why the
contract for the sale of the land was made conditional on the terms of Mr. Offenbachs letter which is attached to the
original agreement. It is quite normal conveyancing practice to supply details of the Vendors title prior to exchange and
delivery of those details is not usually contractually due until eleven working days after the date of a contract however,
this condition, which constituted additional protection for Mr. Offenbachs client, was expressly incorporated into the
Contract.

I shall come to that in a moment. Then he says:

I confirm that Contracts were exchanged between solicitors pursuant to Law Society Formula B at 3.31 p.m. on 31st
May 1990 and my Clients part of the Contract (together with the supplemental chattels contract) was put in the Document
Exchange to Messrs. Offenbach & Co. in accordance with the express undertaking to do which is one of the obligations on
solicitors contained in Law Society Formula B.

Then he produces a copy of the covering letter, which I shall come to. He continues:

I should say that the Vendors part of the Contract was signed by me on his behalf pursuant to an expressed written
authority, which for the purpose of completeness, is now produced and shown to me and marked RMB2.

That is what Mr Berns tells me about the conduct of this matter and I must now look at his letter that he referred to:
 I refer to our telephone conversation at 3.31 on the 31st instant, when contracts were exchanged in relation to the sale
and purchase of the above property, and also in relation to the chattels by way of a Supplemental Agreement in accordance
with Law Society Formula B, and I look forward to 475 receiving your clients part of the Contract duly signed, together
with a cheque for the deposit totalling 70,000. As I was unable to provide you with up-to-date Office Copy entries or,
indeed, entries on the Charge Certificate, contracts have been exchanged conditional on the following basis:1. That the
Office Copy entries will reveal Anthony Record as the registered proprietor [I recall that the only available copy showed
that Lord and Lady Sandford were the registered proprietors]. 2. That there are no other entries on the Register other than
Financial Charges. 3. That the blue colouring on the Office Copy filed plan is the same as the yellow colouring shown on
the Transfer of 10th December 1986. Having checked my own Report on Title, that is the position. I accordingly enclose
herewith the two separate Agreements signed for and on behalf of my Client, and please accept this letter as my authority
for you to inspect the Register of the title to obtain Office Copy entries yourself. No doubt you will let me have some
Requisitions on Title in early course, together with draft Transfer and receipt for fixtures and fittings.

The following day, 1 June, there is a letter from Offenbachs forwarding the purchasers part. He says:

We enclose herewith the contract of sale and agreement in respect of fixtures together with our solicitors clients
cheque for 65,000 following exchange of contracts today under Formula B at 3.40 pm.

Turning to the part of the contract signed by the defendant one sees that it has this letter from Offenbach & Co dated 1 June
fixed to it:

Dear Mr. Berns,

RE: 6 SMITH SQUARE LONDON SW1

This letter is written to be attached to the Contract of Sale and is part of the contract between the parties. It is agreed that:
(1) Office Copies to be delivered to the Purchaser will show the registered proprietor as Anthony Record and there will be no
other entries different from the copy Charge Certificate supplied to the Purchasers solicitors other than in respect of financial
charges. (2) The blue colouring referred to on the Office Copy filed plan is the same as the yellow copy on the Office Copy
Transfer supplied to us.
That is the version of this arrangement that Mr Offenbach put forward and I should say that in due course up-to-date office copies
become available and they showed exactly as was anticipated in the letter, namely that Mr Record was the registered proprietor,
there were no other charges other than financial ones and the colouring on the plan was as stated.
Those, I think, are all the facts that I need refer to in relation to this point. Now I must return to the Law of Property
(Miscellaneous Provisions) Act 1989, s 2. Subsections (1) to (3) are the relevant parts for the purposes of this matter.

(1) A contract for the sale or other disposition of an interest in land can only be made in writing and only by
incorporating all the terms which the parties have expressly agreed in one document or, where the contracts are exchanged,
in each.

(2) The terms may be incorporated in a document either by being set out in it or by reference to some other document.
(3) The document incorporating the terms or, where contracts are exchanged, one of the documents incorporating them (but
not necessarily the same one) must be signed by or on behalf of each party to the contract.
476
Those are the material provisions for the purposes of this case and these are more stringent requirements than were contained in s
40 of the Law of Property Act 1925, which this supersedes. In particular under the new provision, a contract for the sale of land
has to be in writing; it is not sufficient that it be evidenced in writing. Secondly, the contract must contain all the terms expressly
agreed. Thirdly, the terms must be either set out in the contract or incorporated in it by reference to some other document.
Fourthly, the document incorporating the terms must be signed by or on behalf of each party. Lastly, where the documents are
being exchanged, all the terms must be incorporated in each document but the parties, of course, can sign separately.
In his submissions to me on this Mr Halpern for the defendant said, first, that the section does not cater for side letters of the
sort involved in this case unless they are incorporated into the main agreement. Secondly, he says, that the letters in this case
were not incorporated as required by the section, and thirdly in any event they had to be in identical terms when there are two
parts to the contract, and these letters were not in identical terms. He also says, indeed, these letters in this case were not more
than memoranda of a pre-existing oral contract between the solicitors and that was a situation which it was the purpose of the Act
to outlaw.
In reply to that Mr Ritchie submitted first of all that side letters may amount to a collateral contract outside the 1989 Act. As
regards that point Mr Halpern concedes that there is a possibility of side letters being a collateral contract and unless they are
themselves a contract for the sale of land the 1989 Act would not bite. Secondly, Mr Ritchie says, if that is wrong, these letters
were incorporated. Thirdly, meeting Mr Halperns point about identity, these letters were sufficiently identical and, lastly, if it
fails on all those this is a clear case for rectification or estoppel on which summary judgment could be given.
I start with the defendants first two points, that is to say if there are to be side letters they have to be incorporated into the
main agreement, and these were not incorporated. If there has to be a last minute addition to the contract after the document has
been prepared and is awaiting exchange, it could be written into the draft contract before exchange, or some reference to it could
be added to the contract so long as all that was done with the authority of the parties who signed it. I would see no difficulty in
adjusting the contract before exchange in that way. But it could not, in my judgment, be done simply by a document which itself
refers to the contract, and I reject Mr Ritchies submission on this.
Section 2(1) of the 1989 Act requires that a contract for the sale or other disposition can only be made in writing and only
by incorporating all the terms which the parties have expressly agreed in one document. The document in that subsection must
be the document which contains the contract for sale. Going to sub-s (2), The terms may be incorporated in a document either
by being set out in it or by reference to some other document. The former document was a direct reference to the document
referred to in sub-s (1), and the purpose of sub-s (2) is to expand what is meant in sub-s (1) by incorporating the terms. There are
two ways they could be incorporated. They could be set out at length in the contract for sale, or the contract for sale can refer to
some other document in which these terms are to be found. The document referred to need not itself be signed, but it has to be
identified in the document which is signed.
A letter of variation or a letter of additional term, not itself a contract for sale, which is signed by both parties may be a
variation of the original contract after it has been exchanged as, indeed, we have in this very case relating to the completion date.
But it could not, as I see it, be part of the original contract without there being some reference to it contained in the contract for
sale. The terms agreed 477 before exchange have to be incorporated. I do not have to deal with the case of physical attachment
of a paper containing an additional term without verbal reference to it in the main contract. On the facts before me, there was no
reference in the contracts for sale to the supplementary term. It is true that Mr Offenbachs letter had been physically attached to
the purchasers part of the contract, but there was no similar attachment of the other partys letter to the other part of the contract.
Under the new Act, the terms have to be expressly incorporated in each of the contracts where there is more than one.
 I return to Mr Ritchies point that what happened here amounted to a collateral contract, that is an independent contract
collateral to the main contract. In such a case it is not caught by s 2 unless it is itself a contract for sale. Mr Ritchie relied on the
well-known case of De Lassalle v Guildford [1901] 2 KB 215, [19003] All ER Rep 495, a decision of the Court of Appeal, and
in this context I read the short headnote ([1901] 2 KB 215):

The plaintiff and the defendant negotiated for the lease of a house by the latter to the former. The terms were arranged,
but the plaintiff refused to hand over the counterpart that he had signed unless he received an assurance that the drains were
in order. The defendant verbally represented that they were in good order, and the counterpart was thereupon handed to
him. The lease contained no reference to drains. The drains were not in good order, and an action was brought to recover
damages for breach of warranty:

Held, that the representation made by the defendant as to the drains being in good order was a warranty which was collateral
to the lease, and for breach of which an action was maintainable.
A L Smith MR, who delivered the judgment of the court, said ([1901] 2 KB 215 at 221, [19003] All ER Rep 495 at 498499):

Now what constitutes a warranty in law, or a mere representation? To create a warranty no special form of words is
necessary. It must be a collateral undertaking forming part of the contract by agreement of the parties express or implied,
and must be given during the course of the dealing which leads to the bargain, and should then enter into the bargain as part
of it. It was laid down by Buller J. as long ago as 1789 in Pasley v. Freeman (3 Term Rep 51 at 57 [17751802] All ER
Rep 31 at 35): It was rightly held by Holt C.J. in Crosse v. Gardner ((1688) Carth 90, 90 ER 656) and Medina v.
Stoughton ((1700) 1 Salk 210, 91 ER 188), and has been uniformly adopted ever since, that an affirmation at the time of
sale is a warranty provided it appear on evidence to have been so intended. In determining whether it was so intended, a
decisive test is whether the vendor assumes to assert a fact of which the buyer is ignorant, or merely states an opinion or
judgment upon a matter of which the vendor has no special knowledge, and on which the buyer may be expected also to
have an opinion and to exercise his judgment. In the former case it is a warranty, in the latter not: see Benjamin on Sales
(3rd edn), 1884, p 607), whose statement upon the law, in my judgment, is accurate.

Later, dealing with the effect of collateral warranties on the parol evidence rule as it relates to a written contract, he said ([1901] 2
KB 215 at 222, [19003] All ER Rep 495 at 498):

The present contract or warranty by the defendant was entirely independent of what was to happen during the tenancy.
It was what induced the tenancy, and it in no way affected the terms of the tenancy during the 478 three years, which was
all the lease dealt with. The warranty in no way contradicts the lease, and without the warranty the lease never would have
been executed.

I was also referred to City and Westminster Properties (1934) Ltd v Mudd [1958] 2 All ER 733, [1959] Ch 129. Indeed, there is
helpful guidance there from Harman J in that case (see [1958] 2 All ER 733 at 742743, [1959] Ch 129 at 145147), but I do not
think I need read it in extenso.
The terms of the two letters which are material on this case are not precisely identical. I look first at Mr Offenbachs letter
which he sent to Berns to see whether there is indeed a collateral contract between them or whether it is a case where I would
have to say the matter was unclear and give leave to defend. Just looking at it with that in mind, Mr Halpern says the status of
this letter is uncertain. It was attached to the contract for sale and was intended to be part of the contract between the parties. It
was strongly urged on me that that showed that it was sought to amend the contract and not to conclude a collateral contract. But
that would not be fatal; as A L Smith MR said in De Lassalle v Guildford [1901] 2 KB 215 at 221, [19003] All ER Rep 495 at
498499:

It must be a collateral undertaking forming part of the contract by agreement of the parties express or implied, and
must be given during the course of the dealing which leads to the bargain, and then should enter into the bargain as part of
it.

Further, I note that one of the points that A L Smith MR made was that one has to see whether it was intended that what the
vendor assumed to assert was a fact or an opinion. Here we have statements of fact within the vendors exclusive knowledge.
The statement was that the office copy entries did contain entries which had been vouched for. Further, Mr Offenbachs letter is
not inconsistent with the contract, and in particular it is not inconsistent with special condition H.
Turning to Mr Bernss letter, I observed it to be stated that the contracts were exchanged conditionally upon the following
basis: that the office copies would reveal Anthony Record and that there were no other entries on the register other than financial
charges. I do not find in the terms of these letters any difference between what Mr Offenbach has put forward and what Mr Berns
has put forward as to what the vendor is purporting to guarantee. Mr Bernss letter, as one might expect, explains the reasons
why it is necessary to put that forward, that he had failed to obtain up-to-date copies of the Land Registry entries up to the point
of exchange. He describes it that contracts were exchanged conditional upon the following basis, but myself I would not regard
that as fatal to this being a warranty of the sort described in De Lassalle v Guildford, and indeed my conclusion on this is
unhesitating. This was, in my judgment, an offer of a warranty by Mr Berns to Mr Offenbach as to the state of the title, and it
was done to induce him to exchange. That offer was accepted by exchanging contracts. It would be unfortunate if common
transactions of this nature should nevertheless cause the contracts to be avoided. It may, of course, lead to a greater use of the
concept of collateral warranties than has hitherto been necessary.
In those circumstances I do not find it necessary to deal with the questions which have been argued before me relating to the
degree of identity of documents necessary for the purposes of the 1989 Act where the contract is in two parts, or those relating to
rectification or estoppel.
I must now turn briefly to the chattel contracts. I said that there were three. 479The first one was in writing and was part of
the original deal. The second one was oral for additional chattels to be sold for 46,400, and then there was the one relating to
the piano. The first two are not disputed but the third is. The plaintiff seeks specific performance of those contracts in addition to
the one relating to the land. It was argued before me that this was not a case for specific performance. It is not the normal
remedy for a breach of a contract to sell goods, certainly not goods in isolation. There are certain exceptions to that general
proposition. One is if the goods are of unique value. Another exception was called to my attention in a case before Lord Eldon
LC, Nutbrown v Thornton (1804) 10 Ves 159, 32 ER 805, where there was an entire contract of land and goods. Another
exception may occur where the goods are of such a nature that it would damage the land to remove them. It was said, by
contrast, that these are removable chattels, that they were not fixtures but movable chattels of one sort or another on the land and
that therefore I should not award specific performance. But in my judgment the remedy is not limited to those exceptions. The
principle behind the remedy is that damages would not be adequate. Where you have a contract for the sale of a house and
chattels in it, with the furnishings in situ, it seems to me that there, in appropriate cases, the court can award specific
performance. If the court is going to grant an order for specific performance for the house itself, the jurisdiction is not so
restricted that the court cannot extend the decree to the accompanying furnishings. The jurisdiction cannot depend, in my
judgment, on whether the land and chattels were all in one contract or in two separate contracts. Therefore I propose to give
judgment for specific performance in regard to the contract for the sale of 6 Smith Square and for the two chattel contracts, the
contemporaneous one and the oral agreement of 13 June 1990. As to the piano, there is a dispute of fact as to whether that
agreement was entered into, and therefore as regards that part of the transaction I shall give unconditional leave to defend and
order that part of the claim to be transferred to the county court.

Order accordingly.

Solicitors: Piper Smith & Basham; Offenbach & Co.

Hazel Hartman Barrister.

480
[1991] 4 All ER 481

R v R(Rape: marital exemption)

CRIMINAL; Criminal Law

HOUSE OF LORDS
LORD KEITH OF KINKEL, LORD BRANDON OF OAKBROOK, LORD GRIFFITHS, LORD ACKNER AND LORD LOWRY
1 JULY, 23 OCTOBER 1991

Criminal law Rape Husband and wife Marital exemption Whether law of rape subject to marital exemption Whether
husband can be convicted of rape if he has sexual intercourse with wife without her consent Whether unlawful having any
meaning in definition of rape as unlawful sexual intercourse Sexual Offences (Amendment) Act 1976, s 1(1).

The rule that a husband cannot be criminally liable for raping his wife if he has sexual intercourse with her without her consent
no longer forms part of the law of England since a husband and wife are now to be regarded as equal partners in marriage and it
is unacceptable that by marriage the wife submits herself irrevocably to sexual intercourse in all circumstances or that it is an
incident of modern marriage that the wife consents to intercourse in all circumstances, including sexual intercourse obtained only
by force. In s 1(1) a of the Sexual Offences (Amendment) Act 1976, which defines rape as having unlawful intercourse with a
woman without her consent, the word unlawful is to be treated as mere surplusage and not as meaning outside marriage, since
it is clearly unlawful to have sexual intercourse with any woman without her consent (see p 484 b f to p 485 f, p 488 c and p 489
g to p 490 d, post).
________________________________________
a Section 1(1), so far as material, is set out at p 487 h, post

S v HM Advocate 1989 SLT 469 followed.

Decision of the Court of Appeal [1991] 2 All ER 257 affirmed.

Notes
For rape, see 11(1) Halsburys Laws (4th edn reissue) para 515, and for the marital exemption thereto, see ibid para 495, and for
cases on the subject, see 15 Digest (Reissue) 12101211, 1038010382.
For the Sexual Offences (Amendment) Act 1976, s 1, 12 Halsburys Statutes (4th edn) (1989 reissue) 682.

Cases referred to in judgments

HM Advocate v Duffy 1983 SLT 7, HC of Just.
HM Advocate v Paxton 1984 JC 105, HC of Just.
McMonagle v Westminster City Council [1990] 1 All ER 993, [1990] 2 AC 716, [1990] 2 WLR 823, HL.
R v C(rape: marital exemption) [1991] 1 All ER 755, Crown Ct at Sheffield.
R v Caswell [1984] Crim LR 111, Crown Ct at Wakefield.
R v Chapman [1958] 3 All ER 143, [1959] 1 QB 100, [1958] 3 WLR 401, CCA.
R v Clarence (1888) 22 QBD 23, [188690] All ER Rep 133, CCR.
R v Clarke [1949] 2 All ER 448, Assizes.
R v H (14 March 1990, unreported), CCC.
R v J(rape: marital exemption) [1991] 1 All ER 759, Crown Ct at Teeside.
R v Jackson [1891] 1 QB 671, [18914] All ER Rep 61, CA.
R v Kowalski (1987) 86 Cr App R 339, CA.
R v Miller [1954] 2 All ER 529, [1954] 2 QB 282, [1954] 2 WLR 138, Assizes.
481
R v OBrien [1974] 3 All ER 663, Crown Ct at Bristol.
R v Roberts [1986] Crim LR 188, CA.
R v S (15 January 1991, unreported), Crown Ct at Stafford.
R v Sharples [1990] Crim LR 198, Crown Ct at Manchester.
R v Steele (1976) 65 Cr App R 22, CA.
S v HM Advocate 1989 SLT 469, HC of Just.

Appeal
The appellant appealed with the leave of the Court of Appeal, Criminal Division against the decision of that court (Lord Lane CJ,
Sir Stephen Brown P, Watkins, Neill and Russell LJJ) ([1991] 2 All ER 257, [1991] 2 WLR 1065) on 14 March 1991 dismissing
his appeal against his conviction before Owen J in the Crown Court at Leicester on 30 July 1990 ([1991] 1 All ER 747) on
charges of attempted rape (count 1) and assault occasioning actual bodily harm (count 2) on his then wife to which he pleaded
guilty following the trial judges ruling that he could be convicted of rape on his wife. The appellant was sentenced to three
years imprisonment on count 1 and to 18 months imprisonment concurrent on count 2. The Court of Appeal certified under s
33(2) of the Criminal Appeal Act 1968 that a point of law of general public importance was involved in the decision, namely:
whether a husband could be criminally liable for raping his wife. The facts are set out in the opinion of Lord Keith.

Graham Buchanan for the appellant.

John B Milmo QC and Peter Joyce QC for the Crown.

Their Lordships took time for consideration

23 October 1991. The following judgments were delivered.

LORD KEITH OF KINKEL. My Lords, in this appeal to the House with leave of the Court of Appeal, Criminal Division that
court has certified the following point of law of general public importance as being involved in its decision, namely: Is a
husband criminally liable for raping his wife?
The appeal arises out of the appellants conviction in the Crown Court at Leicester on 30 July 1990, upon his pleas of guilty,
of attempted rape and of assault occasioning actual bodily harm. The alleged victim in respect of each offence was the
appellants wife. The circumstances of the case were these. The appellant married his wife in August 1984 and they had one son
born in 1985. On 11 November 1987 the couple separated for about two weeks but resumed cohabitation at the end of that
period. On 21 October 1989 the wife left the matrimonial home with the son and went to live with her parents. She had
previously consulted solicitors about matrimonial problems, and she left at the matrimonial home a letter for the appellant
informing him that she intended to petition for divorce. On 23 October 1989 the appellant spoke to his wife on the telephone
indicating that it was his intention also to see about a divorce. No divorce proceedings had, however, been instituted before the
events which gave rise to the charges against the appellant. About 9 pmon 12 November 1989 the appellant forced his way into
the house of his wifes parents, who were out at the time, and attempted to have sexual intercourse with her against her will. In
the course of doing so he assaulted her by squeezing her neck with both hands. The appellant was arrested and interviewed by
police officers. He admitted 482 responsibility for what had happened. On 3 May 1990 a decree nisi of divorce was made
absolute.
The appellant was charged on an indictment containing two counts, the first being rape and the second being assault
occasioning actual bodily harm. When he appeared before Owen J in the Crown Court at Leicester on 30 July 1990 it was
submitted to the judge on his behalf that a husband could not in law be guilty as a principal of the offence of raping his own wife
(see [1991] 1 All ER 747). Owen J rejected that proposition as being capable of exonerating the appellant in the circumstances of
the case. His ground for doing so was that, assuming an implicit general consent to sexual intercourse by a wife on marriage to
her husband, that consent was capable of being withdrawn by agreement of the parties or by the wife unilaterally removing
herself from cohabitation and clearly indicating that consent to sexual intercourse had been terminated. On the facts appearing
from the depositions either the first or the second of these sets of circumstances prevailed. Following the judges ruling the
appellant pleaded guilty to attempted rape and to the assault charged. He was sentenced to three years imprisonment on the
former count and to 18 months imprisonment on the latter.
The appellant appealed to the Court of Appeal, Criminal Division on the ground that Owen J

made a wrong decision in law in ruling that a man may rape his wife when the consent to intercourse which his wife
gives in entering the contract of marriage has been revoked neither by order of a Court nor by agreement between the
parties.

On 14 March 1990 that court (Lord Lane CJ, Sir Stephen Brown P, Watkins, Neill and Russell LJJ) ([1991] 2 All ER 257, [1991]
2 WLR 1065) delivered a reserved judgment dismissing the appeal but certifying the question of general public importance set
out above and granting leave to appeal to your Lordships House, which the appellant now does.
Sir Matthew Hale in his History of the Pleas of the Crown wrote (1 Hale PC (1736) 629):

But the husband cannot be guilty of rape committed by himself upon his lawful wife, for by their mutual matrimonial
consent and contract the wife hath given herself up in this kind unto her husband which she cannot retract.

There is no similar statement in the works of any earlier English commentator. In 1803 East in his Treatise of the Pleas of the
Crown wrote (1 East PC 446):

a husband cannot by law be guilty of ravishing his wife, on account of the matrimonial consent which she cannot
retract.

In the first edition of Archbold A Summary of the Law Relative to Pleading and Evidence in Criminal Cases (1822) p 259 it was
stated, after a reference to Hale: A husband also cannot be guilty of a rape upon his wife.
For over 150 years after the publication of Hales work there appears to have been no reported case in which judicial
consideration was given to his proposition. The first such case was R v Clarence (1888) 22 QBD 23, [188690] All ER Rep 133,
to which I shall refer later. It may be taken that the proposition was generally regarded as an accurate statement of the common
law of England. The common law is, however, capable of evolving in the light of changing social, economic and cultural
developments. Hales proposition reflected the state of affairs in these respects at the time it was enunciated. Since then the
status of women, and particularly of married women, has changed out of all recognition in various ways 483 which are very
familiar and upon which it is unnecessary to go into detail. Apart from property matters and the availability of matrimonial
remedies, one of the most important changes is that marriage is in modern times regarded as a partnership of equals, and no
longer one in which the wife must be the subservient chattel of the husband. Hales proposition involves that by marriage a wife
gives her irrevocable consent to sexual intercourse with her husband under all circumstances and irrespective of the state of her
health or how she happens to be feeling at the time. In modern times any reasonable person must regard that conception as quite
unacceptable.
In S v HM Advocate 1989 SLT 469 the High Court of Justiciary in Scotland recently considered the supposed marital
exemption in rape in that country. In two earlier cases, HM Advocate v Duffy 1983 SLT 7 and HM Advocate v Paxton 1984 JC
105, it had been held by single judges that the exemption did not apply where the parties to the marriage were not cohabiting.
The High Court held that the exemption, if it had ever been part of the law of Scotland, was no longer so. The principal authority
for the exemption was to be found in Hume Commentaries on the Law of Scotland Respecting the Description and Punishment of
Crimes, first published in 1797. The same statement appeared in each edition up to the fourth, by Bell, in 1844. In that edition,
dealing with art and part guilt of abduction and rape, it was said (vol 1, p 306):

This is true without exception even of the husband of the woman; who, though he cannot himself commit a rape on his
own wife, who has surrendered her person to him in that sort, may however be accessory to that crime committed on
her by another.

It seems likely that his pronouncement consciously followed Hale.

The Lord Justice General (Lord Emslie), who delivered the judgment of the court, expressed doubt whether Humes view
accurately represented the law of Scotland even at the time when it was expressed and continued (1989 SLT 469 at 473):
 We say no more on this matter which was not the subject of debate before us, because we are satisfied that the
Solicitor-General was well-founded in his contention that whether or not the reason for the husbands immunity given by
Hume was a good one in the 18th and early 19th centuries, it has since disappeared altogether. Whatever Hume meant to
encompass in the concept of a wifes surrender of her person to her husband in that sort the concept is to be understood
against the background of the status of women and the position of a married woman at the time when he wrote. Then, no
doubt, a married woman could be said to have subjected herself to her husbands dominion in all things. She was required
to obey him in all things. Leaving out of account the absence of rights of property, a wifes freedoms were virtually non-
existent, and she had in particular no right whatever to interfere in her husbands control over the lives and upbringing of
any children of the marriage. By the second half of the 20th century, however, the status of women, and the status of a
married woman, in our law have changed quite dramatically. A husband and wife are now for all practical purposes equal
partners in marriage and both husband and wife are tutors and curators of their children. A wife is not obliged to obey her
husband in all things nor to suffer excessive sexual demands on the part of her husband. She may rely on such demands as
evidence of unreasonable behaviour for the purposes of divorce. A live system of law will always have regard to changing
circumstances to test the justification for any exception to the application of 484 a general rule. Nowadays it cannot
seriously be maintained that by marriage a wife submits herself irrevocably to sexual intercourse in all circumstances. It
cannot be affirmed nowadays, whatever the position may have been in earlier centuries, that it is an incident of modern
marriage that a wife consents to intercourse in all circumstances, including sexual intercourse obtained only by force.
There is no doubt that a wife does not consent to assault upon her person and there is no plausible justification for saying
today that she nevertheless is to be taken to consent to intercourse by assault. The modern cases of HM Advocate v. Duffy
and HM Advocate v. Paxton show that any supposed implied consent to intercourse is not irrevocable, that separation may
demonstrate that such consent has been withdrawn, and that in these circumstances a relevant charge of rape may lie
against a husband. This development of the law since Humes time immediately prompts the question: is revocation of a
wifes implied consent to intercourse, which is revocable, only capable of being established by the act of separation? In
our opinion the answer to that question must be no. Revocation of a consent which is revocable must depend on the
circumstances. Where there is no separation this may be harder to prove but the critical question in any case must simply
be whether or not consent has been withheld. The fiction of implied consent has no useful purpose to serve today in the
law of rape in Scotland. The reason given by Hume for the husbands immunity from prosecution upon a charge of rape of
his wife, if it ever was a good reason, no longer applies today. There is now, accordingly, no justification for the supposed
immunity of a husband. Logically the only question is whether or not as matter of fact the wife consented to the acts
complained of, and we affirm the decision of the trial judge that charge 2(b) is a relevant charge against the appellant to go
to trial.

I consider the substance of that reasoning to be no less valid in England than in Scotland. On grounds of principle there is
now no justification for the marital exception in rape.
It is now necessary to review how the matter stands in English case law. In R v Clarence (1888) 22 QBD 23, [188690] All
ER Rep 133 a husband who knew that he suffered from a venereal disease communicated it to his wife through sexual
intercourse. He was convicted on charges of unlawfully inflicting grievous bodily harm contrary to s 20 of the Offences against
the Person Act 1861 and of assault occasioning actual bodily harm contrary to s 47 of the same Act. The convictions were
quashed by a court of 13 judges for Crown Cases Reserved, with four dissents. Consideration was given to Hales proposition,
and it appears to have been accepted as sound by a majority of the judges. However, Wills J said that he was not prepared to
assent to the proposition that rape between married persons was impossible (see 22 QBD 23 at 33, [188690] All ER Rep 133 at
139). Field J (in whose judgment Charles J concurred) said that he should hesitate before he adopted Hales proposition, and that
he thought there might be many cases in which a wife might lawfully refuse intercourse and in which, if the husband imposed it
by violence, he might be held guilty of a crime (see 22 QBD 23 at 57, [188690] All ER Rep 133 at 152).
In R v Clarke [1949] 2 All ER 448 a husband was charged with rape upon his wife in circumstances where justices had made
an order providing that the wife should no longer be bound to cohabit with the husband. Byrne J refused to quash the charge. He
accepted Hales proposition as generally sound, but said (at 449):

The position, therefore, was that the wife, by process of law, namely, by marriage, had given consent to the husband to
exercise the marital right 485 during such time as the ordinary relations created by the marriage contract subsisted between
them, but by a further process of law, namely, the justices order, her consent to marital intercourse was revoked. Thus, in
my opinion, the husband was not entitled to have intercourse with her without her consent.

In R v Miller [1954] 2 All ER 529, [1954] 2 QB 282 the husband was charged with rape of his wife after she had left him
and filed a petition for divorce. He was also charged with assault upon her occasioning actual bodily harm. Lynskey J quashed
the charge of rape but refused to quash that of assault. He proceeded on the basis that Hales proposition was correct, and also
that R v Clarke [1949] 2 All ER 448 had been rightly decided, but took the view that there was no evidence which entitled him to
say that the wifes implied consent to marital intercourse had been revoked by an act of the parties or by an act of the court (see
[1954] 2 All ER 529 at 533, [1954] 2 QB 282 at 290). As regards the count of assault, having referred to R v Jackson [1891] 1
QB 671, [18914] All ER Rep 61, where it was held that a husband had no right to confine his wife in order to enforce a decree
for restitution of conjugal rights, he said ([1954] 2 All ER 529 at 533534, [1954] 2 QB 282 at 291292):

It seems to me, on the reasoning of that case, that, although the husband has a right to marital intercourse, and the wife
cannot refuse her consent, and although if he does have intercourse against her actual will, it is not rape, nevertheless he is
not entitled to use force or violence for the purpose of exercising that right. If he does so, he may make himself liable to
the criminal law, not for the offence of rape, but for whatever other offence the facts of the particular case warrant. If he
should wound her, he might be charged with wounding or causing actual bodily harm, or he may be liable to be convicted
of common assault. The result is that in the present case I am satisfied that the second count is a valid one and must be left
to the jury for their decision.

So the case had the strange result that although the use of force to achieve sexual intercourse was criminal the actual
achievement of it was not. Logically, it might be thought that if a wife be held to have by marriage given her implied consent to
sexual intercourse she is not entitled to refuse her husbands advances, and that if she resists then he is entitled to use reasonable
force to overcome that resistance. This indicates the absurdity of the fiction of implied consent. In the law of Scotland, as Lord
Emslie observed in S v HM Advocate 1989 SLT 469 at 473, rape is regarded as an aggravated assault, of which the achievement
of sexual intercourse is the worst aggravating feature. It is unrealistic to sort out the sexual intercourse from the other acts
involved in the assault and to allow the wife to complain of the minor acts but not of the major and most unpleasant one.
The next case is R v OBrien, [1974] 3 All ER 663, when Park J held that a decree nisi effectively terminated a marriage and
revoked the wifes implied consent to marital intercourse, so that subsequent intercourse by the husband without her consent
constituted rape. There was a similar holding by the Criminal Division of the Court of Appeal in R v Steele (1976) 65 Cr App R
22 as regards a situation where the spouses were living apart and the husband had given an undertaking to the court not to molest
his wife. A decision to the like effect was given by the same court in R v Roberts [1986] Crim LR 188, where the spouses had
entered into a formal separation agreement. In R v Sharples [1990] Crim LR 198, however, it was ruled by Judge Fawcus that a
husband could not be convicted of rape upon his wife in circumstances where there was in force a family protection order in 486
her favour and he had had sexual intercourse with her against her will. The order was made under s 16 of the Domestic
Proceedings and Magistrates Courts Act 1978 in the terms that the respondent shall not use or threaten to use violence against
the person of the applicant. Judge Fawcus took the view that it was not to be inferred that by obtaining an order in these terms
the wife had withdrawn her consent to sexual intercourse.
There should be mentioned next a trio of cases which were concerned with the question whether acts done by a husband
preliminary to sexual intercourse with an estranged wife against her will could properly be charged as indecent assaults: see R v
Caswell [1984] Crim LR 111, R v Kowalski (1987) 86 Cr App R 339 and R v H (14 October 1990, unreported), Auld J. The effect
of these decisions appears to be that in general acts which would ordinarily be indecent but which are preliminary to an act of
normal sexual intercourse are deemed to be covered by the wifes implied consent to the latter, but that certain acts, such as
fellatio, are not to be so deemed. Those cases illustrate the contortions to which judges have found it necessary to resort in face
of the fiction of implied consent to sexual intercourse.
The foregoing represent all the decision in the field prior to the ruling by Owen J in the present case. In all of them lip
service, at least, was paid to Hales proposition. Since then there have been three further decisions by single judges. The first of
them is R v C(rape: marital exemption) [1991] 1 All ER 755. There were nine counts in an indictment against a husband and a
co-accused charging various offences of a sexual nature against an estranged wife. One of these was of rape as a principal.
Simon Brown J followed the decision in S v HM Advocate 1989 SLT 469 and held that the whole concept of a marital exemption
in rape was misconceived. He said (at 758):

Were it not for the deeply unsatisfactory consequences of reaching any other conclusion on the point, I would shrink, if
sadly, from adopting this radical view of true position in law. But adopt it I do. Logically, I regard it as the only defensible
stance, certainly now as the law has developed and arrived in the late twentieth century. In my judgment, the position in
law today is, as already declared in Scotland, that there is no marital exemption to the law of rape. That is the ruling I give.
Count seven accordingly remains and will be left to the jury without any specific direction founded on the concept of
marital exemption.

A different view was taken in the other two cases, by reason principally of the terms in which rape is defined in s 1(1) of the
Sexual Offences (Amendment) Act 1976, viz:

For the purposes of section 1 of the Sexual Offences Act 1956 (which relates to rape) a man commits rape if(a) he
has unlawful sexual intercourse with a woman who at the time of the intercourse does not consent to it; and (b) at the time
he knows that she does not consent to the intercourse or he is reckless as to whether she consents to it

In R v J(rape: marital exemption) [1991] 1 All ER 759 a husband was charged with having raped his wife, from whom he
was living apart at the time. Rougier J ruled that the charge was bad, holding that the effect of s 1(1)( a) of the 1976 Act was that
the marital exemption embodied in Hales proposition was preserved, subject to those exceptions established by cases decided
before the Act was passed. He took the view that the word unlawful in the subsection meant illicit, ie outside marriage, that
being the meaning which in R v Chapman [1958] 3 All ER 143, [1959] 1 QB 100 it had been held to bear in s 19 of the Sexual
Offences Act 4871956. Then in R v S (15 January 1991, unreported), Swinton Thomas J followed Rougier J in holding that s
1(1) of the 1976 Act preserved the marital exemption subject to the established common law exceptions. Differing, however,
from Rougier J, he took the view that it remained open to judges to define further exceptions. In the case before him the wife had
obtained a family protection order in similar terms to that in R v Sharples [1990] Crim LR 198. Differing from Judge Fawcus in
that case, Swinton Thomas J held that the existence of the family protection order created an exception to the marital exemption.
It is noteworthy that both Rougier and Swinton Thomas JJ expressed themselves as being regretful that s 1(1) of the 1976 Act
precluded them from taking the same line as Simon Brown J in R v C(rape: marital exemption) [1991] 1 All ER 755.
The position then is that that part of Hales proposition which asserts that a wife cannot retract the consent to sexual
intercourse which she gives on marriage has been departed from in a series of decided cases. On grounds of principle there is no
good reason why the whole proposition should not be held inapplicable in modern times. The only question is whether s 1(1) of
the 1976 Act presents an insuperable obstacle to that sensible course. The argument is that unlawful in the subsection means
outside the bond of marriage. That is not the most natural meaning of the word, which normally describes something which is
contrary to some law or enactment or is done without lawful justification or excuse. Certainly in modern times sexual intercourse
outside marriage would not ordinarily be described as unlawful. If the subsection proceeds on the basis that a woman on
marriage gives a general consent to sexual intercourse, there can never be any question of intercourse with her by her husband
being without her consent. There would thus be no point in enacting that only intercourse without consent outside marriage is to
constitute rape.
R v Chapman [1958] 3 All ER 143, [1959] 1 QB 100 is founded on in support of the favoured construction. That was a case
under s 19 of the Sexual Offences Act 1956, which provides:

(1) It is an offence, subject to the exception mentioned in this section, for a person to take an unmarried girl under the
age of eighteen out of the possession of her parent or guardian against his will, if she is so taken with the intention that she
shall have unlawful sexual intercourse with men or with a particular man.
(2) A person is not guilty of an offence under this section because he takes such a girl out of the possession of her
parent or guardian as mentioned above, if he believes her to be of the age of eighteen or over and has reasonable cause for
the belief

It was argued for the defendant that unlawful in that section connoted either intercourse contrary to some positive enactment or
intercourse in a brothel or something of that kind. Donovan J, giving the judgment of the Court of Criminal Appeal, rejected both
interpretation and continued ([1958] 3 All ER 143 at 145, [1959] 1 QB 100 at 105):

If the two interpretations suggested for the appellant are rejected, as we think they must be, then the word unlawful
in s. 19 is either surplusage or means illicit. We do not think it is surplusage, because otherwise a man who took such a
girl out of her parents possession against their will with the honest and bona fide intention of marrying her might have no
defence, even if he carried out that intention. In our view the word simply means illicit, i.e., outside the bond of
marriage. In other words, we taken the same view as the trial judge. We think this interpretation accords with the common
sense 488 of the matter, and with what we think was the obvious intention of Parliament. It is also reinforced by the
alternatives specifically mentioned in s. 17 and s. 18 of the Act of 1956, i.e., with the intention that she shall marry or have
unlawful intercourse .

In that case there was a context to the word unlawful which by cogent reasoning led the court to the conclusion that it
meant outside the bond of marriage. However, even though it is appropriate to read the 1976 Act along with that of 1956, so that
the provisions of the latter Act form part of the context of the former, there is another important context to s 1(1) of the 1976 Act,
namely the existence of the exceptions to the marital exemption contained in the decided cases. Sexual intercourse in any of the
cases covered by the exceptions still takes place within the bond of marriage. So if unlawful in the subsection means outside
the bond of marriage it follows that sexual intercourse in a case which falls within the exceptions is not covered by the definition
of rape, notwithstanding that it is not consented to by the wife. That involves that the exceptions have been impliedly abolished.
If the intention of Parliament was to abolish the exceptions it would have been expected to do so expressly, and it is in fact
inconceivable that Parliament should have had such an intention. In order that the exceptions might be preserved, it would be
necessary to construe unlawfully as meaning outside marriage or within marriage in a situation covered by one of the
exceptions to the marital exemption. Some slight support for that construction is perhaps to be gathered from the presence of the
words who at the time of the intercourse does not consent to it, considering that a woman in a case covered by one of the
exceptions is treated as having withdrawn the general consent to intercourse given on marriage but may nevertheless have given
her consent to it on the particular occasion. However, the gloss which the suggested construction would place on the word
unlawfully would give it a meaning unique to this particular subsection, and if the mind of the draftsman had been directed to
the existence of the exceptions he would surely have dealt with them specifically and not in such an oblique fashion. In R v
Chapman [1958] 3 All ER 143 at 144, [1959] 1 QB 100 at 102 Donovan J accepted that the word unlawfully in relation to
carnal knowledge had in many early statutes not been used with any degree of precision, and he referred to a number of
enactments making it a felony unlawfully and carnally to know any woman-child under the age of 10. He said ([1958] 3 All ER
143 at 144, [1959] 1 QB 100 at 103): One would think that all intercourse with a child under ten would be unlawful; and on that
footing the word would be mere surplusage. The fact is that it is clearly unlawful to have sexual intercourse with any woman
without her consent, and that the use of the word in the subsection adds nothing. In my opinion there are no rational grounds for
putting the suggested gloss on the word, and it should be treated as being mere surplusage in this enactment, as it clearly fell to be
in those referred to by Donovan J. That was the view taken of it by this House in McMonagle v Westminster City Council [1990]
1 All ER 993, [1990] 2 AC 716 in relation to para 3A of Sch 3 to the Local Government (Miscellaneous Provisions) Act 1982.
I am therefore of the opinion that s 1(1) of the 1976 Act presents no obstacle to this House declaring that in modern times
the supposed marital exception in rape forms no part of the law of England. The Court of Appeal, Criminal Division took a
similar view. Towards the end of the judgment of that court Lord Lane CJ said ([1991] 2 All ER 257 at 266, [1991] 2 WLR 1065
at 1074):

The remaining and no less difficult question is whether, despite that view, this is an area where the court should step
aside to leave the matter to the parliamentary process. This is not the creation of a new offence, it is the 489 removal of a
common law fiction which has become anachronistic and offensive and we consider that it is our duty having reached that
conclusion to act upon it.

I respectfully agree.
My Lords, for these reasons I would dismiss this appeal, and answer the certified question in the affirmative.

LORD BRANDON OF OAKBROOK. My Lords, for the reasons given in the speech of my noble and learned friend Lord
Keith of Kinkel, I would answer the certified question in the affirmative and dismiss the appeal.

LORD GRIFFITHS. My Lords, for the reasons given by my noble and learned friend Lord Keith of Kinkel, I would dismiss
this appeal and answer the certified question in the affirmative.

LORD ACKNER. My Lords, for the reasons given in the speech of my noble and learned friend Lord Keith of Kinkel, I, too,
would answer the certified question in the affirmative and dismiss the appeal.

LORD LOWRY. My Lords, for the reasons given by my noble and learned friend Lord Keith of Kinkel, I would dismiss this
appeal and answer the certified question in the affirmative.

Appeal dismissed.

Solicitors: Kingsford Stacey agents for Hawley & Rodgers, Leicester; Crown Prosecution Service Headquarters.

Mary Rose Plummer Barrister.

490
[1991] 4 All ER 491

Keays v Murdoch Magazines (UK) Ltd and another

CIVIL PROCEDURE

COURT OF APPEAL, (CIVIL DIVISION)

NEILL, NOURSE LJJ AND SIR JOHN MEGAW
20, 23 MAY 1991

Practice Preliminary point of law Application for trial of preliminary issue on point of law Libel action Issue whether
words complained of capable of defamatory meaning Whether suitable to be tried as preliminary issue.

The defendants, the publishers and editor of a monthly womens magazine with a wide circulation and readership in England and
Wales, published in the October 1989 issue under the heading Laughing all the way to the bonk an article describing the
activities of a number of women who had had affairs with prominent men and who had then received or in one case refused
substantial sums from newspapers in return for accounts of their sexual relationships with the men concerned. Four paragraphs
of the article referred specifically to the plaintiff and her relationship with a Cabinet minister, who was the father of her child.
The article stated, inter alia, that there was one aspect of the plaintiffs story which put her firmly in the company of the other
women referred to in the article, namely the man involved was famous and had a reputation to protect. The article continued:
Its a reminder that Kiss n Tell is a thoroughly British pastime. The plaintiff brought an action against the defendants claiming
damages for libel, alleging that the words complained of in the article in their natural and ordinary meaning meant that the
plaintiff had had the affair with the Cabinet minister with the intention of later publishing her revelations in a Kiss n Tell book
which placed her in the same position as other women who had had affairs with famous men in order to make money by selling
their explicit memoirs to the tabloid press. The defendants applied to have the question whether the words complained of by the
plaintiff were capable of bearing the meaning pleaded in the statement of claim tried as a preliminary issue. Both the master and
the judge dismissed the application on the ground that the court had no jurisdiction in a libel action to order trial of a preliminary
issue on defamatory meaning. The defendants appealed to the Court of Appeal. The parties asked that, if the court held that there
was jurisdiction to order the trial of the preliminary issue sought, it should in the circumstances itself decide that issue.

Held The court had jurisdiction in a libel action to order the trial of a preliminary issue in order to determine as a matter of law
whether the words complained of by the plaintiff were capable of bearing the defamatory meaning for which the plaintiff
contended and should exercise that jurisdiction in appropriate cases where it was apparent that a saving of costs would be
achieved if the defendant was wholly or partially successful in showing that the words complained of were not capable of bearing
the defamatory meaning for which the plaintiff contended. Similarly, the court had jurisdiction to order the trial of a preliminary
issue to rule whether the words complained of were capable of bearing a meaning put forward by the defendant which was
challenged by the plaintiff. On the facts, the trial of a preliminary issue was appropriate and to that extent the appeal would be
allowed. However, although it was far from certain that the plaintiff would succeed at trial, it could not be said that the words
which the plaintiff complained of were incapable of bearing the defamatory meaning 491 for which she contended and therefore
the preliminary issue would be determined in the plaintiffs favour (see p 497 j to p 498 c and p 499 e f j to p 500 a post).
Morris v Sandess Universal Products [1954] 1 All ER 47 considered.

Notes
For the power of the court in a libel action to order any question or issue arising to be tried before the trial, see 28 Halsburys
Laws (4th edn) para 212.

Cases referred to in judgments

Anderson v Mirror Newspapers Ltd (No 2) (1986) 5 NSWLR 735, NSW SC.
Dunn v Pressdram Ltd [1988] CA Transcript 329.
Lewis v Daily Telegraph Ltd, Lewis v Associated Newspapers Ltd [1963] 2 All ER 151, [1964] AC 234, [1963] 2 WLR 1063, HL.
Morgan v Odhams Press Ltd [1971] 2 All ER 1156, [1971] 1 WLR 1239, HL.
Morris v Newcastle Newspapers Pty Ltd (1985) 1 NSWLR 260, NSW SC.
Morris v Sandess Universal Products [1954] 1 All ER 47, sub nom Morris v Sanders Universal Products [1954] 1 WLR 67, CA.

Cases also cited or referred to in skeleton arguments

Drummond-Jackson v British Medical Association [1970] 1 All ER 1094, [1970] 1 WLR 688, CA.
Hartt v Newspaper Publishing plc (23 October 1989, unreported), QBD; on appeal (1989) Independent, 27 October, CA.
Lucas-Box v News Group Newspapers Ltd [1986] 1 All ER 177, [1986] 1 WLR 147, CA.
Nevill v Fine Art and General Insurance Co Ltd [1897] AC 68, [18959] All ER Rep 164, HL.
Slim v Daily Telegraph Ltd [1968] 1 All ER 497, [1968] 2 QB 157, CA.

Interlocutory appeal
The defendants, Murdoch Magazines (UK) Ltd, the publishers of New Woman magazine, and Frankie McGowan, the magazines
editor, appealed with leave of the judge against the decision of French J on 17 December 1990 dismissing the defendants appeal
from the order of Master Creightmore dated 19 November 1990 refusing to order the trial of a preliminary issue as to whether the
words complained of by the plaintiff, Sara Keays, in her action for libel were capable of bearing the meaning alleged in the
statement of claim. The facts are set out in the judgment of Neill LJ.

Desmond Browne QC for the defendants.

Edward Garnier for the plaintiff.

Cur adv vult

23 May 1991. The following judgments were delivered.

NEILL LJ. This is an appeal from the order of French J dated 17 December 1990 whereby he dismissed an appeal by the
defendants from the order of Master Creightmore dated 19 November 1990 refusing to order the trial of a preliminary issue in the
action. Leave to appeal was granted by the judge. In refusing the order for the trial of a preliminary issue both the master and the
judge considered that the court was bound by the decision of the Court of Appeal in Morris v Sandess Universal Products [1954]
1 All ER 47, [1954] 1 WLR 67.
492
The plaintiff is Miss Sara Keays. She is the mother of Flora Keays, whose father is Mr Cecil Parkinson MP.
Murdoch Magazine (UK) Ltd, the first defendants, are the publishers of New Woman, a monthly magazine with a wide
circulation and readership in England and Wales. At all material times Miss Frankie McGowan, the second defendant, was the
editor of New Woman.
By a writ issued on 19 January 1990 the plaintiff claimed damages including aggravated damages and an injunction in
respect of an article published in the issue of New Woman dated October 1989 under the heading Laughing all the way to the
bonk.
In the amended statement of claim the plaintiff set out the passages in the article of which she complained and also included
some words printed on the front cover of the magazine and on the contents page.
The theme of the article was indicated in the heading and was explained in more detail in some introductory paragraphs
which appeared at the beginning of the article. These paragraphs, which were printed in purple letters, were as follows:

You can see them any night in Stringfellows. Leggy blondes who are primped, preened and giving the glad eye to
any man who might be someone. They call themselves models, but you need those quotation marks. Their real job is the
pursuit of fame. Other peoples. Their own. Theyre not fussy. Either will do.
For this is the Kiss n Tell circus at its most blatanta gaggle of bimbo girls with not much between their ears apart
from the burning desire to be rich and recognised in the street.
Some of them make it bigtheir names linked week-by-week to a succession of minor pop stars and soap actors.
Others make it really bigand become famous for being infamous. Personal appearances, video contracts, pop promotions
all can follow on from just one blockbuster story in the nationals.
But their ultimate heroines are the girls Fleet Street will pursue, literally, across the world with offers of money running
into thousands. The pocket books of such women list politicians, industrialists, maybe even a member of the Royal Family.
In this months New Woman, we take a look at the world of Kiss n Tellthe ultimate invisible industryto find out
whos paid what to whom and what they got for their money.

The remainder of the article described the activities of a number of women, including Fiona Wright, Pamella Bordes and
Vicki Hodge, who had received substantial sums from newspapers in return for accounts of details of the sexual relationships
which these women had had with a number of prominent men. The article also contained references to Koo Stark, who had
turned down offers of very large sums in return for a story about her private life, and to two other individuals (one unnamed) who
had also resisted similar offers from the press.
There were four paragraphs which referred specifically to the plaintiff. These paragraphs were in the following terms:

But money is not the sole incentive for everyone. Sara Keays, for example, grows angry if you apply the phrase Kiss
n Tell to the sale of her revelations about leading Tory Cecil Parkinson. The idea that her story was auctioned off to the
highest bidder offends her. Their affairfollowed by the birth of daughter Flora, now aged fivewas the greatest political
sex scandal in Britain since Profumo.
493
Back in 1985, Fleet Street papers reached for their cheque books, tested their pens, and made their best offers for the
serialisation of her book, A Question of Judgement. It was to be a story of foul deeds in high places, touching the very door
of Number 10 Downing Street. What would the editors bid for such a prize? The highest offer was reckoned to be
135,000. Yet Miss Keays turned it down. Instead, she chose to go with the Daily Mirror, which had offered her
considerably less.
It takes bravery to judge Miss Keays motives on any given subject. But was it coincidence that the Mirror is a Labour
inclined paperand that serialisation was timed to coincide with the Conservative party conference? Parkinsons
embarrassment was certainly maximised by the way events turned out.
There remains one aspect of her story which puts Miss Keays firmly in the company of Fiona Wright, Vicki Hodge and
the rest. The man involved is famousand has a reputation to protect. Its a reminder that Kiss n Tell is a thoroughly
British pastime. And class has a lot to do with it. If Fiona Wright had slept with someone of average income doing a dull
job no one would be remotely interested.

Following the publication of the article Miss Keays consulted solicitors. On 17 November 1989 they wrote on her behalf to
the editor of New Woman. They said that they were acting for Miss Sara Keays, referred to the article, and continued:

The article suggests to the ordinary reader that our client, although pretending to be superior to the other adventurers
described in the article, is the same or worse. The article suggests that not only did our client stoop to make money from
describing private matters, but being a person motivated by bitter malice (worth even more than money to her), timed the
publication of her book and its newspaper serialisation so as to hurt and embarrass her former lover. Contrary to the
scurrilous falsehoods published by you, our client is not and never has been an adventurer and always conducted herself
with complete discretion. Our client wrote her book (which quite obviously you have never read because it does not
remotely resemble a so-called kiss and tell memoir) to place certain facts on record, to protect her own reputation for the
sake of her daughter and other members of her family. It is entirely wrong of you to describe our client as a base and venal
person and to attribute vengeful motives to her which indeed you have no means of justifying.

Some correspondence then ensued in which Miss McGowan denied, inter alia, that the defendants had suggested that Miss
Keays was an adventurer, but no agreement could be reached between the parties. On 19 January 1990 the writ was issued.
A few days later the statement of claim was served. This pleading has now been amended but both in the original and in the
amended form the plaintiff set out in para 4 the alleged meaning of the article as follows:

The said words in their natural and ordinary meaning, when read in the context of the article as a whole, meant and
were understood to mean that the Plaintiff had had an affair with and a child by Mr Cecil Parkinson, calculating that she
could publish her revelations about him in a Kiss n Tell book in due course which, despite her disingenous denials,
places her in exactly the same category as such women as Fiona Wright, Vicki Hodge and Pamella Bordes, who had affairs
with or had prostituted themselves to famous 494 men in order to [make] money by selling their explicit memoirs to the
tabloid press.

The defence was served on 26 February 1990. It was denied that the words complained of bore the meaning alleged in the
statement of claim and the plaintiffs entitlement to damages was also denied.
On 15 March 1990 the summons for directions was issued. On 24 April the defendants served a notice under the summons
for an order for the trial of a preliminary issue as to whether the words complained of by the plaintiff were capable of bearing the
meaning pleaded in para 4 of the statement of claim.
The application for the trial of a preliminary issue was made under RSC Ord 33, r 3. That rule provides:

The court may order any question or issue arising in a cause or matter, whether of fact or law or partly of fact and
partly of law, and whether raised by the pleadings or otherwise, to be tried before, at or after the trial of the cause or matter,
and may give directions as to the manner in which the question or issue shall be stated.

The summons and the application were heard by Master Creightmore on 19 November 1990. He refused the application.
The defendants appealed to French J who dismissed the appeal on 17 December. We have a transcript of the judges judgment.
He said:

This is an appeal from a decision of Master Creightmore on the summons for directions refusing the defendants
application for an order for the trial of a preliminary issue as to whether the words complained of are capable of bearing the
meaning alleged in para 4 of the statement of claim. That is a question, as I understand it, of pure law; it is for the judge
alone to make a decision on that matter, and if it came to trial in the ordinary way that, no doubt, would be the first matter
with which the judge would have to deal.

The judge then referred to the submission which had been made to him, and then continued a little later:

I am bound to say that if the matter were tabula rasa I would find the submission of Mr Browne QC very attractive,
namely that this is a matter which is incapable of assistance by any evidence. It is a pure point of law to be decided from a
perusal of the statement of claim and a perusal of three or four pages in a glossy magazine. Having said that it seems to me
that in the light of the longstanding authority of Morris v Sandess Universal Products [1954] 1 All ER 47, [1954] 1 WLR
67 I ought to follow it even though if the matter were to come before me de novo I doubt whether I would come to the
same conclusion. However, quite apart from that matter, it seems to me plain, and I say that with great respect to the
strenuous argument of Mr Browne, that the words are capable of bearing the meanings asserted in para 4 of the statement
of claim. Accordingly, even if contrary to my view it were open to me to order trial of the matter by way of preliminary
issue, I would not do so because it seems to me that to do so would be a further waste of time and money in so far as the
parties are concerned. It appears to me so clearly that the words are capable of bearing the meanings asserted and are
capable of bearing those meanings, not only to the eye of a particularly salacious and scandal-seeking reader, nor indeed to
the eye of a meticulous reader seeking to construe every word of the article in question and giving every phrase its due
 weight, but also to the eye of the ordinary man reading 495 the article simply in the way that such articles are commonly
read, namely for some form of perhaps mild information or, perhaps more realistically, for amusement value.

The defendants have now appealed to this court. It is said that the decision of the Court of Appeal in Morriss case does not
lay down an inflexible rule and that in any event, being a matter of procedure and not of substantive law, it is open to this court to
look at the matter afresh in the light of recent developments in the practice in libel actions both in this country and in New South
Wales. For his part Mr Garnier on behalf of Miss Keays no longer contends that Morriss case lays down a rule of practice which
can never be departed from, but argues that this is not a suitable case for the trial of a preliminary issue. Both parties agree,
however, that if a preliminary issue is to be tried it would be a waste of time and money for the issue to be sent for determination
by a judge and we are invited and, indeed, urged to decide the matter ourselves.
It is therefore necessary to turn to the decision in Morris v Sandess Universal Products [1954] 1 All ER 47, [1954] 1 WLR
67. I start by reading part of the headnote ([1954] 1 WLR 67):

The two plaintiffs had been employed as sales managers by the defendants until June 20, 1952, when their
employment terminated. Shortly afterwards the defendants sent circular letters to certain of their customers in several areas
in which the plaintiffs respectively had been employed, stating in each case that We have dismissed the plaintiff who
worked in that area. In this action the plaintiffs each claimed damages for libel, alleging that the words of the circular
letters meant that the plaintiffs had respectively been dismissed from their employment against their will, in circumstances
which were discreditable. The defendants obtained an order under R.S.C., Ord. 25, r. 2, [which was the forerunner of
Order 33, r. 3] to have the issue tried as a preliminary point of law whether the words complained of had in their ordinary
significance any defamatory meaning.

Lord Goddard CJ, before whom the issue came, held that the point of law failed and decided that the words were capable of
the meaning alleged. We are not concerned with the other facts of the case, but at the end of his judgment Jenkins LJ, who was
one of the two judges who heard the appeal, said ([1954] 1 All ER 47 at 51, [1954] 1 WLR 67 at 7374):

I must say that, in my judgment, the procedure under R.S.C., Ord. 25, r. 2, is most unsuitable for the purpose for which
it has been used in this case. If recourse is to be had to that rule on the question whether or not words complained of in a
libel action are capable of a defamatory meaning, it seems to me that the practice may grow up of splitting libel actions into
two stages, the first being concerned with the aspect of the case with which we have been occupied today and the second
being the trial of the case itself in the event of the defendants failing to put a summary end to the proceedings on the
preliminary issue with which we are now dealing. That appears to me to be a most undesirable practice, and, in my view, a
question such as that now raised is not a proper subject for an application under the procedure prescribed by R.S.C., Ord.
25, r. 2.

Morris LJ, who was sitting with Jenkins LJ, agreed. He said ([1954] 1 All ER 47 at 52, [1954] 1 WLR 67 at 74):

I would also add that I am in further agreement with what JENKINS L.J., and LORD GODDARD, CJ, in the court
below, have said with regard to procedure.
496

It is not clear what was said by Lord Goddard CJ in the caseit does not appear in the reportbut it seems plain from the
context that he too disapproved of the procedure being used for this purpose.
The decision in Morriss case is cited in Gatley on Libel and Slander (8th edn, 1981) para 1090 as authority for the
proposition that the question whether the words complained of are capable of a defamatory meaning is not suitable for an
application for the trial of a preliminary issue. There is a similar passage in The Supreme Court Practice 1991 para 33/4/5.
I have come to the conclusion, however, that the judgments in Morriss case are not to be treated as laying down a rule
which is binding on the court in all circumstances. In the first place it is clear that the expressions of opinion, though strongly
worded, were not part of the ratio decidendi. The court did not say that the trial judge had had no jurisdiction to try the matter as
a preliminary issue but merely expressed disapproval of the practice which had been followed. In the second place it is to be
remembered that at the time of the decision in Morriss case there was less general concern than there is today about the
complexity and costs of actions for defamation. I am satisfied therefore that it is open to this court to look at the matter afresh.
Strong support for the submission put forward on behalf of the defendants is to be found in the judgment of Lord Donaldson
MR in Dunn v Pressdram Ltd [1988] CA Transcript 329, where he said:

In passing, I would remark that if ever there was a case for seeking a preliminary ruling on whether the words of
which the plaintiff complains were capable of the defamatory meaning for which he contends, it is this one, but that is not
before the court. If it were ruled, as it might well be, that they were incapable of bearing the meaning alleged, that would
end what will otherwise be a long and costly dispute.

Further support is to be found in the practice currently followed in New South Wales where it has been held by Hunt J in
Morris v Newcastle Newspapers Pty Ltd (1985) 1 NSWLR 260 that the question whether words are capable of conveying the
various imputations pleaded by the plaintiff is a question of law which in appropriate cases is suitable to be decided by the trial of
a preliminary issue. There are other authorities to the same effect, including Anderson v Mirror Newspapers Ltd (No 2) (1986) 5
NSWLR 735.
It is also relevant to consider the alternative to the trial of a preliminary issue. At one time it seems to have been the practice
to seek a ruling from the judge on the question whether the words were capable of the alleged defamatory meaning at the
conclusion of the case for the plaintiff or even at a later stage of the trial. We were told that in some recent cases the defendant
has invited the judge to make such a ruling at the outset of the hearing as a preliminary point. Whichever practice is followed it
means that the parties will have prepared for trial and that very substantial additional expense will have been incurred.
It has been suggested that sufficient protection is given to defendants by the existence of the right to apply to strike out a
pleaded meaning which is considered extravagant and unfit to be considered by the jury. But, according to the law as clearly
stated by Lord Guest and Lord Pearson in Morgan v Odhams Press Ltd [1971] 2 All ER 1156 at 1173, 1182, [1971] 1 WLR 1239
at 1257, 1268, on the hearing of an application to strike out the question to be determined is not whether the words are capable of
bearing a defamatory meaning but whether they are arguably capable of bearing such meaning. It is, I believe, the experience of
practitioners that it is rare for an application of this nature to succeed.
I am satisfied that the jurisdiction exists to order the trial of a preliminary issue 497 to determine whether the words
complained of are capable of bearing a particular meaning and that this jurisdiction should be exercised in appropriate cases
where it is apparent to the court that a saving of costs would be achieved. If such an application by a defendant succeeds in full
the action will be at an end, unless the plaintiff seeks and is granted an amendment to plead some alternative meaning. Even if
the application is only partially successful, a saving of costs may well be effected by limiting discovery and the preparation of
evidence to that meaning or those meanings which the court has ruled the words are capable of bearing. Furthermore, I see no
reason in principle why, if the defendant seeks to put forward a meaning which the plaintiff seeks to challenge, the court should
not, in an appropriate case, rule on the defendants meaning at a preliminary stage. I should add, however, that I anticipated that
there will be many cases where the trial of a preliminary issue will be wholly unnecessary and where it would itself add to the
expense of the proceedings and would occasion unjustified delay.
In the present case, however, we were asked to deal with the preliminary issue ourselves and not send it to a judge to
determine. I consider that this is a case where it would be appropriate to order the trial of a preliminary issue. I therefore turn to
consider the second matter which was argued before us.
Mr Browne QC on behalf of the defendants reminded us of the speeches in the House of Lords in Lewis v Daily Telegraph
Ltd, Lewis v Associated Newspapers Ltd [1963] 2 All ER 151, [1964] AC 234, where guidance was given as to the correct
approach to the meanings of words in libel action. It is sufficient to refer to passages in the speech of Lord Reid. He spoke about
the matter generally as follows ([1963] 2 All ER 151 at 154, [1964] AC 234 at 258):

There is no doubt that in actions for libel the question is what the words would convey to the ordinary man: it is not
one of construction in the legal sense. The ordinary man does not live in an ivory tower and he is not inhibited by a
knowledge of the rules of construction. So he can and does read between the lines in the light of his general knowledge
and experience of wordly affairs. I leave aside questions of innuendo where the reader has some special knowledge which
might lead him to attribute to the words a meaning not apparent to those who do not have that knowledge.

Then a little later Lord Reid went on to consider what test a judge should apply when ruling as to whether words were or were
not capable of a particular meaning which the plaintiff might attribute to them. Having considered earlier authorities, Lord Reid
continued ([1963] 2 All ER 151 at 155, [1964] AC 234 at 259):

it is, I think, sufficient to put the test in this way. Ordinary men and women have different temperaments and
outlooks. Some are unusually suspicious and some are unusually nave. One must try to envisage people between these
two extremes and see what is the most damaging meaning that they would put on the words in question.

Then Lord Reid went on to consider the facts of that particular case.
Applying this test, said Mr Browne, the ordinary reasonable reader could not understand the article to bear the meaning
alleged in para 4 of the statement of claim. He might well understand the article to mean that the plaintiff had been actuated by
malice and had sought to embarrass her former loverthe meaning complained of in the letter before action but no longer
persuedbut he could not reasonably read into the article the meaning that she had had the affair with Mr Parkinson calculating
that she would be able to publish her revelations later. It is to be noted that the defendants place considerable reliance on the
differences 498 which they detect between the original complaint and the meaning pleaded in the statement of claim.
It was clear, submitted Mr Browne, that the article distinguished between two groups of women. In the first group were
women like Fiona Wright, who were self-confessed adventurers and gold-diggers who set out to entrap men into a relationship so
that in due course money could be made out of their memoirs. In the second group were those who, after the event, were pursued
by the press to tell their stories. Some, like Miss Keays, succumbed and sold their stories for money, though she herself accepted
considerably less than the highest offer made to her. Others, like Miss Stark, resisted the offers and kept quiet. But those in the
second group, whether they published their stories or not, were not calculating adventurers.
Mr Browne, in a careful analysis of the article, explained its structure and the way in which different women and the roles
they played were introduced into the story. The link between Miss Keays and Fiona Wright was not that they were both
calculating adventurers but because they had both associated with famous men. It would be absurd to suggest that anyone could
think that the article meant that Miss Keays had begun her affair with the intention of writing about it afterwards.
I see the force of Mr Brownes submissions. Indeed it may very well be that if the action proceeds to trial the jury will be
persuaded that the article makes a sufficiently plain distinction between the two groups in the Kiss n Tell industry and that
therefore it does not bear the meaning alleged. In my view it is far from certain that the plaintiff will win. At this stage, however,
I am quite unable to say that the words are incapable of bearing the alleged meaning.
I do not propose to give detailed reasons for my conclusion but I think it right to mention the following matters which in my
view entitle the plaintiff to seek the decision of a jury as to the actual meaning of the words. (a) Both the front cover (with its
reference to a bimbo) and the heading of the article Laughing all the way to the bonk are consistent with the view that anyone
named in the article is to be regarded as being in a single category. (b) The references to the world of Kiss n Tell and
industry also suggest a close link between all the participants and that they are all inspired by motives which are both deliberate
and mercenary. (c) The rules of the game provide another indication of a link between the participants. (d) The reference, in
the context of Fiona Wright, to the fact that part of the trick of Kiss n Tell is to make a relationship look and sound real is
capable of being understood to be of general application to all those in the industry.
In many cases it may be better where the judge rules that words are capable of bearing a particular meaning for him to
refrain from giving any reasons for his conclusion. Thus it might be thought that these expressed reasons could influence the trial
judge when summing up. In this case, however, we were specifically asked to give some reasons for our conclusion and it is
possible that these reasons and this judgment may assist in any negotiations for a settlement which may take place. I have
therefore done so. But I would add this. (1) I have not attempted to set out all the passages which have influenced my decision.
(2) No reference to this judgment should be made in front of any jury which may try this case hereafter. (3) This ruling is only on
the question whether the words are capable of bearing the pleaded meaning. I repeat that in my view it is quite possible that the
jury will reject this meaning as the actual meaning.
For these reasons I would allow the appeal to the extent indicated. I think that it will be necessary to consider the exact form
of the order to be made.
499

NOURSE LJ. I have had the advantage of reading in draft the judgment which has been delivered by Neill LJ. I agree with it
and do not wish to add anything of my own.

SIR JOHN MEGAW. I also agree.

Appeal allowed in part. No order for costs in the Court of Appeal or below; masters order for costs to stand.

Solicitors: Daniel B Taylor; Lipkin Gorman.

L I Zysman Esq Barrister.

[1991] 4 All ER 500
 Kenneth Allison Ltd (in liq) and others v A E Limehouse & Co (a firm)
CIVIL PROCEDURE: COMPANY; Partnerships

HOUSE OF LORDS
LORD BRIDGE OF HARWICH, LORD TEMPLEMAN, LORD GOFF OF CHIEVELEY, LORD JAUNCEY OF TULLICHETTLE AND LORD LOWRY
8, 9 JULY, 17 OCTOBER 1991

Writ Service on partnership Personal service Service of writ on duly authorised agent of partner Service on personal
assistant of partner No contract between parties providing for service on personal assistant of partner Whether effective
service on partnership RSC Ord 10, rr 1(1), 3, Ord 81, r 3(1)(a).

The plaintiffs issued a writ against the defendants, a firm of chartered accountants, claiming damages for negligence in carrying
out an audit for them in 1981. On the last day of the validity of the writ the plaintiffs instructed a process server to effect
personal service of the writ on the defendants. The process server attended at the defendants offices, where he told the senior
partners personal assistant that he wished to serve a writ. She consulted one of the partners and he authorised her to accept the
writ. She then told the process server that she had been so authorised and received from him a sealed copy of the writ and a form
of acknowledgment of service. The defendants subsequently issued a summons seeking an order setting aside service and a
declaration that the writ had not been duly served because it had not been served on the firm pursuant to RSC Ord 81, r 3(1)( a)a
by being served on the partner personally as required by Ord 10, r 1(1) b. The district registrar dismissed the summons but the
judge allowed an appeal and made the order sought. On appeal by the plaintiffs the Court of Appeal upheld the judges decision.
The plaintiffs appealed to the House of Lords.
________________________________________
a Rule 3(1), so far as material, is set out at p 510 b c, post
b Rule 1(1) is set out at p 502 h, post

Held The appeal would be allowed for the following reasons

(1) In the circumstances the plaintiffs had not served the writ personally on the partner since personal service required that
the document be handed to the person to be served or, if he would not accept it, that he be told what the document contained and
that it be left with or near him (see p 503 b c, p 508 h, p 512 a b and p 515 c d, post).
(2) However (per Lord Bridge, Lord Templeman, Lord Jauncey and Lord Lowry), service of the writ on the defendants had
been effective since service 500 under an ad hoc agreement made in relation to contemplated proceedings, by which one party,
knowing that the other party wished to serve process upon him, requested or authorised the other to do so in a particular way
which was outside the rules and the other did so, was valid and legally effective as there was nothing in the rules of court
restricting consensual service of the writ to the manner specified in Ord 10, r 3 c, namely an agreement as to service embodied in
a wider contract. Accordingly, the plaintiffs were entitled to rely on the ad hoc agreement whereby the partner expressly
authorised acceptance of service, which acceptance was communicated to and acted upon by the process server when he handed
over the writ (see p 505 j to p 506 c, p 507 h, p 508 d e h and p 515 c d, post); Montgomery Jones & Co v Liebenthal & Co [1898]
1 QB 487 applied.
________________________________________
c Rule 3 is set out at p 507 c d, post

(1) Alternatively (per Lord Goff), although a form of service other than that specified in the rules of court could not
constitute good and effective service because the rules did not contemplate other modes of service and although there was no
contract between the parties to the effect that service on the defendants agent should be treated as good and effective service on
the defendants and nor was there any representation to that effect sufficient to give rise to a promissory estoppel, the plaintiffs
had acted on the common but mistaken assumption that service of the writ on the duly authorised agent of the partner would
constitute good and effective service on the defendants and the defendants were therefore estopped by convention from denying
the validity of that service (see p 513 h, p 514 c d g to j and p 515 b, post); Amalgamated Investment and Property Co Ltd (in liq)
v Texas Commerce International Bank Ltd [1981] 3 All ER 577 applied.
Decision of the Court of Appeal [1990] 2 All ER 723 reversed.

Notes
For personal service of writ of summons, see 37 Halsburys Laws (4th edn) para 149, and for cases on the subject, see 37(2)
Digest (Reissue) 257258, 16711683.
For service of writ of summons on a partnership, see 35 Halsburys Laws (4th edn) para 82 and 37 Halsburys Laws (4th
edn) para 161, and for cases on the subject, see 36(2) Digest (Reissue) 687688, 776784.

Cases referred to in opinions

Amalgamated Investment and Property Co Ltd (in liq) v Texas Commerce International Bank Ltd [1981] 3 All ER 577, [1982]
QB 84, [1981] 3 WLR 565, CA.
British Wagon Co Ltd v Gray [1896] 1 QB 35, CA.
Montgomery Jones & Co v Liebenthal & Co [1898] 1 QB 487, CA.
Tharsis Sulphur and Copper Co Ltd v Socit des Mtaux (1889) 58 LJQB 435, DC.

Appeal
The plaintiffs, Kenneth Allison Ltd (in liq), Kenneth Allison, Gerald Caley, Euphemia Margaret Allison and Sonia Kay Caley,
appealed with leave of the Appeal Committee of the House of Lords given on 9 October 1990 from the decision of the Court of
Appeal (Russell and Farquharson LJJ (Lord Donaldson MR dissenting)) ([1990] 2 All ER 723, [1990] 2 QB 527) dismissing their
appeal from the order of McCullough J sitting at Norwich on 21 July 1989 whereby he allowed the appeal of the defendants, A E
Limehouse & Co (a firm), against the order of Mr District Registrar Rutherford in chambers dated 6 March 1989 dismissing the
defendants summons for an order that the service of a writ on the 501 defendants by the plaintiffs be set aside and for a
declaration that the writ had not been duly served. The facts are set out in the opinion of Lord Bridge.

P I F Vallance QC for the plaintiffs.

Dominic Dowley for the defendants.

Their Lordships took time for consideration

17 October 1991. The following opinions were delivered.

LORD BRIDGE OF HARWICH. My Lords, the defendants are a firm of chartered accountants. On 5 October 1987 the
plaintiffs issued a writ against them claiming damages for negligence in carrying out an audit in or about November 1981. On 4
October 1988, the last day of the currency of the writ, a Mr Swann, on the instructions of the plaintiffs solicitors, attended at the
offices of the defendant firm in order to serve the writ. The receptionist called Mrs Morgan, the personal assistant to the senior
partner, to the reception area. Mr Swann showed Mrs Morgan the writ. She told him that she would have to refer the matter to a
partner before the writ could be accepted. She left Mr Swann in the reception area and went to speak to Mr Hall, a partner in the
defendant firm. Mr Hall told Mrs Morgan that she might accept the writ. Mrs Morgan then returned to the reception area, told
Mr Swann that she had been authorised to accept the writ and received from Mr Swann a sealed copy of the writ and a form of
acknowledgment of service. These facts are as recounted in the affidavit of Mrs Morgan filed by the defendants and are
undisputed.
In due time the defendants applied by summons for an order setting aside service of the writ or declaring that it had not been
duly served. The application was dismissed by Mr District Registrar Rutherford, but allowed on appeal by McCullough J, who
declared that the writ had not been duly served on the defendants. The plaintiffs appeal was dismissed by a majority of the Court
of Appeal (Russell and Farquharson LJJ, Lord Donaldson MR dissenting) (see [1990] 2 All ER 723, [1990] 2 QB 527). The
plaintiffs now appeal by leave of your Lordships House.
The important question which lies at the heart of the appeal is whether the provisions of the Rules of the Supreme Court
which relate to the service of originating process constitute an exclusive code by which alone such service may be effected, as
McCullough J and the majority of the Court of Appeal held, or whether, if parties agree between themselves on a mode of service
outside the ambit of the rules, service in that mode (consensual service, as Lord Donaldson MR aptly called it) will, as he held,
be effective.
Order 10, r 1(1) provides: A writ must be served personally on each defendant by the plaintiff or his agent. Paragraphs (2)
and (3) provide for service by post or through a letter box at the defendants usual or last known address. Paragraph (4) provides:

Where a defendants solicitor indorses on the writ a statement that he accepts service of the writ on behalf of that
defendant, the writ shall be deemed to have been duly served on that defendant and to have been so served on the date on
which the indorsement was made.
502

Order 65, r 2 provides:

Personal service of a document is effected by leaving a copy of the document with the person to be served.

Where, as here, partners are sued in the name of a firm, Ord 81, r 3 provides that the writ may be served on any one or more of
the partners. The rule also provides for service at the principal place of business of the partnership either by post or on any
person having control or management of the partnership business there.
Mr Vallance QCs first submission in support of the appeal is that, in the circumstances deposed to by Mrs Morgan in her
affidavit, the writ was served personally on Mr Hall. I cannot accept this. There is abundant authority for the proposition that
personal service requires that the document be handed to the person to be served or, if he will not accept it, that he be told what
the document contains and the document be left with or near him. It follows that Mr Vallance cannot rely on any provision in the
rules to validate the service and must rely on Mr Halls express authorisation of Mrs Morgan to accept service on his behalf
which was communicated to and acted on by Mr Swann when he handed the writ to Mrs Morgan. Do the rules operate to prevent
such an ad hoc agreement having effect? This question is not free of authority, but the relevant decisions were made in relation to
the Rules of the Supreme Court 1883, which provided by Ord 9, rr 1 and 2 as follows:

1. No service of writ shall be required when the defendant, by his solicitor, undertakes in writing to accept service and
enters an appearance.
2. When service is required the writ shall, wherever it is practicable, be served in the manner in which personal service
is now made, but if it be made to appear to the Court or a Judge that the plaintiff is from any cause unable to effect prompt
personal service, the Court or Judge may make such order for substituted or other service, or for the substitution for service
of notice, by advertisement or otherwise, as may be just.

In Tharsis Sulphur and Copper Co v Socit Industrielle et Commerciale des Mtaux (1889) 60 LT 924 an English company
and a French company, which had no place of business in England, had entered into a contract to be governed by English law
whereby the French company submitted to the jurisdiction of the High Court of Justice in England and appointed an agent in
London on whom any writ or other legal process in respect of any matter arising out of this contract may be served. The
English company duly served a writ on the appointed agent, but the French company applied to set the service aside as not being
in accordance with the rules. Delivering the first judgment in the Divisional Court, which dismissed the application, Field J said
(at 926):

Now, it is clearly not a service in the manner provided for in the rules, but then is it to be competent to anybody to
contract himself out of the rules, at all events to agree to a particular mode of service, and, not only that, but to appoint a
particular person to accept service for him? it is quite clear, on principle, that a person may for consideration appoint
another as agent to accept service, and may contract with someone else that that person shall be the person, until
revocation, to accept service.

I refer next to British Wagon Co Ltd v Gray [1896] 1 QB 35. This was concerned with service out of the jurisdiction under
Ord 11 but is relevant to any understanding of the subsequent development of the Rules of the Supreme Court with reference to
contractual service of process. The plaintiff was an English 503 company which had contracted with a person resident in
Scotland. By its terms the contract was to be governed by English law and the Scottish resident submitted to the jurisdiction of
the High Court of Justice in England. By Ord 11, r 1(e) service out of the jurisdiction was to be allowed where:

The action is founded on any breach or alleged breach within the jurisdiction of any contract wherever made, which,
according to the terms thereof, ought to be performed within the jurisdiction, unless the defendant is domiciled or
ordinarily resident in Scotland or Ireland.

The English companys application for leave to serve the writ in Scotland was refused by the judge in chambers. Lord Esher MR
delivering the first judgment in the Court of Appeal, which dismissed an appeal against the refusal, said in reference to Ord 11, r
1(e) (at 36):
 The rule would permit the Court to make the order but for the last clause, which expressly excepts such a case as this.
The question whether such an order can be made is a question of jurisdiction, and therefore, by the very terms of the rule,
the Court has no jurisdiction in such a case as this.

Referring to the Tharsis case, Lord Esher MR said (at 37):

all that was decided was that a person without the jurisdiction may appoint a person in this country to accept
service, and that acceptance by a person so appointed is a proper acceptance. That is not a question of the jurisdiction of
the Court to make an order as to service.

Montgomery Jones & Co v Liebenthal & Co [1898] 1 QB 487 was another case between an English company and a Scottish
company. Their contract provided that, for the purpose of any legal proceedings arising out of the contract, service of
proceedings on the Scottish company should be effected by leaving the same at the office of the London Corn Trade Association
and posting a copy to the company in Scotland. The English company issued a writ to enforce an arbitration award in their
favour by the London Corn Trade Association and served it in the manner provided by the contract. The Scottish companys
application to set aside the service of the writ was refused by the judge in chambers and the Court of Appeal dismissed their
appeal. Counsel for the defendants (appellants) argued (at 488489):

Service must be effected according to the rules, and no service is valid unless it is so effected. It is not competent to
the parties to contract that a different mode of service shall be adopted: British Wagon Co. v. Gray ([1896] 1 QB 35).

A L Smith LJ said (at 491):

The question arises whether that agreement as to service is or is not a valid agreement. The writ, as I have said, has
been served in the manner in which the parties agreed that it should be served. The defendants, nevertheless, say that there
has been no effective personal service upon them, because the agreement as to service is invalid. To my mind that point is
not tenable. I can see nothing in the rules to prevent the parties from agreeing to such a course of proceedings, and I can
find no case in the books which shews that such an agreement as that made in this case is invalid.

Chitty LJ said (at 493494):

There remains the question, which is the main question in the case, 504whether the agreement as to the service is a
valid agreement or not. The argument is that the service was not effected according to the rules, and is therefore void. In
my opinion the distinction pointed out between this case and the case of the British Wagon Co. v. Gray ([1896] 1 QB 35) is
a sound one. In that case the Court was dealing with Order XI., which, as has been said, contains a complete code
governing service out of the jurisdiction. The Court can only allow service out of the jurisdiction in the cases there
specified, and rule 1(e) of that order shews at once that the Court has no jurisdiction, in the case of a contract to be
performed within the jurisdiction, to allow service out of the jurisdiction on a person who is domiciled or ordinarily
resident in Scotland or Ireland. So that the Court there had to deal with an express prohibition as to service out of the
jurisdiction. There is no such provision applicable to this case. I do not propose to travel through the rules. I can find no
rule which prohibits a person from agreeing as to the mode in which service may be effected on him, as, for instance, by
the writ being left with his wife or with some other person. If the contention of the defendants is correct, a person who is
ill cannot make a request that the plaintiff should hand the writ to his wife, but must endure the inconvenience of being
served personally, otherwise the service will be bad as being in contravention of the rules. I cannot find that in any of the
rules. This case comes within the principle of the decision of the Divisional Court in Tharsis Sulphur Co. v. Socit
Industrielle des Mtaux ((1889) 59 LJQB 435), and I see no reason for differing from the judgment of Field J. in that case.
That learned judge thought it clear upon principle that a person might appoint another as agent to accept service for him,
and might enter into a contract that the agent should be the person to accept service, and that service upon that agent should
be good service upon himself. That seems to me to be good sense. This case falls within the principle there laid down, and
I can find no rule which avoids any such agreement.

Collins LJ said (at 494):

In the present case the parties have put into operation the machinery as to service which they themselves have
provided, and now when that machinery has been put into operation the defendants ask the Court to treat that agreement as
non-existent, and to set aside the service. I do not think we can do that. There is no prohibition, express or implied, in the
rules against their coming to such an arrangement.

Mr Dowley accepts that this case was rightly decided, but submits that the principle of the decision must be limited in its
application to cases where an agreement as to mode of service is embodied in a wider contract and provides for the institution of
proceedings relating to that contract. It does not apply, he submits, to an ad hoc agreement made in relation to other
contemplated proceedings which simply provides how service of the writ in those proceedings is to be effected. The illustration
given by Chitty LJ of the plaintiff validly serving a writ on the defendants wife at the request of her sick husband to avoid the
inconvenience of personal service is said to have been obiter and wrong.
I can see no good reason in principle for making this distinction. If the rules in force in 1898 did not, as all three Lords
Justices held, prohibit the parties to the contemplated litigation from effecting service in a manner agreed between themselves, I
can see no ground for saying that an ad hoc agreement specifically relating to mode of service and nothing else would at that date
have been any less effective for its purpose than an agreement embodied in a wider contract. Indeed, 505so far from regarding
the example given by Chitty LJ of service by agreement on the sick defendants wife as an aberration, I think the example was
adduced by him as an a fortiori case which illustrated and emphasised the untoward practical consequences which would result
from giving the rules with respect to service the restrictive and exclusive effect contended for by the appellant.
I do not see any difficulty in holding that the kind of ad hoc agreement in question is legally effective. If one party, knowing
that another wishes to serve process upon him, requests or authorises the other to do so in a particular way which is outside the
rules and the other does so, then, unless the rules themselves prohibit consensual service, the party so served cannot be heard to
say that the service was not valid. Thus, I have no doubt that, if the circumstances of the present case had come before the court
in 1898, the validity of the service would have been affirmed. The crucial question is whether subsequent changes in the Rules of
the Supreme Court have introduced just such a prohibition of consensual service outside the rules as was unsuccessfully
contended for in Montgomery Jones & Co v Liebenthal & Co [1898] 1 QB 487.
The only relevant alteration to RSC 1883 effected before the comprehensive revision undertaken in 1962 and 1965 was by
the addition to Ord 11 in 1920 (by r 4 of RSC (No 3) 1920, SR & O 1920/1296) of a new r 2A, which provided as follows:

Notwithstanding anything contained in Rule I of this Order, the parties to any Contract may agree (a) that the High
Court of Justice shall have jurisdiction to entertain any action in respect of such contract, and, moreover or in the
 alternative, (b) that service of any Writ of Summons in any such Action may be effected at any place within or out of the
Jurisdiction on any party or on any person on behalf of any party or in any manner specified or indicated in such Contract.
Service of any such Writ of Summons at the place (if any) or on the party or on the person (if any) or in the manner (if any)
specified or indicated in the Contract shall be deemed to be good and effective service wherever the parties are resident,
and if no place or mode or person be so specified or indicated, service out of the jurisdiction of such Writ may be ordered.

The evident purpose of this addition was to overrule British Wagon Co v Gray [1896] 1 QB 35, so that, notwithstanding the
prohibition in Ord 11, r 1(e) of service on defendants in Scotland and Ireland, Scottish or Irish residents in contracting with
English residents might not only give the English courts jurisdiction over their contractual disputes but also make provision for
service of process in relation to such disputes in any manner they chose either within or outside the jurisdiction. This was both a
formal adoption and an extended application of the principle on which Montgomery Jones & Co v Liebenthal & Co had been
decided for the limited purpose of freeing parties contracting across the borders of the different jurisdictions in the United
Kingdom from an unnecessary fetter.
RSC 1965, which replaced RSC 1883, resulted from a comprehensive revision undertaken in two stages. RSC (Revision)
1962, SI 1962/2145, came into force on 1 January 1964 and RSC (Revision) 1965, SI 1965/1776, came into force on 1 October
1966. I will shortly consider certain general changes as between the 1883 rules and the 1965 rules, but I must first trace the
further changes made specifically with reference to service effected in accordance with provisions embodied in a contract
between the parties in commencing an action relating to that contract, on which particular reliance has been placed by Mr
Dowley. The 1962 revision substituted for Ord 11, r 2A a new Ord 10, r 3 as follows:
506

Where(a) the High Court has jurisdiction to hear and determine any action in respect of a contract (whether or not
entered into within the jurisdiction); and (b) the parties to the action have agreed that, in the event of any such action being
begun in the High Court against any of them, the writ by which the action is begun may be served on the defendant in such
manner, or on such other person on his behalf or at such place (whether within or out of the jurisdiction) as may be
specified in the agreement; and (c) the writ is served in accordance with the agreement; then, notwithstanding anything in
Rule 1(1) or in Order 11, the writ shall be deemed to have been duly served on the defendant.

The 1965 revision further amended the language of Ord 10, r 3 as follows:

(1) Where(a) a contract contains a term to the effect that the High Court shall have jurisdiction to hear and
determine any action in respect of a contract or, apart from any such term, the High Court has jurisdiction to hear and
determine any such action, and (b) the contract provides that, in the event of any action in respect of the contract being
begun, the process by which it is begun may be served on the defendant, or on such other person on his behalf as may be
specified in the contract, in such manner or at such place (whether within or out of the jurisdiction), as may be so specified,
then, if an action in respect of the contract is begun in the High Court and the writ by which it is begun is served in
accordance with the contract, the writ shall, subject to paragraph (2), be deemed to have been duly served on the defendant.
(2) A writ which is served out of the jurisdiction in accordance with a contract shall not be deemed to have been duly
served on the defendant by virtue of paragraph (1) unless leave to serve the writ, or notice thereof, out of the jurisdiction
has been granted under Order 11, rule 1 or 2.

Both versions of the new Ord 10, r 3 embody a more general adoption and formalisation of the principles applied in
Montgomery Jones & Co v Liebenthal & Co giving effect to contractual arrangements for service of process which have been
embodied in contracts to be sued on. The significance of the change in language as between 1962 and 1965 is not very clear save
that the 1965 para (2) imposes a new restriction requiring leave to serve out of the jurisdiction although such service has been
contractually agreed. The editors of The Supreme Court Practice 1967 suggested in a note that the purpose of the 1965 wording
was to make clear that the rule extends to all cases where the court has jurisdiction over a contractual dispute, whether given by a
term in the contract or otherwise (see vol 1, para 10/3/1). However that may be, the crucial question is whether the embodiment
in the rules of an express provision for consensual service in the contractual cases to which Ord 10, r 3 applies, operates, as Mr
Dowley submits, as an exclusion of consensual service in any other case. In the light of the legislative history, I am satisfied that
it does not. The first alteration of the rule in 1920, effected for the very limited purpose to which I have drawn attention, cannot
possibly have been intended to effect any change of general significance. When those responsible for the major revision of the
rules in 1962 and 1965 gave to the principle already embodied in the old Ord 11, r 2A the more general application expressed in
the new Ord 10, r 3, I think this is readily explained as a logical rationalisation and extension of the previous rule. The general
approval given by the Court of Appeal in Montgomery Jones & Co v Liebenthal & Co to consensual service outside the rules
must have been perfectly well known to the revisers and, if they had intended so drastically to curtail it, they would surely have
effected that intention directly and 507 unambiguously rather than in the oblique fashion suggested by this argument.
Is a prohibition of consensual service to be spelt out of any other provision of the 1965 rules? The majority of the Court of
Appeal regarded the requirement of Ord 10, r 1(1) that a writ must be served personally on each defendant as mandatory and
subject only to the exceptions provided in the rules themselves. But, here again, I do not regard the substitution of the words
must be served personally for the language of Ord 9, r 2 of the 1883 rules, shall be served in the manner in which personal
service is now made, as sufficient to indicate an intention to introduce the prohibition of consensual service which the Court of
Appeal in Montgomery Jones & Co v Liebenthal & Co failed to find in the 1883 rules.
Some reliance was placed in argument on Ord 10, r 1(4), the text of which I have set out earlier in this opinion, as an implied
indication that a defendants solicitor is the only agent upon whom the rules intend that service may be effected. The rules, as
one would expect, have always contained an express provision governing this most common method of initiating proceedings. In
the 1883 rules the solicitor was to undertake in writing to accept service and to enter an appearance. In the 1965 rules he is to
indorse his acceptance of service on the writ and the date of the indorsement fixes the date of service. Here, yet again, if the old
rule did not indicate a prohibition of consensual service, the new rule is no more apt to do so.
It is said that it is necessary to require strict adherence to the rules in order to achieve certainty with respect to the date of
service. I see no reason why it should be more difficult to establish the date when consensual service was effected by whatever
method the parties may have chosen for their own convenience than to establish the date when the defendant was served
personally. There is certainly no difficulty in this case. Consensual service was effected on the last date possible before the
plaintiffs claim became statute-barred. That explains the defendants motivation in challenging the validity of service, but it has
no other relevance.
Lord Donaldson MR summed the matter up in words with which I entirely agree and on which I could not hope to improve
when he said ([1990] 2 All ER 723 at 727, [1990] 2 QB 527 at 533534):

The rules are the servants of the courts and of their customers, not their masters, unless expressed in a wholly
mandatory and exclusive fashion which these rules are not. It would be wholly contrary to the spirit of the times that the
rules should be construed in a manner which would forbid parties to litigation to act reasonably with a view to eliminating
or reducing the acerbities inevitable in litigation, when to do so creates no problems whatsoever for the defendant in terms
of deciding precisely when service was effected for the purposes of the Limitation Acts or otherwise.
 I would allow the appeal, set aside the orders of the Court of Appeal and of McCullough J and dismiss the defendants
summons with costs here and below.

LORD TEMPLEMAN. My Lords, for the reasons given by my noble and learned friend Lord Bridge of Harwich, I would
allow the appeal.

LORD GOFF OF CHIEVELEY. My Lords, this appeal raises a question of construction of the Rules of the Supreme Court, in
particular Ord 10, r 1; and, depending on the answer to that question, subsidiary questions relating to estoppel and to the exercise
of the courts discretion under Ord 2, r 1.
The appellants claim that the respondents, who are a firm of accountants, caused damage to them as a result of negligence in
advising and carrying out an 508 audit on behalf of the first named appellant, Kenneth Allison Ltd, in or about November 1981.
On 5 October 1987, nearly at the end of the relevant limitation period, the appellants issued a writ. On 4 October 1988, on the
last day of the validity of that writ, the appellants attempted to serve that writ on the respondents. The central question in the case
is whether they were successful in doing so. On an application by the respondents to set aside the service of the writ, the district
registrar dismissed the application; but on appeal from that order McCullough J allowed the appeal and set aside the service of
the writ, and his decision was affirmed by a majority of the Court of Appeal (Russell and Farquharson LJJ, Lord Donaldson MR
dissenting) (see [1990] 2 All ER 723, [1990] 2 QB 527). The appellants now appeal from that decision with the leave of this
House.
The facts of the case are very simple. On 4 October 1988 Mr Swann, an enquiry agent instructed by the appellants
solicitors to effect personal service of the writ, attended at the respondents office. There he met Mrs Morgan, the secretary and
personal assistant to Mr Hall, the senior partner of the respondents. He told her that he wanted to serve a writ, and showed her
the sealed copy he had with him. She said that before she could accept it she would have to refer the matter to a partner. She
then went upstairs and spoke to Mr Hall, who authorised her to accept it. She returned downstairs and told Mr Swann that she
was authorised to accept the writ. Mr Swann then handed her the copy of the writ and the form of acknowledgment of service.
At his request, she gave him her name. Nothing was said about her position in the firm. That is all that happened. On 17
January 1989 the respondents issued their summons to set aside the service of the writ.
I turn to the relevant rules of court. The general rule is to be found in Ord 10, r 1(1) which provides: A writ must be served
personally on each defendant by the plaintiff or his agent. This rule is however expressed by Ord 10, r 1(7) to be subject to the
provisions of the Supreme Court Act 1981 and the Rules of the Supreme Court. It is not expressed to be subject to anything else.
We are here concerned only with service within the jurisdiction. Under the provisions of the rules, a number of exceptions
are to be found to the general rule in Ord 10, r 1(1). These are as follows.
(1) Service by post or through a letter box Instead of a writ being served personally on a defendant, it may, under Ord 10, r
1(2), be served either (para (a)) by sending a copy of the writ by ordinary first-class post to him at his usual or last-known
address, or (para (b)) by inserting a copy of the writ through a letter box at that address. Specific provision is made, in Ord 10, r
1(3), for the date of the service in such circumstances.
(2) Acceptance of service by defendants solicitor Under Ord 10, r 1(4), where the defendants solicitor indorses on the writ
a statement that he accepts service of the writ on behalf of the defendant, the writ shall be deemed to have been duly served on
the defendant on the date when the indorsement is made.
(3) Service pursuant to a contract Under Ord 10, r 3(1):

Where(a) a contract contains a term to the effect that the High Court shall have jurisdiction to hear and determine
any action in respect of a contract or, apart from any such term, the High Court has jurisdiction to hear and determine any
such action, and (b) the contract provides that, in the event of any action in respect of the contract being begun, the process
by which it is begun may be served on the defendant, or on such other person on his behalf as may be specified in the
contract, in such manner or at such place (whether within or out of the jurisdiction), as may be so specified, then if an
action in respect of the contract is begun in the High Court and the writ 509 by which it is begun is served in accordance
with the contract the writ shall, subject to paragraph (2) be deemed to have been duly served on the defendant.

(4) Partnerships Order 81, r 3 provides (so far as relevant) as follows:

(1) Where by virtue of rule 1 partners are sued in the name of a firm the writ may, except in the case mentioned in
paragraph (3) be served(a) on any one or more of the partners, or (b) at the principal place of business of the partnership
within the jurisdiction, on any person having at the time of service the control or management of the partnership business
there; or (c) by sending a copy of the writ by ordinary first-class post (as defined in Order 10, rule 1(2)) to the firm at the
principal place of business of the partnership within the jurisdiction and subject to paragraph (2) where service of the writ
is effected in accordance with this paragraph, the writ shall be deemed to have been duly served on the firm, whether or not
any member of the firm is out of the jurisdiction
(4) Every person on whom a writ is served under paragraph (1)(a) or (b) must at the time of service be given a written
notice stating whether he is served as a partner or as a person having the control or management of the partnership business
or both as a partner and as such a person; and any person on whom a writ is so served but to whom no such notice is given
shall be deemed to be served as a partner.

(5) Service on a body corporate Special provision is to be found in Ord 65, r 3.

(6) Service on a person suffering from a disability Special provision is to be found in Ord 80, r 16.
(7) Substituted service Under Ord 65, r 4 the court may make an order for substituted service where it appears to the court
that it is impracticable for any reason to serve the document in question in the manner prescribed.
The rules in their present form are the result of a thorough-going revision which took place in the early 1960s. An account
of this revision is to be found in the preface to the first edition of the Supreme Court Practice, published in 1967 as successor to
the old Annual Practice. This preface contains the following passage:

Since the last Edition of the Annual Practice, the Rules of the Supreme Court 1965 have been passed and they come
into operation on October 1, 1966 (RSC (Revision) 1965, SI 1965/1776). Without doubt, this is the most important
development in the history of our procedural law since 1883. For the first time since 1883, the entire Rules of the Supreme
Court, revised and re-written, have been passed and issued as one complete, integral body of Rules. In the process, some
144 Orders and Rules made since 1883 have been revoked, and the provisions of nine Acts of Parliament have been
repealed. In fact, the Rules of the Supreme Court 1965 mark the culmination of the labours of several years, undertaken to
implement the strong recommendation of the Evershed Committee on Supreme Court Practice and Procedure made in their
Second Interim Report in 1951 (Cmd 8176, para 117) that a complete revision of the Rules be immediately put in hand.
That formidable task has been achieved in two stages: first, by the partial revision of about half the rules which was
introduced in 1962 and which came into force January 1, 1964 (RSC (Revision) 1962, SI 1962/2145), and now, by the
complete revision, which represents the revision of the remaining half of the rules and embodies the 1962 Revised Rules.
 It may fairly be claimed that the final completed product constitutes a comprehensive, consistent and coherent code of
procedure in the Supreme Court.
510

I have no reason to doubt that the last sentence in that passage gives a correct account of the present position.
When, in these circumstances, I look at the rules relating to service which I have summarised, the basic position appears to
me to be clear. Order 10, r 1(1) prescribes a mandatory rule which must be followed, subject to the provisions of the 1981 Act
and of the rules. In the rules are to be found a whole range of exceptions to r 1(1). There are the two alternative modes of service
under Ord 10, r 1(2); and the need for service may be obviated, as must very often be the case, where the defendants solicitor
places the requisite indorsement on the writ under Ord 10, r 1(4). Where circumstances justify it, an order for substituted service
may be obtained. Special provision is made for special cases; in particular, in the case of a partnership, it is not necessary to
serve all the partners, for the plaintiff may take advantage of one of the alternatives in Ord 81, r 3(1). But the rules themselves do
not contemplate any alternative mode of service other than those specified.
It is against the background of the rules that I turn to the facts of the present case. It seems that Mr Swann was seeking to
serve the writ on the respondent partnership. I do not know whether he was familiar with the provisions of Ord 81, r 3(1); if he
had been, he would have realised that he need not serve the writ on every partner, for service on one partner would be enough,
but, by virtue of the general rule in Ord 10, r 1(1), he would have to serve that partner personally (unless he was able to take
advantage of one of the alternative modes of service specified in the rules). The only partner he came into contact with,
indirectly through Mrs Morgan, was Mr Hall; but he did not serve him personally. What he did was to serve the writ on Mrs
Morgan as the agent of Mr Hall authorised by him to accept service.
What was the effect of that? In the Court of Appeal, it was argued that what happened gave rise to a promissory estoppel on
the part of Mr Hall, binding the respondents, precluding them from asserting that the service was ineffective in law. This
argument was rejected, expressly by Lord Donaldson MR and by Farquharson LJ, and implicitly by Russell LJ, because (per
Farquharson LJ ([1990] 2 All ER 723 at 731, [1990] 2 QB 527 at 539)) no representation was made as to the validity of the
service. This conclusion was, in my opinion, plainly right; and the argument was not pursued by the appellants before your
Lordships House. For the same reason, no argument could be advanced before your Lordships on the basis of contract (and
indeed none was so advanced); for, just as there was, on the facts of the case, no representation by or on behalf of the respondents
that service upon Mrs Morgan constituted valid service upon the respondents, so also there was no promise to that effect. The
present case is not like a case where there is, for example, a provision in a contract that service in a certain manner (not
authorised by the rules of court) shall be good and effective service; nor even is it like a case where there is an ad hoc agreement
to that effect. The appellants relied upon the simple fact that they effected service of the writ upon the authorised agent of one of
the partners; on that basis, as was recognised by Mr Vallance QC for the appellants, the question arose whether such service
constituted good service in accordance with the rules.
Mr Vallance advanced three arguments. First, he submitted that what occurred did amount to personal service. Second, he
submitted that, even if it did not amount to personal service, nevertheless, by virtue of certain nineteenth century authorities,
service on Mrs Morgan as Mr Halls authorised agent to accept service was good service, despite the absence of any provision in
the Rules of the Supreme Court which permitted such service. Third, in the last resort, he invited the court to exercise its
discretion under Ord 2, r 1, to permit the action to continue despite 511 the fact that the purported service on the last possible day
was irregular, and despite the further fact that no such application had been made in any of the courts below.
Like my noble and learned friend Lord Bridge of Harwich, I am satisfied that Mr Vallances first submission must fail.
Personal service means what it says. Prima facie, the process server must hand the relevant document to the person upon whom
it has to be served. The only concession to practicality is that, if that person will not accept the document, the process server may
tell him what the document contains and leave it with him or near him (see Ord 65, r 2 and the notes to that rule in The Supreme
Court Practice 1988). Nothing of that kind happened here.
So, in the course of argument, attention was focused upon Mr Vallances second submission. Having regard to the terms of
the rules themselves, this faces great difficulty. The wording of Ord 10, r 1(1), is perfectly clear: A writ must be served
personally on each defendant by the plaintiff or his agent. If Mr Vallance was in effect suggesting that the words or his agent
should be added after the words on each defendant, that is not, as I see it, possible as a matter of construction. But that was not
Mr Vallances primary submission. He invoked a line of late nineteenth century cases as authority for the proposition that,
because there was nothing in the rules to prevent an agreement between the parties for service otherwise than in accordance with
the rules, therefore service in accordance with that agreement could be effective service. Prima facie, that is a remarkable
submission in relation to what is now said to be a comprehensive code. It presupposes that parties can contract out of the
provisions of Ord 10, r 1(1), which is prima facie difficult to square with the mandatory terms of the paragraph. Accordingly it is
necessary for me to consider the nineteenth century authorities.
The effect of these has already been fully set out in the speech of my noble and learned friend Lord Bridge of Harwich, and I
am relieved of the burden of setting out the facts of each case. In the first case, Tharsis Sulphur and Copper Co Ltd v Socit des
Mtaux (1889) 58 LJQB 435 (the fuller report), 60 LT 924, the point was squarely raised. In argument, counsel for the
defendants submitted (58 LJQB 435 at 436):

Mere service on agents is bad The plaintiffs should have proceeded under Order XI. It is not competent to the
parties to contract themselves out of the Orders and Rules of the Supreme Court.

Counsel for the plaintiffs replied: It is quite competent for one person to appoint another for a consideration as agent to accept
service. Field J, who delivered the principal judgment, accepted the latter argument. He said (at 438):

On principle it is clear that one person may appoint another, for consideration, as agent to accept service, and may
contract with someone else that that person shall be the person until revocation to accept service.

Lord Coleridge CJ agreed with the conclusion of Field J, but on another ground.
As Lord Bridge has pointed out, British Wagon Co Ltd v Gray [1896] 1 QB 35 was concerned with a different point; but the
third case, Montgomery Jones & Co v Liebenthal & Co [1898] 1 QB 487, was the case upon which Mr Vallance principally
relied. That was a case in which a contract for the sale of goods between Scottish sellers and English buyers contained a clause
under which it was agreed that service of process on a party residing or carrying on business in Scotland or Ireland

by leaving the same at the office of the London Corn Trade Association, 512together with the posting of a copy of
such proceedings to the address in Scotland or Ireland, shall be deemed good service, any rule of law or equity to the
contrary notwithstanding.

(See [1898] 1 QB 487 at 488.)

The English buyers commenced proceedings against the Scottish sellers by acting in accordance with that clause. It was
argued by the sellers that the service was bad, because service had to be effected in accordance with the rules of court which then,
as now, required personal service subject to specified exceptions (then more limited than they are today). This argument was
rejected by the Court of Appeal. All members of the court accepted the proposition that parties may, as regards the mode of
service, contract themselves out of the rules and appoint a person as agent to accept service, so long as they do not purport to do
something which is prohibited under the rules.
In these circumstances, I find myself faced on the one hand with Ord 10, r 1(1), which is expressed in mandatory terms,
subject to specified exceptions, and on the other hand with a proposition based upon an authority which has stood, so far as I
know unchallenged, for nearly 100 years, but which appears at first sight to be inconsistent with the mandatory rule. It has been
strongly argued by Mr Dowley for the respondents that, in these circumstances, the proper course for your Lordships House is to
overrule Montgomery Jones & Co v Liebenthal & Co and to give effect to the rules in accordance with their terms, leaving a case
such as the present to be dealt with under the courts discretionary power contained in Ord 2, r 1, where applicable and
appropriate. I must confess to having been attracted by this approach, which is consistent with the conclusion of the majority of
the Court of Appeal. It is not to be forgotten that the rules themselves provide ample opportunity for alternative modes of
service; and that the problem in the present case has only arisen because the appellants left the service of the writ to the last
possible moment. Such a case can, Mr Dowley suggested, be dealt with most appropriately by the exercise of discretion.
Furthermore, as Mr Dowley urged upon us, questions of service of proceedings do not affect only the parties themselves; they
affect also the administration of justice itself. It is important that those concerned at court offices, and especially those who have
to deal with applications for judgment in default, should know precisely what mode of service has been adopted, and therefore be
able to know (by reference to the relevant rules of court) the precise date upon which the proceedings are treated as having been
served. In these circumstances, it is suggested, it is not surprising that the rules should provide for a mandatory method of
service, subject to specified exceptions.
I approach the matter as follows. First of all, as it seems to me, effect must be given to the rules of court in accordance with
their terms. Here, the rules of court do indeed provide a comprehensive code, with a mandatory rule of personal service subject
to certain specified exceptions. Such service alone constitutes good and effective service for the purpose of the rules of court.
With all respect, I feel unable to accept earlier authority in so far as it suggests that any different form of service, for example
such service in accordance with an agreement between the parties (otherwise than as permitted by the rules), can constitute good
and effective service. Even so, as it seems to me, what has passed between the parties may have the effect that one party, upon
whom service has been effected by the other otherwise than in accordance with the rules, may be estopped from asserting as
against the other that such service is ineffective. This would occur where (as was unsuccessfully contended below in the present
case) the party served has represented that he will treat the service as good service and it is inequitable for 513 him to go back
upon his representation; a fortiori will it be the case where, as in Montgomery Jones & Co v Liebenthal & Co, it had been agreed
between the parties that service in a certain manner shall be deemed to be good and effective service.
I have naturally been concerned that, since the rules provide a comprehensive code and embody (in Ord 2, r 1) a
discretionary power which is specifically directed to enabling the court to deal, in its discretion, with those cases in which there
has been a failure to comply with the terms of the rules, it can be said that, as a matter of construction of the rules, that power
alone can be invoked by a party for that purpose, with the effect that he cannot invoke the principle of estoppel. There is force in
that proposition; and on that basis Mr Dowley was able to submit, first, that Ord 2, r 1, was not in its terms wide enough to
provide for the circumstances of the present case and, second, that the court should not in the exercise of its discretion assist the
appellants who had found themselves in their present predicament because they had left the service of the writ to the last possible
moment. However, as it seems to me, the principle of estoppel is essentially a principle of justice. For my part I would not hold
it to be excluded unless public policy so requires; and, despite the argument of Mr Dowley in which he stressed that questions of
service affected the administration of justice itself, I do not consider that public policy does here require the exclusion of the
principle of estoppel.
On that basis, I turn to the facts of the present case. Here there was no good and effective service in accordance with the
rules of court. Next, as I have already indicated, there was no contract between the parties to the effect that service on Mrs
Morgan as agent for the respondents (or of Mr Hall) should be treated as good and effective service on the respondents; nor was
there any representation to that effect sufficient to give rise to a promissory estoppel.
But, as it seems to me, the matter does not stop there. For what in reality happened was that both Mr Hall and the appellants
(acting through their agent Mr Swann) proceeded on the common but mistaken assumption that service of the writ upon the duly
authorised agent of Mr Hall would constitute good and effective service upon the respondents. Furthermore, it is legitimate to
infer that the course of action of Mr Swann was influenced by the adoption by both parties of that common mistaken assumption
in that, if they had not proceeded on the basis of it, Mr Swann would in all probability not have been content with service upon
Mrs Morgan but would have asked to serve the writ upon Mr Hall personally, and there is no reason to suppose that that request
would have been refused. On these facts, in my opinion, the respondents will be estopped by convention from thereafter
contending that there was not good and effective service of the writ upon them, on the principle established in Amalgamated
Investment and Property Co Ltd (in liq) v Texas Commerce International Bank Ltd [1981] 3 All ER 577, [1982] QB 84. In that
case, the Court of Appeal invoked the principle of estoppel by convention as expressed in Spencer Bower and Turner Estoppel by
Representation (3rd edn, 1977) p 157, which was founded upon an agreed statement of facts the truth of which has been
assumed, by the convention of the parties, as the basis of a transaction into which they are about to enter, but proceeded to
extend it to apply to the rather different situation where both parties proceed on the basis of a common, but mistaken, assumption
as to the legal effect of a certain transaction between them, and in consequence one party is so influenced by the conduct of the
other that it would be unconscionable for the latter to take advantage of the formers error (see, in particular, the judgment of
Brandon LJ ([1981] 3 All ER 577 at 590, [1982] QB 84 at 130131)). It is the principle of estoppel by convention in this sense
that can, in my opinion, be invoked by the appellants in the present case.
514
I must confess to being troubled by the fact that no argument was addressed to your Lordships upon this point, and I
naturally hesitate to reach a conclusion upon a point which has not been argued. However since, as I understand the position, the
remainder of your Lordships have reached the same conclusion by a rather different route, I am content in the circumstances to
state that I agree that the appeal should be allowed, though I for my part would have proposed a rather different order as to costs,
requiring the appellants to bear all the costs in the courts below, and ordering that, in view of the great delay which has occurred
resulting from the appellants slowness in commencing the present proceedings, the costs incurred in your Lordships House
should be costs in the cause in the main action.

LORD JAUNCEY OF TULLICHETTLE. My Lords, I have had the advantage of reading in draft the speech of my noble and
learned friend Lord Bridge of Harwich. I agree with it and for the reasons he gives I, too, would allow the appeal.

LORD LOWRY. My Lords, I have had the advantage of reading in draft the speech of my noble and learned friend Lord Bridge
of Harwich. I agree with it and for the reasons he gives I, too, would allow the appeal and concur in the order which he proposes.

Appeal allowed.

Solicitors: Gregory Rowcliffe & Milners agents for Ben Pearson; G J Starling & Co, Kings Lynn; Pinsent & Co agents for
Pinsent & Co, Birmingham.

Mary Rose Plummer Barrister.

 515
[1991] 4 All ER 516

Apac Rowena Ltd v Norpol Packaging Ltd

CIVIL PROCEDURE: INTELLECTUAL PROPERTY; Copyright

CHANCERY DIVISION
HARMAN J
30 JANUARY 1991

Action Dismissal Failure to deliver statement of claim Copyright action Plaintiff issuing writ out of Queens Bench
Division seeking delivery up of printing plates and injunction restraining infringement of copyright Judge in chambers making
order sought on ex parte application Plaintiff failing to serve statement of claim Action transferred to Chancery Division
Defendant applying to dismiss action for failure to serve statement of claim Whether judge in chambers should have made ex
parte order Whether injunction should be discharged and action dismissed Supreme Court Act 1981, s 61, Sch 1, para 1(i).

Practice Distribution of business among High Court divisions Copyright matters Writ in copyright action issued out of
Queens Bench Division Judge in chambers making order for delivery up of printing plates and granting injunction restraining
breach of copyright on ex parte application Whether order made on false basis of law Supreme Court Act 1981, s 61, Sch 1,
para 1(i).

The plaintiff issued out of the Queens Bench Division a writ indorsed with what was headed Statement of Claim claiming
entitlement to possession of printing plates, delivery up of the plates and an injunction restraining infringement of copyright
therein. The indorsement, however, alleged no facts such as would be necessary to constitute a statement of claim. The plaintiff
applied ex parte to the Queens Bench judge in chambers, where, counsel having failed in his duty to inform the judge that
copyright matters fell within the exclusive jurisdiction of the Chancery Division, the judge granted an order compelling the
defendant to deliver up forthwith to the plaintiff or its solicitors certain plates and artwork listed in the order and restraining the
defendant until trial of the action or further order from using or copying the plates and all connected artwork or infringing the
copyright therein. Certain plates were delivered by the defendant to the plaintiff pursuant to the order. The defendant, having
made two unsuccessful requests for a statement of claim to be served, applied successfully to the Queens Bench Division for the
action to be transferred to the Chancery Division and then made a further unsuccessful request for a statement of claim to be
served. The defendant eventually received from the plaintiffs solicitors a letter saying that counsel had been instructed. The
defendant then applied for an order dismissing the action for failure to serve a statement of claim.

Held Since s 61 of and para 1(i) a of Sch 1 to the Supreme Court Act 1981 assigned all copyright matters exclusively to the
Chancery Division, which was a matter of law that had not been drawn to the attention of the Queens Bench judge in chambers,
not only had the order been made on a false basis of law but, being wholly unfamiliar with copyright matters, the judge had failed
to notice that such evidence as there was before him was wholly inadequate to show any proper cause of action in copyright
vested in the plaintiff. It followed, therefore, that the order should not have been made. In all the circumstances, however, the
court would not dismiss the writ and action but would give the plaintiff a deadline for serving a statement of claim, failing which
the action would be dismissed. In 516 the meantime, since there was no prima facie case of copyright vested in the plaintiff
which would warrant an injunction being maintained, the injunction would be discharged but without prejudice to any further
application by the plaintiff, supported by proper evidence for an injunction without having to show any change in circumstances
(see p 518 e to h, p 519 d e g to j and p 520 a b d to f, post).
________________________________________
a Paragraph 1, so far as material, is set out at p 518 d, post

Notes
For dismissal of an action for failure to deliver a statement of claim, see 37 Halsburys Laws (4th edn) para 404, and for a case on
the subject, see 37(3) Digest (Reissue) 27, 3092.
For distribution of business among the divisions of the High Court, see 37 Halsburys Laws (4th edn) paras 5662, and for
cases on the subject, see 37(2) Digest (Reissue) 222, 14541458.
For the Supreme Court Act 1981, s 61, Sch 1, para 1, see 11 Halsburys Statutes (4th edn) 819, 866.

Cases referred to in judgment

Brinks-MAT Ltd v Elcombe [1988] 3 All ER 188, [1988] 1 WLR 1350, CA.
R v Kensington Income Tax Comrs, ex p Princess Edmond de Polignac [1917] 1 KB 486, CA.

Motion
By a writ issued out of the Queens Bench Division on 8 October 1990 the plaintiff, Apac Rowena Ltd, claimed as against the
defendant, Norpol Packaging Ltd, (1) that it was entitled to possession of certain printing plates which despite the plaintiffs
repeated requests had been retained and wrongfully used by the defendant to its profit, the value of which was estimated at
7,34117, (2) delivery up of the plates, damages for infringement of copyright, which commenced on or about September 1990
and was continuing, damages for conversion, alternatively an account of the profits received by the defendant in infringing the
plaintiffs rights and an injunction restraining the defendant from using or copying the plates or infringing the copyright therein,
and (3) interest. On 8 October 1990 on an ex parte application by the plaintiff Alliott J, sitting in chambers, ordered (1) that the
defendant deliver up forthwith to the plaintiff or its solicitors the plates and artwork listed in the order and (2) that the defendant
be restrained until trial of the action or further order from using or copying the plates and all connected artwork or infringing the
copyright therein. On 2 January 1991 on the defendants application and by consent the action was transferred to the Chancery
Division. By notice of motion dated 23 January 1991 the defendant applied in the Chancery Division for, inter alia, an order
dismissing the action for failure to serve a statement of claim and an inquiry as to damages pursuant to the plaintiffs cross-
undertaking in damages recited in the order of 8 October 1990. The facts are set out in the judgment.

Nicolas Bragge for the defendant.

Alexander Drysdale Wilson (who did not appear before the judge in chambers) for the plaintiff.
30 January 1991. The following judgment was delivered.

HARMAN J. This is a motion by notice dated 23 January 1991 and served that day by the defendant on the plaintiff to strike out
a writ for want of any statement of claim. The writ was issued by well-known solicitors frequently practising in 517 this class of
work on 8 October 1990 in the Queens Bench Division. It was indorsed with what is headed Statement of Claim and bears a
signature but is plainly intended to be a general indorsement and alleges no facts such as would be necessary to constitute a
statement of claim. The indorsement alleges entitlement to possession of printing plates, delivery up of the plates and an
injunction restraining infringement of copyright therein.
By an ex parte application to the Queens Bench judge in chambers on 8 October an order was obtained. The ex parte order
was (1) that the defendant be compelled to deliver up forthwith to the plaintiffs solicitors plates and artwork listed in Schedule 1
of the order, and (2) that the defendant be restrained until trial of the action or further order from using or copying the plates and
all connected artwork or infringing the copyright therein. Counsel appearing before the judge in chambers that day (not counsel
before me) seriously failed in his duty to the court and seriously misled the Queens Bench judge in chambers.
Section 61 of the Supreme Court Act 1981 provides that business shall be assigned by direction of the Lord Chancellor to
the various divisions of the High Court. The Act also provides a schedule to the Act itself. Schedule 1, para 1 says:

To the Chancery Division are assigned all causes and matters relating to (i) patents, trade marks, registered designs
or copyright

Plainly by the statute, unless and until varied by statutory instrument made by the Lord Chancellor with the relevant
concurrences, copyright matters are the exclusive business of the Chancery Division. That serious matter of law was apparently
not called to the attention of the Queens Bench judge in chambers. Had it been so called I have no doubt he would have said:
This is not a matter which ought to be in Queens Bench chambers at all; I have no business to deal with it. Transfer to the
Chancery Division and make your application there.
The Queens Bench judge in chambers naturally, since all copyright work is assigned to this division, was wholly unfamiliar
with copyright matters. He had before him an affidavit sworn on 5 October 1990, before the writ was issued, by one David
Martin Carpenter which was the whole of the evidence. Upon examination that material does not show any title in the plaintiff to
any copyright in any specific design, or written or artistic material. The evidence is simply wholly inadequate to show any proper
cause of action in copyright vested in this plaintiff. The evidence refers to a different company, then in receivership, which may
or may not have had copyright in some particular design or designs so far unidentified by any exhibit or other representation, but
it does not show any adequate vesting in this plaintiff or identify any particular design of which copyright could properly be
claimed.
The Queens Bench judge in chambers, naturally not being familiar with the requirements of copyright procedure, and I
assume not having his attention directed to such matters by counsel, who had already overlooked the basic question, failed to
notice these difficulties and therefore made the ex parte order until trial which he did.
The matter proceeded, if it can be called proceeding, by (1) an attempt to start committal proceedings, which were dismissed
by consent and the plaintiff ordered to pay the costs, on 26 October last, (2) a request for the statement of claim without delay
made on 31 October 1990 when I believealthough I am not sure of the exact datethe plaintiff was already out of time for the
service of a statement of claim, (3) a further request for the statement of claim on 2 November 1990, (4) an application to the
Queens Bench Division for the transfer to this division of this action, as plainly was right and inevitable the moment anyone 518
thought about the matter, which resulted in an order for transfer on 2 January 1991, (5) a further request for the statement of
claim on 9 January 1991, three months after the issue of the writ on 8 October 1990, and eventually (6) the courtesy of a letter
from the plaintiffs solicitors on 14 January saying: Counsel has now been instructed. Such a deplorable catalogue of
misconduct of proceedings is not, fortunately, very common, at least in this division.
The next step was that on 23 January notice of motion was served to dismiss the action for want of a statement of claim, and
this morning the matter comes on before me with no statement of claim available either by way of draft disclosed between the
parties or exhibited to any affidavit or produced to me. A draft has been settled by the experienced copyright counsel appearing
for the plaintiff before me but, very naturally, since his clients have not yet had a proper opportunity to see that document, he
considered he should not yet show that draft either to his opponent or to me, and that I entirely understand and accept as proper
conduct.
Thus, here we are on 30 January with no statement of claim, despite inquiries and requests for it specifically back to 31
October last year, and a gross default according to the rules. I have already indicated that I propose to allow the plaintiff, in case
there is a genuine case fit to be tried, not to be driven from the judgment seat unheard. I shall grant a small further locus
poenitentiae provided the statement of claim is served by 4 pm on Friday next and filed in court by 4 pm on Friday next. I will
not make an immediate order on this motion dismissing the writ and action. I will make an order nisi, dismissing the action with
costs to be taxed on the standard basis and paid by the plaintiff to the defendant if the statement of claim is not served by 4 pm on
Friday.
If the statement of claim is served by 4 pm on Friday, I would usually make the ordinary order on a motion like this: that
there be no order on the motion save that the costs be taxed on the standard basis forthwith and paid by the plaintiff to the
defendant.
However, a further question arises. The order of the Queens Bench Division of 8 October was in two partsa mandatory
order, which has been complied with, resulting in certain things called plates being actually delivered by the defendant to the
plaintiff; those are now in the plaintiffs possession and will remain in the plaintiffs possession until they are taken away
pursuant to some lawful order or instruction. No application is made to me in respect of the plates. However, it is submitted to
me that in the light, first, of the extreme dilatoriness in serving a statement of claim and, secondly, of the fact that the order made
was wrongly made with no proper basis in law because the action should never have been in the Queens Bench Division, being a
matter specifically assigned to this division by statute, the order was therefore made on a false basis of law.
Further, upon examination of the evidence before the court today, which consists only of the original affidavit put before the
Queens Bench judge which was itself wholly inadequate to make out any case in copyright, and having regard for the lack of any
other material allegations of fact such as might have been available had a statement of claim been prepared even in the week
since service of this notice of motion on 23 January, there is at present no prima facie case of copyright vested in the plaintiff in
particular designs which would warrant an injunction being maintained.
In my judgment, although Mr Drysdale Wilson seeks time at this moment to make a case at present not before the court for
copyright in particular designs, it would be wrong to grant further adjournments in favour of a plaintiff who is so grossly in
default on the rules and in its conduct of the whole of this matter. It 519 seems to me that the right order today is to discharge the
negative injunction in para 2 of the order of 8 October and to leave the matter with the express provision that that discharge is
without prejudice to any fresh application for an injunction based upon proper material without evidence of any change of
circumstance but merely showing a case which at present is not apparent to the court.
I have had pressed upon me, perfectly rightly, by Mr Drysdale Wilson such authorities as Brinks-MAT Ltd v Elcombe [1988]
3 All ER 188 esp at 194195, [1988] 1 WLR 1350 esp at 1359, where Slade LJ referred to the tendency to regard what I have
always called the golden rule, ie the rule of frankness and full disclosure, as being thought by some litigants to be a tabula in
naufragio. I entirely accept that the golden rule as set out in R v Kensington Income Tax Comrs, ex p Princess Edmond de
Polignac [1917] 1 KB 486 is capable of modification perhaps to the extent that, if there has been a material non-disclosure and
therefore a breach of the golden rule, the court will, if it is none the less satisfied later that despite the breach there was a truly
proper case for making an injunction, allow the injunction improperly obtained to remain on foot.
That does not seem to me to have much to do with this case, where the injunction was improperly obtained in the sense that
it was obtained on a complete misleading of the learned judge by counsel as to the law and a total absence of any evidence at all
before the court which could warrant the making of any injunction. There being no evidence warranting the making of an
injunction, the injunction ought not to remain. This is not a case where, upon further and better examination, one can see
material for an injunction; there is no material here.
I therefore propose to direct that the order nisi, which I already suggested should be made, will be made and that I should
discharge the negative injunction ordered on 8 October but without prejudice to further application if such should be thought right
on the basis of proper material without change of circumstance having occurred. I shall leave the matter in that form.

Order accordingly. Injunction discharged.

Solicitors: Haddon Owen & Son, Louth; Collyer-Bristow agents for Fishers, Ashby de la Zouch.

Evelyn M C Budd Barrister.

520
[1991] 4 All ER 521

Moores v Director of Public Prosecutions

CRIMINAL; Criminal Law

QUEENS BENCH DIVISION

BINGHAM LJ AND HODGSON J
24 APRIL 1991

Criminal law Disorderly house Keeping disorderly house Single offence of indecency in public house by male stripper No
evidence of publicans involvement in indecent conduct Whether necessary to show persistent use of premises for indecent
performances Whether keepers knowledge of indecent conduct necessary.

The appellant was the licensee and keeper of a public house. On 20 April 1989 two plain clothes police officers while on duty in
the public house saw two performances of a male exotic stripper which they considered to be indecent. The appellant was
charged with the common law offence of keeping a disorderly house. The justices found as a fact that the first performance was
not indecent. The appellant submitted that he could only be convicted if the prosecution could show persistent use of the
premises for indecent acts and that it was necessary that he was shown to have knowledge of that use of the premises. The
justices convicted the appellant on the ground that the premises did not need to be used on more than one occasion to become a
disorderly house and that there had been persistent indecency throughout the course of the second performance. They accepted
that there was nothing to suggest the appellants involvement or prior knowledge of the indecent conduct but held that he could
not evade his liability to ensure that his premises were conducted in an orderly fashion merely by refraining to condone or
condemn the conduct. The appellant appealed.

Held The appeal would be allowed for the following reasons

(1) In order to establish the common law offence of keeping a disorderly house it was necessary to establish habitual or
persistent use, since the mischief at which the common law was aimed was the continuity of keeping a house to which members
of the public resorted for the purposes of disorderly recreation which was available there. Accordingly, a house did not acquire
the legal character of disorderliness merely because disorder occurred there on one occasion. Furthermore, persistency could not
be established by a performance of a given length which was wholly indecent on a single occasion (see p 524 b c j, p 525 d to j, p
526 e to h and p 527 b c, post); Marks v Benjamin (1839) 5 M & W 565, R v Davies [18959] All ER Rep 1066 and R v Brady, R
v Ram [1964] 3 All ER 616 considered.
(2) Knowledge of the use to which the premises were being put was necessary before a defendant could be convicted of the
offence of keeping a disorderly house (see p 525 j to p 526 a b d f, post); Marks v Benjamin (1839) 5 M & W 565 and R v Farmer
(1973) 58 Cr App R 229 considered.

Notes
For disorderly houses, see 11(1) Halsburys Laws (4th edn reissue) 379, and for cases on the subject, see 15 Digest (Reissue)
10541055, 90769078.

Cases referred to in judgments

Marks v Benjamin (1839) 5 M & W 565, 151 ER 239.
R v Brady, R v Ram [1964] 3 All ER 616, CCA.
R v Davies [1897] 2 QB 199, [18959] All ER Rep 1066, CCR.
R v Farmer (1973) 58 Cr App R 229, CA.
521

Case also cited

R v Quinn, R v Bloom [1961] 3 All ER 88, [1962] 2 QB 245, CCA.

Case stated
Brian John Moores appealed by way of case stated by the Rochdale justices in respect of their adjudication on 21 February 1990
whereby they convicted the appellant of the offence of keeping a disorderly house on 20 April 1989 at Rochdale, contrary to
common law. The questions for the High Court were (a) whether the justices were correct in concluding that on the particular
facts of the case there was no need for an element of persistence of use of the premises for indecent performances in order to
convict the appellant, (b) whether the justices were correct in concluding that on the particular facts of the case an element of
persistence of indecency of the conduct throughout the one performance was sufficient, (c) whether the justices were correct in
concluding on the evidence in the case that an element of persistence of conduct throughout the second performance had been
proved, (d) whether the justices were correct in their view that the definition of public was capable of including the particular
audience, (e) whether there was sufficient evidence to support the appellants conviction as the keeper of a disorderly house, (f)
whether the justices were correct in finding that the conduct alleged was an outrage to public decency and (g) whether the justices
were correct in rejecting the contention that there should be no condemnation of one isolated incident outraging decency. The
facts are set out in the judgment of Bingham LJ.

Christopher Hartley for the appellant.

Leslie Hull for the Director of Public Prosecutions.

24 April 1991. The following judgments were delivered.

BINGHAM LJ. On 21 February 1990 the appellant was convicted by the Rochdale justices of keeping a disorderly house at
Rochdale on 20 April 1989 contrary to common law. He appeals against that conviction by case stated. The facts found by the
justices are these.
The justices found that on 20 April 1989 the appellant was the licensee and keeper of the Waggon and Horses public house
in Rochdale. On that date two members of the police force, a man and a woman, were on plain clothes duty at the public house.
Both officers saw what is described as a male exotic dancer give two performances of his act; one of them at 9.30 in the evening
lasting about ten minutes and other at 10.30 pm lasting slightly longer.
The audience consisted of about 70 people, mainly girls and middle-aged women. The performance given at 9.30 pm
involved the male dancer wearing a G-string and rubbing a plastic penis up and down whilst dancing to music. There was no
audience participation. The performance given at about 10.30 pm involved participation by the audience, with one female
member of the audience rubbing oil on the mans penis behind a towel, his underpants having been removed, and the man then
walking around the audience and standing over one woman when he was completely unclothed, causing this woman
embarrassment by his behaviour. The justices finally conclude that no complaints were received from any persons present.
I should mention that the justices expressly find that the first of these two performances, that taking place at 9.30, was not
indecent and, accordingly, the issue turns on the legal effect of the second performance.
The justices have raised a number of questions for the court arising out of the 522 contentions below. I think it is necessary
for present purposes only to consider two of the issues which they raise.
The appellant argued in the court below that he could only be convicted if the prosecutor could show persistency of the use
of the premises for indecent acts. He went on to say that there must be persistency of indecency throughout the act. He
furthermore argued that it was necessary, before he could be convicted, that he should be shown to have knowledge of the use of
the premises.
The prosecutors contention was that although there had only been one act of indecency, that being the performance at 10.30
pm, persistency was not a necessary element of the offence. He argued that either there was no need for an element of
persistence or that, if such an element was required, it was open to the court to take into consideration both the first and second
performances whether or not the first performance itself was indecent. The prosecutor further argued that there was enough
knowledge established against this appellant in this case.
The justices expressed their opinion in three paragraphs which I shall quote from the case, which were these:

6. We were of the opinion that the premises did not need to be used on more than one occasion to become a disorderly
house. The cases referred to which cited persistency, referred to it as an assumption. We, therefore, accepted the assertion
of the respondent that this was merely persuasive not binding. By the charge being Contrary to Common Law, equally, any
reference to persistency in any Statute was not relevant. We felt that this was to allow for isolated occasions.
7. We were of the opinion that there was persistent indecency throughout the course of the second performance. The
indecency throughout this second performance became steadily worse. It had been conceded that the first act was not
offensive but was relevant to the evening as a whole. We were of the opinion that the first performance, although not of the
most tasteful, could not be considered indecent. This first performance, therefore, could not be considered in the question
of persistency of indecency. We considered that there was increasing indecency throughout the second performance. We
did not accept the contention by the appellant that there should be no condemnation if there was only one isolated incident
which was to be regarded as outraging decency
9. We accepted from the evidence that there was nothing to suggest the appellants involvement, participation or prior
knowledge as to the particular conduct. However, as the licensee of the premises, we concluded he was the keeper and
were of the opinion that by doing nothing either to condone or condemn the conduct, he could not evade his liability to
ensure that his premises were conducted in an orderly fashion.

The justices then pose a series of questions for the opinion of the court which include these:

(a) Whether we were correct in concluding that on the particular facts of the case, there was no need for an element of
persistence of use of the premises for indecent performances in order to convict the appellant. (b) Whether we were correct
in concluding that on the particular facts of this case, an element of persistence of indecency of the conduct throughout the
one performance was sufficient. (c) Whether we were correct in concluding on the evidence in the case that an element of
persistence of conduct throughout the second performance had been proved (e) Whether there 523 was sufficient
evidence to support the appellants conviction as the Keeper of a disorderly house

The first question which arises is whether, in order to establish the common law offence, it is necessary for the prosecutor to
show that the defendant habitually or, as counsel has said, persistently kept a house which was a disorderly house.
In support of the appellants appeal Mr Hartley submits that such an element of habitual or persistent user must be
established. He acknowledges, and Mr Hull for the prosecution agrees, that there is no authority precisely in point so far as the
establishment of this common law offence is concerned. Mr Hartley submits that the authorities which do exist are in his favour,
at any rate persuasively, that there are no authorities contrary to his proposition and that consideration of the underlying principle
and the mischief at which the common law offence is aimed supports his submission.
So far as authority is concerned it is convenient to start with R v Brady, R v Ram [1964] 3 All ER 616. That appeal
concerned a common law charge of keeping a disorderly house. The point at issue concerned the adducing of evidence relating to
performances given on occasions outside the period covered by the indictment. However, Lord Parker CJ said (at 617):

That keeping under certain statutes, e.g., the Disorderly Houses Act, 1751, and the Gaming Houses Act, 1854,
involves some element of persistent user is clear: see Marks v. Benjamin ((1839) 5 M & W 565 at 569, 151 ER 239 at 241)
per PARKE, B., and R. v. Davies ([1897] 2 QB 199, [189599] All ER Rep 1066). While the present proceedings are in
respect of an alleged common law offence, the court, without coming to a final decision on the matter, will assume that the
same element must be found. Even so the court can see no reason why the prosecution cannot call evidence, or as in this
case rely on the evidence of the defence, to show that what happened during the period the subject of the charge was
merely a continuation of a prior user.

Mr Hartley, of course, acknowledges that the court was not there giving a ruling but merely making an assumption. But he
relies on the willingness of an eminent court to make that assumption. He referred us to the observations of Parke B in Marks v
Benjamin to which Lord Parker CJ made reference. That case concerned the Disorderly Houses Act 1751 and was therefore
distinguishable as not relating to a common law offence. Parke B said (5 M & W 565 at 568569, 151 ER 239 at 241):

It is enough for the present to say that we think the case ought to have been left to the jury. There is no doubt or
difference of opinion on the law. In the first place, the house or room must be kept with the defendants knowledge;
secondly, it must be kept for the purpose prohibited by the statute; there must be something like an habitual keeping of it,
which, however, need not be at stated intervals; thirdly, it must be public, to which all persons have a right to go, whether
gratuitously or on payment of money, no matter whether paid to the defendant or not, if he knows of the payment. All
these are questions to be left to the jury. (Parke Bs emphasis.)

That case therefore is plain authority for the proposition that so far as the statutory offence of keeping a disorderly house is
concerned a habitual keeping of it is necessary.
I refer then to R v Davies, to which Lord Parker CJ also refers. That was concerned with an alleged gaming house and with
the application of s 4 of the 524 Gaming Houses Act 1854 but in the course of his judgment Lord Russell CJ said ([1897] 2 QB
199 at 202, [18959] All ER Rep 1066 at 1067):

it is in my opinion monstrous to say that the case falls at all within the mischief or within the provisions of the
statute, which was intended to prevent the user of a house as a gaming house. As far as appears from the case, neither these
people nor anybody else had ever played at the house before. In my judgment it is impossible to say that the defendant
kept, opened, or used the house for the purpose of playing an unlawful game within the meaning of the statute, and on that
ground alone the conviction cannot stand.

Those cases therefore point in the direction of the principle for which Mr Hartley contends. There are a number of other
cases concerned with disorderly houses but in none of them was the element of habitual keeping or persistency in issue and
therefore they are not directly in point. I would, however, accept Mr Hartleys argument that so far as the authorities go they help
him.
His second proposition that there are no authorities contrary to his argument is accepted. The researches of counsel have
failed to disclose any instance of a case in which a defendant has been convicted of keeping a disorderly house on the strength of
one isolated incident.
So far as principle and mischief are concerned, I find Mr Hartleys argument persuasive. It is plain that to establish this
offence the prosecution have to prove two things: first that the premises in question were a disorderly house and, secondly, that
the defendant kept them.
I address myself for present purposes to the first of those ingredients. It is necessary, I think, to emphasise that the offence is
not presenting, mounting or procuring an indecent performance, exhibition or show. If it were, no doubt one performance,
exhibition or show would be enough if the defendants involvement was established. The offence is keeping a disorderly house.
That is a house having the characteristic of disorderliness, as that expression has been defined in the cases. It seems to me that a
house does not acquire the legal character of disorderliness because disorder occurs there on one occasion any more than a house
becomes a gaming house because cards are played there once or a house becomes a brothel because it is used for purposes of
prostitution by more than one woman on a single occasion.
Moreover, it appears to me that the mischief at which the common law offence is aimed is the mischief of keeping a house to
which members of the public resort for purposes of the disorderly recreation, if one can so describe it, which is available there,
whether it takes the form of indecency or illicit pugilism or cock fighting or whatever. The essence of the mischief is the
continuity which exists where the use of premises for a given unlawful purpose becomes notorious.
Despite Mr Hulls argument therefore that an offence can be committed even though there is indecency on only one occasion
for a period of only ten minutes or so, I prefer to accept the argument of Mr Hartley for the appellant that whether one is looking
at the statute or whether one is looking at the common law offence a habitual keeping of the premises is necessary. I need not go
in detail into the argument which we have heard concerning persistency throughout a performance. I would find it impossible to
hold that persistency was established because there was a performance of a given length which was wholly indecent on a single
occasion.
I turn therefore to the question of knowledge. On that point Mr Hartley submits that the authorities show knowledge to be
necessary and that, as a 525 common law offence, it is in any event necessary that the knowledge of the defendant should be
shown.
The first of the authorities relied on is the authority I have already mentioned of Marks v Benjamin (1839) 5 M & W 565 at
568, 151 ER 239 at 241 and the same passage from Parke B where he says, of course construing the statute, that the house or
room must be kept with the defendants knowledge. I would for my part read that as meaning that the house or room must be
kept for disorderly purposes with the defendants knowledge. That reading I think gains some support from the observations of
Lawton LJ, an eminent authority in this field, on a sentence appeal. The case is R v Farmer (1974) 58 Cr App R 229. I refer to
the passage where Lawton LJ said (at 231):

Griffin was not seen by the police actually in the Variety Bar, but as licensee of the public house he must have known
what was going on, and indeed by his plea he accepted that he knew what was going on.

The offence in question was the common law offence of keeping a disorderly house and Lawton LJ was clearly treating the
plea of guilty as involving acceptance of knowledge of the use to which the premises were being put.
I accordingly conclude that, on the authorities, knowledge is necessary, and I would also need a great deal of persuasion that
an absolute offence could exist at common law, namely an offence of which a defendant could be guilty without any knowledge
of the facts giving rise to commission of the offence. I would therefore on that point also accept Mr Hartleys submission.
I turn back therefore to the questions which the justices have raised. To their question (a) I would give the answer No. To
their question (b) I would give the answer No. I think it is unnecessary to answer question (c), but to question (e) I would answer
that on the justices findings there was not sufficient evidence to support the appellants conviction as the keeper of a disorderly
house.
I would accordingly allow the appeal and quash this conviction.

HODGSON J. I entirely agree. As this is the first time which a court has been asked to decide in respect of the common law
offence of keeping a disorderly house I add a few words of my own
As Lord Parker CJ pointed out in R v Brady, R v Ram [1964] 3 All ER 616 at 617, referred to by Bingham LJ in his
judgment, there is no doubt that where the word keeping is used in the definition of a statutory offence some element of
persistent user or habitual user is clearly necessary and has, in emphatic terms over a very long period of time, been so laid down
in the cases to which Bingham LJ has referred. In R v Brady, R v Ram, however, the Court of Criminal Appeal drew back from
coming to a final decision on the matter where the common law offence is concerned.
The only argument which would take the common law offence out of the general rule in respect of the construction of the
word keeping where used in a statute would be that there is some distinction between the use of the word in the two cases. It is
perhaps of some interest that the common law offence of keeping a disorderly house was referred to in the Disorderly Houses Act
1751, s 8. For the purpose of proof of the offence, that is the common law offence, s 8 of that Act provided:

any person who shall at any time hereafter appear, act or behave himself or herself as master or mistress, or as the
person having the care, government or management of any bawdy-house or other disorderly house, shall be deemed and
taken to be the keeper thereof, and shall be liable 526 to be prosecuted and punished as such, notwithstanding he or she
shall not in fact be the real owner or keeper thereof.

Perhaps some help can be gained from that in that it seems to me to be clear that in that section the statute does seem to be
contemplating the government or management or keeping of a house where a persistent course of conduct is performed.
The only other matter to which I would refer is the argument advanced by Mr Hull that on the example he gave, of a
publican having a single extremely indecent performance when he is about to open a public house, it would be repugnant if he
were not guilty of the common law offence. He put it in this way: it will be repugnant if the publican had a free run. I
personally am not convinced by that argument at all. True it is that in so far as the common law offence is concerned he might
have one free run. But depending upon the circumstances and the facts there seems to me to be no doubt that he would be guilty
of any one of a number of other criminal offences. In those circumstances, as I have said, I entirely agree with the conclusion
that Bingham LJ has reached.

Appeal allowed. Conviction quashed.

Solicitors: Kristina Harrison, Manchester; Crown Prosecution Service, Rochdale.

Dilys Tausz Barrister.

[1991] 4 All ER 527

Happ v Happ
FAMILY; Ancillary Finance Property

COURT OF APPEAL, CIVIL DIVISION

PURCHAS, BELDAM LJJ AND SIR ROGER ORMROD
24 JANUARY, 2 MARCH 1990

Divorce Financial provision Military pay, pension etc Avoidance of assignment of, or charge on, military pay, pensions etc
Army discharge gratuity Husband receiving gratuity on discharge from army Wife applying for lump sum payment out of
gratuity Whether court precluded from making lump sum order out of gratuity already received Army Act 1955, s 203 (1)(2)
Matrimonial Causes Act 1973, ss 23(1), 25.

After the parties divorce in 1986 the husband, who had been in the army since 1964, continued his army career while the wife
pursued her own career as a nurse and, assisted by relatives, purchased a house for herself and the two young children of the
marriage to live in. The husband made periodical payments under a consent order for the maintenance of the wife and the two
children. At the end of August 1988 the husband left the army and received an army gratuity of some 14,000 on his discharge.
The wife applied for a lump sum payment out of the gratuity while the husband sought a reduction of the maintenance payments.
In March 1989 the registrar, exercising his discretion under s 25 a of the Matrimonial 527 Causes Act 1973, made a lump sum
order under s 23(1)b of that Act in favour of the wife of one-half of the husbands army gratuity on the basis that the gratuity was
part of the family assets available for distribution. He continued the periodical payments in favour of the children but reduced the
wifes periodical payments to a nominal amount. The husband appealed to the judge, who confirmed the lump sum order on the
ground that the court could take the gratuity into account as family assets and make whatever order it thought appropriate in
respect of the gratuity, notwithstanding that s 203 c of the Army Act 1955 provided that an assignment of or charge on any
pay, military award, grant, pension or allowance payable in respect of [military] service was void. The husband appealed to
the Court of Appeal, contending that the lump sum order contravened s 203 of the 1955 Act because it had the effect of
restraining the husband from receiving part of his gratuity, contrary to s 203(2), or, alternatively, that the judge in exercising his
discretion under s 25 of the 1973 Act should, by analogy with s 203(1) of the 1955 Act, have had regard to the source of the
annuity, namely that it was an army gratuity, and should therefore have disregarded the gratuity in dealing with the distribution of
the family assets.
________________________________________
a Section 25, so far as material, provides:
(1) It shall be the duty of the court in deciding whether to exercise its powers under section 23 and, if so, in what manner, to have regard to
all the circumstances of the case, first consideration being given to the welfare while a minor of any child of the family who has not attained
the age of eighteen.
(2) As regards the exercise of the powers of the court under [s 23(1)(c)] the court shall in articular have regard to the following matters(a) the
income, earning capacity, property and other financial resources which each of the parties to the marriage has or is likely to have in the
foreseeable future (b) the financial needs, obligations and responsibilities which each of the parties to the marriage has or is likely to
have in the foreseeable future
b Section 23(1), so far as material, provides: On granting a decree of divorce or at any time thereafter (whether, in the case of a decree of
divorce before or after the decree is made absolute), the court may make any one of the following orders, that is to say ( c) an order
that either party to the marriage shall pay to the other such lump sum or sums as may be so specified
c Section 203, so far as material, is set out at p 533 b, post

Held The purpose of s 203(2) of the 1955 Act was to inhibit the court from making an order which would prevent a person
from receiving in the future any military pay, award, pension etc to which he would be entitled in the future. However, where a
person had already received a gratuity on being discharged from the army, s 203(1) and (2) did not prevent the court from making
an order under s 23 of the 1973 Act for a lump sum payment out of that gratuity and nor was the court, when exercising its
discretion under s 25 of the 1973 Act, required by s 203 of the 1955 Act to disregard as family assets available for distribution an
army gratuity which had already been received. It followed that the judge had been entitled to confirm the registrars lump sum
order. The husbands appeal would therefore be dismissed (see p 535 a to f h and p 536 j, post).
Ranson v Ranson [1988] 1 WLR 183 distinguished.
Notes
For lump sum payments following divorce, see 13 Halsburys Laws (4th edn) paras 11051115, and for cases on the subject, see
27(3) Digest (2nd reissue) 243257, 1063410702.
For restraint on assigning or charging any royal forces pay or allowance, see 41 Halsburys Laws (4th edn) para 214.
For the Army Act 1955, s 203, see 3 Halsburys Statutes (4th edn) 205.
For the Matrimonial Causes Act 1973, ss 23, 25, see 27 Halsburys Statutes (4th edn) 724, 729.

Cases referred to in judgments

G v G [1985] 2 All ER 225, [1985] 1 WLR 647, HL.
Morris v Morris (1977) 7 Fam Law 244, CA.
Ranson v Ranson [1988] 1 WLR 183, CA.
528
Roberts v Roberts [1986] 2 All ER 483, [1986] 1 WLR 437.
Walker v Walker [1983] 2 All ER 909, [1983] Fam 68, [1983] 3 WLR 421, CA.

Cases also cited

D v D (1974) 5 Fam Law 61.
Daubney v Daubney [1976] 2 All ER 453, [1976] Fam 267, CA.
Fraser v Fraser (1982) 3 FLR 98.
Furniss v Furniss (1982) 3 FLR 46, CA.
Milne v Milne (1981) 2 FLR 286, CA.
Priest v Priest (1980) 1 FLR 189, CA.
Slater v Slater (1982) 12 Fam Law 153, CA.
Stockford v Stockford (1982) 3 FLR 58, CA.
Suter v Suter and Jones [1987] 2 All ER 336, [1987] Fam 111, CA.

Appeal
Peter Frederick Happ (the husband) appealed from the order made by Judge Bates QC in the Bournemouth County Court dated
17 August 1989 dismissing the husbands appeal from the order made by Mr I E Weintroub sitting as a deputy registrar on 7
March 1989 whereby he varied a consent order dated 12 March 1986 by (1) ordering the husband to pay the wife, Jennifer Mary
Happ, by way of a lump sum payment the sum of 7,330 out of the gratuity he received on his discharge from the army in
August 1988, the amount of the lump sum payment being one-half of the gratuity, and (2) increasing the periodical payments to
the two children of the family from 100 per month to 150 per month. The facts are set out in the judgment of Purchas LJ.

Peter Duckworth for the husband;.

Giles Harrap for the wife.

2 March 1990. The following judgments were delivered.

PURCHAS LJ. The court has before it an appeal by Peter Frederick Happ (the husband) against an order made by Judge Bates
QC in the Bournemouth County Court on 17 August 1989. This order provided that the husband should pay to Jennifer Mary
Happ (the wife) (1) a lump sum of 7,330 and 1,000 towards her costs and (2) 150 per month to each of the two children of
their marriage, Peter, who was born on 6 July 1976, and Ruth, who was born on 6 September 1977. On 7 May 1989 Mr I E
Weintroub sitting as a deputy registrar, on an application to vary a consent order dated 12 March 1986, had ordered a lump sum
of 7,330 to be paid by the husband to the wife. There had been no such provision in the consent order. At the same time the
deputy registrar reduced an order for periodical payments of 100 per month to 5 per annum in favour of the wife but continued
periodical payments of 100 per month in favour of the two children. The husband appealed to the judge against the lump sum
provision. After the hearing before the registrar the wife applied to increase the payments to the two children. Both matters were
before the learned judge when he made the order under appeal.
The husbands appeal from the registrar against the lump sum was dismissed. The judge acceded to the wifes application
and increased the payments to each of the children to 150 per month. The husband now seeks to challenge both the order for a
lump sum in favour of the wife and the provision for periodical payments in favour of the children.
529
The husband made a career in the army. He joined up in 1964. He met the wife in late 1973 and they were married in
February 1974. As with many service families, they did not at any time acquire a matrimonial home which they owned. They
lived either in army quarters or in rented accommodation. The marriage lasted until 1982 when they separated by agreement.
The wife returned to Bournemouth where she bought a property with assistance from her family and set up a home for herself and
her two children who were then aged about six and five. The wife is a nurse.
The husband continued with his service in the army. He had a lady friend at the time of the separation to whom I shall refer
as Frances. It is not suggested that her presence on the scene was a determinative factor in the breakdown of the marriage. The
husband presented a petition in 1985 which, I presume, was based on two years separation. It has not been placed before us. In a
statement made pursuant to r 76A of the Matrimonial Causes Rules 1977, SI 1977/344, submitted to the court in about March
1986, the husband offered a payment of 300 per month by way of maintenance for his family as a whole. This resulted in the
consent order to which I have referred dated 12 March 1986. The marriage was dissolved by decree absolute on 14 January
1986. In 1987 Frances became pregnant and a child was born in January 1988.
On 7 October 1987 the husband served notice of intention to apply to the court to reduce the order of 12 March 1986. He
swore an affidavit of the same date. In his service with the army the husband was a physiotherapist and was fortunate enough to
be able to use this profession as a bridge from army life into civilian life. In his affidavit he refers to subscriptions to professional
bodies both military and civilian. It also appears that by this date, presumably against his release from the army, the husband had
acquired an interest in a property and disclosed himself as joint owner of house (38,000 mortgage) current market value 48
50,000. It appears that Frances was also a nurse as the affidavit described her as staff nurse income ceases December 1987 (the
baby was expected early in February 1988). In the affidavit the husband also disclosed that he intended to marry Frances in early
February 1988. As things turned out they did marry but not until a later date. Nothing turns on this, however. On the basis of a
figure for his earnings and expected earnings as a physiotherapist in the national health service after leaving the army the husband
sought a reduction in the periodical payments provided in the consent order.
The wife had filed a r 76A statement but this has not been included in our papers and we are told by counsel that it is not
necessary for the consideration of this appeal. However, on 27 January 1988 she issued an application supported by an affidavit
of that date seeking relief under s 37 of the Matrimonial Causes Act 1973 against the disposal by the husband of part of the
gratuity which it was expected he would receive upon his anticipated discharge from the army in February 1988. The wife had
also sworn an affidavit in reply to the husbands application to vary the consent order. This was dated 14 January 1988. The
husband swore a further affidavit in reply to both affidavits sworn by the wife and her application under s 37. This affidavit was
sworn on 29 April 1988 from which it appears that the husband had not taken his discharge from the army as expected in
February 1988 but now expected to be discharged on 31 August 1988.
In his final affidavit the husband set out in considerable detail his financial position and that of Frances. In para 11 he made
the point:

When the Respondent and I separated in 1982 we divided the small capital we had on an equal basis and I have for a
substantial period of time since then paid the Respondent maintenance on firstly a voluntary basis and then by 530 Consent
Court Order thus enabling her to pay the mortgage and live securely in her property which must by now have accrued a
substantial equity therein.

There was no suggestion in this affidavit of any major capital investment which the husband decided later to make in order to
establish a private practice as a physiotherapist. The wifes final affidavit, sworn on 4 July 1988, asserts for the first time, so far
as I am aware, that the separation in 1982 was because of the adultery between the husband and the lady who was to become his
second wife. This aspect of the case clearly had no impact upon either the registrar or the judge and, in my judgment, correctly
so. Finally, in her affidavit the wife produced a copy of an estimate of work which was necessary to put her own house into a
reasonable state of repair. This was in the sum of 8,000a figure which has not been disputed by Mr Duckworth acting for the
husband.
On 26 August 1988 Mr Registrar Wood acceded to the wifes application under s 37 of the Matrimonial Causes Act 1973
and made an order restraining the husband from dealing with or otherwise disposing of an amount of 5,000 from the lump sum
gratuity of 13,75116 to be paid to him on or about 31 August 1988.
The husband brought the evidence of his position up to date in a supplemental affidavit of 3 March 1989. In this affidavit
the husband reports his purchase on 2 December 1988 of a property suitable to convert into accommodation and a private
physiotherapy clinic. This was at 120 Mytchett Road, Mytchett, Surrey. This investment had a substantial impact upon the
husbands financial position. It meant that he took on a substantial mortgage in order to purchase this property of an enhanced
asset value and, therefore, his current revenue position was reduced by the necessity to service this mortgage. At the same time
he included evidence of the earnings of his second wife.
The registrar, after reading the affidavits and hearing the argument of counsel both for the husband and the wife, delivered a
judgment to which it is convenient to refer shortly. The following extracts are relevant:

To his credit he did obtain position at Cambridge Hospital and has gone some way to establishing own practice.
Property: cost a lot of money (140,00000) with view to living accommodation + practice. Steps already taken to
convert. But has taken mortgage of over 100,00000 + life policies (some previously in existence) resulting in expre
1031 pm, 92 on policy and 120 on new policy = 1300 pm. No income as yet produced though only a matter of time.
H told me he is looking to turn around in 12 months. So moderate income in expectation
Wife has bought new house. Has managed commendably well, has supported children with 200 to 1/86 then 300 pm.
Cant have been easy and has continued to work with 2 children quite young and coped with them while growing up, an
obligation she will continue to fulfill
Lump sum
Only identifiable fund from which lump sum can be satisfied is gratuity payment.
Seems to me on s 25 W has appropriate claim against it for a lump sum.
Marriage may have been short. Also abundantly clear from what I know that had it been the Ws wish the marriage
would have continued at Ws risk. She would have had proper expectations on Hs retirement from Army. Also 2 young
children shes provided for.
531
H is in stronger wealth position, with all his expectations. Widows pension has been talked about. Always
contentious. Only evidence in front of me is letter from Pensions Office 12/9/88, taken me by surprise but only evidence
here. Suggests pension lost on separation, as well as divorce. Whether thats of any help or not, her life expectations are
such that widows pension is wholly guesswork. Parties still young, fit & healthy. (H is sporty).
Gratuity I find that the W has performed all duties she could possibly have expected to perform and has done them
well. The Hs approach in 1982 was that funds should be split half each. Nothing in what happened in 1982 to suggest that
should terminate obligations between parties. Never suggested before, nothing in documents, looked at accounts, I think
wholly appropriate now. Having started with 1/3, looking at all factors and future obligations appropriately W should have
half share. I order payment of half gratuity.

Before the judge both parties gave evidence and were cross-examined. By this time the wife was a state enrolled nurse. The
relevant parts of the note of the judgment of Judge Bates read:

The 7,330 is half of the lump sum (the gratuity) paid to [the husband] when he retired from the army. In this
connection I was referred to s 203 of the Army Act 1955, which contains provision for the avoidance of assignment of or
charge on military pay, pensions etc. And I was referred to Ranson v Ranson [1988] 1 WLR 183 which dealt with the
provisions of s 203 of the Air Force Act 1955, which is similar in terms to s 203 of the Army Act 1955 On the facts of
this case as I understand them [the husbands] gratuity had been received and assimilated into the capital of [the husband]
at the time of the hearing before the learned deputy registrar. Accordingly, it seems to me that that court and this court may
take account of its existence and make whatever order it thinks appropriate As persons, both [the husband] and [the
wife] impressed me. [The husband] appeared to me to be an honourable, determined ex-soldier, [the wife] a resourceful
nurse. Her resourcefulness manifests itself in the fact that she has got a house for herself and her two children. The house
has been said to be at the lower end of the market, and on the evidence, it clearly needs repairs and improvements such as
central heating. She has had to redecorate her daughter Ruths room. And she has improved her nursing qualifications and
is working full-time, but without the assistance of her father and brother she would not have managed as well as she has.
She is certainly contributing in my judgment by looking after the house and caring for the family. [The husband] manifests
his determination by pursuing a new profession of physiotherapist. For this purpose, and also for domestic
accommodation, he has acquired premises on which he has a mortgage of, I believe, 105,000. [The husband] will, I feel
sure, deservedly succeed in his new profession and his earning capacity is likely to improve in the foreseeable future. The
mortgage, however, is a heavy burden on [the husband]; but as it seems to me, he is now and will continue to get the
benefit of it. It does not seem to me that, because of the mortgage, [the wife] should be prejudiced. In all the
circumstances of the case I dismiss [the husbands] appeal against part of the order of the deputy registrar and I allow [the
wifes] appeal on periodical payments by way of maintenance. Costs 1,000.

Mr Duckworths first proposition was based upon the provisions of s 203 of the Army Act 1955. He submitted that to order
a lump sum the effect of which was to distribute half the gratuity received by the husband on his discharge from the 532 army
was contrary to the provisions of this section. Incidentally, with this submission went the assertion that the order made under s 37
of the 1973 Act was itself ultra vires. Section 203 provides:
 Avoidance of assignment of or charge on military pay, pensions, etc.(1) Every assignment of or charge on, and every
agreement to assign or charge, any pay, military award, grant, pension or allowance payable to any person in respect of his
or any other persons service in Her Majestys military forces shall be void.
(2) Save as expressly provided by this Act, no order shall be made by any court the effect of which would be to restrain
any person from receiving anything which by virtue of this section he is precluded from assigning and to direct payment
thereof to another person

Mr Duckworth submitted that the order made by the registrar and confirmed by the judge was in direct breach of the provisions
of s 203 since the lump sum award was an order made by the court the effect of which would be to restrain the husband from
receiving part of his gratuity. He based this submission upon the judgment of this court in Ranson v Ranson [1988] 1 WLR 183
and other authorities to which I will refer later. Ranson v Ranson concerned an application in proceedings for relief ancillary to
divorce proceedings by the wife of a husband who was a sergeant in the Royal Air Force whose service was unlikely to end for at
least another seven years. The registrar ordered, inter alia, that the husband should pay the wife a lump sum equal to 20 per cent
of the terminal gratuity received by him on his discharge from the Royal Air Force. On appeal the judge ordered that this part of
the registrars order should be struck out since it contravened s 203(2) of the Air Force Act 1955 (a section in equivalent terms to
s 203 of the Army Act 1955). On the wifes appeal to the Court of Appeal the court held that the judge was correct and that s
203(1) and (2) of the Air Force Act 1955 should be construed purposively, in that although it did not restrain the husband from
receiving the whole of his gratuity or require it to be paid to another the order had the effect of directing payment of part of the
gratuity to the wife.
Before the Court of Appeal in Ransons case Mr Spence, who was counsel for the wife, contended that the lump sum order
was an order for a payment of money which had been received by the husband and did not in any way restrain the husband from
receiving the gratuity which otherwise would be subject to the restriction against assignment or charge under s 203(1). Reference
was made to the judgments of this court in Walker v Walker [1983] 2 All ER 909, [1983] Fam 68, which concerned an order made
by the registrar that the Paymaster General should pay into court the moneys due to the husband on his discharge from the army.
This was held to be in breach of s 203 of the Army Act 1955. Griffiths LJ said ([1983] 2 All ER 909 at 914, [1983] Fam 68 at
76):

The object of sub-s (1) of s 203 of the Army Act 1955 is to ensure that a soldier will receive in his hands his pay or the
other analogous sums payable by the Crown such as pensions, grants, and so forth, so that he can then dispose of them as
he wishes, and to this end it is expressly provided that any previous assignment or charge on the pay or other emolument is
void. I read sub-s (2) as directed towards the same end. It is to provide that no court shall make any order which would
impose a restraint on his pay, or other emolument, which would prevent him receiving it into his hand to be disposed of as
he then wishes.
533

The court was then referred to Roberts v Roberts [1986] 2 All ER 483, [1986] 1 WLR 437, where the order made was that the
respondent husband

do pay to the Petitioner as a lump sum one quarter of the Respondents terminal grant, if and when such grant be paid
by the Crown to the Respondent in respect of his military service.

In Roberts v Roberts Wood J held that the order amounted to a charge on the gratuity, and basing himself on Walker v Walker held
that the order was in contravention of the section. Wood J, however, made the qualification ([1986] 2 All ER 483 at 485, [1986]
1 WLR 437 at 439):

Once he has received it the picture might change, but for the present purposes I am quite satisfied that the order is
contrary to s 203 and is therefore void.

In Morris v Morris (1977) 7 Fam Law 244 the judgment of the Court of Appeal was delivered by Sir John Pennycuick who
adjourned the application for a lump sum in a case where the discharge from the services was to take place seven years in the
future and ordered that the husband should give notice to the wife when he left the army and gave liberty to either party to restore
the summons.
Turning now to the judgment of May LJ in Ranson v Ranson [1988] 1 WLR 183 at 188189:

In so far as a short adjournment is concerned, which it would seem Wood J. might have been prepared to grant, it
seems to me that although there may be an anomaly, once the gratuity has been received and assimilated into the capital of
an ex-serving airforceman, the court can take account of its existence and make whatever order it thinks appropriate,
having regard to the capital and income assets of the husband. However, I think that in considering all the circumstances of
the case, it would be right for the court at least to bear in mind the source from which that particular capital had come and
the statutory provisions which would have been applicable to it. In addition to submitting that this court should construe
the provisions of section 203(1) and (2) of the Act of 1955 in accordance with their clear terms and not to give effect to any
wider purposive construction of such words, Mr. Spence pointed out that the order made by the registrar only went so far as
to direct a payment of a lump sum by reference to the gratuity. It did not direct any payment of any part of the gratuity
which was the position in Roberts v. Roberts ([1986] 1 WLR 437) and which was why understandably the judge in that
case came to the conclusion which he did. Counsel also drew our attention to the fact that in 1955 there was no power to
make lump sum orders in matrimonial causes as presently exists. He further referred us to section 150 of the Act of 1955
and the subsequent sections which provide for specific enforcement of maintenance orders and deductions from pay,
notwithstanding the general provisions of section 203. In those circumstances, if one applied the proper construction of
section 203 to the actual words of the order, the judge below was wrong, this appeal should be allowed and the order of the
registrar allowed to stand.

Notwithstanding the able submissions of Mr Duckworth I have come to the conclusion that the present case is
distinguishable from Ranson v Ranson and the other cases to which reference was made in the judgment of May LJ. Those cases
were concerned with an order of the court which prevented or had the effect of preventing the receipt at some stage in the future
by the pensioner of his gratuity or other payments which would fall under the provisions of s 203(1). In my 534 judgment s
203(2) is plain as to its meaning and does not require any purposive construction or gloss in order to make it intelligible. The
purpose of the section is to inhibit the court from making any order which would prevent the receipt by the pensioner in due
course of any pension or gratuity etc to which he is entitled in the future. It does not inhibit the court in making any other kind of
order once the pensioner has safely received the sum of money to which he is due under the pension arrangements to which the
section is directed. Clearly May LJ had this distinction in mind in the passage from his judgment in Ranson v Ranson which I
have already cited. Section 203(1) was concerned with preventing the pensioner from charging or assigning any sum of money
which was due to come to him as a result of his service before he ever had the chance of enjoying the benefit of it. The two
subsections deal with quite different problems and do not have any direct bearing upon each other, other than to define the sort of
orders in respect of which the powers of the court are to be inhibited under s 203(2). Thus, for the purposes of the powers of the
court under s 23 of the Matrimonial Causes Act 1973 in relation to the distribution of the family assets by way of making a lump
sum provision, subject to the provisions of s 25, these are in no way affected by the provisions of s 203 of the Army Act 1955 or
the equivalent sections in the other royal forces Acts. For these reasons Mr Duckworths first ground of appeal fails.
In the alternative Mr Duckworth submitted that in the exercise of his discretion under s 25 of the 1973 Act the judge should
have had regard to the source from which the gratuity had been received, namely the Army Pension Scheme, and should,
therefore, have in dealing with the distribution of the family assets discounted the contribution available for distribution from this
particular source. Mr Duckworth based this argument by analogy with the provisions of s 203(1) of the 1955 Act; but I am not
persuaded by this submission. In my view, the judge was entitled to include the receipt of the gratuity as part of the family assets
as a whole and to make his distribution according to a discretion exercised in line with s 25 of the 1973 Act which he in fact did.
The order made by the registrar and confirmed by the judge was to effect, along with the concept behind the original consent
order, an equal division of the family assets, namely in this case half the value of the gratuity but not affecting the payments
under the pension scheme in the long term.
Mr Duckworth submitted that in considering the requirements of the parties under s 25(2)( b) of the 1973 Act the judge
should have taken into account the need of the husband for a capital sum in order to relieve or mitigate the burden of servicing
the very substantial mortgage he had arranged in order to provide himself with a substantial residence large enough to
accommodate his physiotherapy clinic. At the same time it must be remembered that the wife had established a need for 8,000
to put her own home where she lives with the two children in order. I have come to the conclusion that the judge was perfectly
entitled in assessing the respective requirements for capital sums of the two parties to make an even distribution. For these
reasons I am unable to say that the judge exercised his discretion incorrectly in allowing the order of the registrar to stand and
that, therefore, on this aspect of the appeal I would dismiss the appeal.
I now turn to the question of the periodical payments ordered in favour of the two children as a result of the wifes
application to vary which came before the judge at first instance. I have already set out the reasons given by the judge for his
decision to increase the payments to 150 per month. In summary, he exercised his discretion on an assessment of the resources
of the two parties. He recorded that the wife had improved her nursing qualifications and was working full-time but that she
would not have managed as well as she had without the assistance of 535 her father and brother. She was, the judge held,
contributing by looking after the house and caring for the children. When he turned to the husband he came to the conclusion
that he was a determined physiotherapist and took the view that he would be successful in his civilian venture. The justification
for his acquiring premises at a price of 140,000 with a mortgage of 105,000 was that the judge was confident that he would
deservedly succeed in his new profession and his earning capacity likely to improve in the foreseeable future. He took into
account the burden resulting from the mortgage but dealt with it in this way:

The mortgage, however, is a heavy burden on [the husband]; but as it seems to me he is now and will continue to get
the benefit of it. It does not seem to me that, because of the mortgage, [the wife] should be prejudiced.

In my judgment, the judge was entitled to take an overall, broad-brush approach to this problem. Mr Duckworth presented
the court with calculations based upon the current income and expenses of both parties which, on their face, showed that neither
party was financially viable. This is only too frequently the result of a detailed analysis of expenses but ignores the adjustment of
which each party is capable and to which each party must yield. In view of the optimistic prognosis which the judge found in the
case of the husband, in my judgment he was entitled in the exercise of his discretion not to be deterred from a just and reasonable
provision for the two children by the day-to-day finances of each of the parties as disclosed in their evidence before him. I do not
believe that fine-tuning of the respective figures for income and expenses in a case such as the present is an exercise upon which
this court ought to embark where there is, in the overall picture, not a lack of money available in one form or other. The deputy
registrar and the judge correctly took the view that such was the earning capacity of the wife that she should not rely upon her ex-
husband for support. That having been said, the judge was equally entitled to take into account the fact that it was the wife who
was providing the home and looking after the children and would be so doing for quite a number of years to come and that if the
husbands practice as a physiotherapist developed as was expected, he would be earning substantially increased amounts of
money and would be perfectly capable of meeting financial obligations to be imposed upon him by the judge for the benefit of
the children.
Taking the overall view of this matter I have come to the conclusion that as a matter of discretion the judge was perfectly
entitled to increase the payments for the two children by the comparatively modest amount of 50 per month each (it is to be
remembered that the husband accepted that he should continue to pay 100 per month for the children in any event) and that this
court is not entitled to interfere with the exercise of that discretion bearing in mind the approach to be adopted by this court as set
out in the speech of Lord Fraser of Tullybelton in G v G [1985] 2 All ER 225 at 228, [1985] 1 WLR 647 at 651. For these
reasons the husbands appeal against the provision for periodical payments in favour of the children also fails. I would
accordingly dismiss the appeal.

BELDAM LJ. I agree.

SIR ROGER ORMROD. I also agree.

Appeal dismissed.

Solicitors: Campbell Hooper, Camberley; Richards & Morgan, Bournemouth.

Wendy Shockett Barrister.

536
[1991] 4 All ER 537

Cotgrave v Cotgrave
FAMILY; Ancillary Finance & Property

COURT OF APPEAL, CIVIL DIVISION

PURCHAS, BUTLER-SLOSS AND MCCOWAN LJJ
23 APRIL 1991
Divorce Financial provision Military pay, pension etc Avoidance of assignment of, or charge on, military pay, pensions etc
Naval resettlement grant Husband due to receive resettlement grant on discharge from Royal Navy Registrar ordering
husband to pay wife lump sum on receipt of resettlement grant Whether court precluded from making order Naval and
Marine Pay and Pensions Act 1865, ss 4, 5 Army Act 1955, s 203 Air Force Act 1955, s 203.

In 1985 the wife and the husband, who was then in the Royal Navy, separated. The wife applied for ancillary relief by way of
financial provision in the form of a lump sum and periodical payments. On 22 February 1990 the registrar ordered the husband
to pay to the wife a lump sum of 2,500 on receipt of his resettlement grant. On 23 July the registrar made an order pursuant to s
37 of the Matrimonial Causes Act 1973 restraining the husband from disposing of any moneys received on his discharge from the
navy and on 10 August the order was continued after an inter parties hearing. On 13 August the husband received 4,436 by way
of settlement grant from the navy but failed to pay the wife the lump sum of 2,500. On 19 September the judge ordered the
husband to pay to the wifes solicitors the sum of 3,500 within 24 hours of service of the order. The wife applied for the
committal of the husband for contempt in refusing to comply with the order of 10 August and subsequent orders made in support
of that order. The judge refused to make the committal order sought, on the ground that the court was precluded by ss 4 a and 5b
of the Naval and Marine Pay and Pensions Act 1865 from making an order in respect of money due to a serving seaman prior to
the money actually being paid over to him on his leaving the service. The wife appealed.
________________________________________
a Section 4 is set out at p 540 b, post
b Section 5 is set out at p 540 c, post

Held Although both s 203c of the Army Act 1955 and s 203 of the Air Force Act 1955, which were equivalent provisions, in
terms prohibited the court from making an order in the course of divorce proceedings which had the effect of directing a serving
member of the army or the air force to pay his wife a lump sum on receipt of a resettlement grant, ss 4 and 5 of the 1865 Act
contained no restrictions on the powers of the courts and on their true construction did not prohibit a court from making such an
order against a serving member of the Royal Navy. The appeal would therefore be allowed and the case remitted for a rehearing
on the notice to show cause in respect of the alleged contempt of court (see p 541 d e g j to p 542 a, post).
________________________________________
c Section 203, so far as material, is set out at p 540 e, post

Notes
For assignment of pay and pensions, see 21 Halsburys Laws (4th edn) 159.
For the Naval and Marine Pay and Pensions Act 1865, ss 4, 5, see 3 Halsburys Statutes (4th edn) 982.
For the Army Act 1955, s 203, see ibid 205.
For the Air Force Act 1955, s 203, see ibid 400.
For the Matrimonial Causes Act 1973, s 37, see 27 Halsburys Statutes (4th edn) 751.
537

Cases referred to in judgments

Happ v Happ [1991] 4 All ER 527, [1990] 1 WLR 1282, CA.
Walker v Walker [1983] 2 All ER 909, [1983] Fam 68, [1983] 3 WLR 421, CA.

Case also cited

Ranson v Ranson [1988] 1 WLR 183, CA.

Appeal
Susan Bernice Lorraine Cotgrave (the wife) appealed from the order of Judge Carter QC sitting in the Altrincham County Court
on 3 December 1990 dismissing the wifes application for the committal of Thomas Edward Cotgrave (the husband) to prison for
non-compliance with an order made by Mr Registrar Woolf on 22 February 1990 that the husband make a lump sum payment of
2,500 to the wife on receipt of his resettlement grant from the Royal Navy, an order made by Mr Registrar Woolf on 23 July
restraining the husband until 10 August from disposing of any moneys received on his discharge from the navy, which order was
continued on 10 August after an inter parties hearing, and an order made by Judge Hammond on 19 September that the husband
pay to the wifes solicitors the sum of 3,500 within 24 hours of service of the order. The facts are set out in the judgment of
Butler-Sloss LJ.

Adrian Wallace for the wife.

Maura Logan for the husband.

23 April 1991. The following judgments were delivered.

BUTLER-SLOSS LJ(delivering the first judgment at the invitation of Purchas LJ). This is an unusual point raised on appeal
which turns on whether or not a resettlement sum paid to a seaman on leaving the Royal Navy can be the subject of a lump sum
order under s 23 of the Matrimonial Causes Act 1973 before the sum is actually paid to the seaman. If it can, the husband (who
was the respondent to the original petition and the respondent to this appeal) is at fault in not paying under the order, and there
has been an application for committal for contempt by the wife.
That application came before Judge Carter QC on 3 December 1990. He refused to make a committal order not on the
merits of the case but, despite his view that the husband was in clear contempt of court, on the basis that there was no power in
the court under s 37 of the Matrimonial Causes Act 1973 to make such a lump sum order or indeed to prevent the payment of the
resettlement sum by the Royal Navy to the husband to be dealt with as he chose. There is an appeal by the former wife from the
refusal of the judge to commit the husband for contempt.
The short facts relevant to this appeal are that the parties married on 27 April 1974. There are three children born in 1976,
1978 and 1986, all of whom are with the wife. The husband until very recently was serving with the Royal Navy and the family
lived throughout in married quarters, the last being in Rosyth, Scotland. In 1985 the parties separated. The wife moved with the
children to Manchester and the husband sold or disposed of all the furniture and goods in the former matrimonial home, which
was the cause of a substantial dispute at the hearing before the registrar on ancillary relief, a dispute which it appears was
resolved in favour of the wife, the wife receiving no benefit whatever from the disposal of these goods, and she being not only on
social benefit but having to ask 538 the state to supply her with the bare necessities of life. That was the background to this
application by the wife.
The husband left the navy prematurely with health problems accentuated, it appears, by an excessive intake of alcohol. He
had intended to stay in the navy until 1991. He had the expectation of a pension, a resettlement grant and a terminal lump sum.
 There were earlier applications for maintenance pending suit and interim periodical payments for the children. There was an
application by the wife for periodical payments for herself and a lump sum under s 23. She was aware that the husband would be
getting certain lump sums from the navy. She made an application to prevent the dissipation of these sums and there was an
interim s 37 order granted ex parte. That order was continued inter partes on 10 August 1990. It being the second order inter
partes there is no doubt whatever that the husband was aware that he could not dispose of any money that was in fact given to
him by the navy.
The substantive hearing on ancillary relief was on 22 February 1990 before Mr Registrar Woolf, who ordered that the
Respondent do forthwith on receipt of his resettlement grant on leaving the Royal Navy pay to the petitioner a lump sum of
2,500 On 31 October 1990 there was an application by the husband for leave to appeal out of time before Judge Blackburn.
That application was refused. On neither of those occasions was the question whether the registrar had jurisdiction to make the
lump sum order in the form in which he did actually raised before the court, and there has been no application for leave to appeal
against the order of Judge Blackburn.
On or about 13 August 1990 there was a payment to the husband of the re-settlement grant of 4,436 but no other payment,
as I understand it, has been made to him. He did not pay the 2,500 or the costs to the wife and there was an application to
commit him to prison on 2 September with notice to show cause in respect of the alleged contempt of court. The committal
hearing came on on 3 December 1990 and it is against the refusal to commit him to prison that this appeal comes to this court.
Two issues arise. On one only is it necessary for this court to make a decision because it disposes of the appeal. The first is
a question of the construction of the Naval and Marine Pay and Pensions Act 1865. The second question is whether it was open
to the judge to look behind the order of the registrar and the refusal of leave to appeal by Judge Blackburn in refusing to commit
the husband for contempt on the basis that the order was void. Since in my judgment the first issue on interpretation of the 1865
Act disposes of this appeal, it is not necessary to go down the further road of questions of estoppel which can be left to another
day and another court.
For the first time the court was faced with whether there was jurisdiction to make an order in respect of money due to a
serving seaman and to attach conditions to it so that it could not be disposed of as he chose. The learned judge came to the
conclusion that what he had to do was to decide whether the registrars order of 22 February 1990 was valid and binding, and he
looked at the Naval Marine Pay and Pensions Act 1865. In the last page of his judgment he construed the Act and said:

Having construed the wording, there is no significant difference in fact. The spirit in the Act of 1865 has been
preserved in the 1955 Act.

The 1955 Act to which he referred was the Army Act and the identical Act is the Air Force Act 1955. Section 203 of each of
those Acts specifically deals with the money, pensions, wages, grants and so on of the army and the air force.
539
Mr Wallace for the wife argues that the judge was wrong in law, that he incorrectly construed the 1865 Act and that the 1865
Act is to be seen as not covering the same areas as the two 1955 Acts. Section 4 of the 1865 Act reads as follows:

Prohibition of Assignment of Pensions, &c. Any Assignment, Sale, or Contract made after the Commencement of this
Act by an Officer, Seaman, or Marine entitled to any Naval Pension,or by a Person entitled to a Pension as the Widow of
an Officer,or by a Person entitled to an Allowance from the Compassionate Fund,of or in relation to such Pension,
Allowance, shall be void.

And s 5, which is specifically relevant to this appeal, reads as follows:

Prohibition of Assignment of Wages, &c. Any Assignment, Sale, or Contract made after the Commencement of this
Act, of or relating to any Pay, Wages, Bounty Money, Grants, or other Allowances in the Nature thereof, payable in respect
of Services in Her Majestys Naval or Marine Force to a Person being or having been a Subordinate Officer, Seaman, or
Marine shall be void.

That is to be compared (and for convenience I will take the Army Act, though, as I have said already the identical section
was enacted in the Air Force Act) with s 203 of the Army Act 1955, which reads as follows:

Avoidance of assignment of or charge on military pay, pensions, etc.(1) Every assignment of or charge on, and every
agreement to assign or charge, any pay, military award, grant, pension or allowance payable to any person in respect of his
or any other persons service in Her Majestys military forces shall be void.
(2) Save as expressly provided by this Act, no order shall be made by any court the effect of which would be to restrain
any person from receiving anything which by virtue of this section he is precluded from assigning and to direct payment
thereof to another person

Miss Logan for the husband has valiantly tried to persuade us that there is no difference in principle between the 1865 Act
and the 1955 Acts. She has asked us to look to see the mischief which the 1865 Act was designed to prevent. That was, quite
clearly, the intention to save a man who was in the Royal Navy or the Royal Marines from himself and from signing away such
sums of money as might become due to him when he left the Royal Navy or the Royal Marines. She seeks to draw from the
undoubted difference in words between s 4 and s 5 the fact that, whereas s 4 (on the face of it at least) appears to be the
prevention of mischief by voluntary disposal by a man in the Royal Navy or the Royal Marines, s 5 is to be read in a wider
context, and it is of sufficient breadth to include by way of assignment an order of the court. But it is clear that in the Army and
Air Force Acts Parliament felt it necessary expressly to deal with court orders. Interestingly enough, sub-s (2) of s 203, in
dealing with court orders and precluding the courts from making orders which would restrain any person from receiving anything
which by virtue of this section he is precluded from assigning and to direct payment thereof to another person, excluded the
payment of any sum to a trustee in bankruptcy for distribution amongst creditors. Miss Logan accepts, as indeed she has to, that
no specific mention is made of the court in the 1865 Act but she urges us to say that it must be implied.
There have been decisions, particularly since spouses have been ordered to pay lump sums, specifically dealing with s 203
of the Army and Air Force Acts. Those started with Walker v Walker [1983] 2 All ER 909, [1983] Fam 68and there 540 have
been several cases since then all of them either in relation to the Army or the Air Force. It is clear from those decisions that
neither the pension nor any assignment or charge nor any order can be made by a court in respect of money due to a serving
airman or soldier prior to the money actually being paid over to him on his leaving the service. Purchas LJ in the most recent
decision of Happ v Happ [1991] 4 All ER 527 at 534535, [1990] 1 WLR 1282 at 1290 said in regard to s 203:

In my judgment s 203(2) is plain as to its meaning and does not require any purposive construction or gloss in order to
make it intelligible. The purpose of the section is to inhibit the court from making any order which would prevent the
receipt by the pensioner in due course of any pension or gratuity etc to which he is entitled in the future. It does not inhibit
the court in making any other kind of order once the pensioner has safely received the sum of money to which he is due
under the pension arrangements to which the section is directed Section 203(1) was concerned with preventing the
 pensioner from charging or assigning any sum of money which was due to come to him as a result of his service before he
ever had the chance of enjoying the benefit of it.

In my judgment s 203(1) of the 1955 Acts bears a very close resemblance to both ss 4 and 5 of the 1865 Act. But it goes
further in that it includes the word charge, which is not to be found in the 1865 Act. As I read it, and following what Purchas LJ
said, s 203(1) deals with the voluntary disposal by the soldier or airman. Subsection (2) deals with the courts powers to deal
with such sums and precludes it from doing so, which would, in my judgment, include the inability to make a s 37 order when the
money was not yet paid. That provision under s 203(2) is markedly absent from the 1865 Act and, in my judgment, cannot be
implied into it. I read the 1865 Act as looking to what a man may do to himself or others may do to the man. I do not read it as
including the court.
Miss Logan for the husband goes on to ask us, accepting that there is no direct prohibition, to apply what she calls the
golden rule to produce a commonsense result, so that sailors should not be at a disadvantage compared with soldiers and airmen,
and she urges us to say that this is illogical, unreasonable and unfair. The fact is, and we cannot get away from it, that the
position of seamen is protected by the 1865 Act and the position of soldiers and airmen is protected by the 1955 Acts. They are
in different forms and use different words. That is as Parliament has enacted them. Speaking for myself I cannot, as I have
already said, read into s 5 any prohibition upon the court making an order which would have the effect of directing payment to
another person, although if it had been a soldier or an airman the court could not have that power, as is shown by Walker v Walker
[1983] 2 All ER 909, [1983] Fam 68 and Happ v Happ [1991] 4 All ER 527, [1990] 1 WLR 1282 and a number of other
decisions to which we have been referred.
It is, in the event, a short point and, in my judgment, the registrar (who was not asked to consider it) was nonetheless entitled
to make the order that he did. It was not a matter that would have influenced Judge Blackburn in refusing to grant leave to appeal
out of time. It formed the basis of Judge Carters decision and in my judgment he was wrong in law. I would therefore allow this
appeal with the consequence that this case will have to be remitted for a rehearing on the notice to show cause in respect of
contempt of court.

McCOWAN LJ. I agree.

541

PURCHAS LJ. I also agree that the appeal must be allowed and the matter sent back to the Altrincham County Court.

Appeal allowed. Case remitted to county court.

Solicitors: Linder Myers, Manchester; Glyn Jones & Co, Manchester.

Celia Fox Barrister.

[1991] 4 All ER 542

Mercers Co v New Hampshire Insurance Co

CIVIL PROCEDURE

QUEENS BENCH DIVISION (COMMERCIAL COURT)

PHILLIPS J
11 JANUARY, 11, 21 MARCH 1991

Practice Pre-trial relief Interim payment Repayment of interim payment Interest Jurisdiction to award interest
Whether court having power to order payment of interest when ordering repayment of interim payment Supreme Court Act
1981, s 32 RSC Ord 29, r 17.

Although neither s 32a of the Supreme Court Act 1981 nor RSC Ord 29, r 17 b, which was made pursuant to s 32, make express
provision for awarding interest when repayment of an interim payment is ordered pursuant to r 17, rules making provision for the
payment of interest when ordering repayment of an interim payment fall within the rule-making power in s 32(3) to make
incidental, supplementary and consequential provisions relating to interim payments and an order providing for the payment of
interest when repayment of an interim payment is ordered falls within the power under r 17 to make such order with respect to
the interim payment as may be just. Accordingly, the court has power under Ord 29, r 17 to order the payment of interest when
ordering repayment of an interim payment (see p 546 b c, post).
________________________________________
a Section 32, so far as material, is set out at p 543 h to p 544 a, post
b Rule 17 is set out at p 544 b to d, post

Notes
For adjustment of an interim payment on final judgment or on discontinuance of an action, see 37 Halsburys Laws (4th edn) para
370.
For the Supreme Court Act 1981, s 32, see 11 Halsburys Statutes (4th edn) (1991 reissue) 993.

Cases referred to in judgment

BP Exploration Co (Libya) Ltd v Hunt (No 2) [1982] 1 All ER 925, [1983] 2 AC 352, [1982] 2 WLR 253, HL.
Goodearl v Kimberly-Clark Ltd [1989] CA Transcript 1105.

Application
The plaintiffs, the Wardens and Commonalty of the Mistery of Mercers of the City of London, brought an action against the
defendants, New Hampshire Insurance Co, claiming moneys due from the defendants. The defendants were ordered by
Hobhouse J on 29 June 1990 to make an interim payment of 3,390,03353 to the plaintiffs. On 18 January 1991 Phillips J
ordered the plaintiffs to repay the amount of the interim payment to the defendants. The defendants applied to the court for
payment of interest on the amount ordered to 542 be repaid from the date it was paid by the defendants to the plaintiffs until the
date it was repaid by the plaintiffs. The facts are set out in the judgment.
Michael Crystal QC and Susan Prevezer for the plaintiffs.
Simon Tuckey QC and Richard Wilmot-Smith for the defendants.

Cur adv vult

21 March 1991. The following judgment was delivered.

PHILLIPS J. At the end of my judgment in this case I adjourned for further argument a short point of some difficulty. The
material facts are as follows.
On 29 June 1990 Hobhouse J ordered the defendants to make an interim payment to the plaintiffs pursuant to RSC Ord 29, rr
11, 12 in the sum of 3,379,340. On 3 July 1990 the plaintiffs solicitors issued a writ of fieri facias in respect of this sum, a copy
of which they sent to the defendants solicitors under cover of a letter which ended:

We must record that unless we have received appropriate assurance from you regarding payment of the sum ordered
and interest upon it by close of business this evening we shall proceed to execution.

On 6 July 1990 the defendants paid to the plaintiffs the total sum of 3,390,03353 made up as follows: (1) 3,379,340the
sum ordered by Hobhouse J, (2) 97214an additional sum tendered and accepted as part of the interim payment, and (3)
9,72139interest at the Judgments Act 1838 rate of 15% on (1) and (2) for seven days. On 18 January 1991 I ordered,
pursuant to Ord 29, r 17, that the plaintiffs repay the defendants the sum of 3,380,31214 (ie amounts (1) and (2)) within 28
days. On 18 February 1991 this sum was repaid by the plaintiffs to the defendants.
The point left over was whether to accede to the defendants application that I should (i) order the repayment of the
9,72139 Judgments Act interest and (ii) order the 3,380,31214 to be repaid with interest from 6 July 1990 when it was paid to
the date of my judgment.
Two more esoteric points have not been canvassed, namely (i) whether I could award interest on the 9,72139 and (ii)
whether interest accrues on the 3,380,31214 between the date of my order and the date of repayment. I do not address these
questions.
The parties approach the issue of my jurisdiction from a common standpoint. The provisions of s 35A of the Supreme Court
Act 1981 do not apply to the facts of the present case. If jurisdiction exists it can only be by virtue of s 32 of that Act and the
rules of court made pursuant to that section. Section 32 provides:

Orders for interim payment.(1) As regards proceedings pending in the High Court, provision may be made by rules
of court for enabling the court, in such circumstances as may be prescribed, to make an order requiring a party to the
proceedings to make an interim payment of such amount as may be specified in the order, with provision for the payment
to be made to such other party to the proceedings as may be so specified or, if the order so provides, by paying it into court.
(2) Any rules of court which make provision in accordance with subsection (1) may include provision for enabling a
party to any proceedings who, in pursuance of such an order, has made an interim payment to recover the whole or part of
the amount of the payment in such circumstances, and from 543 such other party to the proceedings, as may be determined
in accordance with the rules.
(3) Any rules made by virtue of this section may include such incidental, supplementary and consequential provisions
as the rule-making authority may consider necessary or expedient

Rules made pursuant to s 32 include Ord 29, r 17, which provides:

Where a defendant has been ordered to make an interim payment or has in fact made an interim payment, whether
voluntarily or pursuant to an order, the Court may, in giving or making a final judgment or order, or granting the plaintiff
leave to discontinue his action or to withdraw the claim in respect of which the interim payment has been made, or at any
other stage of the proceedings on the application of any party, make such order with respect to the interim payment as may
be just, and in particular(a) an order for the repayment by the plaintiff of all or part of the interim payment, or ( b) an
order for the payment to be varied or discharged, or (c) an order for the payment by any other defendant of any part of the
interim payment which the defendant who made it is entitled to recover from him by way of contribution or indemnity or in
respect of any remedy or relief relating to or connected with the plaintiffs claim.

Mr Tuckey QCs submissions for the defendants were simple and succinct. Order 29, r 17 gives the court power to make
such order with respect to the interim payment as may be just. An order that the plaintiffs repay the 9,72139 interest on the
interim payment was an order with respect to the interim payment that was manifestly just. An order that the plaintiffs pay
interest on the interim payment to reflect the benefit that they had had, and which the defendants had been denied, from the use of
the interim payment was equally an order with respect to the interim payment that was just. Order 29, r 17, as so interpreted,
was intra vires for the relevant provision fell within the power conferred by s 32(3) of the Supreme Court Act 1981 to make such
incidental, supplementary and consequential provisions as the rule-making authority may consider necessary or expedient.
Mr Crystal QC for the plaintiffs accepted that the court had jurisdiction to order repayment of the 9,72139 interest paid by
the defendants. He contended, however, that so to interpret Ord 29, r 17 as to permit the court to order a plaintiff to repay an
interim payment with interest was to give it an effect that was ultra vires. The legislature had always regulated the power to
award interest by express statutory enactment. Having particular regard to this, a power to award interest on repayment of
interim payments could not properly qualify as an incidental, supplementary or consequential provision of the rule providing for
repayment.
Both counsel and I were concerned to seek guidance from the analogous situation that arises where the Court of Appeal
allows an appeal by a defendant who has satisfied a judgment given against him at first instance. We sought to ascertain whether
in those circumstances it was the practice of the court to order repayment of the judgment debt with interest. On this question
The Supreme Court Practice is silentindeed the rules make no express provision at all in respect of repayment of a satisfied
judgment debt when an appeal by a defendant succeeds. It appears that in practice successful defendants do not normally seek
any order from the Court of Appeal in respect of such sums as may have been paid in settlement of the judgment given at first
instance. This suggests that the parties usually agree between themselves the terms under which any payment is made by a
defendant prior to a pending appeal, so that intervention by the court 544 is not necessary. At all events, Court of Appeal practice
affords no assistance in resolving the problem that arises in this case.

Repayment of the 9,72139

Mr Crystal conceded that I had power to order his clients to repay this sum. He did not explain the basis of this concession.
If the concession was rightly made, it must, it seems to me, be on the basis that (i) the order to repay this sum is an order in
respect of the interim payment which it is just to make, within Ord 29, r 17 and (ii) the power to make the order is incidental,
supplementary or consequential to the power to order repayment of the interim payment, within s 32(3) of the Supreme Court
Act 1981.
 Mr Tuckey submitted that if this was true of an order to repay interest paid on the interim payment, it was a small step to
hold that a power to order the interim payment to be repaid with interest fell equally within the rule and the 1981 Act. There is
force in this submission, but it would not be right to found my decision on Mr Crystals concession.

The power to award interest

The words incidental, supplementary and consequential in the 1981 Act and with respect to the interim payment in the
rule are not words of precision. In considering whether these words should be so construed as to embrace a power to award
interest, I consider it pertinent to consider the general legislative policy in respect of the awarding of interest. It is clear
legislative policy that, where the court orders one party to make a payment by way of debt, damages or restitution to another, the
court should have a discretionary power to award interest to compensate the successful party for the loss of use of the money
between the date of the cause of the action and the date of judgment.
In one of the leading cases in the law of restitution, BP Exploration Co (Libya) Ltd v Hunt (No 2) [1982] 1 All ER 925,
[1983] 2 AC 352, the question arose of the jurisdiction of the court to award interest on a payment ordered under the Law Reform
(Frustrated Contracts) Act 1943. In affirming the existence of such jurisdiction, Lord Brandon described the provisions of s 3(1)
of the Law Reform (Miscellaneous Provisions) Act 1934 as very wide, so that they cover any sum of money which is
recoverable by one party from another, either at common law or in equity or under a statute of the kind here concerned (see
[1982] 1 All ER 925 at 992, [1983] 2 AC 352 at 373).
McGregor on Damages (15th edn, 1988) para 575 accurately describes the position since the enactment of s 35A of the
Supreme Court Act 1981 as follows:

statute now requires the court to award interest as damages in claims arising out of personal injury and wrongful
death. In all other cases resort must be made to the general discretionary power to award interest which statute has
conferred on the courts, a discretionary power which is generally exercised now that the awarding of interest, by being
made mandatory in a central area of litigation, has achieved a greater degree of prominence in the lives of the courts.

The provisions of the 1981 Act and the rules pursuant thereto in relation to the repayment of an interim payment that proves
to have been erroneously ordered give the court an express power to order restitution. Both the requirements of justice and
general legislative policy demand that the court should have the power to award interest to compensate for the period when the
defendant has unjustifiably been deprived of the interim payment and the plaintiff has unjustifiably had the use of it. I agree with
Mr Crystal that one might have 545 expected those who drafted both s 32 of the 1981 Act and Ord 29, r 17 to have dealt
expressly with the power to award interest. But it does not follow that one should for this reason exclude from the general
provisions of s 32(3) of the 1981 Act and Ord 29, r 17 the power to award interest.
In my judgment, a rule of court giving the court power to award interest when ordering repayment of an interim payment
can properly be said to be incidental, supplementary and consequential to the power to order repayment of the interim payment,
within s 32(3) of the 1981 Act. Having regard to the policy considerations that I have outlined, the 1981 Act should be so
interpreted as to confer upon the rule-making authority the power to make such a rule. Applying the same reasoning, I consider
that the power granted to the court by Ord 29, r 17 to make such order with respect to the interim payment as may be just both
can and should be so interpreted as to permit the court to award interest when ordering repayment of an interim payment.

Justice in this case

Mr Crystal submitted that, as the result of the action had operated harshly against the plaintiffs, justice did not require them
to pay interest to reflect the use that they have enjoyed of the interim payment. I agree that the result of the action has been harsh
for the plaintiffs, but it does not follow from this that it is just that they should have enjoyed free use of the interim payment. The
result of my judgment is that the plaintiffs have, without legal right, enjoyed the use of some 3m belonging to the defendants. In
my judgment justice requires that they should pay for the use of this money. They should do so by paying interest from 6 July
1990 to 18 February 1991 at the rates set out in the schedule prepared by the defendantswhich are somewhat below the rate
payable on a judgment debt.
The decision that I have reached conflicts with the following passage in the judgment of Lord Donaldson MR in Goodearl v
Kimberly-Clark Ltd [1989] CA Transcript 1105:

The interim payment was made on the footing that, as all interim payments are, the plaintiff could have the use of the
money interest free until such time as there was a final determination of the amount (if anything) to which she was entitled.
It is not inaccurate, therefore, to describe an interim payment as an interest free loan. If she achieved nothing on the
assessment of damages the defendants would have been entitled to an order that she repay the sum of 4,000.

This was a passing observation on a matter which seems unlikely to have been canvassed on the appeal, as it did not bear on the
issues or the result. For the reasons that I have given I have concluded that an interim payment is not accurately described as an
interest-free loan.

Order accordingly.

Solicitors: Masons; Davis Blank Furniss, Manchester.

K Mydeen Esq Barrister.

546
[1991] 4 All ER 547

R v Department of Health, ex parte Gandhi

CONSTITUTIONAL LAW; Civil Rights & Liberties: PROFESSIONS; Medical

QUEENS BENCH DIVISION

TAYLOR LJ AND MORLAND J
26, 29, 30 OCTOBER, 21 DECEMBER 1990

Race relations Medical Practices Committee Appeal to Secretary of State Appeal raising complaint against committee of
racial discrimination Medical practitioner appealing against refusal to appoint him to vacancy Appeal refused by Secretary
of State without oral hearing Whether Secretary of State required to deal with racial allegation as discrete issue Whether
Secretary of State required to hold oral hearing Whether appellant entitled to disclosure of all material necessary to enable him
to present appeal Race Relations Act 1976, ss 12, 54(2) National Health Service Act 1977, s 33(5) National Health Service
(General Medical and Pharmaceutical Services) Regulations 1974, reg 12(3).

The applicant, an Indian-born medical practitioner in general practice, applied along with a large number of other doctors to take
over the practice of a retiring practitioner in a neighbouring area when the vacancy was advertised. While the applications were
being considered the applicant also applied, as did a number of other doctors, to be included on the medical list in the area in
order to open a branch surgery to take over part of another practice which had become vacant. The applicant was short-listed and
interviewed but other doctors were duly appointed to the vacancy and the branch surgery by the Medical Practices Committee on
the recommendation of the local family practitioner committee. The applicant appealed to the Secretary of State under s 33(5) a
of the National Health Service Act 1977 in respect of both decisions by the Medical Practices Committee, alleging that in both
cases his applications had been refused because of racial discrimination. His appeals were dismissed by the Secretary of State
without an oral hearing. The applicant sought judicial review of the Secretary of States decisions, contending that, since it was
unlawful for the Medical Practices Committee, being a body conferring authorisation or qualification for a particular
profession for the purposes of s 12b of the Race Relations Act 1976, to discriminate against an applicant for a vacancy or
inclusion on a medical list on racial grounds, the Secretary of State, when hearing an appeal from the committee which amounted
to a complaint against the committee of racial discrimination, was required by virtue of the fact that s 54(2) c of the 1976 Act
provided that an industrial tribunal did not have jurisdiction to hear a complaint of racial discrimination against a qualifying body,
to hear and determine that complaint in the same way as an industrial tribunal hearing such a complaint, and that accordingly the
Secretary of State was required to hold an oral hearing and the applicant was entitled to disclosure of all relevant documents
before the hearing to enable him to present his case at the hearing.
________________________________________
a Section 33(5), so far as material, is set out at p 551 h, post
b Section 12, so far as material, is set out at p 553 b, post
c Section 54(2) is set out at p 553 d, post

Held (1) Although the Medical Practices Committee was a qualifying body for the purposes of s 12 of the 1976 Act, the
Secretary of State, when hearing an appeal from a decision of that committee alleging that it had discriminated against a medical
practitioner on racial grounds, was exercising an administrative function concerned with the public interest rather than private
rights and 547 therefore was not required by s 54(2) of the 1976 Act to determine whether the complaint of racial discrimination
was made out or whether redress should be granted to the appellant. Furthermore, it would be inappropriate for him to do so,
since his function under the 1977 Act was to consider whether the committees decision was properly made with a view to
providing the best available medical services in a locality. However, since s 12 of the 1976 Act made it unlawful for the Medical
Practices Committee to discriminate against a medical practitioner on racial grounds and since the same law applied on appeal
from the committee, the Secretary of State was required to take into account any discrimination by the committee when
exercising his appellate function and had to allow the appeal if it was shown that the committee had discriminated against the
appellant on racial grounds unless there were other grounds for the committees decision (see p 554 h j, p 555 a h j and p 561 g h,
post).
(2) The Secretary of State was not required to hold an oral hearing of an appeal from a decision of the Medical Practices
Committee merely because the appeal raised an allegation of racial discrimination on the part of the committee. Instead, the
Secretary of State had a discretion under reg 12(3) d of the National Health Service (General Medical and Pharmaceutical
Services) Regulations 1974 to dispense with an oral hearing and where an allegation of racial discrimination was made the
exercise of that discretion would depend on the facts of the case, the particular allegations made, whether there were other
obvious grounds for the decision and whether there were significant conflicts of evidence. Although he ought to hold an oral
hearing where in all the circumstances the issues could not fairly be resolved otherwise, it was desirable, having regard to the
expensive and onerous nature of an oral hearing, that an appeal be determined without a hearing if it could properly be disposed
of in that manner provided that administrative convenience was not allowed to override the exigencies of a particular case.
Nevertheless, a medical practitioner appealing to the Secretary of State was entitled to disclosure of all the material necessary to
enable him to present his appeal and to answer any points made against him except where public interest immunity could be
established or where any overriding confidentiality regarding a third party required a particular document or part of it not to be
disclosed (see p 556 g j to p 557 b d to f and p 561 g h, post); dictum of Wood J in Williams v Dyfed CC [1986] ICR 449 at 454
applied.
________________________________________
d Regulation 12(3) is set out at p 552 e, post

(iii) On the facts, the Secretary of States exercise of his discretion to dispense with an oral hearing could not be faulted
since the applicant had simply made bare assertions of racial discrimination on the part of the committee without providing any
evidence in support and it was clear that the issue could be fairly resolved without an oral hearing since the facts of the case and
the allegations made were simple and there were no significant conflicts of evidence. Furthermore, there were cogent and
factually incontestable grounds for preferring the successful applicants. However, the failure to disclose the family practitioner
committees report to the applicant amounted to a procedural impropriety and he would be granted a declaration to that effect (see
p 561 a to g, post).

Notes
For the jurisdiction and procedure of the Medical Practices Committee, see 33 Halsburys Laws (4th edn) paras 108109.
For appeals to the Secretary of State from decisions of the Medical Practices Committee, see ibid para 110.
For the Race Relations Act 1976, ss 12, 54, see 6 Halsburys Statutes (4th edn) 776, 804.
548
For the National Health Service Act 1977, s 33, see 30 Halsburys Statutes (4th edn) (1991 reissue) 824.

Cases referred to in judgments

Amin v Entry Clearance Officer, Bombay [1983] 2 All ER 864, [1983] 2 AC 818, [1983] 3 WLR 258, HL.
Baker v Cornwall CC [1990] ICR 452, EAT.
Chattopadhyay v Headmaster of Holloway School [1982] ICR 132, EAT.
Khanna v Ministry of Defence [1981] ICR 653, EAT.
Lloyd v McMahon [1987] 1 All ER 1118, [1987] AC 625, [1987] 2 WLR 821, HL.
R v Army Board of the Defence Council, ex p Anderson [1991] 3 All ER 375, [1991] 3 WLR 42, DC.
R v Housing Appeal Tribunal [1920] 3 KB 334.
Williams v Dyfed CC [1986] ICR 449, EAT.
Cases also cited
Black-Clawson International Ltd v Papierwerke Waldhof-Aschaffenburg AG [1975] 1 All ER 810, [1975] AC 591, HL.
General Medical Council v Goba [1988] ICR 885, EAT.
Habib v Elkington & Co Ltd [1981] ICR 435, EAT.
Hampson v Dept of Education and Science [1990] 2 All ER 513, [1991] 1 AC 171.
Johnson & Co (Builders) Ltd v Minister of Health [1947] 2 All ER 395, CA.
McInnes v Onslow-Fane [1978] 3 All ER 211, [1978] 1 WLR 1520.
National Heart and Chest Hospitals Board of Governors v Nambiar [1981] ICR 441, EAT.
North West Thames Regional Health Authority v Noone [1988] ICR 813, CA.
Oxford v Dept of Health and Social Security [1977] ICR 884, EAT.
R v Immingration Appeal Tribunal, ex p Jones [1988] 2 All ER 65, [1988] 1 WLR 477, CA.
R v Immigration Appeal Tribunal, ex p Mehmet [1977] 2 All ER 602, [1977] 1 WLR 795, DC.
R v Secretary of State for the Home Dept, ex p Hassan [1989] Imm AR 75, DC.
R v Secretary of State for the Home Dept, ex p Brind [1990] 1 All ER 469, [1990] 2 WLR 787, CA.
Selvarajan v Race Relations Board [1976] 1 All ER 12, [1975] 1 WLR 1686, CA.
West Midlands Passenger Transport Executive v Singh [1988] 2 All ER 873, [1988] 1 WLR 730, CA.

Application for judicial review

Dr Anil Gandhi, a general medical practitioner, applied with the leave of Hodgson J given on 18 December 1989 for judicial
review of (i) the decision of the Secretary of State given on or about (i) 6 December 1988 rejecting without a hearing the appeal
of Dr Gandhi against the decision of the Medical Practices Committee given on or about 26 August 1988 refusing him permission
to be included on the medical list of the Brent and Harrow family practitioner committee in order to open a branch surgery at 82
Chandos Crescent, Edgware, (ii) the decision of the Secretary of State given on or about 6 September 1988 refusing without a
hearing the appeal of Dr Gandhi against the decision of the Medical Practices Committee on or about 30 June 1988 to grant the
vacancy within the area of the Brent and Harrow family practitioner committee following the resignation of Dr Curry to a Dr
Golden and not to Dr Gandhi and (iii) the decisions of the Secretary of State given on or about 27 July 1989 refusing to review
those decisions by way of an oral hearing. The relief sought was orders of certiorari and mandamus and a 549 declaration that it
was the duty of the Secretary of State when determining appeals under s 33(5) of the National Health Service Act 1977 and para
12 of Sch 1 to the National Health Service (General Medical and Pharmaceutical Services) Regulations 1974, SI 1974/160, where
there was a complaint of unlawful racial discrimination to conduct the appeals in accordance with the rules of natural justice and
that therefore the Secretary of State should allow an appellant an oral hearing and an opportunity to see all relevant documents
necessary for a fair decision by the Secretary of State. The facts are set out in the judgment of Taylor LJ.

Robin Allen and Anthony Bradley for the applicant.

David Pannick for the Secretary of State for Health.
Nicholas Underhill for the Medical Practices Committee and the family practitioner committee.

Cur adv vult

21 December 1990. The following judgments were delivered.

TAYLOR LJ. Dr Gandhi is a registered medical practitioner. He was born in India in 1942 and qualified as a doctor in 1969 at
Madras University. He held a series of appointments over several years at the University Teaching Hospital, Lusaka in Zambia,
before coming to the United Kingdom. Here, he worked as a senior house officer in a department of anaesthetics for 18 months
before undergoing a years traineeship in general practice in 1980 to 1981. In 1982 he started his own general practice as a sole
practitioner at 35 Norwich Road, Northwood Hills, Middlesex and has built up his list from nil to 850 patients. The practice is in
the Hillingdon area, which borders the neighbouring Brent and Harrow area.
A Dr Curry, practising from Kenton Road in the latter area, decided to retire as from 1 August 1988. The vacancy was
advertised and Dr Gandhi applied, as did a number of other doctors. In the event, a lady doctor named Dr Golden was appointed
to fill the vacancy. Dr Gandhi appealed to the Secretary of State but his appeal was dismissed without an oral hearing on 6
September 1988.
Quite separately, a Dr Zeitlin practising from 82 Chandos Crescent, also in the Brent and Harrow area, planned to retire on
31 August 1988. It was decided that his patients should be dispersed among the remaining local practices, but the family
practitioner committee were anxious to retain surgery premises at or near 82 Chandos Crescent. A number of applications were
made to open a branch surgery there, including one from Dr Gandhi. In the event, the successful applicant was a Dr Manning.
Again, Dr Gandhi appealed to the Secretary of State and again his appeal was rejected without an oral hearing on 6 December
1988.
Believing that in each instance he had failed because he was the victim of racial discrimination, Dr Gandhi sought the
assistance of the Commission for Racial Equality. Eventually, on 18 October 1989, an application was launched for leave to
apply for judicial review of the two decisions by the Secretary of State. Leave was granted on 18 December 1989.

Statutory provisions
The statutory framework is to be found, so far as medical practices are concerned, in the National Health Service Act 1977
and regulations made thereunder, and as to race discrimination in the Race Relations Act 1976.
550
Section 1 of the 1977 Act describes the Secretary of States duty to promote a comprehensive health service and to secure
the effective provision of services which, by s 3(1)(c), include medical services. Section 7 created the Medical Practices
Committee and s 10 provided for the establishment by the Secretary of State of family practitioner committees for localities
throughout England and Wales. Section 29(1) and (1A) places a duty on every family practitioner committee in accordance with
regulations to arrange, as respects their locality, for medical practitioners to provide personal medical services to be known as
general medical services. By s 29(2) regulations may provide, inter alia, for securing that the arrangements will enable all
persons to receive adequate personal care and attendance and the regulations

shall include provision(a) for the preparation and publication of lists of medical practitioners who undertake to
provide general medical services

Section 30 provides as follows, so far as is relevant:

(1) all applications made by medical practitioners in the prescribed manner to a Family Practitioner Committee for
inclusion in a list kept by that Committee of the names of medical practitioners undertaking to provide general medical
services for persons in the Committees locality shall be referred by the Committee to the Medical Practices Committee and
 any medical practitioner whose application is granted by that Committee shall be entitled to the inclusion of his name in
the list

Section 33 provides, so far as is relevant, as follows:

(1) The Medical Practices Committee may refuse any application under section 30 above on the grounds that the
number of medical practitioners undertaking to provide general medical services in the locality of the Family Practitioner
Committee concerned or in the relevant part of that locality is already adequate
(2) if in the opinion of the Medical Practices Committee additional practitioners are required for any locality or part
of a locality, but the number of applications exceeds the number required, the Committee shall select the persons whose
applications are to be granted and shall refuse the other applications.

Section 33(3) provides for consultation between the Medical Practices Committee (MPC) and the family practitioner
committee (FPC) concerned, and any local medical committee in the locality, before selecting any persons under sub-s (2).
Section 33(5) provides as follows, so far as is relevant:

A medical practitioner who has made an application under section 30 which has been refused by the Medical Practices
Committee may appeal to the Secretary of State; and the Secretary of State may, on any such appeal, direct the Medical
Practices Committee to grant the application either unconditionally or subject to such conditions as the Secretary of State
may specify.

The relevant regulations are the National Health Service (General Medical and Pharmaceutical Services) Regulations 1974,
SI 1974/160, which continue to have effect by virtue of s 129 of and Sch 14 to para 1(1) of the 1977 Act. Regulation 4 provides
for the preparation by the FPC of the medical list for its locality. Regulation 7 deals with applications to the FPC for inclusion on
the medical list or to succeed to a vacancy. Regulation 11 lays down the procedure for the 551 determination of applications by
the MPC after the FPC have referred them. In particular, reg 11(3) provides:

If the Medical Practices Committee is of the opinion that one or more doctors are required for the locality or part of the
locality concerned and the number of applicants exceeds the number of doctors required, it shall(a) consider the report
by the [family practitioner committee] with respect to the applications; (b) if it thinks fit, give to the applicants or any of
them the opportunity of making representations to it in person or in writing; (c) select the applicant or applicants whose
applications are to be granted and forthwith inform them, the [family practitioner committee] and the Secretary of State of
its determination.

Regulation 12 deals with appeals to the Secretary of State and provides, so far as is relevant, as follows:

(1) A doctor may appeal to the Secretary of State against the refusal by the Medical Practices Committee of an
application to which regulation 7 applies by sending to the Secretary of State notice of appeal within 7 days from
the date on which the notice of the decision of the Medical Practices Committee is given to him.
(2) The notice of appeal shall contain a concise statement of the facts and contentions upon which the appellant intends
to rely.
(3) If it appears to the Secretary of State that the appeal is of such a nature that it can properly be determined without an
oral hearing, he may dispense with an oral hearing and determine the appeal summarily, and shall communicate his
decision to the appellant, the Medical Practices Committee and the [family practitioner committee].
(4) If the Secretary of State is of the opinion that an oral hearing is required, he shall appoint one or more persons to
hear the appeal.
(5) An oral hearing shall take place at such time and place as the Secretary of State may direct and notice of the hearing
shall be sent by post to the appellant, the Medical Practices Committee, the [family practitioner committee] and any doctor
whose application for appointment to the vacancy to which the application relates was granted
(6) The appellant and any of the parties to whom notice of the hearing is required to be given may attend and be heard
in person or by counsel or solicitor or other representatives. The Medical Practices Committee and the [family practitioner
committee] may be represented at the hearing by any duly authorised officer or member or by counsel or solicitor.
(7) Subject as aforesaid the procedure at the oral hearing shall be such as the person or persons hearing the appeal may
determine.
(8) The person or persons hearing the appeal shall report thereon to the Secretary of State stating the relevant facts and
his or their conclusions and the Secretary of State after taking the report into consideration shall give his decision and
communicate it to the appellant, the Medical Practices Committee, the [family practitioner committee] and such doctors as
have under the foregoing provisions of this regulation been served with notice of the hearing.

The relevant provisions of the Race Relations Act 1976 for the purposes of this case are as follows. Section 1(1) provides:

A person discriminates against another in any circumstances relevant for the purposes of any provision of this Act if
(a) on racial grounds he treats that other less favourably than he treats or would treat other persons
552

Section 3(1) defines racial grounds as

any of the following grounds, namely colour, race, nationality or ethnic or national origins.

Section 12 provides:

(1) It is unlawful for an authority or body which can confer an authorisation or qualification which is needed for, or
facilitates, engagement in a particular profession to discriminate against a person(b) by refusing, or deliberately
omitting to grant, his application for it
(2) In this section(a) authorisation or qualification includes recognition, registration, enrolment, approval and
certification

In Pt VIII of the Act, under the heading Enforcement in employment field, s 54 provides as follows, so far as is relevant:

(1) A complaint by any person (the complainant) that another person (the respondent)(a) has committed an act
of discrimination against the complainant which is unlawful by virtue of Part II may be presented to an industrial
tribunal.
 (2) Subsection (1) does not apply to a complaint under section 12(1) of an act in respect of which an appeal, or
proceedings in the nature of an appeal, may be brought under any enactment, or to a complaint to which section 75(8)
applies.

For completeness, s 75(8) provides:

This subsection applies to any complaint by a person (the complainant) that another person(a) has committed an
act of discrimination against the complainant which is unlawful by virtue of section 4 [discrimination against employees]
if at the time when the act complained of was done the complainant was serving in the armed forces and the
discrimination in question relates to his service in those forces.

Section 75(9) provides, so far as is relevant:

Section 54(1) shall not apply to a complaint to which subsection (8) applies, but any such complaint may be made, and
if made shall be dealt with, in accordance with whichever of the following provisions for the redress of complaints is
appropriate, namely section 181 of the Army Act 1955

Functions of the Secretary of State

The first issue concerns the relationship between a doctors appeal to the Secretary of State and ss 12 and 54 of the Race
Relations Act 1976. Clearly, on any appeal by a doctor pursuant to s 33(5) of the 1977 Act and reg 12 of the 1974 regulations, the
Secretary of State has to determine whether the challenged decision should stand or whether the appellants application should be
granted conditionally or unconditionally. But how, if at all, is his duty affected when the appeal is coupled with an allegation of
race discrimination? Mr Allen contends that, in addition to determining the appeal, the Secretary of State has to consider and
determine the complaint of race discrimination. He says the effect of s 54(2) of the 1976 Act is to give the appellate body (here
the Secretary of State) the same duty as would in a case under s 54(1) be discharged by an industrial tribunal.
553
It is common ground that the MPC, in appointing a doctor to a vacancy or including him on the medical list for a locality, is
acting as a qualifying body to which s 12 of the Race Relations Act 1976 applies. It is therefore unlawful for the MPC to
discriminate against an applicant on racial grounds. A complaint of such discrimination to an industrial tribunal is excluded by s
54(2) because an appeal may be brought under the National Health Service Act 1977. Mr Allen argues that unless, therefore, the
Secretary of State hearing the appeal is also required specifically to determine the complaint under s 12 of the 1976 Act, no
remedy is available for a breach of that section. It is convenient to repeat s 54(2) of that Act:

Subsection (1) does not apply to a complaint under section 12(1) of an act in respect of which an appeal, or
proceedings in the nature of an appeal, may be brought under any enactment, or to a complaint to which section 75(8)
applies.

Those words do not support Mr Allens argument. Had it been the intention of Parliament that the appellate body should
entertain a complaint under the 1976 Act and deal with it as a discrete issue, specific words to that effect could have been used.
Instead, the subsection simply excludes reference of the complaint to an industrial tribunal where there is an appeal in respect of
the act to which the complaint relates.
By contrast, the final words of s 54(2) also exclude complaints by soldiers from being presented to an industrial tribunal.
They, however, are expressly made subject to an army complaints procedure under s 75(8) and (9). Under those provisions,
complaints under specified sections of the 1976 Act are to be made and if made shall be dealt with, in the case of the army,
under s 180 or 181 of the Army Act 1955. It is thus made clear that the commanding officer or the Defence Council, where a
complaint of race discrimination is made, has to deal with it specifically as a complaint under the 1976 Act (see R v Army Board
of the Defence Council, ex p Anderson [1991] 3 All ER 375, [1991] 3 WLR 42).
It may seem inconsistent that there should be no enforcement provision for complaints under s 12 analogous to those
otherwise available in the employment field. However, Parliament may have considered that, in the field covered by s 12, it was
sufficient that the statutory appellate body should be able to redress any injustice due to race discrimination by allowing an
appeal and thereby granting the rejected application.
Mr Allen conceded in argument that it would be difficult to go the whole way and contend for a full determination of the
complaint by the Secretary of State as a breach of s 12 to the point of awarding compensation. Neither s 33 of the 1977 Act nor
any other provision would appear to empower the Secretary of State to make such an award, although it was suggested faintly
that he might do so ex gratia. Moreover, the Secretary of States function under the 1977 Act is not, like that under the 1976 Act
of an industrial tribunal or even, by s 75(8) and (9), of the Army Board, to determine whether the complainants rights have been
breached and grant redress. His function is to consider whether the decision of the MPC, which is being appealed, was properly
made so as to provide the best available medical services. It is essentially an administrative function concerned with the public
interest rather than private rights.
In my judgment, the Secretary of State is not required by s 54(2) to do any more than determine the appeal. He is not under
a duty, nor would it be appropriate for him, to pronounce separately on the complaint of racial discrimination or grant any
specific redress in respect of it.
554
That is not to say, however, that the Secretary of State can disregard the complaint or the substantive provisions of the 1976
Act.
Mr Pannick submitted that such a complaint could have only, in his words, limited relevance to a s 33 appeal, and that the
Secretary of State need not apply or have regard to the 1976 Act in determining the appeal, notwithstanding the complaint of race
discrimination. Indeed, he goes further and submits that the Secretary of State is not bound by the 1976 Act in his determination
of the appeal by reason of s 75(1), which provides as follows:

This Act applies(a) to an act done by or for purposes of a Minister of the Crown or government department; or (b) to
an act done on behalf of the Crown by a statutory body, or a person holding a statutory office, as it applies to an act done by
a private person.

Mr Pannick says the effect of that subsection is that, if the Secretary of State were making a decision as an employer, he
would be bound by the Act, but not when exercising his appellate function. He relies on the decision of the House of Lords in
Amin v Entry Clearance Officer, Bombay [1983] 2 All ER 864, [1983] 2 AC 818. Lord Fraser said ([1983] 2 All ER 864 at 873,
[1983] 2 AC 818 at 835):

That section puts an act done on behalf of the Crown on a par with an act done by a private person, and it does not in
terms restrict the comparison to an act of the same kind done by a private person. But in my opinion it applies only to acts
done on behalf of the Crown which are of a kind similar to acts that might be done by a private person. It does not mean
 that the Act is to apply to any act of any kind done on behalf of the Crown by a person holding statutory office. There must
be acts (which include deliberate omissions: see s 82(1) [of the Sex Discrimination Act 1975]) done in the course of
formulating or carrying out government policy which are quite different in kind from any act that would ever be done by a
private person, and to which the 1975 Act does not apply. (Lord Frasers emphasis.)

If Mr Pannicks argument is right, a bizarre situation would exist. It is conceded that the MPC is bound by the 1976 Act and
subject to s 12 thereof. It must not discriminate on racial grounds. If it is alleged to have done so, the case may be appealed to
the Secretary of State. On Mr Pannicks argument, the Secretary of State could find that the MPC had rejected the appellant
solely on racial grounds but, not being himself bound by the 1976 Act, could decline to interfere. This would be repugnant to
common sense and, in my judgment, cannot be right. Mr Pannicks own concession that the complaint of race discrimination
could have limited relevance prompts the questions: what relevance? What criteria should the Secretary of State apply?
In my judgment, since s 12 makes it unlawful for the MPC to discriminate on racial grounds, the same law must apply on
appeal, ie the substantive provisions of the 1976 Act and judicial decisions interpreting them. I would therefore hold that,
although the Secretary of State is not required to determine the race discrimination complaint discretely, he is required to consider
it in determining the appeal and in doing so must apply the provisions of the 1976 Act. Thus, if an appellant were rejected by the
MPC solely on racial grounds as defined in the Act, his appeal should be allowed. On the other hand, if, purged of racial
grounds, the MPCs decision was in the Secretary of States judgment still right, he would, notwithstanding the flaw in the initial
process, dismiss the appeal. In either of those situations, which one would hope and expect to be unlikely, the Secretary of State
would no doubt consider exercising his default powers under 555 s 85 of the 1977 Act or at least giving a strong direction to the
MPC as to its approach to future cases.

Procedure
Although, as already observed, the Secretary of States appellate function is primarily concerned with the effective
distribution of general medical services, the procedures he follows and his determination must be fair to the appellant. Mr Allen
contends for the very highest standards of procedural fairness where race discrimination is alleged. His approach derives from
the premise already rejected that the appeal is analogous to a hearing before the industrial tribunal of a complaint under the 1976
Act, but it does not depend necessarily upon that premise. He contends for an oral hearing in all cases, for cross-examination and
for all documents seen by the Secretary of State to be seen by the appellant.
In R v Army Board of the Defence Council, ex p Anderson [1991] 3 All ER 375, [1991] 3 WLR 42 we reviewed the
authorities as to the criteria by which procedural requirements of any decision-making body should be determined. In particular,
reference was made to the speech of Lord Bridge in Lloyd v McMahon [1987] 1 All ER 1118 at 1161, [1987] AC 625 at 702,
which I venture to quote again:

My Lords, the so-called rules of natural justice are not engraved on tablets of stone. To use the phrase which better
expresses the underlying concept, what the requirements of fairness demand when any body, domestic, administrative or
judicial, has to make a decision which will affect the rights of individuals depends on the character of the decision-making
body, the kind of decision it has to make and the statutory or other framework in which it operates. In particular, it is well
established that when a statute has conferred on any body the power to make decisions affecting individuals, the courts will
not only require the procedure prescribed by the statute to be followed, but will readily imply so much and no more to be
introduced by way of additional procedural safeguards as will ensure the attainment of fairness.

Here Mr Allen concedes that an appeal of this kind is nearer the administrative end of the spectrum than the judicial end.
The regulations themselves make it clear that an oral hearing will not necessarily be required. Thus reg 12(3) provides for the
Secretary of State to dispense with an oral hearing if it appears to him that the appeal is of such a nature that it can properly be
determined without. It was argued that the wording of reg 12(3) suggested an oral hearing should be the norm and the Secretary
of State should dispense with it only exceptionally. In my view, that seeks to read too much into the form of words used. The
test is clear and is a matter for the discretion and judgment of the Secretary of State.
It is also submitted, as in the Anderson case, that an oral hearing is necessary where race discrimination is alleged because
proof may be elusive. Discriminatory motivation may be innocent or subconscious. Without cross-examination it may not be
brought to light. Mr Allen relies, in support of these general propositions, on dicta of Browne-Wilkinson J in Khanna v Ministry
of Defence [1981] ICR 653 at 658 and in Chattopadhyay v Headmaster of Holloway School [1982] ICR 132 which were
approved by this court in Baker v Cornwall CC [1990] ICR 452 at 460.
I accept that some appeals to the Secretary of State where race or sex discrimination is alleged may well require an oral
hearing. Whether it is required in any particular instance will turn, inter alia, upon the facts of the case, the particular allegations
made, whether there appear to be other obvious grounds for the decision and whether there are significant conflicts of evidence. I
am far 556 from accepting that whenever there is a claim of race discrimination an oral hearing is obligatory. The requirements
of such a hearing laid down by regulations make it an expensive and onerous exercise requiring a tribunal to be appointed and
notice to be given to the appellant, the MPC, the FPC and any doctor whose application for appointment to the vacancy was
granted, all of whom are entitled to appear and be legally represented (reg 12(4), (5) and (6)). If, therefore, the appeal can
properly be determined without such a hearing, it is desirable that that should be done.
On the other hand, it was drawn to our attention that between 1982 and 1988, out of 833 appeals in respect of practice
vacancies, oral hearings were ordered in only 9. Of those, only one was in 1985, one in 1986 and there were none in 1987 or
1988. In 277 appeals concerning the medical list during the same period, only one oral hearing was ordered and that was in 1984.
From these statistics, we are invited to conclude that the power to order an oral hearing has been increasingly more honoured in
the breach than the observance. We have no details as to the issues raised in any of those other appeals or whether any of them
involved claims of racial discrimination.
We are, therefore, unable to say whether the strikingly small number of oral hearings was all that was rendered necessary by
the circumstances of each case. It would, however, be surprising if that was so, and I would emphasise that administrative
convenience should not be allowed to override the exigencies of a particular case. An oral hearing should be held where, in all
the circumstances, the issues cannot fairly be resolved otherwise.
As to documents, there can be no doubt that the appellant is entitled to disclosure of all the material necessary to enable him
to present his appeal and answer any points made against him. He is thus clearly entitled to see any report, recommendations or
submissions made by the FPC and the MPC and seen by the Secretary of State.
In my view he should see all the documents put before the Secretary of State except where public interest immunity can be
established or where any overriding confidentiality regarding a third party requires a particular document or part of it not to be
disclosed (see Williams v Dyfed CC [1986] ICR 449 at 454).
With these principles in mind, it is necessary to look in a little detail at the facts of the two appeals which are the subject of
this application.

The vacancy appeal

There were 87 applicants for the vacancy created by Dr Currys impending retirement on 1 August 1988. Twelve of these
were short-listed by the Brent and Harrow FPC. One withdrew, and the other 11 were interviewed on 20 June 1988. On 27 June
1988 the FPC sent its recommendations to the MPC. Dr Golden was the first choice, second was Dr Charlton, third was the
practice of Dr Kelshiker, his wife and Dr Shah, and fourth was the practice of Dr David and Dr Subanandan. The applicant and
the three remaining candidates followed behind.
In their detailed recommendations, the FPC, whilst accepting that Dr Goldens experience was not as extensive as many of
the other interviewees (including the applicant), based their decision on the impression she had made by her excellent written
application and subsequently oral presentation at her interview. She presented convincing proposals and positive ideas as to
how she would conduct the practice. The committees recommendation of her ended as follows:

It was generally felt by members that the standard of preparation for interview by all the candidates was good,
however, they felt that the admittance of a young forward-thinking female doctor such as Doctor 557 Golden into an
area, where the number of female doctors is low, would be a considerable asset and therefore placed her as first choice.

Criticism is made of the FPCs approach on the ground, inter alia, that their final paragraph amounted to sex discrimination.
If the committee could fall into that error, it is argued that they would be the more likely to fall into error in regard to race
discrimination. Indeed, dealing with their third choice, the FPC referred to the practice of Drs Kelshiker, his wife and Dr Shah in
the following terms:

Members also noted that in their current practice the doctors have in the region of 75% of their patients from the ethnic
minorities whereas the patients of the vacant practice were 75% Caucasian.

The purpose of including that paragraph was not made clear. Mr Underhill, appearing on behalf of the FPC and the MPC,
had no instructions as to this. It could be indicative of an objectionable approach involving discrimination on racial grounds. On
the other hand, a number of documents produced by this family practitioner committee shows them to be conscious of the
substantial ethnic minority in their locality and anxious to see that proper provision is made and equal access to services provided
for all sections of the community. In particular we were told that many women among the ethnic minority prefer to be treated by
a woman doctor.
Whatever may be said about the inclusion by the FPC of the quoted passage in their report, two things are clear. First, this
case is not based upon sex discrimination. Secondly, the challenge here is to the decision of the Secretary of State on appeal from
the MPC, not to a decision of the FPC.
It is to be noted that although other doctors of Asian origin were placed in the first four by the FPC, the applicant was not.
There is no question, therefore, of Dr Golden simply being preferred to the applicant. He was not placed at all. He indicated that
he proposed to apply for a partner so that he would be able to retain his present practice as a branch surgery. The FPC felt that in
comparison with the other candidates his proposals were not as acceptable.
The MPC accepted the recommendation that Dr Golden should fill the vacancy and so notified the applicant. He appealed
to the Secretary of State, saying that he believed he was eminently suitable and better qualified than the candidate selected to fill
the vacancy. He added:

I believe the selection committee were biased in their decision and their motives were racial.

He advanced three points on his own behalf: that he had been practising for seven years, a far better record than the
candidates selected, that he was able to offer practice accommodation in the immediate vicinity of Dr Currys practice and that
he lived only a quarter of a mile from the proposed location of the surgery. Despite being notified that his letter should contain a
comprehensive statement of the facts and contentions upon which you rely, he did not elaborate on his complaint of racial
motives.
The Secretary of State received letters both from the FPC and the MPC regarding the appeal. The FPC, in a letter of 21 July
1988, strongly rejected the allegation of racial motives. They pointed out that they had recently filled two other vacancies by
appointing Indian doctors. They justified their recommendation of Dr Golden on the basis that she was the outstanding applicant
and her proposals were more cogent and detailed than those of the applicant, who did not interview well. Dr Golden also lived
within a mile of the vacancy area and had made arrangements for surgery accommodation. The MPC by letter dated 29 558July
1988 reported in similar terms, concluding that Dr Golden was seen to have exceptional personal qualities and the most realistic
plans for developing services. Of the applicant, they said that in addition to his present 850 patients, if he obtained the vacancy

he would have a new total list of some 4,000 patients and would therefore need to apply to take a partner, but he did
not bring a prospective partner with him to the interview. He had considered various properties in the area but had reached
no firm commitment on any of them. The MPC noted that the FPC could not recommend Doctor Gandhis application as
his proposals were not as acceptable as other candidates and the MPC concurred.

Neither the letter from the FPC nor that from the MPC was disclosed to the applicant. On 6 September 1988 the Department
of Health wrote to the applicant telling him that after studying the relevant documents the Secretary of State had concluded that
the appeal was of such a nature that it could properly be determined without an oral hearing and having given careful
consideration to the facts and contentions upon which the appellant relied he had dismissed the appeal.

The medical list appeal

As already noted, the applicants practice was in the Hillingdon area. In August 1982 the MPC granted the applicants
application for inclusion in the medical list of the Brent and Harrow FPC subject to a condition which prevented his opening a
surgery in those parts of the FPC area where the number of medical practitioners was already adequate. The effect of this was to
allow the applicant to accept and treat patients from the Brent and Harrow FPC area but not to have a surgery there. From August
1984 the applicant assisted Dr Zeitlin at his surgery in Chandos Crescent and also acted as locum for him from time to time. In
October 1985 consent for Dr Zeitlin to employ the applicant in these capacities was withdrawn, although the applicant was not so
informed and the arrangement continued. When Dr Zeitlin decided to retire from 31 August 1988, the applicant applied to take
over the surgery there. There were two other applicantsDr Manning and Dr Regunathan.
On 6 July 1988 the FPC decided to approve the application of Dr Manning and reject the other two. In their report, the FPC
noted that the applicants residence was about a mile and a half from Chandos Crescent and his current practice was six miles
away. They formed the view, as did Hillingdon FPC, that the applicant would not be able to undertake his responsibilities in the
Hillingdon area if he were to open a branch surgery in Chandos Crescent. He would need to apply to the MPC for variation of
the condition they had imposed in August 1982 and the FPC would not support such a variation. On 14 July 1988 the applicant
was informed by the FPC of their decision and the reasons for it. He also received a copy of the letter setting out Hillingdon
FPCs views. On 23 August 1988 the MPC indorsed the FPCs decision regarding the surgery at Chandos Crescent. They
declined to vary the terms of the applicants inclusion on the list of Brent and Harrow FPC on the grounds that there were an
adequate number of doctors in the district already.
On 26 August the MPC wrote to the applicant informing him of their decision and the reasons for it. The applicant appealed
and letters were written to the Secretary of State by both the FPC and the MPC in regard to the appeal. The applicant was
provided with copies of both and invited to make observations or additional points for consideration on his appeal. He did so by
letter dated 24 October 1988. On 6 December 1988 the department wrote to the appellant in the following terms:
559

After studying the relevant documents, including your letters of 12th September and 24th October, the Secretary of
State concluded that your appeal was of such a nature that it could properly be determined without an oral hearing and that
an oral hearing was not required. He has given careful consideration to the facts and contentions upon which you relied,
your qualifications and experience, the observations of the MPC and the FPC and your comments on their observations but
he was not satisfied that there were grounds for disturbing the MPCs decision. I regret to have to inform you, therefore,
that the Secretary of State has dismissed your appeal. In considering an appeal against a decision of the MPC the Secretary
of State is bound, like that Committee, to take account of the adequacy of the number of general practitioners in the area,
because of the need to secure a proper distribution of medical manpower. The Secretary of State concluded that the
number of medical practitioners undertaking to provide general medical services is already adequate in the area, and that
there were no special considerations of sufficient weight to override this.

Delay
Although the appeals were dismissed by decisions dated respectively 6 September and 6 December 1988, it was not until 21
April 1989 that solicitors on behalf of the applicant wrote asking for reconsideration of the two appeals and for oral hearings in
each case. On 27 July 1989 the Secretary of State declined to reconsider the appeals. It was not until 18 October 1989 that
application was made for leave to move for judicial review. In the case of the vacancy appeal, a period of over 13 months had
elapsed, and in regard to the other appeal over 10 months. Meanwhile, Dr Golden had established herself in Dr Currys former
practice and Dr Manning had proceeded with arrangements in regard to Chandos Crescent.
RSC Ord 53, r 4 provides as follows:

(1) An application for judicial review shall be made promptly and in any event within three months from the date when
grounds for the application first arose unless the Court considers that there is good reason for extending the period within
which the application shall be made

Section 31(6) of the Supreme Court Act 1981 provides:

Where the High Court considers that there has been undue delay in making an application for judicial review, the court
may refuse to grant (b) any relief sought on the application, if it considers that the granting of the relief sought would
be likely to cause substantial hardship to, or substantially prejudice the rights of, any person or would be detrimental to
good administration.

The only reasons advanced for the delay are (a) the time taken in seeking and obtaining the support of the Commission for
Racial Equality and (b) the time taken in seeking to persuade the Secretary of State to reconsider his decision. In my judgment
these reasons are insufficient to rebut the submission that there has been undue delay in the present case. In these circumstances
it has been accepted that because of the delay no relief should be granted which would prejudice the position of either Dr Golden
or Dr Manning. Accordingly, as to the first appeal the only relief sought is declaratory. As to the second appeal a submission was
made that the decision not to vary the terms of the applicants inclusion on the list of the Brent and Harrow FPC should be
quashed even though the applicant could in fact apply again.
560

Conclusions
(a) The vacancy appeal I do not consider the decision by the Secretary of State to dispense with an oral hearing of this
appeal can be validly criticised. The applicant was not even in the first four of those short-listed. He clearly had not provided
proposals which were as detailed or satisfactory as those of other applicants. The successful applicant had made a very good
impression. Other doctors of Asian origin had recently been appointed to vacancies and four were actually placed ahead of the
applicant in this case. His allegation of racial motives was a bare assertion. Apart from the passage quoted from the FPC report,
which admittedly referred to racial distinctions, there was no hint of discrimination in the papers. No crucial conflicts of
evidence on the facts required resolution. It was, in my judgment, within the discretion of the Secretary of State to take the view
he did regarding an oral hearing.
As to documents, the position is different. The letters of the FPC and the MPC and the FPCs report were not disclosed to
the applicant. It has not been explained why. The suggestion made was that the passage referring to ethnic and Caucasian
percentages may have been thought better kept undisclosed. Whatever the reason, it is conceded that the documents should have
been disclosed. The appellant was deprived of the opportunity of responding to the adverse points made about him. In these
circumstances, there really was no hearing at all of the applicants appeal (see R v Housing Appeal Tribunal [1920] 3 KB 334 at
340342 per Lord Reading CJ). It may well be that the outcome would have been no different even if the documents had been
disclosed. However, I am prepared to make a declaration that the failure to disclose the documents amounted to procedural
impropriety. Despite the delay, I consider it to be in the interests of good administration that the procedural requirements on an
appeal of this kind should be declared.
(b) The medical list appeal Here again, I do not think that the Secretary of States exercise of his discretion to dispense
with an oral hearing can be faulted. Again there were no particular allegations of discrimination, just a general assertion. There
were cogent and factually incontestable grounds given for preferring Dr Manning and rejecting the other two applicants. Both of
the FPCs whose localities were involved were of the view that for the applicant to run his existing practice and have a surgery
with many more patients six miles away was unsatisfactory. In this instance there was nothing in any of the documentation,
which was fully disclosed to the applicant, giving any hint of race discrimination. Nor was there any central issue of fact
requiring to be explored by cross-examination. Accordingly, so far as this second appeal is concerned, I would reject the
application.

MORLAND J. I agree.

Declaration granted that Secretary of States failure to disclose to the applicant all relevant documents relating to his appeal
amounted to procedural impropriety. Other applications refused.

Solicitors: Hodge Jones & Allen; Treasury Solicitor; Hempsons.

Dilys Tausz Barrister.

561
[1991] 4 All ER 562
 Practice Direction
(probate: non-contentious probate: grant on behalf of minor)
PRACTICE DIRECTIONS
FAMILY DIVISION
26 September 1991.

Probate Practice Non-contentious probate Grant of representation Grant on behalf of minor Evidence in support of
application Application by mother Application by father having or who has acquired parental responsibility Application by
father not married to mother at time of birth of child but who has parental responsibility Application by parent having parental
responsibility by virtue of adoption order Application by guardian having parental responsibility Sexual Offences Act 1956
Guardianship of Minors Act 1971 Adoption Act 1976, s 12 Family Law Reform Act 1987, s 4(1) Children Act 1989, ss 2(1),
4, 5, Sch 14, paras 4, 6, 12, 13 Non-Contentious Probate Rules 1987, r 32 Parental Responsibility Agreement Regulations
1991 Non-Contentious Probate (Amendment) Rules 1991.

The Non-Contentious Probate (Amendment) Rules 1991, SI 1991/1876, in force from 14 October 1991, amend r 32 of the Non-
Contentious Probate Rules 1987, SI 1987/2024, which relates to grants on behalf of minors. The amendments are consequential
upon the coming into effect of the Children Act 1989.
The evidence is required in support of an application for such a grant in specified circumstances is as follows.
(1) Where the applicant is the mother of the child she must state in the oath that she is the mother of the minor.
(2) Where the applicant is the father of the child having parental responsibility under s 2(1) of the 1989 Act the oath must
state that the applicant is the father of the minor and has parental responsibility under that provision.
(3) Where the applicant is the father of the child and has acquired parental responsibility as provided by s 4 of the 1989 Act
the oath must state that he is the father of the minor and has parental responsibility under an order or under a duly recorded
parental responsibility agreement. A copy of the order or sealed copy of the agreement recorded in the principal registry of the
Family Division under the Parental Responsibility Agreement Regulations 1991, SI 1991/1478, must be produced.
(4) Where the applicant is the father of the child and was not married to the mother at the time of the childs birth, but has
parental responsibility in accordance with para 4 or 6 of Sch 14 to the 1989 Act either (a) by virtue of an order under s 4(1) of the
Family Law Reform Act 1987 or (b) by virtue of an order giving him custody or care and control of the child in force
immediately before the commencement of Pts I and II of the 1989 Act, the oath must state that he is the father of the minor and a
parent having parental responsibility by virtue of such an order which was in force immediately before the commencement of the
1989 Act. A copy of the order must be produced in each instance.
(5) Where the applicant has parental responsibility by virtue of an adoption order the oath must state that he or she is the
adopter or one of the adopters of the minor by an order made within the meaning of s 12 of the Adoption Act 1976. A copy of the
order must be produced.
(6) Where the applicant is a guardian who has been appointed in accordance with s 5 of the 1989 Act the oath must state he
he or she is a guardian of the minor having parental responsibility by virtue of (a) an order made under s 5 of the 1989 Act or (b)
an appointment made by AB, a parent having parental responsibility for the minor by will (or by deed as appropriate) or (c) an
appointment made by CD, a duly appointed guardian having parental 562 responsibility for the minor by will (or by deed as
appropriate). The order, will or deed must be produced (or, in the case of a proved will, an official copy), together with such
further evidence as a district judge or registrar may require in the circumstances of a case. The date of death of the person
making the appointment must be included in the oath as must the date of death or any other person upon whose death the
appointment takes effect.
(7) An applicant who is a guardian of the child having parental responsibility by virtue of an appointment under the
Guardianship of Minors Act 1971, the Sexual Offences Act 1956 or the High Courts inherent jurisdiction with respect to children
which is deemed to be an appointment made and having effect under s 5 of the 1989 Act (by paras 12 and 13 of Sch 14 of the
1989 Act) must include such information in the oath. A copy of the order must be produced.
26 September 1991.

G Angel, Senior District Judge

[1991] 4 All ER 563

Scally v Southern Health and Social Services Board (British Medical

Association, third party) and other appeals
EMPLOYMENT; Contract of Service

HOUSE OF LORDS
LORD BRIDGE OF HARWICH, LORD ROSKILL, LORD GOFF OF CHIEVELEY, LORD JAUNCEY OF TULLICHETTLE AND LORD LOWRY
17, 18 JULY, 23 OCTOBER 1991

Employment Contract of service Implied term Obligation on employer to notify employee of benefit or right Right to
enhance pension entitlement by purchase of added years Medical practitioners employed by Northern Ireland health and social
services boards under contracts incorporating statutory superannuation scheme Scheme amended to give employees right to
purchase added years of pension entitlement to qualify for maximum pension Right exercisable within 12 months of amendment
coming into force by persons already in employment or within 12 months from first taking up employment Boards failing to
inform plaintiffs of right to purchase added years of pension entitlement Whether boards under duty to notify employees of
right Whether implied term requiring boards to notify employees of entitlement Whether claims time-barred.

Employment Written particulars of employment Duty to give employee written particulars of terms of employment Remedy
for non-compliance provided by statute Whether employee also having civil right of action Contracts of Employment and
Redundancy Payments Act (Northern Ireland) 1965(NI), ss 4, 5.

The four plaintiffs were medical practitioners employed by health and social services boards in Northern Ireland under contracts
of employment which incorporated the regulations from time to time in force governing the superannuation rights and liabilities
of persons employed in the health service. Accordingly, under the terms of their contracts of employment, the plaintiffs were
required to make contributions to the statutory superannuation scheme and were entitled to benefits under the scheme. Under the
Health Services 563(Superannuation) Regulations (Northern Ireland) 1962 an employee had to complete 40 years contributory
service to qualify for a full pension. The Health Services (Superannuation) (Amendment) (No 3) Regulations (Northern Ireland)
1974 gave employees the right to purchase added years of pension entitlement on certain terms in order to make up the full 40
years contributions to qualify for the maximum pension. That right, however, was only exercisable within 12 months from 10
February 1975 by persons already employed in the health services when the regulations came into force and within 12 months
from first taking up employment by persons employed thereafter. The Department of Health and Social Services had a discretion
to extend the 12 months time limit and to vary the terms of purchase where the time was extended. A further amendment of the
scheme was introduced by the Health Services (Superannuation) (Amendment) (No 2) Regulations (Northern Ireland) 1983,
which removed the departments discretion to extend the 12 months time limit and substituted a right to purchase added years at
any time until two years before an employees retirement on fixed and progressively less favourable terms. The department was
aware of the necessity to bring details of the superannuation scheme to the attention of employees in the health services and
published two guides to the scheme which gave information regarding the purchase of added years. Circulars issued by the
department to the boards from time to time required the boards to ensure that the guides were given to all employees participating
in the superannuation scheme when the 1974 regulations came into force and to all new personnel thereafter, but they were never
given to any of the plaintiffs, who being unaware of their right to purchase extra years service, failed to take up that right before
the 1983 regulations came into force. Under para 2 a of Sch 1 to the Health and Personal Social Services (Northern Ireland)
Order 1972 the boards were liable in respect of any liabilities incurred in the exercise of their functions as employers. The
plaintiffs claimed that the boards as their employers had failed to bring to their notice the right to enhance their pension
entitlement by the purchase of added years of the terms available under the 1974 regulations and brought actions claiming
damages from the boards alleging breach of an implied term of the contract of employment, breach of a duty of care and breach
of a statutory duty under s 4(1)b of the Contracts of Employment and Redundancy Payments Act (Northern Ireland) 1965, which
imposed a duty on an employer to give his employees written particulars of the terms of their employment. At the trial the claims
based on breach of statutory duty were abandoned and the judge dismissed the claims on the other two grounds. On appeal to the
Court of Appeal in Northern Ireland the plaintiffs were permitted to revive the claim based on breach of statutory duty and the
appeals were allowed. The boards appealed to the House of Lords, contending, inter alia, that the responsibility for bringing the
matter to the attention of employees lay with the department rather than the boards and that if the boards were in breach of their
contractual obligations three of the plaintiffs, of whom one was first employed in 1974 and two in 1978, were barred in any event
from recovering since their causes of action accrued at the 564 latest when their entitlement to purchase lapsed on the expiry of
the relevant 12 months period and their writs had been issued outside the six-year limitation period.
________________________________________
a Paragraph 2 is set out at p 570 a b, post
b Section 4(1), so far as material provides: Not later than thirteen weeks after the beginning of an employees period of employment with an
employer, the employer shall give the employee a written statement giving the following particulars of the terms of employment ( d)
(iii) pensions and pension schemes Provided that paragraph (d)(iii) shall not apply to employees of any body or authority if the
employees pension rights depend on the terms of a pension scheme established under any statutory provision and the body or authority are
required by any such provision to give to new employees information concerning their pension rights, or concerning the determination of
questions affecting their pension rights.

Held (1) Where the terms of an employees contract of employment had not been negotiated with the individual employee but
resulted from negotiation with a representative body or were otherwise incorporated by reference, and a particular term of the
contract made available to the employee a valuable right contingent upon his taking action to avail himself of its benefit and the
employee could not, in all the circumstances, reasonably be expected to be aware of the term unless it was drawn to his attention,
it was an implied term of the contract of employment that the employer was under an obligation to take reasonable steps to bring
the term of the contract in question to the employees attention, so that he was in a position to enjoy its benefit. Accordingly,
there was such an implied term in each of the plaintiffs contracts of employment which the boards, as the employers by virtue of
para 2 of Sch 1 to the 1972 order, were in each case in breach (see p 571 f g j to p 572 b and p 573 e to h, post).
(2) Each plaintiffs cause of action accrued at the latest when his entitlement to purchase added years as of right on the terms
laid down in the regulations lapsed after the expiry of the relevant 12-month period and therefore the three plaintiffs who were
first employed in 1974 and 1978 were too late to claim in respect of the lost opportunity to purchase added years as of right.
However, the employing board was in each case in continuing breach of its contractual obligation to bring to the plaintiffs
attention his right to purchase added years throughout the 12-month period, so that on expiry of the period the board remained
under an obligation to bring to his attention the opportunity to apply to the department to exercise its discretion to allow the
purchase of added years out of time on varied terms, which obligation continued until the relevant provisions of the 1974
regulations were superseded in 1983. Accordingly, the actions of those plaintiffs were not time-barred. The appeals would
therefore be dismissed and the case remitted to the trial judge to assess the damages due to each plaintiff, which in the case of the
three out-of-time plaintiffs would be based on the value of the lost chance of a favourable exercise by the department of its
discretion had they applied to purchase added years in 1982(see p 572 g to j and p 573 a d to h, post).
Per curiam. A breach by an employer of the duty imposed on him by s 4(1) of the 1965 Act to give an employee written
particulars of there terms of his employment is remediable only by recourse to an industrial tribunal as provided by s 5 c of that
Act and confers no civil right of action on the employee sounding in damages (see p 572 c d and p 573 e to h, post).
________________________________________
c Section 5, so far as material, provides:
(1) Where an employer is required by section 4 to give a written statement under subsection (1) of that section, and the employer does not
give such a statement to the employee within the time limited by that section, the employee may require a reference to be made to a tribunal
to determine what particulars ought to be included or referred to in a statement given so as to comply with the requirements of that section.
(2) Where a statement purporting to be a statement under subsection (1) of section 4 is given by an employer to an employee, and the question
arises as to the particulars which ought to be included or referred to in the statement so as to comply with the requirements of that section,
either the employer or the employee may require that question to be referred to a tribunal

Notes
For the implication of terms into contracts of employment, see 9 Halsburys Laws (4th edn) para 358.
565
For construction of a statute to ascertain whether a civil action lies for breach of statutory duty, see 44 Halsburys Laws (4th
edn) para 961.
Sections 1 and 11 of the Employment Protection (Consolidation) Act 1978 contain provisions similar to ss 4(1) and 5 of the
Contracts of Employment and Redundancy Payments Act (Northern Ireland) 1965. For SS 1 and 11 of the 1978 Act, see 16
Halsburys Statutes (4th edn reissue) 236, 243.
Cases referred to in opinions
Lister v Romford Ice and Cold Storage Co Ltd [1957] 1 All ER 125, [1957] AC 555, [1957] 2 WLR 158, HL.
Liverpool City Council v Irwin [1976] 2 All ER 39, [1977] AC 239, [1976] 2 WLR 562, HL.
Tai Hing Cotton Mill Ltd v Liu Chong Hing Bank Ltd [1985] 2 All ER 947, [1986] AC 80, [1985] 3 WLR 317, PC.

Appeals
The defendants, the Southern Health and Social Services Board and the Eastern Health and Social Services Board of Northern
Ireland, appealed with leave of the Court of Appeal in Northern Ireland from the decision of that court (MacDermott and Murray
LJJ (Kelly LJ dissenting)) on 19 December 1990 allowing the appeals of the plaintiffs, Dr Gabriel Scally, Mr Anthony Peter
Walby, Dr Peter James Wilson and Dr Joseph McGivern, from the judgment of Carswell J in the Queens Bench Division of the
High Court in Northern Ireland given on 26 September 1989 dismissing their actions for damages for loss and damage sustained
by the plaintiffs by reason of the negligence, negligent misstatement, breach of contract and breach of Statutory duty of the
defendants, their servants and agents, in and about the employment of the plaintiffs and in and about the performance of their
duty adequately to inform and advise the plaintiffs of their contractual and statutory rights to exercise a valuable option to
purchase added years of pension entitlement under the terms of the statutory superannuation scheme. The Southern Health and
Social Services Board was the defendant in respect of the first and fourth plaintiffs and the Eastern Health and Social Services
Board was the defendant in respect of the second and third plaintiffs. The British Medical Association was joined as a third party
to each of the four actions but the boards claims against the association were dismissed by the Court of Appeal. The actions
were heard together on the application of both defendants. The facts are set out in the opinion of Lord Bridge.

Michael Lavery QC and Alva Brangam for the boards.

Frederic Reynold QC and Donnell Deeny QC for the plaintiffs.

Their Lordships took time for consideration

23 October 1991. The following opinions were delivered.

LORD BRIDGE OF HARWICH.. My Lords, the plaintiffs in the four actions from which these appeals arise are all medical
practitioners employed in the Northern Ireland health services. The defendants are the respective health and social services
boards by whom each plaintiff is employed. The terms of the contracts under which the plaintiffs have been employed have at all
material times incorporated the provisions from time to time in force of regulations 566 governing the rights and liabilities of
persons employed in the health services in relation to superannuation. Hence, under the terms of their contracts of employment,
the plaintiffs have been required to make contributions to the statutory superannuation scheme and have been entitled to its
benefits. The principal regulations are the Health Services (Superannuation) Regulations (Northern Ireland) 1962, SR & O (NI)
1962/237. To qualify for a full pension under the principal regulations as originally enacted it was necessary for an employee to
complete 40 years contributory service. The Health Services (Superannuation) (Amendment) (No 3) Regulations (Northern
Ireland) 1974, SR & O (NI) 1974/327, which came into force on 10 February 1975, gave to employees the right to purchase
added years of pension entitlement on certain terms in order to make up the full 40 years contributions to qualify for maximum
pension. This right, however, was only exercisable within 12 months from 10 February 1975 by persons already employed in the
health services when the 1974 regulations came into force and within 12 months from first taking up employment by persons so
employed thereafter. The Department of Health and Social Services had a discretion to extend the 12 months time limit, but in
so doing also had a discretion to vary the terms of purchase. A further amendment of the scheme was introduced by the Health
Services (Superannuation) (Amendment) No 2) Regulations (Northern Ireland) 1983, SR & O (NI) 1983/178 which came into
force on 12 August 1983. This removed the departments discretion to extend the 12 months time limit and substituted a right to
purchase added years at any time until two years before an employees retirement on fixed and progressively less favourable
terms.
In the actions, all commenced by writ dated 30 March 1988, each plaintiff claims damages from his employer alleged to
flow from the employers failure to bring to the plaintiffs notice the right to enhance his pension entitlement by the purchase of
added years on the terms available under the 1974 regulations. The claim, as pleaded in each case, is based on the alternative
grounds of breach of an implied term of the contract of employment, breach of a duty of care owed to the plaintiff and breach of a
statutory duty. The four actions were tried together by Carswell J. At the trial the claims based on breach of statutory duty were
abandoned. The judge rejected the claims of the other two grounds. On appeal to the Court of Appeal in Northern Ireland the
plaintiffs were permitted to revive the claim based on breach of statutory duty. The appeals succeeded by a majority. Kelly LJ
rejected all three grounds of claim. MacDermott LJ held the defendants liable in each case on the sole ground of the breach of an
implied term of the contract of employment. Murray LJ held the defendants liable in each case on the sole ground of a breach of
statutory duty under s 4 of the Contracts of Employment and Redundancy Payments Act (Northern Ireland) Act 1965. The
defendant boards now appeal by the leave of the Court of Appeal.
Before the courts below there were also third party claims by the defendant boards against the British Medical Association
which were rejected by the Court of Appeal.
The facts as found by the trial judge are not now in issue and for the purpose of determining the questions of law on which
the appeals turn it is not, I think, necessary to present more than a brief summary of the factual background. The terms of which
a young doctor could purchase added years under the 1974 regulations were highly advantageous and represented a valuable right
and, as Carswell J put it, an opportunity not to be missed if a doctor reckoned to stay in the health services for his professional
lifetime. Thus, it was of obvious importance to any young doctor employed in the health services that he should become aware
of this valuable right in due time to avail himself, if he so decided, of the 567 opportunity to purchase the necessary added years
to qualify for a full pension. The four plaintiffs were first employed in the health services at different dates, but nothing turns on
this save in relation to an issue of limitation to which I must later advert. In relation to the central issue of liability it is only
necessary to record in summary the judges findings: (i) that none of the plaintiffs was made aware by his employer, or otherwise
became aware, at the material time of his right to purchase added years; (2) that each plaintiff, if he had been aware of the right at
the material time, would on the balance of probabilities have exercised the option to purchase added years; (3) that if the
employing board owed any duty to employees to bring to their notice the existence of the right it was in each case in breach of
that duty.

The contractual claim

The central question then is whether the employing boards owed any such duty. Leaving aside the claim based on breach of
statutory duty, which turns on the true construction of the 1965 Act, it seems to me that the plaintiffs common law claims can
only succeed if the duty allegedly owed to them by their employers arose out of the contract of employment. If a duty of the kind
in question was not inherent in the contractual relationship, I do not see how it could possibly be derived from the tort of
negligence. The observations of Lord Scarman in delivering the advice of the Judicial Committee of the Privy Council in Tai
Hing Cotton Mill Ltd v Liu Chong Hing Bank Ltd [1985] 2 All ER 947 at 957, [1986] AC 80 at 107 are here very much in point.
He said:
 Their Lordships do not believe that there is anything to the advantage of the laws development in searching for a
liability in tort where the parties are in a contractual relationship. This is particularly so in a commercial relationship.
Though it is possible as a matter of legal semantics to conduct an analysis of the rights and duties inherent in some
contractual relationships including that of banker and customer either as a matter of contract law when the question will be
what, if any, terms are to be implied or as a matter of tort law when the task will be to identify a duty arising from the
proximity and character of the relationship between the parties, their Lordships believe it to be correct in principle and
necessary for the avoidance of confusion in the law to adhere to the contractual analysis: on principle because it is a
relationship in which the parties have, subject to a few exceptions, the right to determine their obligations to each other, and
for the avoidance of confusion because different consequences do follow according to whether liability arises from contract
or tort, eg in the limitation of action. Their Lordships respectfully agree with some wise words of Lord Radcliffe in his
dissenting speech in Lister v Romford Ice and Cold Storage Co Ltd [1957] 1 All ER 125 at 139, [1957] AC 555 at 587.
After indicating that there are cases in which a duty arising out of the relationship between employer and employee could
be analysed as contractual or tortious Lord Radcliffe said: Since, in any event, the duty in question is one which exists by
imputation or implication of law and not by virtue of any express negotiation between the parties, I should be inclined to
say that there is no real distinction between the two possible sources of obligation. But it is certainly, I think, as much
contractual as tortious. Since, in modern times, the relationship between master and servant, between employer and
employed, is inherently one of contract, it seems to me entirely correct to attribute the duties which arise from that
relationship to implied contract. Their Lordships do not, therefore, embark on an investigation whether in the relationship
of banker and customer it is 568 possible to identify tort as well as contract as a source of the obligations owed by the one
to the other. Their Lordships do not, however accept that the parties mutual obligations in tort can be any greater than
those to be found expressly or by necessary implication in their contract

In the instant case I believe that an attempt to analyse the issue in terms of the law of tort may be positively misleading. If
the question is framed in terms of the law of negligence, it takes the form: did the employers owe a duty of care to their
employees to save them from economic loss consequent on a failure to purchase added years of pensionable entitlement in due
time? The strong trend of recent authority had been to narrow the range of circumstances which the law of tort will recognise as
sufficient to impose on one person a duty of care to protect another from damage which consists in purely economic loss. This
induced Kelly LJ to say:

It would be contrary to the current inclination of the law to imply a term into contracts of employment enabling a
claim by an employee for purely economic loss to be brought against an employer where no express term in those contracts
provided for such relief

But if the issue is analysed in contract, the starting point is quite different. Here the express terms of the contract of employment
confer a valuable right on the employee which is, however, contingent upon his taking a certain action. Where that situation is
known to the employer but not to the employee, will the law imply a contractual obligation on the employer to take reasonable
steps to bring the existence of the contingent right to the notice of the employee? It is true that such an implication may have the
consequence of sustaining a claim for purely economic loss. But this consideration would not furnish the essential reason for
making the implication. If there is a basis for making the implication, it must lie rather in the consideration that the availability
of the contingent right was intended by those who drew up the terms of the contract for the benefit of the employee; but if the
existence of the contingent right never comes to his attention, he cannot profit by it and it might, so far as he is concerned, just as
well not exist.
The problem is a novel one which could not arise in the classical contractual situation in which all the contractual terms,
having been agreed between the parties, must, ex hypothesi, have been known to both parties. But in the modern world it is
increasingly common for individuals to enter into contracts, particularly contracts of employment, on complex terms which have
been settled in the course of negotiations between representative bodies or organisations and many details of which the individual
employee cannot be expected to know unless they are drawn to his attention. The instant case presents an example of this
phenomenon arising in the context of the statutory provisions which regulate the operation of the health services in Northern
Ireland. These are found in the Health and Personal Social Services (Northern Ireland) Order 1972, SI 1972/1265. Article 4, in
Pt II of the order, imposes the general duty of the Department of Health and Social Services to provide or secure the provision of
integrated health services in the province and the ensuing articles of Pt II spell out in detail the nature of the services to be
provided. By art 16 the department is to establish the health and social services boards for different areas and by art 17 these
boards are to exercise on behalf of the department such functions with respect to the administration of such health services as the
department may direct. Paragraph 2 of Sch 1 provides:
569

A Health and Social Services Board shall, notwithstanding that it is exercising functions on behalf of the [department]
or the Ministry of Home Affairs, be entitled to enforce any rights acquired and shall be liable in respect of any liabilities
incurred (including liabilities in tort) in the exercise of those functions in all respects as if it were acting as a principal, and
all proceedings for the enforcement of such rights or liabilities shall be brought by or against the Health and Social
Services Board in its own name

The employment of doctors both in hospital appointments and in general practice being a function exercised on behalf of the
department pursuant to art 17 by the board, it is the board who, by virtue of para 2 of Sch 1, have all the liabilities of employers,
but the terms of the contracts of employment are determined by the department, no doubt in negotiation with representative
bodies representing doctors interests.
The department was clearly aware of the necessity to bring to the attention of employees in the health service the details of
the superannuation scheme to which they were required to contribute. This is shown by the publication in 1975 of a document
described as Easy-to-read guide to the improved Health and Personal Social Services superannuation for Northern Ireland and a
further document described as leaflet SDT which gave additional information regarding the purchase of added years. Circulars
issued by the department to the boards from time to time required them to ensure that these documents were given to all
employees participating in the superannuation scheme when the 1974 regulations came into force and to all new entrants
thereafter. The trial judge was critical of the quality of these documents, no doubt justifiably, but I do not think anything turns on
this since they were never given to any of the plaintiffs.
When the 1974 regulations introduced the opportunity for employees in the health services to buy added years, it was
intended that this should be for their benefit. They could not, however, enjoy the benefit unless they were aware of the
opportunity. There are three possible views of the legal consequences arising from this situation. The first is that it could be
properly left to individual employees, knowing that they were compulsory contributors to a superannuation scheme to make
enquiries and ascertain the details of the scheme for themselves. In the light of the judges findings, I think this view can be
confidently rejected. There was no reason whatever why young doctors embarking on a career in the health services should
appreciate the necessity to enquire into the details of the superannuation scheme to which they were contributors in order to be in
a position to enjoy its benefits. The second view is that the law provided no means of ensuring that the intended beneficiaries of
the opportunity to buy added years become aware of it, so that it would be a matter of chance whether or not, in relation to any
individual employee, the relevant provision of the 1974 regulations achieved its intended purpose. I find this view so unattractive
that I would accept it only if driven to the conclusion that there was no other legally tenable alternative. The third view is that
there was an obligation on either the employing board or the department to take reasonable steps to bring the relevant provision
to the notice of the employees in time to avail themselves of the opportunity to but added years if they so decided.
It was argued for the boards that the responsibility, if there was one, for bringing the matter to the attention of the employees
lay with the department rather than the boards. I find this argument both unappealing on the merits and unconvincing in law.
Where a question at issue is whether a plaintiff is entitled to recover from public funds, it is to my mind a little surprising that a
responsible public authority, required by statute to exercise functions on behalf of another public authority, should seek to avoid
liability by sheltering behind that other 570 authority. But in any event the evidence shows that the department relied on the
board, as the employing authority, to disseminate the necessary information to employees and if the Easy-to-read guide and
leaflet STD had been given to the plaintiffs, whatever the shortcomings of those documents, I do not see how the plaintiffs
could have succeeded. Kelly LJ attached importance to the circumstance that special knowledge of the scheme rested with the
department and that any obligation to give information about it would call for a degree of expertise which the department, but
not the board, would have. With respect, I am unable to agree. The management of the board were perfectly well aware of the
circumstance that the option to purchase added years of pensionable service was required to be exercised within a limited time
and it required no expertise to appreciate that a doctor entering the health service at an age when he could not expect to complete
40 years service would need to know this.
I recognise that a quite different situation might arise where the pension rights available to an employee in connection with
his employment were not part of the terms of his contract of employment but arose out of a separate contract between the
employee and an insurance company or the trustees of a pension fund. But that is not this case. Here there is no doubt whatever
that the terms of the superannuation scheme as laid down in the regulations in force from time to time were embodied in the
terms of the contract of employment of each plaintiff. Since the relevant board was in each case the employer upon whom,
although acting as agent for the department, all liabilities were imposed by para 2 of Sch 1 to the 1972 order, it seems to me
beyond question that the legal obligation, if there was one, to notify the plaintiffs of their rights in relation to the purchase of
added years rested in each case on the board, not on the department.
Will the law then imply a term in the contract of employment imposing such an obligation on the employer? The
implication cannot, of course, be justified as necessary to give business efficacy to the contract of employment as a whole. I
think there is force in the submission that, since the employees entitlement to enhance his pension rights by the purchase of
added years is of no effect unless he is aware of it and since he cannot be expected to become aware of it unless it is drawn to his
attention, it is necessary to imply an obligation on the employer to bring it to his attention to render efficacious the very benefit
which the contractual right to purchase added years was intended to confer. But this may be stretching the doctrine of implication
for the sake of business efficacy beyond its proper reach. A clear distinction is drawn in the speeches of Viscount Simonds in
Lister v Romford Ice and Cold Storage Co Ltd [1957] 1 All ER 125 at 132133, [1957] AC 555 at 576 and Lord Wilberforce in
Liverpool City Council v Irwin [1976] 2 All ER 39 at 44, [1977] AC 239 at 255 between the search for an implied term necessary
to give business efficacy to a particular contract and the search, based on wider considerations, for a term which the law will
imply as a necessary incident of a definable category of contractual relationship. If any implication is appropriate here, it is, I
think, of this latter type. Carswell J accepted the submission that any formulation of an implied term of this kind which would be
effective to sustain the plaintiffs claims in this case must necessarily be too wide in its ambit to be acceptable as of general
application. I believe however that this difficulty is surmounted if the category of contractual relationship in which the
implication will arise is defined with sufficient precision. I would define it as the relationship of employer and employee where
the following circumstances obtain: (1) the terms of the contract of employment have not been negotiated with the individual
employee but result from negotiation with a representative body or are otherwise incorporated by reference; (2) a particular term
of the contract makes available to the employee a valuable right contingent upon action being taken by him to avail himself of its
benefit; (3) the employee cannot, in all the circumstances, reasonably 571 be expected to be aware of the term unless it is drawn
to his attention. I fully appreciate that the criterion to justify an implication of this kind is necessity, not a reasonableness. But I
take the view that it is not merely reasonable, but necessary, in the circumstances postulated, to imply an obligation on the
employer to take reasonable steps to bring the term of the contract in question to the employees attention, so that he may be in a
position to enjoy its benefit. Accordingly I would hold that there was an implied term in each of the plaintiffs contracts of
employment of which the board were in each case in breach.

Breach of statutory duty

In relation to the plaintiffs alternative claims for damages for breach of statutory duty I find myself in complete agreement
with the judgment delivered by Kelly LJ (572 See pp 573576, post) in the Court of Appeal and, since I could not hope to
improve on his reasoning, I do not think it would serve any good purpose for me to express a fully reasoned opinion of my own.
I gratefully and respectfully adopt his reasons for reaching the conclusion that a breach by an employer of the duty imposed on
him by s 4 of the Contracts of Employment and Redundancy Payments Act (Northern Ireland) 1965 to give to an employee
written particulars of the terms of his employment is remediable only as provided by s 5 of the Act and confers no civil right of
action on the employee sounding in damages.

Limitation
Mr Walby was first employed in the health services in 1974. In his case, therefore, the period of 12 months during which he
was entitled as of right to purchase added years on the terms prescribed by the 1974 regulations ran from 10 February 1975, the
date when the regulations came into force. Dr Wilson and Dr Scally were both first employed on 1 August 1978 and it was,
therefore, from that date that the relevant 12-month period ran in their cases. Dr McGivern was first employed in 1982. No
question of limitation arises in Dr McGiverns case, but as against the other three plaintiffs the employing board in each case
pleads the statutory limitation, the effect of which is to bar recovery in respect of any causes of action which accrued before 31
March 1982.
The boards contend that, if they were in breach of any duty to inform the plaintiffs of their rights under the 1974 regulations,
each plaintiffs cause of action accrued at the latest when his entitlement to purchase added years as of right on the terms laid
down in the regulations lapsed on the expiry of the relevant 12 month period. This is correct in so far as Mr Walby, Dr Wilson
and Dr Scally are too late to complain that what they lost by the boards breaches was the opportunity to purchase added years as
of right on the terms laid down in the regulations. But, just as the employing board was in each case in continuing breach of its
contractual obligation to bring to the plaintiffs attention his right to purchase added years throughout the relevant 12-month
period, so also, on the expiry of that period, the board remained under an obligation to bring to his attention the opportunity to
seek the discretion of the department to make the necessary purchase out of time and on such terms as the department would
allow and this obligation continued until the relevant provisions of the 1974 regulations were superseded on 12 August 1983. It
follows that these three plaintiffs are entitled to recover such damages as they are able to prove as flowing from their causes of
action which arose from the respective boards breaches of their contractual obligations on and after 31 March 1982.
The Court of Appeal ordered that the case be remitted to the trial judge to 572 assess the damages due to each plaintiff. In
the cases of Mr Walby, Dr Wilson and Dr Scally that assessment will be based on the value of the lost chance of a favourable
exercise by the department of its discretion had they applied to purchase added years in 1982. It is the fact that Mr Walby and Dr
Scally did apply for the exercise of the departments discretion on 14 January and 25 July 1983 respectively. They had been
alerted to the opportunity of doing so by a representative of the British Medical Association. Both applications were in due
course refused. But I think this circumstance is of no relevance in the light of the reasons given for these refusals by the
department. In Mr Walbys case the ground for refusal given was that Advance publicity regarding the added years
arrangements was widely circulated between 27 February 1975 and 9 February 1976. In Dr Scallys case the ground given was
that his first contract contained a reference to the Easy-to-read guide. The clear implication in each case was that the failure to
make application in due time was entirely the doctors own fault. But this view is refuted by the judges findings. The
assessment of damages should accordingly evaluate the prospect in 1982 of a successful application to purchase added years and
of the likely terms of purchase on the footing that it was then known to the department that the failure to make application within
the relevant time limit was due in each case to the boards breach of contract and not to any failure on the part of the doctor.
I would dismiss the appeals with costs in your Lordships House. In both courts below the question of costs was reserved
and I would not disturb these orders.

LORD ROSKILL. My Lords, I have had the advantage of reading in draft the speech of my noble and learned friend Lord
Bridge of Harwich. I agree with it and, for the reasons which he gives, I, too, would dismiss the appeals and make the order
which my noble and learned friend proposes.

LORD GOFF OF CHIEVELEY. My Lords, I have had the advantage of reading in draft the speech of my noble and learned
friend Lord Bridge of Harwich. I agree with it and, for the reasons which he gives, I, too, would dismiss the appeals and make
the order which my noble and learned friend proposes.

LORD JAUNCEY OF TULLICHETTLE. My Lords, for the reasons given in the speech of my noble and learned friend Lord
Bridge of Harwich, I too would dismiss these appeals

LORD LOWRY. My Lords, I have had the advantage of reading in draft the speech of my noble and learned friend Lord Bridge
of Harwich. I agree with it and, for the reasons which he gives, I, too, would dismiss the appeals and make the order which my
noble and learned friend proposes.

Appeals dismissed

Solicitors: Brecher & Co agents for G D H Brangam, Belfast; C H Hughes.

Mary Rose Plummer Barrister.

NOTE

KELLY LJ, in discussing in the course of his judgment in the Court of Appeal in Northern Ireland the issue of whether the
boards were liable in damages for breach of statutory duty, ie under s 4(1)(d)(iii) of the Contracts of Employment and
Redundancy Payments Act (Northern Ireland) 1965, first set out the provisions of s 4 and so much of s 5 as related to the remedy
for non-compliance with s 4 and the powers of industrial tribunals on references under s 5, and continued: Recourse to the
tribunal is the only remedy specified in the Act for non-compliance 573 with s 4(1). There is no penal provision. The Act is
silent as to a civil remedy in damages for breach of s 4(1).
Section 4(1) is virtually a copy of s 4 of the English Contracts of Employment Act 1963 and its replacement, s 1 of the
Employment Protection (Consolidation) Act 1978. It is interesting to note that under the 1963 Act failure to comply with s 4
gave rise to a fine not exceeding 20. However, the Redundancy Payments Act 1965, s 38 removed that penalty and substituted
for non-compliance the right of recourse to a tribunal. This was maintained under the 1978 Act and is still the position in
England. As is the case in our Northern Ireland statute, the 1978 Act is silent as to any civil remedy in damages for breach of s 1
and the only prescribed remedy is the reference to the tribunal given in the same terms and with the tribunal given the same
powers as in Northern Ireland (see s 11).
There has been no reported case to my knowledge in this jurisdiction nor in England in which a breach of s 4(1) or s 1 of the
English Act has been held to give rise to a claim for damages. Counsel have not referred us to any. Mr Deeny seeks to break new
ground.
He referred us to the well-known principles and factors found in the authorities which assist in the determination of the
issue. He submitted that although the 1965 Act was silent as to the remedy he contended for, that was not at all conclusive. He
cited Lord Diplock in Boyle v Kodak Ltd [1969] 2 All ER 439 at 446, [1969] 1 WLR 661 at 672, who said:

The statutes say nothing about civil remedies for breaches of their provisions. The judgments of the courts say all.

He stressed that the reference to the tribunal was an inadequate remedy at any time, and in the instant case quite valueless. He
submitted that the duty imposed by s 4(1) was for the benefit of a particular class, that of new employees, and cited the well-
known authority of Groves v Lord Wimborne [1898] 2 QB 402 at 415416, [18959] All ER Rep 147 at 152, in which Vaughan
Williams LJ said:

it cannot be doubted that, where a statute provides for the performance by certain persons of a particular duty, and
some one belonging to a class of persons for whose benefit and protection the statute imposes the duty is injured by failure
to perform it, prim facie, and if there be nothing to the contrary, an action by the person so injured will be against the
person who has so failed to perform the duty.

He also cited Solomons v R Gertzenstein Ltd [1954] 2 All ER 625, [1954] 2 QB 243, Thornton v Kirklees Metropolitan BC
[1979] 2 All ER 349, [1979] QB 626 and Rickless v United Artists Corp [1987] 1 All ER 679, [1988] QB 40.
On the other hand, Mr Lavery for the board contended that the duty under art 4(1) was no more than a duty to provide
information to the employee and if it was not provided or was not correctly provided, there was a specified remedy given. That
remedy, he submitted, was totally effective and adequate. By recourse to the tribunal, the employee would be given the total and
correct terms of his employment and the purpose of art 4(1) would be fulfilled. Counsel submitted that in this case it must have
been quite apparent to the doctors that any reference in their contract or elsewhere to their superannuation scheme or to the added
years variant of it was an abbreviated one. Their remedy was by reference to a tribunal which would have been totally effective.
The question for the court is: did the legislature intend that a breach of s 4(1) should give rise to a civil remedy for damages
in addition to the right of recourse to a tribunal?
No single rule of law can be employed in isolation from others, to give the 574 answer to this. The rules and presumptions
found in the authorities cited by counsel may usefully be applied so long as it is recognised that there are exceptions and rebuttals
to many of them.
 What is commonly acknowledged as a useful starting point is the general rule formulated by Lord Diplock in Lonrho Ltd v
Shell Petroleum Co Ltd [1981] 2 All ER 456 at 461, [1982] AC 173 at 185:

So one starts with the presumption laid down originally by Lord Tenterden CJ in Doe d Bishop of Rochester v Bridges
(1831) 1 B& Ad 847 at 859, [182434] All ER Rep 167 at 170, where he spoke of the general rule that where an Act
creates an obligation, and enforces the performance in a specified manner that performance cannot be enforced in any
other manner, a statement that has frequently been cited with approval ever since, including on several occasions in
speeches in this House.

Lord Diplock stated two classes of exceptions to this general rule:

The first is where on the true construction of the Act it is apparent that the obligation or prohibition was imposed for
the benefit of a particular class of individuals, as in the case of the Factories Acts and similar legislation The second
exception is where the statute creates a public right and a particular member of the public suffers what Brett J in
Benjamin v Storr (1874) LR 9 CP 400 at 407 described as particular, direct and substantial damage other and different
from that which was common to all the rest of the public.

Thus the prima facie rule is that the only remedy is the specified remedy in the instant case.
My Deeny however contends that, although a specified remedy is given, it is so inadequate that Parliament intended it
should be supplemented by a civil claim for damages whenever loss is suffered. But there is, in my opinion, considerable force in
Mr Laverys answer to this, that the duty under s 4(1) is no more than a duty to give a statement of particulars of employment and
a full and effective remedy is given for a breach of such a duty in recourse to a tribunal empowered to determine such
particulars. One of the authorities relied on by Mr Deeny to show that a civil remedy was intended when the statute which was
breached was one for the protection of a particular class of persons was Thorntons case. In that case, the Court of Appeal held
that a civil action for damages lay against the housing authority for failing to secure that accommodation was made available to
the plaintiff as a homeless person pending their inquiries and decision as to whether he was homeless, contrary to s 3(4) of the
Housing (Homeless Persons) Act 1977. But Megaw LJ made it clear in his judgment that the 1977 Act provided no special
remedy for a breach of s 3(4). He distinguished that case from Southwark London Borough v Williams [1971] 2 All ER 175,
[1971] Ch 734, where, for breach of s 21 of the National Assistance Act 1948 (a duty cast on the local authority to provide
temporary accommodation for those in urgent need), a special remedy was given by s 36 of the Act by which the local authoritys
default could be corrected by the Secretary of State. He distinguished it also from Wyatt v Hillingdon London BC (1978) 76 LGR
727, where it was held that no civil action for damages lay by a disabled person against the council for their breach of duty under
s 2 of the Chronically Sick and Disabled Persons Act 1970 in failing to meet her needs for home help. A special remedy had been
prescribed in this case also, under the National Assistance Act 1948: see also to the same effect McCall v Abelesz [1976] 1 All
ER 727, [1976] QB 585.
These cases were concerned with statutes containing obligations imposed for 575 the benefit of a particular class, yet
because a special statutory remedy was provided for the breach of the duty, no civil action for damages was held to be. And it is
of interest to note that in McCalls case [1976] 1 All ER 727 at 732, [1976] QB 585 at 595596 Ormrod LJ said (having
expressed caution in the application of any formula to determine the question):

In my judgment, this formula, though useful, must be cautiously applied, for it purports to do just what Lord Simonds
declined to do in Cutlers case (Cutler v Wandsworth Stadium Ltd [1949] 1 All ER 544 at 548, [1949] AC 398 at 407),
namely to formulate a set of rules. Moreover, it depends largely on the distinction between provisions designed for the
benefit of the public at large and provisions intended to protect or benefit a particular category of persons, the validity of
which was challenged by Atkin LJ in Phillipss case (see Phillips v Britannia Hygienic Laundry Co Ltd [1923] 2 KB 832 at
841, [1923] All ER Rep 127 at 132), by Greer and Maugham LJJ in Monk v Warbey [1935] 1 KB 75 at 8182, 85, [1934]
All ER Rep 373 at 376377, 378379, and Somervell LJ in his dissenting judgment in Solomons v R Gertzenstein Ltd
[1954] 2 All ER 625 at 631,[1954] 2 QB 243 at 255.

When I look at s 4(1) in its entirety, the nature of its content induces in me a strong conviction that Parliament did not intend
to give a civil claim in damages for any breach of its provisions. Breaches of many of its provisions will not be capable of being
assessed in money, breaches of other provisions will be claims for economic loss. In the field of employment the instant case is
not a commonplace one on its facts, in that an appendage of an unusual, if not unique, nature, namely the added years
entitlement, was given to any ordinary superannuation scheme.
It seems to me that the trend of the more recent legislation granting and imposing rights and duties in the field of
employment, is to provide a remedy for their resolution which is speedy, inexpensive and informal. To this end, Parliament has
chosen a reference to an industrial tribunal as the appropriate remedy. This, I think, is evident from the statutes and orders in
council in this jurisdiction in providing remedies in respect of unfair dismissal, redundancy, discrimination etc. And I think it is
particularly highlighted in England where in a single comprehensive statute, the Employment Protection (Consolidation) Act
1978 touching very many aspects of employment, differences between employers and employees are to be resolved by reference
to an industrial tribunal. On the other hand, the civil courts are left to their ordinary jurisdiction in employment, in contract
whenever breaches of contract occur, and in tort, whenever personal injury or death is suffered by an employee during the course
of his employment.
I believe that Parliament intended to make this distinction in s 4(1) of the 1965 Act in that whenever non-compliance with its
provisions occurred, the remedies of a new employee in respect of a statement of the particulars of his employment should be
consummated by recourse to the industrial tribunal. I do not believe that Parliament intended a further remedy of a civil action
for damages. By applying to the tribunal, the employee can discover the terms of his employment or what they should be and the
purpose of s 4(1) will then have been achieved. Then, if he finds there has been, or is, in the future, a breach of any of these
terms of his employment, he can go to the civil courts seeking damages, not for a breach of statutory duty under s 4(1) of the
1965 Act, but for a breach of an express term of his contract at common law.
Accordingly, I would hold that the plaintiffs have no remedy in damages for breach of s 4(1) of the Act.
576
[1991] 4 All ER 577

Woolwich Building Society v Inland Revenue Commissioners (No 2)

EQUITY: TAXATION; Tenancies: CONTRACT

COURT OF APPEAL, CIVIL DIVISION

GLIDEWELL, RALPH GIBSON AND BUTLER-SLOSS LJJ
18, 19, 20, 21, 22 MARCH, 22 MAY 1991

Restitution Money paid to Crown Payment of unlawful demand for tax Recovery of money paid and interest Building
society paying tax in response to demand made under ultra vires regulations Whether society immediately acquiring prima
facie right to be repaid amount paid Whether interest payable from date of payment Whether general restitutionary principle
that if subject pays in response to unlawful demand for tax he immediately acquires right to be repaid.

The Revenue issued a demand under the Income Tax (Building Societies) Regulations 1986 to the plaintiff building society for
payment of tax amounting to nearly 57m on interest and dividends paid to investors between 30 September 1985 and 1 March
1986. The plaintiff disputed the validity of the 1986 regulations but paid the amount assessed in three instalments commencing
on 16 June 1986. The next day it applied for judicial review of the regulations and in anticipation of a favourable decision it
issued a writ on 15 July to recover the amount paid as money had and received, together with interest thereon pursuant to s 35A a
of the Supreme Court Act 1981. The judicial review proceedings were decided in the plaintiffs favour at first instance on 31 July
1987 and the Crown repaid the capital with interest from 31 July 1987 pending an appeal. The Crowns appeal was ultimately
unsuccessful when the relevant 1986 regulations were held to be ultra vires and void. The plaintiff then continued its action for
repayment, seeking the payment of interest on the capital from the dates of payment of the three instalments until judgment was
given at first instance on 31 July 1987. The plaintiff contended that its entitlement to interest arose because the Crown was under
a legal obligation to repay the capital sum and thus owed it a debt for the purposes of s 35A and that it had a right to be repaid,
and its cause of action arose, at the dates when it paid the three instalments. The judge held that, since the capital payments were
not recoverable under any general restitutionary principle but under an implied agreement with the Crown that the sums would be
repaid if the plaintiff was successful in the judicial review proceedings, the right to repayment arose only when it was held that
the regulations were invalid and he therefore refused the claim to interest from the time the payments were made. The plaintiff
appealed, contending (i) that it was entitled to repayment under a general restitutionary principle that if a subject made a payment
in response to an unlawful demand by or on behalf of the Crown for tax there was a presumption that he immediately acquired a
right to be repaid the payment or alternatively (ii) that the plaintiff had paid under duress and thus had an immediate right to
claim repayment. The Crown contended (i) that there was no such general principle as that suggested by the plaintiff, (ii) that the
facts did not come within the established principles of restitution of sums paid under duress, (iii) that it was under no obligation
to make any repayment and did so only as a matter of grace or alternatively (iv) that the repayment had been made, as the judge
had found, under an implied agreement that repayment would be dependent on the outcome of the judicial review proceedings
and therefore interest was due only from 31 July 1987.
577
________________________________________
a Section 35A, so far as material, is set out at p 582 f, post

Held (Ralph Gibson LJ dissenting) Having regard to (i) the provision in s 1 b of the Bill of Rights (1688) that where there was
no parliamentary authority for the imposition of a tax the taxing authority was not entitled to any money paid on an invalid
demand, (ii) the extraordinary statutory powers of the Revenue to enforce its demands and (iii) the need for a general standard of
fairness in the Revenues dealings with taxpayers, there was at common law a general restitutionary principle that a subject who
made a payment in response to an unlawful demand for tax or any like demand for which there was no basis in law immediately
acquired a prima facie right to be repaid the amount so paid unless the payment had been made voluntarily to close a transaction
or had been made under a mistake of law. Since neither limitation applied to the plaintiffs claim it was entitled to rely on the
general principle. It followed that, when the plaintiff paid the three instalments under the ultra vires 1986 regulations it
immediately acquired a legal right to recover those sums and accordingly it was entitled to be paid interest from the dates of those
payments until judgment was given at first instance on 31 July 1987. The appeal would therefore be allowed (see p 599 b to d f
g, p 602 b c, p 603 a b and p 637 a c d g h, post).
________________________________________
b Section 1, so far as material, is set out at p 583 g, post

Sargood Bros v Commonwealth (1910) 11 CLR 258, Atchison Topeka and Santa Fe Rly Co v OConnor (1912) 223 US 280,
Mason v New South Wales (1959) 102 CLR 108 and Tower Hamlets London BC v Chetnik Developments Ltd [1988] 1 All ER 961
followed.
Campbell v Hall [15581774] All ER Rep 252, Dew v Parsons (1819) 2 B & Ald 562, Steele v Williams (1853) 8 Exch 625
and Hooper v Exeter Corp (1887) 56 LJQB 457 explained.
Slater v Burnley Corp (1888) 59 LT 636, William Whiteley Ltd v R [190810] All ER Rep 639 and Twyford v Manchester
Corp [1946] 1 All ER 621 doubted.

Notes
For restitution from the Crown, see 1(1) Halsburys Laws (4th edn reissue) paras 194, 196.
For actions for moneys had and received, see 9 Halsburys Laws (4th edn) paras 637, 676677, and for cases on the subject,
see 12(2) Digest (2nd reissue) 496503, 81268189.
For the invalidity of taxation without parliamentary authority, see 8 Halsburys Laws (4th edn) para 913, and for cases on the
subject, see 11 Digest (Reissue) 665, 5758.
For the Bill of Rights (1688), s 1, see 10 Halsburys Statutes (4th edn) 44.
For the Supreme Court Act 1981, s 35A, see 11 Halsburys Statutes (4th edn) (1991 reissue) 998.

Cases referred to in judgments

A-G v Luncheon and Sports Club Ltd [1929] AC 400, HL.
A-G v Wilts United Dairies Ltd (1921) 37 TLR 884, CA; affd 91 LJKB 897, HL.
Air Canada v British Columbia (1989) 59 DLR (4th) 161, Can SC.
Amministrazione delle Finanze dello Stato v SpA San Giorgio Case 199/82 [1983] ECR 3595.
Atchison Topeka and Santa Fe Rly Co v OConnor (1912) 223 US 280, US SC.
Atlee v Backhouse (1838) 3 M & W 633, 150 ER 1298.
Auckland Harbour Board v R [1924] AC 318, PC.
B & S Contracts and Design Ltd v Victor Green Publications Ltd [1984] ICR 419, CA.
Barton v Armstrong [1975] 2 All ER 465, [1976] AC 104, [1975] 2 WLR 1050, PC.
Bilbie v Lumley (1802) 2 East 469, [17751802] All ER Rep 425, 102 ER 448.
578
Blackpool and Fleetwood Tramroad Co v Bispham with Norbreck UDC [1910] 1 KB 592, DC.
Bourgoin SA v Ministry of Agriculture Fisheries and Food [1985] 3 All ER 585, [1986] QB 716, [1985] 3 WLR 1027, QBD and
CA.
BP Exploration Co (Libya) Ltd v Hunt (No 2) [1982] 1 All ER 925, [1983] 2 AC 352, [1982] 2 WLR 253, HL.
Brocklebank (T & J) Ltd v R [1924] 1 KB 647.
Brown v MKinally (1795) 1 Esp 279, 170 ER 356.
Browning v Morris (1778) 2 Cowp 790, 98 ER 1364.
Buckingham v Francis [1986] 2 All ER 738.
Campbell v Hall (1774) 1 Cowp 204, [15581774] All ER Rep 252, 98 ER 1045.
Chase Manhattan Bank NA v Israel-British Bank (London) Ltd [1979] 3 All ER 1025, [1981] Ch 105, [1980] 2 WLR 202.
Dew v Parsons (1819) 2 B & Ald 562, 106 ER 471.
Fairbanks v Snow (1887) 145 Mass 153, 13 NE 596, Mass Sup Jud Ct.
Fibrosa Spolka Akcyjna v Fairbairn Lawson Combe Barbour Ltd [1942] 2 All ER 122, [1943] AC 32, HL.
Glasgow Corp v Lord Advocate 1959 SC 203, Ct of Sess.
Great Western Rly Co v Sutton (1869) LR 4 HL 226.
Hamlet v Richardson (1833) 9 Bing 644, 131 ER 756.
Harse v Pearl Life Assurance Co [1904] 1 KB 558, [19047] All ER Rep 630, CA.
Hooper v Exeter Corp (1887) 56 LJQB 457, DC.
IRC v National Federation of Self-Employed and Small Businesses Ltd [1981] 2 All ER 93, [1982] AC 617, [1981] 2 WLR 722,
HL.
IRC v Nuttall [1990] STC 194, [1990] 1 WLR 631, HL.
Irving v Wilson (1791) 4 Term Rep 485, 100 ER 1132.
James, Ex p, re Condon (1874) LR 9 Ch App 609, [187480] All ER Rep 388, LJJ.
Kelly v R (1902) 27 VLR 522, Vict SC.
Kiriri Cotton Co Ltd v Dewani [1960] 1 All ER 177, [1960] AC 192, [1960] 2 WLR 127, PC.
Lynch v DPP for Northern Ireland [1975] 1 All ER 913, [1975] AC 653, [1975] 2 WLR 641, HL.
Maskell v Horner [1915] 3 KB 106, [191415] All ER Rep 595, CA.
Mason v New South Wales (1959) 102 CLR 108, Aust HC.
Maxwell v Griswold (1850) 51 US (10 How) 242, US SC.
Morgan v Palmer (1824) 2 B & C 729, 107 ER 554.
Moses v Macferlan (1760) 2 Burr 1005, [15581774] All ER Rep 581, 97 ER 676.
Muschinski v Dodds (1986) 62 ALR 429, Aust HC.
National Pari-Mutuel Association Ltd v R (1930) 47 TLR 110, CA; affg 46 TLR 594.
Nepean Hydro Electric Commission v Ontario Hydro (1982) 132 DLR (3d) 193, Can SC.
OSullivan v Management Agency and Music Ltd [1985] 3 All ER 351, [1985] QB 428, [1985] 3 WLR 448, CA.
Paal Wilson & Co A/S v Partenreederei Hannah Blumenthal, The Hannah Blumenthal [1983] 1 All ER 34, [1983] 1 AC 854,
[1982] 3 WLR 1149, HL.
President of India v La Pintada Cia Navegacion SA [1984] 2 All ER 773, [1985] AC 104, [1984] 3 WLR 10, HL; rvsg [1983] 1
Lloyds Rep 37.
Preston v IRC [1985] 2 All ER 327, [1985] AC 835, [1985] 2 WLR 836, HL.
Queen of the River Steamship Co Ltd v River Thames Conservators (1899) 15 TLR 474.
R v Board of Inland Revenue, ex p MFK Underwriting Agencies Ltd [1990] 1 All ER 91, [1990] 1 WLR 1545, DC.
R v Chief Constable of the Merseyside Police, ex p Calveley [1986] 1 All ER 257, [1986] QB 424, [1986] 2 WLR 144, CA.
Robertson v Frank Bros Co (1889) 132 US 17, US SC.
579
Rogers v Ingham (1876) 3 Ch D 351, [187480] All ER Rep 209, CA.
Sargood Bros v Commonwealth (1910) 11 CLR 258, Aust HC.
Sebel Products Ltd v Customs and Excise Comrs [1949] 1 All ER 729, [1949] Ch 409.
Sharp Bros & Knight v Chant [1917] 1 KB 771, CA.
Sharpe (a bankrupt), Re, ex p trustee of the bankrupt v Sharpe [1980] 1 All ER 198, [1980] 1 WLR 219.
Simmonds, Ex p, re Carnac (1885) 16 QBD 308, [18815] All ER Rep 895, CA.
Slater v Burnley Corp (1888) 59 LT 636, DC.
Somes v British Empire Shipping Co (1860) 8 HL Cas 338, [184360] All ER Rep 844, 11 ER 459.
South of Scotland Electricity Board v British Oxygen Co Ltd (No 2) [1959] 2 All ER 225, [1959] 1 WLR 587, HL.
Steele v Williams (1853) 8 Exch 625, 155 ER 1502.
Tower Hamlets London BC v Chetnik Developments Ltd [1988] 1 All ER 961, [1988] AC 858, [1988] 2 WLR 654, HL; affg
[1987] 1 WLR 593, CA; rvsg [1987] RVR 87.
Twyford v Manchester Corp [1946] 1 All ER 621, [1946] Ch 236.
Tyler, Re, ex p Official Receiver [1907] 1 KB 865, [19047] All ER Rep 181, CA.
Universe Tankships Inc of Monrovia v International Transport Workers Federation [1982] 2 All ER 67, [1983] 1 AC 366, [1982]
2 WLR 803, HL.
Whiteley (William) Ltd v R (1909) 101 LT 741, [190810] All ER Rep 639.
Woolwich Equitable Building Society v IRC [1991] 4 All ER 92, [1990] 1 WLR 1400, HL; rvsg [1989] STC 463, CA; rvsg in part
[1987] STC 654.

Cases also cited

Cordell v Second Clanfield Properties Ltd [1968] 3 All ER 746, [1969] 2 Ch 9.
Eadie v Brantford Township (1967) 63 DLR (2d) 561, Can SC.
IRC v Aken [1990] STC 497, [1990] 1 WLR 1374, CA.
Neste Oy v Lloyds Bank plc [1983] 2 Lloyds Rep 658.
Pao On v Lau Yiu [1979] 3 All ER 65, [1980] AC 614, PC.
Wallersteiner v Moir (No 2) [1975] 1 All ER 849, [1975] QB 373, CA.
Western United Investment Co Ltd v IRC [1958] 1 All ER 257, [1958] Ch 392.

Appeal
The plaintiffs, Woolwich Building Society (formerly Woolwich Equitable Building Society) (Woolwich), appealed from the
decision of Nolan J ([1989] STC 111, [1989] 1 WLR 137) dismissing their claim in an action for money had and received for the
recovery of interest on payments of tax amounting to 56,998,211 on interest and dividends paid to investors between 30
September 1985 and 1 March 1986 which had been paid by the society to the Inland Revenue Commissioners pursuant to a
demand made under the Income Tax (Building Societies) Regulations 1986 and repaid by the Revenue following the decision of
Nolan J ([1987] STC 654) that the relevant 1986 regulations were ultra vires and void. The facts are set out in the judgment of
Ralph Gibson LJ.

John Gardiner QC, Nicholas Underhill and Jonathan Peacock for Woolwich.
Anthony Grabiner QC and Alan Moses QC for the Crown.
 Cur adv vult

22 May 1991. The following judgments were delivered.

GLIDEWELL LJ. In his judgment Ralph Gibson LJ explains the judicial review proceedings which resulted in the relevant
parts of the Income Tax (Building 580 Societies) Regulations 1986, SI 1986/482, being declared ultra vires and therefore void in
so far as they purported to require the payment by building societies of tax on dividends and interest paid by such societies for the
period immediately preceding 6 April 1986. He also summarises the circumstances in which the Woolwich Building Society
(Woolwich) paid the total sum of 56,998,211 to the Revenue, including the relevant correspondence before and at the time of
payment, and the history of this action. I gratefully adopt what Ralph Gibson LJ says.
I therefore need only summarise briefly certain of the facts referred to by Nolan J ([1989] STC 111, [1989] 1 WLR 137) and
Ralph Gibson LJ in their judgments, which are in my view necessary for the determination of this appeal. They are: (i) from the
start, Woolwich challenged the validity of the 1986 regulations, even when they were in draft; (ii) the form on which Woolwich
was required to make a return for the period ending 31 May 1986 and for subsequent quarterly periods, and the accompanying
notes for guidance, made it clear that when each form was returned to the Revenue it had to be accompanied by payment of the
amount calculated in accordance with the form. There was also in the notes a reminder that interest was chargeable on tax paid
late, which was not an allowable deduction for tax purposes; (iii) all three payments made by Woolwich were made without
prejudice to their contention that the 1986 regulations were ultra vires; (iv) at the same time as it made the first payment on 16
June 1986to be precise on the following dayWoolwich applied for leave to move for judicial review of the validity of the
1986 regulations; and (v) Nolan J summarised the factors which induced Woolwich to make the three payments in the following
terms ([1989] STC 111 at 116, [1989] 1 WLR 137 at 142143):

First and foremost, the requirements of the Regulations as amplified in communications from the Revenue amounted
on their face to lawful demands from the Crown. Woolwich would have expected any refusal of payment to lead to
collection proceedings which would have been gravely embarrassing for Woolwich, the more so as it would have been the
only building society refusing to pay. Any publicity suggesting that Woolwich might be in difficulty in meeting its
financial obligations, or that alone amongst building societies it was pursuing a policy of confrontation with the Crown,
might have damaging effects far outweighing Woolwichs prospects of success on the issue of principle. Secondly,
Woolwich feared that if it failed in its legal arguments it might incur penalties. Thirdly, the three payments to which I have
referred formed parts of larger quarterly payments, the other parts of which were agreed to have been correctly charged. At
the time when the payments were made, it had not been possible to identify the amounts in dispute. Fourthly, Woolwich
was not, of course, to know at the time of the payments that it would succeed in the judicial review proceedings. Had
Woolwich failed in those proceedings, it would have faced a bill for interest, which would not have been deductible for tax
purposes, in an amount far exceeding the net return which Woolwich could have obtained from investing the money
withheld.

The judge found in relation to these reasons ([1989] STC 111 at 116, [1989] 1 WLR 137 at 143):

It seems to me, judging from the language of para 4(1) of Sch 20 to the Finance Act 1972, that Woolwich could
reasonably have anticipated at least the raising of an assessment under para 4(3), and possibly the issue of a writ pursuant
to s 68 of the Taxes Management Act 1970 with the result in either case of highly undesirable publicity for Woolwich if it
had withheld the very large sums claimed by the Revenue to be due The substantial point made 581 by Woolwich in the
first of its reasons for making the payment lies in the damage to its reputation which it feared from failing to meet an
ostensibly lawful claim for tax, and the importance of this factor is something on which the judgment of Woolwich is
entitled to respect. Again, although the risk of penalty proceedings must have seemed remote, there being no question of
negligence, let alone fraud, on the part of Woolwich, and although Mr Green and Mr Bousher say that in practice there was
no risk of penalty proceedings at all, I can understand that the prospect of being even technically in breach of a penal
provision if it failed in the judicial review proceedings is one which would weigh with Woolwich. And there can be no
dispute about the significance of the interest factor. Subject to the outcome of the present case, the scales in this respect
were tilted heavily in favour of the Revenue. I accept that, as a practical matter, Woolwich had little choice but to make the
three payments.

Nolan J gave his decision in the judicial review proceedings on 31 July 1987 (see R v IRC, ex p Woolwich Equitable Building
Society [1987] STC 654). He declared the 1986 regulations ultra vires and void. Before that date, the writ in the present action
claiming repayment of the capital sum with interest had been issued. Although the Crown appealed against Nolan Js decision,
by agreement pending the hearing of the appeal it made repayment of the capital sum, leaving the issue as to whether the interest
was payable to be decided later.
Woolwichs claim therefore is to interest on the capital sum, calculated from the various dates on which it paid the three
sums which make up the total to the date of Nolan Js judgment in the judicial review proceedings. The claim is made under s
35A of the Supreme Court Act 1981, which, so far as is relevant, provides:

(1) in proceedings before the High Court for the recovery of a debt there may be included in any sum for
which judgment is given simple interest, at such rate as the court thinks fit or as rules of court may provide, on all or any
part of the debt in respect of which judgment is given, or payment is made before judgment, for all or any part of the
period between the date when the cause of action arose and(a) in the case of any sum paid before judgment, the date of
the payment

It follows that in order to succeed in its claims to interest Woolwich must show (i) that the Revenue was under a legal obligation
to repay the capital sum, and thus owed Woolwich a debt, and (ii) that Woolwich had a right to be repaid, so that its cause of
action arose, at the dates on which it made the three payments which together totalled 56,998,211.
The case argued for Woolwich before Nolan J and in this court can be summarised as follows. (i) The primary submission
of Mr Gardiner QC is that a subject who makes a payment in response to an unlawful demand for tax, or any like demand, ie a
demand for which there is no basis in law, immediately acquires a prima facie right to be repaid the amount so paid. This is a
distinct head of the law of restitution. (ii) Alternatively, Woolwich made payment under duress, and thus had an immediate right
to claim repayment.
The response of Mr Grabiner QC for the Crown, before this court as before Nolan J, is: (i) there is no such general principle
as that suggested by Woolwich; (ii) the facts of this case do not come within the established principles of restitution of sums paid
under duress; (iii) thus the Revenue were under no obligation to make any repayment, and did so only as a matter of grace; (iv)
alternatively, Nolan J was correct to find an implied agreement that the Revenue would hold the moneys paid by Woolwich as a
deposit on account of tax which might be held 582 to have been due at the dates of payment. The judge held that on this basis
Woolwich only became entitled to reclaim the money once the risk that the tax might be due was set at nought and thus interest
only began to run from that date, ie the date of Nolan Js judgment in the judicial review proceedings (see [1989] STC 111 at 120,
[1989] 1 WLR 137 at 148).
 The principal issue is therefore: is there such a general principle of law as that for which Woolwich contends? If so, what, if
any, are the limitations on the operation of that principle? This issue, which is obviously of considerable importance, has been
much discussed by distinguished academic commentators, but has not been directly the subject of any modern decided case.
I think it right to draw a distinction between cases in which a plaintiff claims restitution, ie repayment from a defendant who
is a private citizen or body or who, although acting on behalf of a public body, had received the payment in the course of a
commercial transaction between them, and cases in which the defendant is an instrument or officer of central or local
government, exercising a power to require payment of a tax, customs duty, licence fee or other similar impost. Cases in the first
category are clearly part of ordinary private law. Cases in the second category, however, seem to me properly to fall in the sphere
of what is now called public law. The main distinguishing feature between the two types of case is that in the public law cases
there is no question of the defendant having given, offered or purported to give any consideration for the payment by the plaintiff.
The payment is required under what purports to be a statutory power entitling the defendant to claim such a payment, sometimes
in return for a licence, in other cases simply as part of a general power to levy a tax or customs duty.
The argument which counsel for Woolwich advances in support of his primary proposition that, since the Revenue was not
empowered to demand or receive the payments of tax under the invalid 1986 regulations, it was repayable immediately to
Woolwich when paid, is based in part on general principle, and in part on previous decided cases. I will examine each in turn.

GENERAL PRINCIPLES
Mr Gardiner for Woolwich starts by reminding us of the words of the fourth paragraph of s 1 of the Bill of Rights (1688):

That levying money for or to the use of the Crowne by [pretence] of prerogative without grant of Parlyament for
longer time or in other manner than the same is or shall be granted is illegal.

As to the general principles of the law of restitution, in a well-known passage in his judgment in Moses v Macferlan (1760) 2
Burr 1005 at 1012, [15581774] All ER Rep 581 at 585 Lord Mansfield CJ described the basis of the action for money had and
received, ie for restitution:

it lies for money paid by mistake; or upon a consideration which happens to fail; or for money got through
imposition, (express, or implied;) or extortion; or oppression; or an undue advantage taken of the plaintiffs situation,
contrary to laws made for the protection of persons under those circumstances. In one word, the gist of this kind of action
is that the defendant, upon the circumstances of the case, is obliged by the ties of natural justice and equity to refund the
money.

In his speech in the House of Lords in Fibrosa Spolka Akcyjna v Fairbairn Lawson Combe Barbour Ltd [1942] 2 All ER 122 at
135, [1943] AC 32 at 61 Lord Wright said:
583

The claim was for money paid for a consideration which had failed. It is clear that any civilised system of law is
bound to provide remedies for cases of what has been called unjust enrichment or unjust benefit, that is, to prevent a man
from retaining the money of, or some benefit derived from, another which it is against conscience that he should keep.
Such remedies in English law are generically different from remedies in contract or in tort, and are now recognised to fall
within a third category of common law which has been called quasi-contract or restitution.

Lord Wright quoted the passage from the judgment of Lord Mansfield CJ which I have set out above (see [1942] 2 All ER 122 at
136, [1943] AC 32 at 62).
Clearly in the circumstances of the present case there was no question of consideration for the payment by Woolwich to the
Revenue. The question is, to use Lord Mansfield CJs phraseology: was the Revenues demand for the tax an implied
imposition, or did the Revenue take an undue advantage of Woolwich? Is it obliged by the ties of natural justice and equity to
refund the money?

DECIDED CASES
There have been decisions in what is now recognised as the field of public law in which a plaintiff who has paid to an officer
of government or of some other public body a sum which he was under no legal obligation to pay has successfully claimed
repayment of that sum. The cases are by no means unanimous, nor indeed sometimes clear, as to the principle under which such
repayment was ordered by the court. In some of the cases it is said that the right to recover arose because the unjustified demand
for payment was made by the officer under colour of his office. This archaic phrase is at best vague and at worst almost
meaningless at the present day. Certainly of itself I find it unhelpful.
However, in his judgment in the decision of the High Court of Australia in Mason v New South Wales (1959) 102 CLR 108
at 140 Windeyer J gave a most helpful definition of one category of the cases with which we are concerned:

Yet, although all forms of extortion will ground an action for money had and received, all forms of extortion by
officials are not properly described as being by colour of office. Extortion by colour of office occurs when a public officer
demands and is paid money he is not entitled to, or more than he is entitled to, for the performance of his public duty.
Examples of such exactions are overtolls paid to the keepers of toll-bridges and turnpikes, excessive fees demanded by
sheriffs, pound-keepers, & c. The parties were not on an equal footing; and generally the payer paid the sum demanded in
ignorance that it was not due.

Some of the textbook writers have referred to cases in this category as withholding cases. Whatever description is applied to
the cases, there have been over the past two centuries a number of decisions of the courts in which the plaintiffs have succeeded
in recovering the money they had paid in circumstances which fell within Windeyer Js definition. These cases include the
following.
Irving v Wilson (1791) 4 Term Rep 485, 100 ER 1132. The plaintiffs goods were unlawfully seized by a Revenue officer,
who refused to return the goods without payment of a fee. The plaintiff paid and recovered the goods. He then sued to recover
the payment and succeeded.
Morgan v Palmer (1824) 2 B & C 729, 107 ER 554. The mayor of a borough improperly charged a fee for renewing a
publicans licence. The fee was recoverable.
Maskell v Horner [1915] 3 KB 106, [191415] All ER Rep 595, a decision of the 584 Court of Appeal. For many years the
plaintiff had carried on business in a market. The market owner each year demanded a toll from the plaintiff under threat of
seizure of his goods if he refused to pay. On the first occasion the plaintiff objected and the market owner did seize the goods.
The plaintiff thereon paid the toll in order to secure the release of the goods. In later years the plaintiff paid under protest. After
12 years it was held in other proceedings that the defendant had no right or power to demand the toll, which was therefore
unlawful. The plaintiff brought an action to recover the amounts he had paid. This court held that he was entitled to recover the
amount of tolls he had paid except those which were barred by the Statute of Limitations, ie he was entitled to recover for the
preceding six years.
 In his judgment Lord Reading CJ said ([1915] 3 KB 106 at 118, [191415] All ER Rep 595 at 597):

Upon the second head of claim the plaintiff asserts that he paid the money not voluntarily but under the pressure of
actual or threatened seizure of his goods, and that he is therefore entitled to recover it as money had and received. If the
facts proved support this assertion the plaintiff would, in my opinion, be entitled to succeed in this action. If a person with
knowledge of the facts pays money, which he is not in law bound to pay, and in circumstances implying that he is paying
voluntarily to close the transaction, he cannot recover it. Such a payment is in law like a gift, and the transaction cannot be
reopened. If a person pays money, which he is not bound to pay, under the compulsion of urgent and pressing necessity or
of seizure, actual or threatened, of his goods he can recover it as money had and received. The money is paid not under
duress in the strict sense of the term, as that implies duress of person, but under the pressure of seizure or detention of
goods which is analogous to that of duress. Payment under such pressure establishes that the payment is not made
voluntarily to close the transaction The payment is made for the purpose of averting a threatened evil and is made not
with the intention of giving up a right but under immediate necessity and with the intention of preserving the right to
dispute the legality of the demand

Later, his Lordship said ([1915] 3 KB 106 at 121122, [191415] All ER Rep 595 at 599):

There is no doubt that if a person pays in an action or under threat of action the money cannot be recovered by him, as
the payment is made to avoid the litigation to determine the right to the money claimed. Such payment is not made to keep
alive the right to recover it, inasmuch as the opportunity is thus afforded of contesting the demand, and payment in such
circumstances is a payment to close the transaction and not to keep it open. Even if the money is paid in the action
accompanied by a declaration that it is paid without prejudice to the payers right to recover it, the payment is a voluntary
payment, and the transaction is closed. (See Brown v. MKinally ((1795) 1 Esp 279, 170 ER 356).) It is argued that as
unpaid tolls can be recovered by distress levied upon the goods of the person who fails to pay, the seizure is to be regarded
like the issue of a writ, and therefore that a payment of tolls on seizure must be treated as a voluntary payment. I cannot
agree with this contention. When goods are seized, the owner can only relieve them from seizure by payment. He has no
opportunity of contesting the right to demand tolls from him except by allowing the seizure and detention of his goods to
continue, or by making payment to protect them.
585

Buckley LJ quoted a dictum of Parke B in Atlee v Backhouse (1838) 3 M & W 633 at 650, 150 ER 1298 at 1305:

If my goods have been wrongfully detained and I pay money simply to obtain them again, that being paid under a
species of duress or constraint, may be recovered back.

(See [1915] 3 KB 106 at 124, [191415] All ER Rep 595 at 600.) Buckley LJ then commented ([1915] 3 KB 106 at 124, [1914
15] All ER Rep 595 at 601):

The same is true, I think, when payment is made not to release goods seized but to intercept the threat to seize them.
When the defendant demanded payment of the plaintiff, the latter, if he had refused payment, exposed himself to the
seizure and sale, rightfully or wrongfully, of his goods. When he made payment to escape such seizure and sale, the
payment was, I think, within Parke B.s words, not a voluntary payment. Further, if there be added to the above facts the
further fact that the party making the payment protests that the money is being wrongfully taken from him, a further factor
is added which goes to show that the payment was not voluntary.

Pickford LJ gave judgment to the same effect.

A-G v Wilts United Dairies Ltd (1921) 37 TLR 884 was another decision of this court. Under wartime legislation, the
defendant company, who were milk wholesalers, applied for a licence entitling them to purchase milk outside the area where they
were based. The food controller required them to pay 2d per gallon for the grant of the licence. The defendants agreed to the
payment and the licence was granted. The defendants then refused to make any payment. The Attorney General claimed from
them the amount due under the agreement. This court held that the imposition of the charge was not within the statutory powers
of the food controller, and thus could not be justified. The defendants therefore could not be required to make payment despite
their agreement. Atkin LJ, in a judgment agreeing with Bankes and Scrutton LJJ, said (at 887):

It makes no difference that the obligation to pay the money is expressed in the form of an agreement. It was illegal for
the Food Controller to require such an agreement as a condition of any licence. It was illegal for him to enter into such an
agreement. The agreement itself is not enforceable against the other contracting party; and if he had paid under it he could,
having paid under protest, recover back the sums paid, as money had and received to his use.

The decision of this court was upheld in the House of Lords (see 91 LJKB 897).
The same result followed in another decision of this court, T & J Brocklebank Ltd v R [1924] 1 KB 647, which expressly
followed the decision in A-G v Wilts United Dairies Ltd. That was a case, also under wartime legislation, in which the shipping
controller had required an unlawful payment as a condition of a licence to the plaintiffs to sell one of their ships to a foreign firm.
Mr Gardiner makes the point that, although both A-G v Wilts United Dairies Ltd and T & J Brocklebank Ltd v R were cases
within Windeyer Js definition in Mason v New South Wales (1959) 102 CLR 108 at 140, nevertheless the passage which I have
quoted from Atkin LJs judgment is of wider application. To this Mr Grabiner answers that if that be so, Atkin LJs observation
in the circumstances was not part of his reasoning in the decision itself.
In a number of other cases the present parties dispute whether or not the facts 586 of the case were withholding cases, ie
within Windeyer Js definition. These cases include Dew v Parsons (1819) 2 B & Ald 562, 106 ER 471, in which the sheriff
charged an attorneys clerk for issuing warrants a sum greater than the amount he was authorised to charge. It was held that the
attorney was entitled to reclaim the balance. The defendants plea that the payment was made under a mistake of law failed.
Mr Grabiner points out correctly that in none of the three judgments is there any suggestion that the basis of the entitlement
to payment was that the attorneys clerk paid under compulsion. Indeed the reasoning in the second judgment, that of Holroyd J,
is in the following terms (2 B & Ald 562 at 566567, 106 ER 471 at 473):

If the defendant has paid more money than the sheriff is allowed by law to demand as his fee, the sheriff cannot retain
that surplus, and must (if required so to do) return it to the defendant.

Mr Gardiner therefore argues that this case is one which does not fall within Windeyer Js definition.
In Steele v Williams (1853) 8 Exch 625, 155 ER 1502 the defendant, a parish clerk, was entitled to charge fees for making
certified copies of extracts from the parish registers. The plaintiff, an attorneys clerk, wished to examine the registers and to
make his own extracts, which would not be certified by the defendant. Nevertheless the defendant said that the charge would be
the same whether the plaintiff made the extracts himself or was given certificates. After the plaintiff had made the extracts he
desired, the defendant demanded a charge from him which the plaintiff paid. The attorney then sought to recover it and
succeeded.
In his judgment Parke B said (8 Exch 625 at 630, 155 ER 1502 at 1504):

I think that, upon the true construction of the evidence, the payment in this case was not voluntary, because, in effect,
the defendant told the plaintiffs clerk, that if he did not pay for certificates when he wanted to make extracts, he should not
be permitted to search.

Later, Parke B said (8 Exch 625 at 631, 155 ER 1502 at 1505):

Therefore, in the first place, I think that there is evidence that this payment was not voluntary, but necessary for the
exercise of a legal right; and further, I by no means pledge myself to say that the defendant would not have been guilty of
extortion in insisting upon it, even without that species of duress, viz. the refusal to allow the party to exercise his legal
right, but colore officii. Dew v. Parsons certainly goes to that extent. But it is not necessary to decide this case on that
ground.

Platt B agreed. Martin B said (8 Exch 625 at 632633, 155 ER 1502 at 1505):

As to whether the payment was voluntary, that has in truth nothing to do with the case. It is the duty of a person to
whom an Act of Parliament gives fees, to receive what is allowed, and nothing more. This is more like the case of money
paid without considerationto call it a voluntary payment is an abuse of language. If a person who was occupied a
considerable time in a search gave an additional fee to the parish clerk, saying, I wish to make you some compensation for
your time, that would be a voluntary payment. But where a party says, I charge you such a sum by virtue of an Act of
Parliament, it matters not whether the money is paid before or after the service rendered; if he is not entitled to claim it,
the money may be recovered back.
587

Martin B was thus not basing his judgment on facts which fall within Windeyer Js definition, though it seems that the other two
judges probably were.
Another case in this category was Queen of the River Steampship Co Ltd v River Thames Conservators (1899) 15 TLR 474.
That decision is not binding on us, and for my part I do not think it adds anything to what is contained in the decisions to which I
have already referred.
We were referred also by Mr Gardiner to two cases upon which he strongly relies in which the plaintiff recovered payments
he had made in circumstances which undoubtedly do not fall within Windeyer Js definition. The first was Campbell v Hall
(1774) 1 Cowp 204, [15581774] All ER Rep 252, another decision of Lord Mansfield CJ. The customs collector, without any
lawful authority, imposed on the export of sugar from the island of Grenada a customs duty. The plaintiff paid and then brought
action to recover back the amount he had paid. He was held entitled to recover. Lord Mansfield CJs reasoning was contained in
one short passage in his judgment (1 Cowp 204 at 205, 98 ER 1045 at 10451046):

The action is an action for money had and received; and it is brought upon this ground; namely that the money was
paid to the defendant without any consideration; the duty, for which, and in respect of which he received it, not having been
imposed by lawful or sufficient authority to warrant the same.

The second case is the decision of the Divisional Court in Hooper v Exeter Corp (1887) 56 LJQB 457. The corporation had
power under a private Act to charge dues for the landing of stone, but there was an exception that dues were not payable on
limestone intended to be burned into lime. The plaintiff, who landed considerable quantities of limestone to burn into lime, was
unaware of this exception. On discovering it, he reclaimed the dues he had paid on stone to be burned into lime. The corporation
refused but he succeeded in his claim. Morgan v Palmer (1824) 2 B & C 729, 107 ER 554 was cited during the course of the
argument. In his judgment Lord Coleridge CJ said (56 LJQB 457 at 458):

From the case cited in the course of argument it is shewn that the principle has been laid down that, where one exacts
money from another and it turns out that though acquiesced in for years such exaction is illegal, the money may be
recovered as money had and received, since such payment could not be considered as voluntary so as to preclude its
recovery. I am of the opinion that that principle should be adopted here, and that accordingly the plaintiff is entitled to
recover his money on the ground that he has paid it involuntarily.

Smith J agreed and referred also to the decision in Steele v Williams (1853) 8 Exch 625, 155 ER 1502.
The proposition set out by Lord Coleridge CJ undoubtedly is much wider than that relating merely to the cases which fall
within Windeyer Js definition, and thus supports Mr Gardiners argument.
We were on the other hand referred to a number of cases which tend to suggest that there is no such general principle as that
submitted on behalf of Woolwich. The first is Slater v Burnley Corp (1888) 59 LT 636. The corporation demanded and the
plaintiff paid water rates for some houses based on the gross value of the properties. The corporation were only empowered to
charge rates based on the net value. The plaintiff claimed back the balance. He succeeded in the county court but failed on
appeal to the Divisional Court. Steele v Williams and Hooper v 588 Exeter Corp were referred to in the argument but not in either
of the judgments. The defence which succeeded was that the payment was voluntary. It is set out most clearly in the judgment of
Wills J (at 639):

In my opinion, the payment in this case was a voluntary payment. The respondent gave way and paid. It seems to me
in these circumstances that it is idle to say that there is anything like duressthere was nothing in the nature of a threat
used; it is simply the ordinary case of a person raising a contention when a demand is made upon him. This is not
sufficient to constitute duress, so as to prevent a payment being a voluntary one. It seems to me, therefore, in this case that
the contention of the appellants on this ground is well founded, and that on this ground the appeal must succeed.

A case on which Mr Grabiner much relies is the decision of Walton J in William Whiteley Ltd v R (1909) 101 LT 741, [190810]
All ER Rep 639. The employers of male servants were required to take out licences for such employees, for which fees were
payable to the Revenue. Whiteley employed a number of men to prepare and serve meals to its shop assistants. The Revenue
claimed that these men were male servants, but Whiteley consistently disputed this. Nevertheless, for six years under protest
Whiteley paid the fees claimed by the Revenue. In the seventh year it refused to pay. The Revenue took proceedings to recover
the fees for the seventh year, but Whiteley was held to be correct in its contention that the employees were not male servants
within the proper interpretation of the relevant regulations. Whiteley then sought to recover the moneys it had paid during the
past six years, but was held not entitled to do so. Walton J held that it was not entitled to recover because it had paid voluntarily,
not under compulsion. He held, correctly in my view, that the facts did not show anything in the nature of duress or a demand for
payment colore officii within Windeyer Js definition. Therefore he decided that since Whiteley had not taken the step in earlier
years of refusing to make payment and arguing the matter in court, it must be taken to have paid voluntarily.
In National Pari-Mutuel Association Ltd v R (1930) 47 TLR 110 the company, without objection, paid betting duty to
operate a totalisator. Later another company, on identical facts, brought proceedings in which it was held not liable to pay the
duty. The plaintiff company now brought an action for repayment of the duty it had paid. They failed in this court, on the ground
that the payment had been made as a result of a mistake of law made by the company, and thus on general principle the amount
paid could not be recovered. Scrutton LJ, in a judgment with which Greer and Romer LJJ agreed, said (at 111):

What was the mistake which the appellants had made in this case? They knew all the facts, their own rules, and what
they were doing with the totalisator. They had considered the Finance Act, 1926, and they had come to the conclusion that
they were liable to pay the betting tax The question of liability was one of law. It was a question of the construction of
the Act of Parliament. The Act of 1926 provided for a tax on every bet made with a bookmaker, and a bookmaker was
defined as a person receiving and negotiating bets. The appellant company carried on business of that class The
company thought that they were liable to pay the tax. After they had paid it, the House of Lords, in [A-G v Luncheon and
Sports Club Ltd [1929] AC 400], decided that a company doing similar business were not liable to the tax. Mr. Justice
Branson held that the mistake was one of law, and that the company could not recover. That decision was right
589

In Twyford v Manchester Corp [1946] 1 All ER 621, [1946] Ch 236 the corporation sought to charge fees to a monumental mason
for permission to work on memorials in the cemetery. The plaintiff paid fees under protest. After some time he brought an action
claiming that the corporation was not entitled to make the charges. It was held that the charges had been levied improperly, but
nevertheless the plaintiff was not entitled to recover them.
In his judgment Romer J referred to William Whiteley Ltd v R and Slater v Burnley Corp. He said of the former case that
Walton J

treated the case as one of payment under a mistake of law. I should myself have doubted whether it was a true case of
money paid under a mistake of law, because William Whiteley, Ld., on their view of the law, were not liable to pay it and,
indeed, said so. Even so, however, I respectfully agree with the rest of Walton J.s judgment, particularly with his
statement that a general rule applies, namely, the rule that, if money is paid voluntarily, without compulsion, extortion, or
undue influence, without fraud by the person to whom it is paid and with full knowledge of all the facts, it cannot be
recovered, although paid without consideration, or in discharge of a claim which was not due or which might have been
successfully resisted. In my judgment that covers the present case in which, having regard to the evidence, the principle of
duress colore officii cannot prevail.

(See [1946] Ch 236 at 241, cf [1946] 1 All ER 621 at 627.)

In Sebel Products Ltd v Customs and Excise Comrs [1949] 1 All ER 729, [1949] Ch 409 Sebel Products claimed a
declaration that one of the articles they manufactured was not liable to purchase tax within the Finance Act 1947. The action was
heard on 2 July 1948, when Vaisey J granted a declaration in favour of the plaintiffs. Two months before that the plaintiffs paid
the Customs and Excise the amount of purchase tax which would have been owing if their claim had failed. They now took out a
summons for an account of the purchase tax which they had paid and for repayment of the amount due.
The Customs and Excise, basing themselves on William Whiteley Ltd v R and National Pari-Mutuel Association Ltd v R,
argued that the money had been paid voluntarily and was thus irrecoverable.
Vaisey J found that Sebel Products were entitled to recover the money paid on the ground that when they made payment to
the Customs and Excise, it was the intention of both parties, and thus there was an implied agreement, that if Sebel Products
succeeded in their action for a declaration the money would be repaid. This of course is the basis on which Nolan J had found for
Woolwich in the present case.
However, in the course of his judgment Vaisey J said ([1949] 1 All ER 729 at 731732, [1949] Ch 409 at 413):

By the Crown Proceedings Act, 1947, s. 21(1), the defendants are placed in the same position as the ordinary subjects
of the Crown and I see no reason why they should not in appropriate cases refuse to refund money paid to them voluntarily
under a mistake of law as the revenue authorities were held to be entitled to do in the case of William Whiteley, Ltd. v. R.
and National Pari-Mutuel Assocn., Ltd. v. R. At the same time I cannot help feeling that the defence is one which ought to
be used with great discretion, and that for two reasons. First, because the defendants, being an emanation of the Crown,
which is the source and fountain of justice, are, in my opinion bound to maintain the highest standards of probity and fair
dealing comparable to 590 those which the courts, which derive their authority from the same source and fountain, impose
on the officers under their control: see Re Tyler ([1907] 1 KB 865, [19047] All ER Rep 181). Secondly, because the
taxpayer, who is too often tempted to evade his liability and to keep in his own pocket money which he ought to have paid
to the revenue, will find too ready an excuse in the plea that the revenue authorities will, if they can, keep in their coffers, if
they can get it there, money which the taxpayer was under no obligation to pay to them, and they had no right to demand.
Although such an excuse would have no validity in either a court of law or in the forum of the taxpayers own conscience, I
think that, in the public interest, grounds for proffering it should, so far as possible, be avoided.

These last observations of Vaisey J find an echo in the speech of Lord Bridge in Tower Hamlets London BC v Chetnik
Developments Ltd [1988] 1 All ER 961 at 969, [1988] AC 858 at 876877, to which Mr Gardiner refers as guidance on the
general approach which taxing or rating authorities, and thus the courts, should adopt.
Chetnik Developments constructed two warehouse units under a consent granted under the London Building Acts 1930 to
1939. The consent was subject to a condition that the buildings should not be occupied until the consent of the Tower Hamlets
London Borough Council had been obtained to the proposed user. Chetnik could not say what the proposed user would be until it
had obtained a tenant for each of the warehouses. This, for some time, it failed to do. The council served a completion notice on
Chetnik under para 1 of Sch 1 to the General Rate Act 1967. Chetnik did not appeal against the notice. Accordingly from 16
November 1976 it was required to pay rates on the warehouses, although unoccupied, as if it was the occupier. Chetnik duly paid
rates until 31 March 1979, on which date the first warehouse was eventually let and occupied. The second warehouse remained
unoccupied until November 1980.
It was only after 31 March 1979 that Chetnik appreciated that para 2 of Sch 1 to the 1967 Act provides that no rates shall be
payable on an unoccupied hereditament under that schedule for any period during which the owner is prohibited by law from
occupying the hereditament or allowing it to be occupied. Chetnik therefore declined to pay any further rates on the second
warehouse. It argued that until it had obtained consent to the proposed user of the warehouse, it was prohibited by law from
allowing it to be occupied. This contention was upheld in proceedings brought by the London borough council in the
magistrates court, and the council did not appeal. Chetnik then sought to reclaim the amount of rates it had paid on both
warehouses for the period from November 1976 to 31 March 1979.
The claim was made under s 9 of the 1967 Act, which provides, so far as is material:
 where it is shown to the satisfaction of a rating authority that any amount paid in respect of rates, and not
recoverable apart from this section, could properly be refunded on the ground that (e) the person who made a payment
in respect of rates was not liable to make that payment, the rating authority may refund that amount or a part thereof.

It was conceded that this gave the council a discretion to decide whether to repay the amount of rates which Chetnik had not been
liable to pay. The council decided not to make any repayment. Chetnik applied for judicial review of that 591 decision. It failed
at first instance (see [1987] RVR 87), but succeeded on appeal to the Court of Appeal (see [1987] 1 WLR 593), and the councils
appeal to the House of Lords was dismissed.
The case was of course one in which the power to repay was contained in the statute. Nevertheless the issue before the court
was whether the reasons which the council gave for exercising its discretion not to repay were proper and valid reasons, or
whether they did not justify the exercise of the discretion to refuse repayment. Although the decision is of course direct authority
in relation to the General Rate Act 1967, in his speech with which the remainder of their Lordships all agreed, Lord Bridge based
his decision on general principles. Mr Gardiner submits, and I agree, that his Lordships observations apply as much to an
authority exercising a power to levy taxes as they do to a rating authority.
Lord Bridge said ([1988] 1 All ER 961 at 967, [1988] AC 858 at 873):

In general terms it is, of course, obvious that the section authorises the refund of rates overpaid. But, to articulate the
apparent principle underlying the section more precisely it is surely envisaged in each of the five cases where the section
authorises refunds of amounts paid in respect of rates which would otherwise be irrecoverable that the ratepayer who has
paid rates in compliance with a demand note which he might have successfully resisted may appropriately be relieved of
the consequences of his oversight.

Lord Bridge then shortly described the five situations in which under s 9 of the 1967 Act a rating authority may decide to make a
repayment. He said ([1988] 1 All ER 961 at 967968, [1988] AC 858 at 874):

The common feature of all the five cases is an error or oversight on the part of the ratepayer. Only in the case of para
(b) is it necessary to predicate any error on the part of the rating authority, which may in any event have been no more than
a clerical error. In none of the other cases is the rating authority likely to have been aware of the ratepayers error which
occasioned the overpayment. To these considerations must be added the important qualification that s 9(2)( b) precludes
any refund of overpaid rates when the underlying error affected current general practice, so that either ratepayers generally
or all ratepayers in the class affected by the error are in the same position. In each case, except para ( a), where the obstacle
to recovery is the conclusive evidential effect of an unchallenged entry in the valuation list, the amount paid would be
irrecoverable apart from the section because paid under a mistake of law. In each case because of his mistake the
individual ratepayer has borne more than his proper share of the rate burden. In each case the section envisages that the
amount overpaid in a past year may be refunded in a future year. The rule that money paid under a mistake of law is
irrecoverable is said to stem from the principle that there must be an end to litigation. But there is an instructive line of
authority showing circumstances in which the court will not permit the rule to be invoked. In Ex p James, re Condon
(1874) LR 9 Ch App 609, [187480] All ER Rep 388 a judgment creditor had levied execution in satisfaction of a
judgment debt against a debtor subsequently adjudicated bankrupt. The judgment creditor later paid over the proceeds of
the execution to the trustee in bankruptcy mistakenly believing that he was legally obliged to do so. The trustee in
bankruptcy claimed to retain this sum for the benefit of the general body of unsatisfied creditors on the ground that it had
been paid under a mistake of law. Rejecting this claim, James LJ said (LR 9 Ch App 609 at 614, [187480] All ER 388 at
390): I am of the opinion that a trustee in bankruptcy is an 592 officer of the Court. He has inquisitorial powers given
him by the Court, and the Court regards him as its officer, and he is to hold money in his hands upon trust for its equitable
distribution among the creditors. The Court, then, finding that he has in his hands money which in equity belongs to
someone else, ought to set an example to the world by paying it to the person really entitled to it. In my opinion, the Court
of Bankruptcy ought to be as honest as other people. Ex p Simmonds, re Carnac (1885) 16 QBD 308, [18815] All ER
Rep 895 was another case of a trustee in bankruptcy claiming to retain money paid to him under a mistake of law. Lord
Esher MR said (16 QBD 308 at 312, cf [18815] All ER Rep 895 at 896897): When I find that a proposition has been
laid down by a Court of Equity or by the Court of Bankruptcy which strikes me as a good, a righteous, and a wholesome
one, I eagerly desire to adopt it. Such a proposition was laid down by James, L.J., in Ex parte James ((1874) LR 9 Ch App
609, [187480] All ER Rep 388). A rule has been adopted by Courts of law for the purpose of putting an end to litigation,
that, if one litigant party has obtained money from the other erroneously, under a mistake of law, the party who has paid it
cannot afterwards recover it. But the Court has never intimated that it is a high-minded thing to keep money obtained in
this way; the Court allows the party who has obtained it to do a shabby thing in order to avoid a greater evil, in order that
is, to put an end to litigation. But James, L.J., laid it down in Ex parte James that, although the Court will not prevent a
litigant party from acting in this way, it will not act so itself, and it will not allow its own officer to act so. It will direct its
officer to do that which any high-minded man would do, viz., not to take advantage of the mistake of law.

Later Lord Bridge said ([1988] 1 All ER 961 at 969, [1988] AC 858 at 876877):

So it emerges from these authorities that the retention of moneys known to have been paid under a mistake at law,
although it is a course permitted to an ordinary litigant, is not regarded by the courts as a high-minded thing to do, but
rather as a shabby thing or a dirty trick and hence is a course which the court will not allow one of its own officers,
such as a trustee in bankruptcy, to take.

He said a little later ([1988] 1 All ER 961 at 970, [1988] AC 858 at 877):

I in no way dissent from this reasoning [ie that of the Court of Appeal], but I should myself have been content to
derive the same conclusion from the broader consideration that Parliament must have intended rating authorities to act in
the same high-principled way expected by the court of its own officers and not to retain rates paid under a mistake of law,
or on an erroneous valuation (s 9(1)(a)), unless there were, as Parliament must have contemplated there might be in some
cases, special circumstances in which a particular overpayment was made such as to justify retention of the whole or part of
the amount overpaid.

There have, of course, been cases in other common law jurisdictions both of the payment of taxes later held to be invalid or
unconstitutional and of fees or other duties demanded under some threat or duress. I wish to refer to three such cases.
The first is Sargood Bros v Commonwealth (1910) 11 CLR 258, a decision of the High Court of Australia. Customs duty
was demanded and paid under a change in legislation which was proposed and announced but which at the relevant time had not
yet come into force. It was held that the amount paid was recoverable as not having been paid voluntarily. OConnor J said (at
276):
593
 The first ground is taken that the payment was voluntary. In one sense it was. It was in fact made without protest and
in the ordinary course of Customs business. But it was paid with the knowledge on both sides that Customs control over
goods imported may be exercised in support of illegal as well as of legal demands of duty. The principle of law applicable
in such cases is well recognized. Where an officer of Government in the exercise of his office obtains payment of moneys
as and for a charge which the law enables him to demand and enforce, such moneys may be recovered back from him if it
should afterwards turn out that they were not legally payable even though no protest was made or question raised at the
time of payment. Payments thus demanded colore officii are regarded by the law as being made under duress. The
principle laid down in Morgan v Palmer ((1824) 2 B & C 729, 107 ER 554), Steele v Williams ((1853) 8 Exch 625, 155 ER
1502) and adopted in Hooper v Exeter Corporation ((1887) 56 LJQB 457) clearly establish that proposition.

It will be seen that in this passage OConnor J was using the expression colore officii in a much wider sense than that used by
Windeyer J and was enunciating a principle which effectively was the same as that for which Woolwich is contending in the
present case.
A year later in Atchison Topeka and Santa Fe Rly Co v OConnor (1912) 223 US 280, a decision of the United States
Supreme Court on error to the US Circuit Court for the District of Colorado, the plaintiff was held entitled to recover money paid
as tax under a law which was later held unconstitutional, and which he had paid under threat of distress and under protest.
Holmes J said (at 285286):

It is reasonable that a man who denies the legality of a tax should have a clear and certain remedy. The rule being
established that apart from special circumstances he cannot interfere by injunction with the States collection of its
revenues, an action at law to recover back what he has paid is the alternative left. Of course we are speaking of those cases
where the State is not put to an action if the citizen refuses to pay. In these latter he can interpose his objections by way of
defence, but when, as is common, the State has a more summary remedy, such as distress, and the party indicates by protest
that he is yielding to what he cannot prevent, courts sometimes perhaps have been a little too slow to recognize the implied
duress under which payment is made. But even if the State is driven to an action, if at the same time the citizen is put at a
serious disadvantage in the assertion of his legal, in this case of his constitutional, rights, by defence in the suit, justice may
require that he should be at liberty to avoid those disadvantages by paying promptly and bringing suit on his side. He is
entitled to assert his supposed right on reasonably equal terms.

Holmes J then referred to disadvantages which the taxpayer would suffer under the relevant statute if he did not pay, and
continued (at 286287):

As appears from the decision below, the plaintiff could have had no certainty of ultimate success, and we are of
opinion that it was not called upon to take the risk of having its contracts disputed and its business injured and of finding
the tax more or less nearly doubled in case it finally had to pay. In other words, we are of opinion that the payment was
made under duress.

It follows that this decision also was made on facts very similar to those of the present case, and on a principle similar to that for
which Woolwich is arguing.
594
The third case is one to which I have already referred, the decision of the High Court of Australia in Mason v New South
Wales (1959) 102 CLR 108. The plaintiffs were carriers of goods by road based in the State of Victoria. Under New South Wales
legislation they required a licence to entitle them to carry goods in their vehicles into that state. The New South Wales authorities
demanded the payment of a fee for the issue of the licence. The plaintiffs paid under protest. There was some tenuous evidence
that the plaintiffs believed that if they did not pay the fee and nevertheless ran their vehicles into New South Wales they might be
seized. After some years it was decided in another case that the requirement of the licence fee was unconstitutional. The
plaintiffs brought action to recover the fees they had paid and were held by a majority entitled to succeed. Windeyer J, who gave
the last judgment, said (at 140):

Extortion by colour of office occurs when a public officer demands and is paid money he is not entitled to, or more
than he is entitled to, for the performance of his public du.

Both he and Menzies J held that on the facts the money had been demanded by the state officials bona fides, under the law as
they understood it to be, and thus not within his restricted definition. Windeyer J said (at 142143):

[The plaintiffs] must establish that there was, in a legal sense, compulsion by something actually done or
threatened, something beyond the implication of duress arising from a demand by persons in authority, which suffices in a
true colore officii case. Further the plaintiffs must establish that they actually paid because of this compulsion, and not
voluntarily despite it. Voluntary payment has a special meaning here. Clearly it does not import a payment by way of
gift. And equally clearly it means more than payment willingly, in the sense of without reluctance In my view, a
payment may be said to be voluntary, in this context and for present purposes, when the payer makes it deliberately with a
knowledge of all relevant facts, and either being indifferent to whether or not he be liable in law, or knowing, or having
reason to think, himself not liable, yet intending finally to close the transaction It seems plain that a man compelled by
pressure colore officii or any other form or duress may yet say well I have really no option but to pay, nevertheless I will
not dispute the matter further. I will pay to put an end to the question.

Dixon CJ and Kitto J went rather further. The former said (at 117):

I have not been able completely to reconcile myself to the view that if the weight of a de facto governmental authority
manifested in a money demand is not resisted although it is incompatible with s. 92 [of the Constitution] the money
belongs to the Crown unless the payment was the outcome of the actual threatened or apprehended withholding of
something to which the payer was entitled or the actual threatened or apprehended impeding of him in the exercise of some
right or liberty. But English authority seems now to say that moneys paid to the Crown as and for taxes cannot be
recovered from the Crown upon its turning out that the moneys were not exigible notwithstanding that they were demanded
by the Crown, unless the circumstances were such that they would be recoverable as between subject and subject, exempli
gratia as involuntary payments or payments made under a mistake of fact. See William Whiteley Ltd. v. The King ((1909)
101 LT 741, [190810] All ER Rep 639); National Pari-Mutuel Association Ltd. v. The King ((1930) 47 TLR 110), and
Sebel Products Ltd. v. Commissioners of Customs and Excise ([1949] 1 All ER 729, [1949] Ch 409)
595

However, he held that the plaintiffs were entitled to recover because of the implied threat to seize the plaintiffs vehicles if they
did not pay. Kitto J said (at 125):
 The general principle to be considered is that which Pollock called the common principle that if a man chooses to
give away his money, or to take his chance whether he is giving it away or not, he cannot afterwards change his mind; but
it is open to him to show that he really had no choice: Principles of Contract (13th edn, 1950, p 481). The defendant
said that the plaintiffs had ample choice. They might defy the State of New South Wales, entering its territory and using its
roads in their inter-State journeys without regard to its statute, pinning their faith to s. 92 as a guarantee that they would
emerge scatheless from the enterprise. But when Pollock referred to a choice he was using the language of practical affairs.
He meant a free choice, uninfluenced by compulsion of any sort. Hodges J. expressed the conception in Kelly v. The King
((1902) 27 VLR 522 at 532): The expression voluntary payment does not mean a payment which the petitioner or any
other person wishes to make. In the case of many persons such payments never are voluntary in that sense. A voluntary
payment means at most a payment made to get rid of a liability (scil. asserted by the payee though not sustainable in law),
made with a free exercise of the will, where no advantage is taken of the position of the person or the situation of his
property. An actual or threatened seizure or detention of the payers property has often been the feature relied upon as
showing that there really was no choice. But other circumstances may show it also.

Kitto J then referred to two other earlier decisions of the United States Supreme Court, Maxwell v Griswold (1850) 51 US (10
How) 242 and Robertson v Frank Bros Co (1889) 132 US 17, and quoted the judgment in the latter case as follows (132 US 17 at
23):

When such duress [namely moral duress not justified by law] is exerted under circumstances sufficient to influence the
apprehensions and conduct of a prudent business man, payment of money wrongfully induced thereby ought not to be
regarded as voluntary. But the circumstances of the case are always to be taken into consideration. When the duress has
been exerted by one clothed with official authority, or exercising a public employment, less evidence of compulsion or
pressure is required,as where an officer exacts illegal fees, or a common carrier excessive charges. But the principle is
applicable in all cases according to the nature and exigency of each.

Kitto J continued (102 CLR 108 at 126):

These observations, accurately reflecting, as I believe they do, the common law of England, seem to me to have
special force in the case of a payment made to a government in order to obviate adverse consequences which a statute
invalidly purports to provide as the alternative.

Kitto J concluded (at 129):

I do not myself feel justified in attaching much weight to the tenuous evidence upon which we were invited to find that
the plaintiffs made their payments because of apprehensions induced by words or conduct of State officials that vehicles
would or might be seized and detained under s. 47 [of the Justices Act 19021955(NSW)]. My judgment rests upon the
view that the plaintiffs had quite enough compulsion upon them from the terms of 596 the Act itself, apart altogether from
anything that may have been said or done by officers of government. Under that compulsion they parted with their money
it was still their money that they parted with, and there is nothing to account for their parting with it except the pressure
they were under. In my opinion they are entitled by law to have it back.

It seems that the reasoning of Menzies and Windeyer JJ in that case would not entitle Woolwich to succeed on the facts of the
present case, but the principle enunciated by Kitto J would support Woolwichs propositions as probably would have Dixon CJ.
I should also refer to a decision of the Court of Session, in which the issues canvassed were similar, but not identical, to
those before us. In Glasgow Corp v Lord Advocate 1959 SC 203, the corporation sued the Customs and Excise Commissioners
for a declarator that purchase tax was not chargeable on stationery manufactured in its own printing department, and for
repayment of purchase tax paid for the years 1951 to 1957. The First Division of the Inner House of the Court of Session
concluded that stationery manufactured for the purposes of carrying out the corporations public services was not chargeable to
purchase tax, that the corporation had paid tax in the past as a result of a mistake made by it as to the proper interpretation of s
18(1) of the Finance Act 1946, and that moneys paid under a mistake as to the proper interpretation of a statute were
irrecoverable. In their judgments both Lord Wheatley, the Lord Ordinary, and the Lord President (Clyde) specifically referred
with approval to the conclusion of this court to the same effect in National Pari-Mutuel.

THE JUDGMENT OF NOLAN J

Nolan Js judgment in this action is reported (see [1989] STC 111, [1989] 1 WLR 137). The reasons which led the judge to
his eventual conclusion are to be found in various places in his judgment. He quoted a passage from Birks Introduction to the
Law of Restitution (1985) p 295 to the following effect ([1989] STC 111 at 114, [1989] 1 WLR 137 at 140):

Where the challenge is made after payment, the effect of a declaration that the demand was unlawful is sometimes to
induce repayment on an ex gratia basis. The crucial question is, however, whether there is ever restitution as a matter of
right. The dominant modern view appears to be that the citizen who pays an ultra vires demand must establish the same
facts against the public authority as would entitle him to restitution from a private individual. This is assumed to mean that
he must in practice show that he paid under a mistake of fact or under duress, or that he made a contract for repayment in
the event that it should turn out that the money was not payable. On the other side of the line, those who pay by mistake of
law, or even under no mistake at all but simply because they despair of making their view prevail against the position taken
by the bureaucratic machine, must on this view be said to have no hope whatever of obtaining restitution.

Nolan J said ([1989] STC 111 at 117, [1989] 1 WLR 137 at 144):

Now that [the payments made by Woolwich to the Revenue] have been shown not to have been lawfully claimed, were
they immediately recoverable? The first ground on which Woolwich contends for an affirmative answer to this question is,
as I have mentioned, that the payments were immediately recoverable by virtue of a general restitutionary principle which
may be invoked by a subject who has paid money in response to a tax demand made 597 by the Crown without lawful
authority. Money thus paid is recoverable, says Woolwich, even in the absence of duress or of a mistake of fact. It is, I
think, necessarily implicit in this contention that, contrary to what Professor Birks described as the dominant modern view
in the passage which I have cited above, different considerations apply to claims by the subject against the Crown or public
authority from those which apply as between subject and subject. Woolwich relies in this connection on doubt expressed
obiter as to the correctness of this view by Dixon CJ in Mason v New South Wales (1959) 102 CLR 108 at 116. For my
part, however, I cannot find any positive support in the decided cases for the application of a general restitutionary
principle, operating in the absence of mistake of fact or duress, on claims by the subject against the Crown or public
authorities. What the decided cases do show, to my mind, is a realistic though limited acknowledgment that the ability of
the Crown or a public authority to apply duress to the subject may be very much greater than that of another subject.
The judge then referred to cases where money has been exacted from the subject under colour of office, quoting the definition of
that concept in the judgment of Windeyer J in Masons case 102 CLR 108 at 140. Nolan J commented: The principle thus
defined, clearly does not apply to the present case. I respectfully agree, and indeed counsel for Woolwich concedes that this is
correct.
The judge then contrasted the situations in Masons case and William Whiteley Ltd v R, and said ([1989] STC 111 at 118,
[1989] 1 WLR 137 at 146):

Counsel for the Crown submits that, so far as the presence or absence of duress is concerned, the present case falls on
the William Whiteley rather than the Mason side of the line. I agree. The potential cost to Woolwich of refusing to pay in
terms of damage to reputation and interest liabilities may have been commercially unacceptable but I cannot regard it as
involving duress on the part of the Revenue. The position might be different if Woolwich had paid under threat of the
Revenue taking distress proceedings without a court order under s 61 of the Taxes Management Act 1970, but as I have
said there is no evidence that such drastic and highly unusual proceedings were either threatened by the Revenue or
anticipated by Woolwich, still less that Woolwich has a reasonable apprehension of being put out of business by them.

The judge then went on to consider whether Woolwich had a right to recover the capital sum under any other head, and concluded
that it was so entitled under an implied agreement with the Revenue which arose when it made the payments, ie that if its
contentions about the invalidity of the 1986 regulations proved to be correct, the moneys would be repaid, but that the right to
repayment would only arise at the moment when the decision as to the invalidity of the 1986 regulations was made. It was for
this reason that Nolan J refused the claim by Woolwich to be awarded interest.

SUMMARY OF ARGUMENTS
What then are the arguments in favour of there being a general restitutionary principle, ie a principle of law that, if a
government body or officer makes a demand for the payment of a tax or duty which he has no legal power to require, and
payment is made in response to the demand, there is a presumption of law that the payer has an immediate right to recover the
payment? There is no doubt that such a presumption arises in the withholding cases, ie where there has been an actual or
threatened seizure of the plaintiffs goods, or the withholding of a 598 service he wishes to receive, as a sanction for the plaintiff
complying with the demand made by the official. This concept, though it may not strictly amount to duress in the sense in which
that word is understood in private law, nevertheless clearly bears a relationship to duress.
The argument for Woolwich in the present case is that it is illogical and unjust that the presumption should only arise in such
circumstances. I summarise the arguments in favour of the wider presumption as follows. (i) The Bill of Rights (1688) point, ie
that where there is no parliamentary authority for the imposition of a tax or duty, the taxing authority never was entitled to any
money paid on an invalid demand, and thus must be obliged to repay. (ii) The taxing officer or body has powers conferred by
statute to enforce his demand over and above the private citizens right to bring an action at law. In addition, in some situations,
of which this is one, the statutory provisions may put the taxpayer at a disadvantage if he does not make a payment which in the
end it proves he was obliged to make as against his position if he does make a payment which he was not obliged to make. I refer
here to what Nolan J called the interest factor. (iii) Such a general restitutionary principle must have underlain, though it was
not expressly articulated in, the decisions in Campbell v Hall (1774) 1 Cowp 204, [15581774] All ER Rep 252 (which expressly
relied on the Bill of Rights ground), Dew v Parsons (1819) 2 B & Ald 562, 106 ER 471, the judgment of Martin B and that of
Parke B, possibly obiter, in Steele v Williams (1853) 8 Exch 625, 155 ER 1502, and Hooper v Exeter Corp (1887) 56 LJQB 457.
(iv) It accords also with the general approach of the House of Lords in Tower Hamlets London BC v Chetnik Developments Ltd
[1988] 1 All ER 961, [1988] AC 858. (v) It also accords with the judgments in Australia and America of OConnor J in Sargood
Bros v Commonwealth (1910) 11 CLR 258, Holmes J in Atchison Topeka and Santa Fe Rly Co v OConnor (1912) 223 US 280
and Dixon CJ and Kitto J in Mason v New South Wales (1959) 102 CLR 108. (vi) Not least, the principle is based on a general
standard of fairness in the relations and dealings between officers and organs of government who require the payment of a tax or
customs duty, and the taxpayer.
I am persuaded by these arguments. I am clearly of the view that there should, in the interests both of justice and good
government, be such a general restitutionary principle as that for which Woolwich contends. The authorities I have quoted
support the view that such a principle is part of the common law, though it is not always by any means articulated clearly in those
decisions. I have therefore considered whether there are any authorities, binding on this court, which would compel us to adopt
the contrary view.

LIMITATIONS ON THE PRINCIPLE

Before I do so, however, I must refer to two principles which are established by the decided cases, and which are relevant to
the question. The first is, to use the words of Lord Reading CJ in Maskell v Horner [1915] 3 KB 106 at 118, [191415] All ER
Rep 595 at 597 in a passage which I have already quoted more extensively:

If a person with knowledge of the facts pays money, which he is not in law bound to pay, and in circumstances
implying that he is paying it voluntarily to close the transaction, he cannot recover it. Such a payment is in law like a gift,
and the transaction cannot be reopened.

Later in his judgment Lord Reading CJ referred to the analogous principle:

There is no doubt that if a person pays in an action or under threat of action the money cannot be recovered by him, as
the payment is made to avoid the litigation to determine the right to the money claimed.
599

(See [1915] 3 KB 106 at 121, [191415] All ER Rep 595 at 599.)

I also revert to a short passage from the judgment of Windeyer J in Mason v New South Wales (1959) 102 CLR 108 at 143,
where he said:

In my view, a payment may be said to be voluntary, in this context and for present purposes, when the payer makes it
deliberately with a knowledge of all relevant facts, and either being indifferent to whether or not he be liable in law, or
knowing, or having reason to think, himself not liable, yet intending finally to close the transaction.

The second concept is that of mistake of law. It is frequently said that a person who makes a payment under mistake of fact has a
right to recover it, while a person who makes a payment under a mistake of law has not. The subject is discussed by Lord Goff
and Professor Jones in Law of Restitution (3rd edn, 1986) ch 4, pp 117136. They argue that confusion arises from the
misunderstanding of a judgment of Lord Ellenborough CJ in Bilbie v Lumley (1802) 2 East 469, [17751802] All ER Rep 425.
The learned authors suggest that the true rationale of that decision was that a payment made in settlement of an honest claim is
irrecoverable. They comment (at 119):
 In our view the principle in Bilbie v Lumley should only preclude recovery of money which was paid in settlement of
an honest claim. Any other payment made under a mistake of law should be recoverable if it would have been recoverable
had the mistake been one of fact.

They are also of the view that many of the English cases which appear to be based on a mistake of law are, when properly
analysed, based on the principle of settlement of a claim.
In National Pari-Mutuel Association Ltd v R (1930) 47 TLR 110, a decision of this court to which I have already referred, it
is clear that the issue argued in the court below and in the Court of Appeal was whether the mistake which the company had made
when it made payment of betting duty was one of fact or of law. No reference was made to any of the earlier cases on a different
line, such as Hooper v Exeter Corp (1887) 56 LJQB 457. Branson J (46 TLR 594), and this court, held unanimously that the
mistake was of law, and thus that the company could not recover. Although the case was no doubt one in which it could equally
have been argued by the Revenue that the company had paid to close the transaction, it is short but clear authority for the
proposition that a payment under a mistake as to the interpretation of the statute is not thereafter recoverable.
However, our attention was also drawn to a passage in the judgment of Lord Denning, giving the decision of the Judicial
Committee of the Privy Council in Kiriri Cotton Co Ltd v Dewani [1960] 1 All ER 177 at 181, [1960] AC 192 at 204:

Nor is it correct to say that money paid under a mistake of law can never be recovered back. The true proposition is
that money paid under a mistake of law, by itself and without more, cannot be recovered back. JAMES, L.J., pointed that
out in Rogers v. Ingham ((1876) 3 Ch D 351 at 355, [187480] All ER Rep 209 at 211). If there is something more in
addition to a mistake of lawif there is something in the defendants conduct which shows that, of the two of them, he is
the one primarily responsible for the mistakethen it may be recovered back. Thus, if as between the two of them the duty
of observing the law is placed on the shoulders of the one rather than the otherit being imposed on him specially for the
protection of the otherthen they are not in pari delicto and the money can be recovered back; see Browning v. Morris
((1778) 2 Cowp 790 at 792, 98 ER 1364 at 1364) by LORD 600 MANSFIELD. Likewise, if the responsibility for the
mistake lies more on the one than the otherbecause he has misled the other when he ought to know betterthen again
they are not in pari delicto and the money can be recovered back; see Harse v. Pearl Life Assurance Co. ([1904] 1 KB 558
at 564, [19047] All ER Rep 630 at 634), by ROMER, L.J.

I come back therefore to consider the cases on which Mr Grabiner relies for his submission that there is no general restitutionary
principle in English law. Neither Slater v Burnley Corp (1888) 59 LT 636 nor William Whiteley Ltd v R (1909) 101 LT 741,
[190810] All ER Rep 639 is binding on us, and for my part I am inclined to think that they were both wrongly decided.
Nevertheless they have been referred to and relied on in a number of later decisions, and for that reason we should not lightly set
them aside. On one view, both decisions were based, not on a denial of any general principle, but on one or more of the possible
limitations to that principle to which I have just referred. In Slater v Burnley Corp both judges in the Divisional Court decided
that the payment was made voluntarily and thus could not be recovered. Wills J based his judgment on the principle that a
payment made to close the transaction may not be recovered. He said (59 LT 636 at 639):

The respondent gave way and paid. It seems to me in these circumstances that it is idle to say that there is anything
like duressthere was nothing in the nature of a threat used; it is simply the ordinary case of a person raising a contention
when a demand is made upon him. This is not sufficient to constitute duress, so as to prevent a payment being a voluntary
one.

In William Whiteley Ltd v R Walton J based his decision upon two principles, firstly that the payment had been made by the
company under a mistake of law and thus could not be recovered, and secondly, on the principle that the company had paid to
close the transaction. As to the first of those matters, I do not myself think that the reported facts of the case justify Walton Js
conclusion, with all respect to him. In my view, therefore, if these two decisions were correct, they should be held to be so only
because they were based on the close the transaction principle.
As I have already said, the decision of this court in National Pari-Mutuel Association Ltd v R is binding upon us and was
undoubtedly decided upon the basis that money paid under a mistake of law as to the proper interpretation of a statute is
irrecoverable. Subject to what I say below, the general restitutionary principle must therefore be subject to that limitation.
In Twyford v Manchester Corp [1946] 1 All ER 621, [1946] Ch 236 at 241 Romer J expressed the view, with which I have
just said I agree, that in the William Whiteley case it seems that the payment by the company had not been made under a mistake
of law. However, Romer J agreed with the remainder of Walton Js judgment. This case also must therefore be considered as a
close the transaction case. If it was not decided on this principle, again I believe it to have been wrongly decided.
Finally, in Sebel Products Ltd v Customs and Excise Comrs [1949] 1 All ER 729, [1949] Ch 409 Vaisey J was bound by the
decision in the National Pari-Mutuel case to hold that a payment under a mistake of law as to the proper interpretation of a
statute was irrecoverable. It is clear to me from the passage in his judgment I have already quoted that if he had not held himself
so bound, he would have found for Sebel Products on a general principle of restitution, rather than on the applied agreement
which he found was the basis on which he was able to give judgment in its favour (see [1949] 1 All ER 729 at 731732, [1949]
Ch 409 at 413).
It follows in my view that none of these authorities, even the decision of this 601 court which is binding on us, impels us to
the view that there is no general restitutionary principle. What they appear to show is that there are limitations on the application
of such a principle, both in cases where it can properly be said that the payment was made in order to close the transaction, and in
cases where the payment was made as a result of the payer being mistaken as to the proper interpretation of the relevant statute.
It is arguable that it is illogical that a general restitutionary principle should be subject to these limitations. However, in the light
of the authorities to which I have referred, it is not in my view open to us in this court to accept this argument. We are bound by
this courts previous decisions in Maskell v Horner and National Pari-Mutuel Association Ltd v R.
I therefore conclude that there is such a general principle as that for which Woolwich contends, but, at least in cases where
the matter in issue is the interpretation of the statute, that principle is subject to the two limitations to which I have just referred,
ie that the payment may not be recoverable if it was made to close the transaction or under a mistake of law. Whether these
limitations apply in a situation where what is in issue is not the proper interpretation of the statute, but an ultra vires regulation, I
doubt. But in the circumstances of this case I do not find it necessary to consider that matter further.
I have considered whether there may not be one further limitation to the general principle of restitution. This, however, is a
matter which has not been argued before us, and I therefore wish to do no more than refer to it without expressing any concluded
view. In a case such as the present where a demand is made for payment of tax and the taxpayer wishes to contend that the
regulation under which the tax is claimed is ultra vires and therefore invalid, he brings his proceedings as Woolwich did by way
of judicial review. It is, however, a normal principle of administrative law that the judicial review jurisdiction will not be
exercised where there is an alternative remedy by way of appeal, save in exceptional circumstances (see the decision of this court
in R v Chief Constable of the Merseyside Police, ex p Calveley [1986] 1 All ER 257, [1986] QB 424 and cases there cited).
If a claim is made for tax and the dispute is as to whether the particular provision of the statute has been properly
interpreted, or even more basically whether the amount assessed is too great, then the taxpayer will normally have a statutory
right of appeal. If for instance a person charged to income tax appealed to the commissioners under s 55 of the Taxes
Management Act 1970, and the commissioners concluded in the event that he had overpaid tax, then s 55(9)( b) requires that any
tax overpaid shall be repaid.
It may be that the courts would decide that where there was a clear avenue of appeal laid down by statute, that was the
course which should be taken and that a remedy by way of judicial review was not available even if the result was that the
taxpayer was repaid the capital overpayment without any interest. As I say, however, this possible limitation has not been
discussed before us, and I do not wish to express any concluded view about it.

CONCLUSION
I have considered the limitations on a general restitutionary principle in cases of payment made to close the transaction or
under a mistake of law, and the possible further limitation where there is an alternative remedy available. However, in my view
on the facts of this case none of these limitations applies. Woolwich made it quite clear from the start that it was not making
payment to close the transaction; it paid without prejudice to the argument in the judicial review proceedings that the 1986
regulations were invalid. Since Woolwich correctly asserted that invalidity from the start, it cannot be suggested that it 602 made
any payment under a mistake of law. The suggestion of an alternative statutory remedy has not been canvassed.
I would therefore hold that when Woolwich made the various payments under the ultra vires 1986 regulations, it
immediately acquired a right in law to recover the amount of those payments. It follows that it was entitled also to be paid
interest on those amounts, at an appropriate rate, from the date of payment to the date of Nolan Js judgment in the judicial
review proceedings.
I would therefore allow the appeal. It follows in my view that Woolwich is entitled to judgment for the appropriate amount
of interest, and it remains to be considered how that amount should be assessed.

RALPH GIBSON LJ. The Woolwich Building Society (Woolwich) appeals against the decision of Nolan J on 12 July 1988
([1989] STC 111, [1989] 1 WLR 137) whereby he dismissed the claim of Woolwich against the Inland Revenue Commissioners
(the Revenue). The claim was for interest on sums of money, totalling 56,998,211, which Woolwich had paid to the Revenue in
respect of claims to tax, which claims were unlawful because they were based on regulations which were ultra vires and void. No
issue arose as to recovery of the capital sum of 56,998,211 because that had been repaid. The amount claimed for interest,
which would require to be assessed by the court if not agreed, is put by Woolwich at about 7.8m.
The appeal raises issues of great public importance and, in particular, the relationship of the constitutional principle, namely
that there can be no taxation without the authority of Parliament, to the rules of law governing recovery from the Crown of
money paid in respect of an unlawful demand for tax.

THE JUDICIAL REVIEW PROCEEDINGS

(i) Woolwich obtained in earlier proceedings a declaration that the relevant regulations were void. The course of those
proceedings, which provide the background to the present dispute, can be summarised briefly because a full account is available
in the reported decisions of Nolan J on 31 July 1987 (R v IRC, ex p Woolwich Equitable Building Society [1987] STC 654), of the
Court of Appeal on 12 April 1989 ([1989] STC 463) and of the House of Lords on 25 October 1990 (sub nom Woolwich
Equitable Building Society v IRC [1991] 4 All ER 92, [1990] 1 WLR 1400).
(ii) Between 1894 and 1985 the tax position of building societies, so far as concerned accounting for tax deducted by a
society on interest paid or credited to its members, was regulated by extra-statutory arrangements made between individual
building societies and the Revenue. By s 23 of the Finance Act 1951, those arrangements received parliamentary recognition:
see now s 343 of the Income and Corporation Taxes Act 1970. The effect of such an arrangement was that a building society was
required to account to the Revenue for a lump sum representing the tax on the interest paid to its members.
(iii) For the year 198586 the lump sum paid by Woolwich, whose accounts were made up to 30 September in each year,
only took into account payments to members down to 30 September 1985; the interest paid during the period 1 October 1985 to 5
April 1986 (interest for the omitted period) was not taken into account.
(iv) In 1986, under powers contained in s 343(1A) of the 1970 Act (now s 476(1) and (2) of the Income and Corporation
Taxes Act 1988) the Board of Inland Revenue made regulations imposing a new system whereby building societies from 198687
onwards were required to account in respect of interest payments 603 made to members on a quarterly basis in respect of interest
paid in the quarter concerned. The Income Tax (Building Societies) Regulations 1986, SI 1986/482, contained transitional
provisions which purported to require building societies to account in respect of interest payments made to members after the end
of the last accounting period but before 1 March 1986.
(v) Section 343(1A) of the 1970 Act was amended by s 47(1) of the Finance Act 1986, which provided that s 343(1A) shall
have effect and be deemed always to have had effect as providing that the sums in respect of which the Board was empowered to
make regulations requiring building societies to account included sums paid or credited before the beginning of [198687] but
not previously brought into account under [s 343(1) or s 343(1A)].
(vi) Woolwich challenged the validity of the 1986 regulations and applied by judicial review for a declaration that the 1986
regulations were void. On 31 July 1987 Nolan J granted the application and declared that, to the extent that the 1986 regulations
purported to impose a liability on Woolwich in 198687 and 198788 in respect of interest for the omitted period, they were ultra
vires and void (see [1987] STC 654).
(vii) On appeal to this court, the Revenue contended that interest for the omitted period consisted of sums paid or credited
before the beginning of 198687 but not previously brought into account under s 343(1), within the meaning of s 343(1A) as
amended, and that therefore the 1986 regulations could not be ultra vires in imposing liability in respect of that interest. It was
conceded by the Revenue that reg 11(4) was ultra vires. Regulation 11(4) provided:

the sum payable to the Board to which paragraph (3) refers is the sum of the reduced rate amount arrived at by
reference to a rate of 25.25 per cent. and the basic rate amount arrived at by reference to a rate of 30 per cent.

The invalidity of that provision was accepted because it purported to charge the sum so brought into account at a reduced rate of
25.25% and a basic rate of 30% which were the rates appropriate to the tax year 198586; but s 343(1A) provided that the sum
for which the society was to be liable in respect of the interest brought into account was to be an amount representing income tax
calculated at the rates determined for the year of assessment concerned. It was, however, contended for the Revenue that that
partial invalidity did not invalidate the rest of reg 11.
(viii) This court allowed the appeal of the Revenue (see [1989] STC 463). It was held that reg 11 did not have the effect of
charging to tax the income of a period of more than one year; and reg 11 did not involve any element of double taxation. The fact
that, as had been conceded, reg 11(4) was invalid did not render the whole of the 1986 regulations invalid.
(ix) On appeal to the House of Lords the order of Nolan J was, on 12 April 1989, restored (see [1991] 4 All ER 92, [1990] 1
WLR 1400). Their Lordships upheld the reasoning of the Court of Appeal so far as concerned their holding that Parliament had
conferred power on the Revenue to make regulations requiring the taxation in the year 198687 and subsequent years of
assessment of sums paid or credited in the omitted periods; but they held that the admitted invalidity of reg 11(4) infected the
whole of that regulation and, therefore, reg 11 and reg 3, so far as it related to the period after February and before 6 April 1986,
were declared to be invalid.
THE PAYMENT OF THE MONEY
The judicial review proceedings were commenced by notice of application on 17 June 1986. The first relevant payment, of
an amount of 42,426,421, was 604 made on 16 June 1986 in the following circumstances. Woolwich had disputed the validity
of the 1986 regulations when they were in draft and before they were made on 13 March 1986. The 1986 regulations came into
force on 6 April 1986. Regulation 3 provided that each building society shall pay to the Revenue on the specified quarterly
dates the appropriate amount of tax in respect of dividends and interest paid by it to its members. By letter of 11 April to
Woolwich, Mr Brunsden, the district inspector, referred to the need to agree the income tax due for the transitional period 1
October 1985 to 28 February 1986, splitting figures between basic rate and composite rate in the usual way and asked for
Woolwichs computation on the same basis as that used in previous years for the annual assessment. That was followed by a
letter of 17 April 1986 in which Mr Fletcher, the collector of taxes, sent to Woolwich the return form CT61(Z), with which
Woolwich was required to make its returns at the end of each of the stated return periods, together with the payment, calculated in
accordance with the form, within 14 days of the end of each period. With the form were sent printed notes for guidance which
included a statement that your returns have to be made to the collector of taxes and this form provides you with space for both
types of return. The form itself contained the reminder that interest is chargeable on tax paid lateit is not an allowable
deduction for tax purposes.
By letter of 12 June 1986 Woolwich returned to the Revenue form CT61(Z) for the period 1 March to 31 May 1986. The
form showed the net tax due on payments as 42,426,421 due on 14 June. The letter noted that, on transfer by automated
payment of that sum on 16 June to the account of the Revenue, no interest would be charged in respect of the two days between
14 and 16 June. The letter concluded:

You should be aware that we are presently seeking leave to commence legal proceedings in connection with the
regulations and accordingly this payment is made without prejudice to any right to recover any payments made pursuant to
the regulations which may arise as a result of legal proceedings, or as a result of any future extinguishment or reduction of
any liability under the said regulations or otherwise.

On 15 September 1986 Woolwich paid 2,856,821 and on 16 March 1987 11,714,969. It is common ground that the second and
third payments were made on the same without prejudice basis and it is not necessary to consider the terms of any further letter.

THE STATUTORY BACKGROUND

The 1986 regulations were directed at the tax liabilities of building societies. The provisions contained in the regulations
and the demands and requirements sent by the Revenue to Woolwich in reliance on the validity of the regulations inevitably made
it clear to the responsible managers of Woolwich that the Revenue possessed and would, if necessary and when appropriate, use
the powers of enforcement which the Revenue have under the provisions of the Taxes Acts. That statutory background, which is
said by Woolwich to justify a finding that the payments were made under duress, was as follows. Regulation 7 provided that Sch
20 to the Finance Act 1972, with certain modifications, should have effect for the collection of the tax under the 1986 regulations
and that interest should be chargeable on overdue payments. Paragraph 4(1) of Sch 20 provides that income tax in respect of any
payment which is required to be included in a return under the schedule shall be due at the time when the return is made and
shall be payable without the making of any assessment. An assessment may, however, be made under para 4(3) of Sch 20 if the
taxpayer fails to include in his 605 return a payment which in the inspectors opinion ought to have been included. The issue of
liability will then be resolved by way of an appeal against the assessment. If the appeal fails, then interest runs in favour of the
Revenue from the time when the tax should have been paid. If it turns out that the taxpayer has paid more tax than was due, then
the payment becomes repayable on the determination of the appeal but without interest (see para 10(4) of Sch 20). It is not
expressly provided that there shall be no interest but it is common ground that that is the effect of the absence of any express
provision for the payment of interest. A power of distress on goods and chattels in the case of failure to pay a sum charged is
provided by s 61 of the Taxes Management Act 1970; and, by ss 66 and 68, tax may be recovered from the person charged as a
debt due to the Crown by action in the county court or the High Court. Under s 98 of the 1970 Act a penalty not exceeding 50
may be imposed on a taxpayer who fails to make a return which has been required of him and provision is made for greater
penalties if the failure is fraudulent or negligent.

THE PROCEEDINGS TO RECOVER THE MONEY AND INTEREST

Woolwich issued its writ on 15 July 1987 between the conclusion of the hearing before Nolan J and the giving by him of his
reserved judgment on 31 July 1987 (see [1987] STC 654). The claim asserted that, since the payments were made pursuant to
demands based on void regulations, the demands were unlawful, the payments had been made under protest and, therefore, the
Revenue were liable to repay the capital sums with interest pursuant to s 35A of the Supreme Court Act 1981.
After the giving of judgment by Nolan J on 31 July 1987 Woolwich and the Revenue agreed, after discussions, for the
repayment of the capital sums with interest from the date of the judgment. It has always been the contention of the Revenue that
the payments were voluntary; and that Woolwich, although it may have had a confident expectation that the Revenue would
return the capital as an ex gratia payment if Woolwich succeeded in the judicial review proceedings, had in law no right to
recover the capital sums save under any contract for repayment which could be implied from the circumstances in which the
payments were made.
The defence of the Revenue set out those contentions, and alleged that if Woolwich had any entitlement in law to repayment,
the Revenue would contend

that the payments were made pursuant to an implied agreement between the Woolwich and the Revenue whereby it
was agreed that the Revenue would hold the sums pending the outcome of proceedings to determine the validity of the
regulations. Any entitlement to repayment arose on the date of judgment of Nolan J and interest ran from that date.

At the hearing of the recovery proceedings before Nolan J, in response to submissions for the Revenue that the statement of claim
disclosed no cause of action, the claim of Woolwich was amended so as to allege that the payments were made in discharge of
unlawful claims to tax and that, therefore, since the payments were thus made without consideration, the capital was repayable by
the Revenue as money had and received to the use of Woolwich. Further, it was alleged that the payments were, in the
circumstances, made under compulsion and were recoverable on that ground.
Since the capital sums had been repaid with interest from 31 July 1987, the only issue before Nolan J was whether
Woolwich could make good a claim to be 606 paid interest for the periods of time that the Revenue had held the capital between
the dates of payment and 31 July 1987. That depended on proof that Woolwich had a cause of action to recover the capital
independent of any contract arising by implication on the circumstances of payment. Woolwich did not then allege that any such
agreement could be held to have contained a term providing for such interest.

THE JUDGMENT OF NOLAN J

It was common ground before Nolan J, as it has been in this court, that if Woolwich had a valid claim against the Revenue,
based on ordinary principles of restitution, by reason of the invalidity of the regulations, or because the circumstances in which
the payments were made are in law the equivalent of duress, then the sums repayable were debts within the meaning of s 35A of
the 1981 Act (see BP Exploration Co (Libya) Ltd v Hunt (No 2) [1982] 1 All ER 925, [1983] 2 AC 352) and that, therefore,
interest would be recoverable at such rate and for such period as the court might think fit. There were placed before Nolan J the
relevant authorities and the comments on those authorities made in textbooks of learned authors and in articles in the journals of
academic lawyers. His conclusions are set out fully in the report of his judgment (see [1989] STC 111, [1989] 1 WLR 137). In
brief summary he held as follows. (i) He was greatly attracted by the argument advanced for Woolwich since it was clear that the
capital would never have been received by the Revenue but for the ultra vires regulations made by them. In effect the Revenue
had, in times of inflation, received a large interest-free loan from Woolwich. (ii) Nevertheless, it was clear that the courts had not
extended the general principle of restitution to those who have submitted to unauthorised demands for tax. On the contrary, the
general rule has been that the maker of the payment has no right to recover the principal sum paid let alone to recover interest on
it. (iii) After stating the statutory context in which the purported claims by the Revenue had been made under the void
regulations, and after reference to the letters and documents passing between the parties, Nolan J held that four factors had
induced Woolwich to make the payments. (a) The requirements of the 1986 regulations, as stated in communications from the
Revenue, amounted to apparently lawful demands from the Crown. Refusal of payments could be expected to lead to
enforcement proceedings and to result in publicity, possibly suggesting that Woolwich might be in difficulty in meeting its
financial obligations, or that it alone among building societies was pursuing a policy of confrontation with the Crown, and such
publicity might have damaging effects outweighing the prospects of success in the judicial review proceedings. (b) Woolwich
feared that, if it failed in the judicial review proceedings, it might incur penalties. (c) The payments made formed part of larger
quarterly payments of which the remainder was correctly charged and, at the time of payment, the amount in dispute was not
precisely identified. (d) The prospects of success in the judicial review proceedings were uncertain. If Woolwich had failed,
sums due for interest on the unpaid demands, which would not have been deductible for tax purposes, would have far exceeded
the net return which Woolwich could have obtained by investing the 56,998,211. The overall cost to Woolwich in interest, if it
had refused to pay and had failed in the judicial review proceedings, was estimated at 4m. He concluded that as a practical
matter Woolwich had little choice but to make the three payments. (iv) No positive support could be found in the decided
cases for the application of a general restitutionary principle, in the absence of mistake of fact or duress, on claims by the subject
against the Crown or public authorities. (v) The principles 607 applied in cases where money has been exacted from the subject
colore officii are confined to cases where a public officer demands and is paid money he is not entitled to, or more than he is
entitled to, for the performance of his public duty (see Mason v New South Wales (1959) 102 CLR 108 at 140 per Windeyer J)
and were thus not applicable in this case. (vi) The analogous and broader principle of duress is not applicable where there is no
threat to the person of the subject or to his goods (see Masons case) and where the sanction involves only the threat of legal
proceedings (see William Whiteley Ltd v R (1909) 101 LT 741, [190810] All ER Rep 639). (vii) The decision of Walton J in
William Whiteley Ltd v R has been consistently followed and this case falls within the principles stated in that case. (viii) The
potential cost to Woolwich of refusing to pay, whether in terms of damage to reputation or of interest liabilities, may have been
commercially unacceptable but did not amount to duress by the Revenue. (ix) There had, however, been a right at law in
Woolwich to recover the capital on the principle stated by Vaisey J in Sebel Products Ltd v Customs and Excise Comrs [1949] 1
All ER 729 at 731, [1949] Ch 409 at 412413, namely on an implied contract for the repayment of the capital by the Revenue in
the event of Woolwich succeeding in the judicial review proceedings. There was, however, no basis in law for implying an
agreement to pay interest.

THE APPEAL TO THIS COURT

The contentions and argument of Woolwich on appeal have been substantially the same as they were before Nolan J save for
one further point. Woolwich has submitted that, if the only ground of recovery of the capital available to Woolwich was in
contract arising by implication on the facts, that contract should be held to include a term that the Revenue would pay interest on
the capital sums from the dates of payment. No objection was taken by the Revenue to the raising of that point in this court. The
Revenues notice under RSC Ord 59, r 6(1)(b) maintained that, if there was no implied agreement for repayment of the capital, no
right to repayment ever arose; alternatively, it was said that once the dispute was resolved in favour of Woolwich in the judicial
review proceedings, it became unconscionable for the Revenue to retain the money and that it was open to the court to impose on
the defendants a constructive trust in respect of that money.
It is to be noted that the Revenue did not there contend that, if Woolwich should show that the circumstances in which the
demands for tax and payments on account of tax were made gave rise to a right to recover the capital sums with interest,
nevertheless the making of the implied agreement for repayment of capital without interest should be held to have compromised
or brought that right to an end. Counsel for the Crown submitted that such a result might well be effected by an agreement in
similar circumstances, but did not argue that the court should so find on the facts of this case.

THE SUBMISSIONS FOR WOOLWICH

(i) Mr Gardiner QC has contended that the relevant authorities are inconsistent and confused and that there is no authority
binding on this court which prevents this court from giving effect to the claim of Woolwich as properly based on well-established
principles; reference was made to Fibrosa Spolka Akcyjna v Fairbairn Lawson Combe Barbour Ltd [1942] 2 All ER 122 at 135
137, [1943] AC 32 at 6164 per Lord Wright and to Kiriri Cotton Co Ltd v Dewani [1960] 1 All ER 177 at 181, [1960] AC 192 at
204205.
(ii) The claim was advanced on two grounds. The first was that, on principle, he who makes a payment in response to an
unlawful demand of taxation, or other 608 like demand from the Crown, acquires a prima facie right to recover the money
forthwith as money had and received. This should be held to be a distinct head of recovery independent of mistake or duress. It
could be limited in this case to circumstances where the demand is based on an ultra vires regulation.
(iii) The law should, as a matter of policy, encourage by its rules the sort of responsible conduct shown by Woolwich in this
case, namely to pay under protest and to seek at once the ruling of the court. The law should not permit the Revenue to enjoy the
right to behave with less than the highest standard of conduct (see Sebel Products Ltd v Customs and Excise Comrs [1949] 1 All
ER 729 at 731732, [1949] Ch 409 at 412413 per Vaisey J and Tower Hamlets London BC v Chetnik Developments Ltd [1988] 1
All ER 961 at 969, [1988] AC 858 at 876877 per Lord Bridge). Further, to deny the prima facie right of recovery would be to
depart from the constitutional principle, contained in the Bill of Rights (1688), against taxation unauthorised by Parliament (see
A-G v Wilts United Dairies Ltd (1921) 37 TLR 884 at 886887 per Atkin LJ). Reference was also made to art 13 of the European
Convention for the Protection of Human Rights and Fundamental Freedoms (Rome, 4 November 1950; TS 71(1953); Cmd 8969)
for the proposition that there should be an effective remedy for the violation of a substantive right (see Amministrazione delle
Finanze dello Stato v San Giorgio SpA Case 199/82 [1983] ECR 3595).
(iv) It was acknowledged for Woolwich that such a right may, in particular circumstances, be defeated by defences arising
on the facts, eg that the payer voluntarily submitted to the unlawful demand in full knowledge of the position and intending to
close the transaction. Proof of such intention would depend not on subjective uncommunicated intention but on that which the
recipient would reasonably understand from what was said and done.
(v) The second basis of claim was duress or practical compulsion which should be held to be proved on the findings of the
judge that Woolwich had little choice but to make the three payments (see [1989] STC 111 at 116, [1989] 1 WLR 137 at 143).
(vi) To have to resort to implied agreement, as the basis for holding that the Revenue had not on the facts been free in law to
retain the capital sums paid by Woolwich, was to apply a fiction and to revert to the discredited implied contract analysis of
restitutionary rights (see Goff and Jones Law of Restitution (3rd edn, 1986) pp 512). There was on the facts no agreement
according to ordinary principles of contract law. To hold, as Nolan J did ([1989] STC 111 at 119, [1989] 1 WLR 137 at 147), that

 generally whenever money is paid to the Revenue pending the outcome of a dispute which, to the knowledge of
both parties will determine whether or not the Revenue are entitled to the money, an agreement for the repayment of the
money if and when the dispute is resolved in the taxpayers favour must inevitably be implied unless the statute itself
produces that result, as it does, for example, in cases falling within para 10(4) of Sch 20 to the Finance Act 1972

is to create a cause of action under a contract imposed by law as contrasted with an agreement made by the parties.
(vii) If, however, it is to be held that there was an implied contract, there should be implied a term for the payment of
interest by the Revenue from the date of receipt of the sums paid.
(viii) Woolwich never argued that this was a mistake case. If, however, the case should be categorised as one of mistake,
then it was submitted that the sums paid were recoverable notwithstanding that the mistake was one of law. The rule 609
excluding recovery for mistake of law should be abrogated as wrong (see Air Canada v British Columbia (1989) 59 DLR (4th)
161 and Nepean Hydro Electric Commission v Ontario Hydro (1982) 132 DLR (3d) 193). In the alternative, the case was said to
be within established exceptions to the rule (see Kiriri Cotton Co Ltd v Dewani [1960] 1 All ER 177, [1960] AC 192).

THE SUBMISSIONS FOR THE REVENUE

The Revenue have claimed no special right or immunity. Their case has been that the law applicable to the claims of
Woolwich is the same as that applicable in disputes between private individuals. In summary, the case put forward by Mr
Grabiner QC for the Crown was as follows.
(i) The law allows no general right of restitution. Since there was no duress, and no unlawful demand colore officii, the
payments were made voluntarily, ie in law there was no right to recover them save under any implied contractual promise.
(ii) Mr Grabiner relied on the William Whiteley case (1909) 101 LT 741, [190810] All ER Rep 639 as authority, strikingly
similar on its facts, which has been consistently followed and never doubted; he referred, for support, to Twyford v Manchester
Corp [1946] 1 All ER 621, [1946] Ch 236, Mason v New South Wales (1959) 102 CLR 108, Sharp Bros & Knight v Chant [1917]
1 KB 771, Slater v Burnley Corp (1888) 59 LT 636, National Pari-Mutuel Association Ltd v R (1930) 47 TLR 110 and Goff and
Jones The Law of Restitution (3rd edn, 1986) pp 120122, 218.
(iii) The colore officii line of authority is, said Mr Grabiner, clearly distinguishable. The Revenue, as Nolan J held, did not
demand money in return for the performance of a public duty (see [1989] STC 111 at 117, [1989] 1 WLR 137 at 144).
(iv) The only implied threat which supported the claims to tax under the void regulations was that of legal process. It is well
established in law, he submitted, that payments made under compulsion of legal process are not to be held to be recoverable as
involuntary payments (see Brown v MKinally (1795) 1 Esp 279, 170 ER 356, Hamlet v Richardson (1833) 9 Bing 644, 131 ER
756, Maskell v Horner [1915] 3 KB 106 at 121122, [191415] All ER Rep 595 at 599, William Whiteley Ltd v R (1909) 101 LT
741, [190810] All ER Rep 639 and Goff and Jones p 207).
(v) On examination of the statutory provisions enacted by Parliament for the recovery of sums overpaid in respect of claims
to tax, it appeared that, when recovery is ordered after successful appeal, interest is not generally allowed. Parliament should be
taken to have made provisions for recovery on the assumption that the common law gives no right of action to recover money
overpaid in respect of tax in the absence of ordinary grounds of claim such as mistake of fact or duress.
(vi) The implied contract was properly found by Nolan J to have been made. There was no fiction and it was implied on the
facts and not imposed by law. No term for payment of interest could properly be implied on the facts (see President of India v La
Pintada Cia Navegacion SA [1984] 2 All ER 773, [1985] AC 104).
(vii) This court was invited to resist any temptation to make new law in this field and in particular to resist the beguiling
submission that the Revenue, by the making of ultra vires regulations, had been unjustly enriched to the extent of the interest on
the payments made by Woolwich. Woolwich was, in effect, in the same position as any other taxpayer who has demonstrated that
the Revenue have taken his money without lawful authority. The fact that, in this case, the relevant regulations were made in
good faith but without statutory authority should not secure to Woolwich the lost interest which would not be recoverable under
the 610 statutory provisions in a case where, for example, the Revenue had in good faith misconstrued the regulation lawfully
made. The statutory provisions relating to tax are considered frequently by Parliament and the making of new law, most
particularly in the field of taxation, should be left to the legislature.

THE REVENUE AND EX GRATIA REPAYMENT OF MONEY

If there is no right of recovery of a payment, made in response to a bona fide but unlawful demand of tax, then, if the
circumstances do not give rise to a claim based on duress or mistake of fact or to an implied promise by the Revenue to repay the
money, the only hope of recovery by the payer must rest on the ability and willingness of the Revenue to repay either as a matter
of grace or by the exercise of a discretion to make repayment. The court asked for assistance from counsel as to the nature and
origin of such a right of payment by the Revenue because, if money is received which the Revenue are at law entitled to retain,
whence comes the right to pay it back? In Auckland Harbour Board v R [1924] AC 318 at 326327, cited by Goff and Jones p
134, Viscount Haldane said:

it has been a principle of the British Constitution now for more than two centuries that no money can be taken
out of the consolidated Fund into which the Revenues of the State have been paid, excepting under a distinct authorization
from Parliament itself. The days are long gone by in which the Crown, or its servants, apart from Parliament, could give
such an authorization or ratify an improper payment. Any payment out of the consolidated fund made without
Parliamentary authority is simply illegal and ultra vires, and may be recovered by the Government if it can, as here, be
traced.

The Revenue submitted that they have a general right outside statute to agree and settle disputed assessments and claims and, as
part of their duty of care and management of the recovery of taxes imposed by Parliament, a discretion to make ex gratia
payments (see IRC v National Federation of Self-Employed and Small Businesses Ltd [1981] 2 All ER 93, [1982] AC 617,
Preston v IRC [1985] 2 All ER 327, [1985] AC 835, R v Board of Inland Revenue, ex p MFK Underwriting Agencies Ltd [1990] 1
All ER 91, [1990] 1 WLR 1545 and IRC v Nuttall [1990] STC 194, [1990] 1 WLR 631). It was acknowledged that, on ordinary
principles, the decisions of the commissioners are open to judicial review but, it was said, in restricted circumstances only,
because of the rule that, if there is an alternative remedy provided by Parliament, relief by judicial review is not available. The
Revenue did not seek to set out any principles by reference to which there might be assessed the reasonableness of any refusal to
repay money received in respect of an unlawful demand to tax. That was not surprising because, as we understand it, there are
waiting for resolution possible claims by other building societies by which tax was paid under the ultra vires regulations without,
it may be, such protestations as might justify a finding of an implied promise to repay.
The question of the reasonableness of the exercise of the discretion to make or to refuse payment under a statutory
provision, namely under s 9(1)(e) of the General Rate Act 1967, was considered in Tower Hamlets London BC v Chetnik
Developments Ltd [1988] 1 All ER 961, [1988] AC 858. That subsection provides:

Without prejudice to sections 7(4)(b) and 18(4) of this Act, but subject to subsection (2) of this section, where it is
shown to the satisfaction of a rating authority that any amount paid in respect of rates, and not recoverable apart from this
 section, could properly be refunded on the ground that (e) the 611 person who made a payment in respect of rates was
not liable to make that payment, the rating authority may refund that amount or a part thereof.

Lord Bridge referred to the rule that money paid under a mistake of law is irrecoverable and noted that it was said to stem from
the principle that there must be an end to litigation (see [1988] 1 All ER 961 at 968, [1988] AC 858 at 874). There was, however,
an instructive line of authority showing circumstances in which the court will not permit the rule to be invoked. After reference
to Ex p James, re Condon (1874) LR 9 Ch App 609, [187480] All ER Rep 388, to Ex p Simmonds, re Carnac (1885) 16 QBD
308, [18815] All ER Rep 895, to Re Tyler, ex p Official Receiver [1907] 1 KB 865, [19047] All ER Rep 181 and to Blackpool
and Fleetwood Tramroad Co v Bispham with Norbreck UDC [1910] 1 KB 592, Lord Bridge continued ([1988] 1 All ER 961 at
969, [1988] AC 858 at 876877):

So it emerges from these authorities that the retention of moneys known to have been paid under a mistake at law,
although it is a course permitted to an ordinary litigant, is not regarded by the courts as a high-minded thing to do and
hence is a course which the court will not allow one of its own officers, such as a trustee in bankruptcy, to take.

Therefore, the conclusion that the purpose of s 9 of the 1967 Act was to enable rating authorities to give redress and to remedy
the injustice that would otherwise ordinarily arise, if they were to retain sums to which they had no right, in cases where persons
had paid rates which they were not liable to pay, could properly be derived

from the broader consideration that Parliament must have intended rating authorities to act in the same high principled
way expected by the court of its own officers and not to retain rates paid under a mistake of law, or on an erroneous
valuation unless there were, as Parliament must have contemplated there might be in some cases, special circumstances
in which a particular overpayment was made such as to justify retention of the whole or part of the amount overpaid.

(See [1988] 1 All ER 961 at 970, [1988] AC 858 at 877 per Lord Bridge.)
For my part, although we have not heard full argument upon the point, because neither side has had occasion to dispute it,
and although it is not necessary in this case to reach any detailed conclusions upon it, it seems clear to me that the Revenue must
be held to have in law the capacity to make such an ex gratia payment. By that I mean a repayment of money, which has been
paid to the Revenue in respect of an ultra vires claim to tax and which, because of the circumstances of payment, was in law a
voluntary payment to recover which the payer has no cause of action. Such a power of repayment is, I think, a necessary part of
the power of the management of the recovery of taxes. A decision by the Revenue, whether or not to repay such a voluntary
payment, must be made, as it seems to me, in the exercise of the discretion which the Revenue has been left by Parliament to use
in the care and management of the recovery of taxes imposed by Parliament and would be prima facie reviewable by the court.
In the absence of such delay or other circumstances which could justify a decision not to repay, a refusal to repay could, of
course, be held by the court to be unreasonable and therefore unlawful. No doubt, difficult questions could arise as to the nature
of the circumstances which could be regarded as justifying a decision not to repay, such as, for example, a contention that the tax
was in substance intended by Parliament to be exacted and that the lack of vires for the particular demand had resulted from no
more than a technical failure in drafting the rule or regulation. 612The principles stated by Lord Bridge with reference to the
discretion under s 9 of the 1967 Act appear to me to be generally applicable to the exercise of the non-statutory discretion which
the Revenue, rightly as I think, claim to have. In the absence of statutory guidelines the relevant principles will have to be further
developed as cases arise.
The relevance in this case of the existence and nature of the power to make such ex gratia repayments, as it seems to me, is
that it is part of the whole structure of the existing rules of law relating to the repayment by the Crown of money paid in respect
of an unlawful claim to tax. To the extent that the citizen is thus effectively protected against the misfortune of paying tax which
is not lawfully due, the need for any extension of the existing law of restitution is reduced. There is, of course, no reason to
suppose that the Revenue would, in any event, refuse to refund money which it would be unreasonable for the Crown to retain
but there is a large and important difference between a right to claim restitution at law and the mere ability to ask that money paid
be returned in the exercise of executive discretion even if the exercise of that discretion is subject to judicial review. Retention
may be reasonable from the point of view of the Revenue and public interest but appear both unfair and unprincipled to the
person who has paid.

THE IMPLIED CONTRACT

Before considering the two main submissions for Woolwich it is convenient to consider the issue of implied contract. It was
argued for Woolwich that Nolan J was wrong to find an implied contract for repayment on the facts of this case and wrong to
hold that, generally

whenever money is paid to the Revenue pending the outcome of a dispute which, to the knowledge of both parties will
determine whether or not the Revenue are entitled to the money, an agreement for the repayment of the money if and when
the dispute is resolved in the taxpayers favour must inevitably be implied unless the statute itself produces that result

(See [1989] STC 111 at 119, [1989] 1 WLR 137 at 147.)

The force of this point, if it is right, would be that the taxpayer who pays, as did Woolwich, would be in greater need of
protection by means of the right of recovery contended for by Woolwich. For my part, I do not accept the submissions made for
Woolwich on the implied contract point.
The point is, I think, of greater complication than importance. Nolan J (see [1989] STC 111 at 119, [1989] 1 WLR 137 at
146) cited and applied the judgment of Vaisey J in the Sebel Products case [1949] 1 All ER 729 at 731, [1949] Ch 409 at 412.
The cited passage begins:

I ask myself, first, with what intention the plaintiffs paid the money, and, secondly, with what intention the
defendants received it? If the intention was the same on both sides, the result, in my judgment, was that an agreement was
made between the parties by implication.

As stated, that, I think, cannot be right. Contracts cannot be made merely by uncommunicated subjective intentions. Thus, in
Paal Wilson & Co A/S v Partenreederei Hannah Blumenthal, The Hannah Blumenthal [1983] 1 All ER 34 at 4849, [1983] 1 AC
854 at 915 Lord Diplock said:

To create a contract by exchange of promises between two parties where the promise of each party constitutes the
consideration for the promise of the other what is necessary is that the intention of each as it has been communicated to
and understood by the other (even though that which has been communicated 613 does not represent the actual state of
mind of the communicator) should coincide. That is what English lawyers mean when they resort to the latin phrase
consensus ad idem and the words that I have italicised are essential to the concept of consensus ad idem, the lack of which
prevents the formation of a binding contract in English law. (Lord Diplocks emphasis.)
Nevertheless, in Sebel Products Vaisey J, as the above passage in his judgment shows, based his finding of implied contract on
the inferences which a reasonable person, knowing what was said and done, would draw from those facts. Mr Gardiner argued
that there was no evidence here of offer or acceptance, that the terms of any agreement were wholly uncertain, and that the
officers of the parties to the contract, who are said to have made it, can have had no authority to do so. I accept that the question
of authority was barely considered in the evidence and not mentioned in the judgment. The reason is clear. Neither party had
raised the implied contract as a basis of relief. The Revenue had pleaded that

if the Woolwich is entitled as a matter of law to repayment of the said sums, the Revenue will contend that the
said payments were made pursuant to an implied agreement whereby it was agreed that the Revenue would hold the
said sums pending the outcome of proceedings to determine the validity of the regulation. In pursuance of that agreement,
entitlement to a repayment arose on the date of the declaration and interest runs from that date.

There was no reply disputing authority. In his affidavit, Mr Mason, on behalf of Woolwich, did not contend that those concerned
on either side lacked authority or ostensible authority to make the implied agreement which the Revenue had alleged. Mr Mason
said in his affidavit of 1 December 1987:

I did not intend by my correspondence with the Revenue to enter into any agreement or contract with regard to the
sums paid or to be paid. Had that been the [Woolwichs] intention, we would not have sought to achieve it by means of a
covering letter accompanying our return, without prior discussion, and immediately preceeding payment. Nor, in my
opinion, would either Mr Fletcher or myself have been the appropriate individuals to commit our respective employers to
an agreement. Nor to the best of my knowledge did anyone else at the Woolwich or in the Revenue seek such an
agreement.

The substance of the implied agreement as alleged was no more than that, if Woolwich succeeded in its contention, the money
would be repaid. No other terms were alleged or found. There was, in my view, nothing uncertain about the terms of the promise
by the Revenue. On the part of Woolwich, the consideration for the promise was the act of payment. The agreement was said to
have arisen on the undisputed actions of the parties which were of stark simplicity, namely the express reservation by Woolwich
that the payment should not prejudice its right of recovery and the receipt and retention of the money in apparent acceptance of
that term. Both sides obviously intended the agreed term to control the legal relationships between the parties. I think the judge
was plainly right in his conclusion that the Revenue had agreed to refund the money.
It is convenient to deal at this point with the issue whether Woolwich could found a claim to interest on the money, for the
time between payment and repayment, upon a term to be implied into the implied agreement. Mr Gardiners argument was that a
term providing for compound interest at commercial rates 614 should be implied, if this court should uphold the finding of this
fictitious or judge-made agreement. It was, he said, inconceivable that Woolwich should have agreed to pay over to the Crown
56m for an indeterminate period on the basis that no interest should be paid on principal eventually found to be repayable. Mr
Grabiners answer was that on the ordinary principles by which terms are to be implied into contracts no such term could be
implied since it was not necessary to give business efficacy to the agreement made and it was impossible to assert that, if asked,
the Revenue would at once have acknowledged that an obligation to pay interest from the date of receipt had been assumed by
the Revenue. In addition Mr Grabiner relied upon the decision of their Lordships in the La Pintada case [1984] 2 All ER 773,
[1985] AC 104.
For my part, although, for the reasons given, I accept the finding of Nolan J that there was a real agreement properly implied
on the facts, I reject without hesitation this submission for an implied term to pay interest. Express reference was made by
Woolwich at the time to interest payable by Woolwich. None was made by either side to payment of interest by the Revenue. I
agree that it is impossible to imply such a term for the reasons put forward by counsel for the Crown.
I do not think that much, if any, assistance is to be derived from the reasoning of their Lordships in the La Pintada case,
which was not concerned with the implication of a term for the payment of interest but with the power of the court or of an
arbitrator to award interest in the absence of any promise to pay it. The contention for Woolwich that it is inconceivable that
Woolwich should have agreed to pay over 56m on the basis that no interest should be paid seems to me to be acceptable but
entirely irrelevant. The implied agreement, as I have explained earlier in this judgment, was not at any stage relied on by the
Revenue as excluding any right to interest which Woolwich might have under a cause of action prior to and independent of the
agreement. It is not suggested that Woolwich impliedly agreed to forgo interest; it is only asserted by the Revenue that, in
impliedly agreeing to repay the capital sum if the court should hold the claim to have been ultra vires, they did not promise to pay
interest on that sum from the date of payment. Such belief as Woolwich has had that it is entitled to interest from the date of
payment has clearly, in my view, rested upon a belief in some right at law to recover the money with interest and not upon any
apparent promise by the Revenue.
As to Nolan Js general observation, to the effect that in similar circumstances a promise of repayment must inevitably be
implied, I see no reason to disapprove or to qualify it. It was, I think, no more than recognition of the fact that, if the Revenue
receive money upon the express stipulation that it is paid, by a payer who asserts the illegality of the demand, without prejudice
to the payers right of recovery if the payers contention is upheld, the Revenue will, in the absence of some circumstances
justifying a different answer, be held to have promised to repay it when and if the payers contention is upheld. The fact that such
a promise may properly be held to have been impliedly made, does not mean that the payer is thereby deprived of any other cause
of action to recover the money, which he may have independently of that promise.
In summary, therefore, the recognised principles of law provide for the payer of money in respect of an ultra vires tax
demand more protection than the argument for Woolwich acknowledged. When the payment is made under mistake of law, the
payer would have at least such protection as is given by the reviewable power of the Revenue to repay; where the payment is
made without mistake on the part of the payer but with express reservation of the right of 615 recovery, a contractual obligation
to repay would normally arise. It should, I think, be emphasised that the payer could stipulate for the payment by the Revenue of
interest from the date of payment if he should succeed on the issue of law. The Revenue could lawfully, as I understand the law,
and no submission was made to the contrary, agree to pay such interest. The Revenue, however, would also be free to refuse to
agree to pay interest in those circumstances. Parliament, as it seems to me, has expressly approved a scheme, where the
legislation is applicable, whereby if a payer does not pay pending determination of his liability, he must pay interest on the unpaid
sums if they are found to be due and that such interest is not chargeable to profits. There is, in other words, and not surprisingly,
no provision for the remission of interest during resolution of a dispute, whether bona fide or not. When it paid, Woolwich
assessed the position as being such that, having regard to the position with reference to interest, it had no real option but to pay,
and Nolan J in substance accepted that. It was, in my view, intended by Parliament that proceedings to dispute liability to tax
should be to that extent at the risk of the taxpayer at least in the sorts of cases covered by specific legislation. There is, therefore,
nothing which the court can regard as inherently unjust in the fact that Woolwich would have risked the payment of unchargeable
interest if it had refused to pay and had thereafter lost on the issue of liability.

EXAMINATION OF THE SUBMISSIONS MADE FOR THE WOOLWICH

Constructive trust
 It is necessary first to mention one matter which was introduced into the case but not, in this court, relied upon by either
side. Woolwich did not rely upon constructive trust before Nolan J. The Revenue, however, raised before Nolan J and in their
respondents notice in this court the contention that, if there was no implied agreement by the Revenue for the repayment of the
capital it might be held that, once the dispute over the legality of the demand was resolved in favour of Woolwich by the court, it
became unconscionable for the Revenue to retain the money and a constructive trust for repayment might be imposed by the
court. The force of the point was, presumably, to show that, in the absence of the right contended for by Woolwich, and where no
agreement for repayment could be implied, the law could afford protection to the taxpayer greater than that provided by the
power to review a decision not to exercise the discretion to repay. This point of constructive trust was not developed by Mr
Grabiner for the Crown before us. Woolwichs written summary of argument gave notice that Woolwich would, if necessary,
submit that the Revenue held the capital sums on constructive trust arising as at the date when payment was made (see Chase
Manhattan Bank NA v Israel-British Bank (London) Ltd [1979] 3 All ER 1025, [1981] Ch 105, Re Sharpe (a bankrupt), ex p
trustee of the bankrupt v Sharpe [1980] 1 All ER 198, [1980] 1 WLR 219 and Muschinski v Dodds (1986) 62 ALR 429).
Therefore, it was submitted, compound interest at commercial rates was due as a matter of equity from the date of payment (see
La Pintada [1983] 1 Lloyds Rep 37, OSullivan v Management Agency and Music Ltd [1985] 3 All ER 351, [1985] QB 428 and
Buckingham v Francis [1986] 2 All ER 738). In argument, however, Mr Gardiner did not develop the submission save to say, in
answer to a question from Butler-Sloss LJ, that the principle of constructive trust supported the position of Woolwich.
In my judgment, Woolwich cannot in this case recover upon the ground of constructive trust the interest which it claims. If
the primary submission for Woolwich succeeds, no question of trust arises. If that submission fails, then, in my judgment again,
no question of trust arises. The Revenue, having received the money without (if I am right) having used duress to obtain it, were
entitled 616 to retain it subject to the lawful exercise of the discretion to repay and subject to any obligation arising from the
terms upon which or from the circumstances in which the payment was made. That obligation was, in my judgment, rightly held
by the judge to be contractual. If the Revenue received money, voluntarily paid, on terms that the money be repaid in the event
that the payer succeeded on the issue as to lawfulness of the demand, but without any implied promise to pay interest between
receipt and repayment, it cannot, in my judgment, be held to be unconscionable for the Revenue not to pay interest for that
period.

The claim based upon duress

I will take first Mr Gardiners alternative submission to the effect that Woolwich is entitled to succeed on the ground of
duress or practical compulsion. I take it first because it seemed to me to be necessary, before dealing with the primary
submission, to determine whether Woolwich is to be held in law to have made the payments under duress. If it is to be so held,
then the cause of action to recover the money arose, in my judgment, upon the making of the payments and not at the time when
the illegality of the demand was demonstrated by the first decision of Nolan J and it would not be strictly necessary to decide
whether the payments would have been recoverable in the absence of duress. Further, I reached the conclusion without hesitation
that this duress submission could not succeed. Examination of the primary submission must therefore proceed, as I see this case,
on the basis that the appeal of Woolwich must fail if the primary submission does not succeed.
Mr Gardiner submitted that the concept of duress should be held to extend, beyond threats of physical injury or
imprisonment or detention of goods, to include all circumstances where the actor is to be held to have been illegitimately
deprived of his right of voluntary action (see Universe Tankships Inc of Monrovia v International Transport Workers Federation
[1982] 2 All ER 67, [1983] 1 AC 366, Barton v Armstrong [1975] 2 All ER 465, [1976] AC 104, Lynch v DPP for Northern
Ireland [1975] 1 All ER 913, [1975] AC 653 and B & S Contracts and Design Ltd v Victor Green Publications Ltd [1984] ICR
419). Since, as Nolan J found, Woolwich had little choice but to make the three payments and since the consequences of non-
payment were perceived by Woolwich to be commercially unacceptable, Woolwich, it was said, had been subjected to duress
because it had been subjected to an improper motive for action in the phrase used by Holmes J in Fairbanks v Snow (1887) 13
NE 596 at 598 cited in Barton v Armstrong [1975] 2 All ER 465 at 477, [1976] AC 104 at 121, or because it had been subjected
to pressure which the law does not regard as legitimate (Universe Tankships Inc of Monrovia v International Transport
Workers Federation [1982] 2 All ER 67 at 7576, [1983] 1 AC 366 at 384 per Lord Diplock). Mr Gardiner acknowledged that
the duress submission, although theoretically distinct, could be regarded as overlapping with his primary submission which,
itself, might be regarded as justified by a presumption of duress.
I have found it impossible to accept the alternative submission for Woolwich based on duress because nothing done or
communicated by the Revenue, whether expressly or impliedly, could, in my judgment, properly be held to be the exerting of
pressure which the law regards as illegitimate. The claim to tax was made by the Revenue in good faith. It was the duty of the
Revenue, therefore, to advance the claim and to obtain the decision of the court upon it if it was disputed. The Revenue did
nothing more. There was nothing which in the law applicable to private citizens could be regarded as duress or unlawful
coercion. I see no good reason to treat the threat of legal proceedings by the Revenue as the equivalent of 617 duress in order to
create a right to repayment against the Revenue where the bona fide threat of legal proceedings is made in respect of an ultra
vires demand. If the right to repayment exists as contended for, it must rest, in my judgment, upon the ultra vires nature of the
demand although, of course, the burden of such a demand made by the Revenue is relevant to the question whether that right
should be held to exist.
If I am right on this part of this case, Woolwich must be held to have chosen to pay the ultra vires demands for the reasons
which it gave: it decided that it was better for it to pay and to exercise such rights to recovery as the law might provide. Such
payment would not prevent Woolwich from recovering the payments, under the right of recovery asserted upon the primary
submission, if that right exists. If payment in respect of an ultra vires demand to tax creates a cause of action to recover the
money paid, it would be for the Revenue to prove some ground in law which would justify retention and none has been alleged.

The primary submission

The primary submission put forward by Mr Gardiner invites the court to revive what is said to be an old rule, once
recognised, which was thereafter lost to view, namely a right of recovery independent of mistake or duress and based simply on
the ultra vires nature of the demand to tax. It is first necessary to consider what must be the nature and extent of such a right, if
the submission were accepted, and the consequences, as they would be likely to be, of holding that such a right exists. In
particular, consideration of these matters will show how far such a general right to recovery of money paid in respect of an ultra
vires tax demand could be established by decision of this court having regard to authority.
(i) It is first to be noted that the right contended for is concerned with cases where the claim to tax is made in good faith
without any actionable misrepresentation or duress. Any claim based on misfeasance in public office (see Bourgoin SA v
Ministry of Agriculture Fisheries and Food [1985] 3 All ER 585, [1986] QB 716) or in respect of a payment induced by
actionable misrepresentation would be covered by separate and recognised rules.
(ii) Woolwich, in this case, proceeded on the basis that a necessary preliminary to the civil action for restitution of the sums
paid was the obtaining of a declaration in judicial review proceedings that the demand was unlawful and that separate subsequent
proceedings for restitution were necessary because the court had no power in the judicial review proceedings to order payment of
a liquidated sum. By s 31(4) of the Supreme Court Act 1981 there is provision for the award of damages but, unlike the provision
in Scotland, there is no express reference to an order for restitution. No submissions were addressed to the court on these points
by Mr Grabiner. The importance of a requirement, in these circumstances, for the initial proceedings by judicial review is that
the time limit imposed by RSC Ord 53, r 4, subject to the power of extension of time, would provide some protection to the
Revenue against delayed claims, which would otherwise be limited only by the six-year period of limitation of action. When,
however, a demand for tax has been held in proceedings by one payer to be unlawful, because the basis of the charge to tax is
ultra vires, it is not clear why there would be any bar, other than under the statute of limitations, in subsequent proceedings by
other payers who have paid in respect of demands based on the same ultra vires provision.
(iii) It has been submitted that the right contended for by Woolwich can be in this case, and may generally be, limited to a
case where there is no basis whatever in law for any such charge as was sought to be made. Mr Gardiner described the 618 point
by comparing it to a claim to tax windows when there is no statutory authority for a window tax. For my part, I do not see how
the right, if it exists in law, can properly be limited to such window tax cases. In principle, payment in respect of any demand
which is bad in law, is payment of tax exacted without the authority of Parliament and it should matter not whether the demand is
bad because it is based on a bona fide but mistaken construction of a valid provision or on a bona fide belief that an invalid
provision has been lawfully enacted. If the right exists, I do not see how it could, consistently with principle, be limited in the
way suggested.
(iv) Next, in this case Woolwich asserts that there was no mistake: Woolwich believed the demand to be ultra vires, asserted
that it was and then made the payments without prejudice to the right to recover. But if the right of recovery asserted by
Woolwich is based on the established principles of justice to which counsel for Woolwich has referred (Lord Wright in the
Fibrosa case [1942] 2 All ER 122 at 135137, [1943] AC 32 at 6164 and Lord Denning in the Kiriri Cotton case [1960] 1 All
ER 177 at 181, [1960] AC 192 at 204205) I am unable to see why (apart from the existence of any authority which prevents
such a course) that right should not be equally available to the person who has paid under mistake of law. Most people who
receive a tax demand are likely to suppose that the basis in law is valid and concentrate upon the factual basis. The essential
justice of their position is no different, by reference to those established principles of justice, from that of the vigilant payer who
believes the demand to be invalid in law but calculates that his position as to interest will be protected better by paying than by
withholding payment while he puts his belief to the test. The rule of mistake of law, as I understand it, is not that a mistake of
law bars recovery if a right of recovery exists independently of the mistake; the rule is that, if the only ground of claim is mistake
and the mistake is a mistake of law, the law gives no right of recovery.
(v) So far as concerns payment under mistake of law, there is authority binding on this court, namely National Pari-Mutuel
Association Ltd v R (1930) 47 TLR 110. There a claim to recover tax paid in circumstances where in law the money was not
payable was rejected by this court. The case was argued for the claimant on the basis that the payment was made under mistake
of fact. No argument was advanced to the effect that there could be recovery if the mistake was rightly held to be a mistake of
law. Glidewell LJ has cited the passage from the judgment of Scrutton LJ (see 47 TLR 110 at 111) in which the ground of
decision is set out. The mistake was, as he has pointed out, a mistake as to the construction of a valid statutory provision. Mr
Gardiner submitted that it is therefore to be distinguished from a case where the statutory provision is ultra vires. For my part, I
do not think that such a distinction could be properly made. As I have said, there is, in my judgment, no relevant difference
between honest misconstruction of a statutory provision and honest assertion of the validity of an invalid statutory provision. The
point was not argued in the National Pari-Mutuel case on the constitutional ground put forward in this case but the decision there
was that there is no general right to recover money paid as tax which was not due in law. It follows that, if the primary
submission is accepted, the general right of recovery would arise in cases of ultra vires demands and in cases of demands based
on misconstruction where there has been payment, but not under mistake of law, and, in cases of ultra vires demands even if
payment is made under mistake of law if the court were able to distinguish the National Pari-Mutuel case on the ground put
forward. This seems to me to be an unsatisfactory description of a general right of recovery and suggests that no such general
right exists.
(vi) If the general right of recovery contended for by Woolwich is held to exist 619 in our law it is likely to extend to a
considerable number of cases. The number would depend, of course, on whether it is limited to cases of ultra vires demands or
extends also to demands based upon misconstruction of statutory provisions. Mr Gardiner submitted that the concept of paying
to close the transaction would be available, when appropriate, to the Revenue particularly in cases of mistake of law by the payer
because in such cases the payer will not do what Woolwich did in this case, namely protest at the illegality of the demand,
stipulate that the payment should be without prejudice to recovery, and take immediate steps to establish the illegality by
proceedings at law. Mr Gardiner submitted that, when a taxpayer has paid so as to close the transaction, he has accepted that
the money has gone with no right of recovery and, thereby, he has waived any right to restitution. For my part, I am uncertain as
to the efficacy of a defence of payment to close the transaction and as to the principles by which it would be held to be or not to
be established. The question whether a payment is made voluntarily to close a transaction seems to me to be apt to an inquiry
whether the payer was acting under duress by, for example, a threat to seize his goods or was paying to settle an honest claim. If,
on the other hand, the law gives the right of action to recover money paid as tax based simply on the illegality of the demand, as
contended for by Woolwich, it is not clear to me why, short of contract or estoppel, that right of recovery should be lost because,
when he paid, the taxpayer appeared to be paying to close the transaction. When a payment is made in the belief that there is a
valid basis in law for the claim which is made, I cannot see on what basis the payer could be taken to have paid to close the
transaction so as to be taken to have waived his right of recovery. Nor can I see that the repetition over time of such payments
would by itself amount to waiver. For such a waiver, it would be essential, I think, to prove that the payer knew of the point as to
the legality of the demand and nevertheless made the payment with the apparent intention of not seeking to recover it. I would
add that it is not clear to me how an intention not to seek recovery would be demonstrated.
(vii) Next, in this case, Woolwich protested about the terms of the regulation before any payment was made; payment was
made without prejudice to the right to recover the money and proceedings to establish the invalidity of the claims were at once
commenced. Little difficulty for the management of the Revenue would arise, in my view, from the existence of a right of
recovery arising on payment in such circumstances. The right asserted, however, goes far beyond such limits. It could, to the
extent explained above, arise in the case both of ultra vires demands and of demands based on misconstruction, and subject to the
point mentioned above with reference to the requirement of preliminary proceedings for a declaration under Ord 53, the
proceedings could be commenced within six years of payment. No doubt, in some circumstances, as Mr Gardiner submitted,
having regard to any knowledge of and reference to the possible invalidity of the demand on the part of the payer, payment might
be held to be irrecoverable because it was paid voluntarily to close the transaction, but potentially, as it seems to me, the right
could be asserted by a large number of payers. It is true that, if grave difficulties should be anticipated for the Revenue,
Parliament might agree to enact retrospective legislation since there is, in our law, no bar to such legislation, but the trouble and
expense arising from such proceedings if not prevented by legislation has been in the past, and should in my judgment still be,
regarded as a relevant consideration when the court is asked to extend the law.
Thus, in Glasgow Corp v Lord Advocate 1959 SC 203 the corporation claimed to recover sums paid for purchase tax which
were not lawfully due. It was argued in that case that on constitutional grounds, since the Crown could not levy tax 620 without
the authority of Parliament, it should not be permitted to retain it if collected without such authority, notwithstanding any
supposed rule against recovery of money paid under mistake of law. Lord Wheatley, the Lord Ordinary, refused to allow
recovery on that ground. His decision was upheld by the Inner House of the Court of Session. The Lord President (Clyde), in a
judgment with which Lords Carmont and Russell on this point agreed, said (at 230231):

This brings me to the second main issue in the case, namely, the question of repayment of the tax in so far as it was
wrongly charged and paid. Repayment was sought to be justified on two separate grounds. The first was a broad
constitutional point. It was said that the Commissioners of Customs and Excise had no authority from Parliament, nor from
anyone else, to impose these charges now found to be illegal; that no one could be forced to pay a single shilling of tax
which was not legally due, and that therefore the Corporation were entitled to recover what now turns out to have been
 unwarrantably charged upon them. But although the premises are unexceptionable, the conclusion does not follow from
them, and no authority of any kind was quoted to us to justify the conclusion. The case of the Attorney-General v. Wilts
United Dairies, Limited ((1921) 37 TLR 884), is not in point in this connexion. If the conclusion did follow from the
premises, I should have expected the point frequently to have arisen before now. Indeed, the elaborate statutory provisions
in various Finance Acts regarding the precise circumstances in which income tax already paid may be reclaimed would
have been quite unnecessary if the conclusion sought to be drawn by the Corporation were sound. It may well be that the
payment thought erroneously to be due at the time should never have been made. But it does not therefore follow that,
when the error is established, the money must automatically be paid back by the taxing authority. For a repayment in such
circumstances has wider repercussions, and affects far more interests than those of the one taxpayer. It would, in my
opinion, introduce an element of quite unwarrantable uncertainty into the relations between the taxpayers and the
Exchequer if there could be a wholesale opening up of transactions between them whenever any Court put a new
interpretation upon an existing statutory provision imposing a tax. Yet this is necessarily involved in the argument for
repayment upon this constitutional ground.

That case is not, of course, binding upon this court but it is, in my view, of persuasive authority. At this point, I have referred to it
only in justification of reference to the possibly damaging effect of accepting the primary case for Woolwich.
(viii) The right contended for would, if I have understood the nature and extent of it correctly, in the case of payment of tax
in respect of an ultra vires demand, be effective in widely differing circumstances and (subject to the decision in National Pari-
Mutuel being distinguished on the grounds that it is limited to cases of misconstruction of a valid provision) would set aside in
this context two generally accepted principles, namely that a payment made under mistake of law is not recoverable and that a
payment made in the absence of any mistake of fact and under no compulsion other than the threat of legal proceedings, is not
recoverable.

The attractiveness of the primary submission

Our law has long recognised a rule that, subject to exceptions, money paid under a mistake of law is irrecoverable. It has
also long been a principle of our 621 law that, if a defendant is under an obligation from the ties of natural justice to refund
money which he has received, the law implies a debt which the payer may recover (see the speech of Lord Wright in the Fibrosa
case [1942] 2 All ER 122 at 136, [1943] AC 32 at 62, quoting Lord Mansfield CJ in Moses v Macferlan (1760) 2 Burr 1005 at
1012, [15581774] All ER Rep 581 at 585, which Nolan J cited in his judgment (see [1989] STC 111 at 113)). There is, clearly,
much to be said in favour of the contention that money paid in respect of an ultra vires tax demand should prima facie be
recoverable on that ground alone. Nolan J described the submission as attractive and I agree with him. The argument advanced
for Woolwich based on constitutional principle seems to me to have much force and to deserve to be given effect unless there is
some reason to be found in the authorities to prevent that course. Since the Bill of Rights (1688) forbids levying money for or to
the use of the Crowne without grant of Parlyament (see A-G v Wilts United Dairies Ltd (1921) 37 TLR 884 at 886 per
Scrutton LJ) money obtained by an ultra vires demand for tax should be recoverable, even though the only form of compulsion
has been the implied threat of recovery by legal proceedings, unless there is some reason to deny the right.
Our law, however, has not in all respects developed rules which can be regarded as fully in accordance with what an ideal
system of justice would ensure (see the La Pintada case [1984] 2 All ER 773 at 789, [1985] AC 104 at 129 per Lord Brandon).
Sometimes the reasons for the apparent deficiency in a rule are to be found in a wider view of the public interest than that
required by the private economic interest of individual citizens. A blunt-edged rule may fail to distinguish as carefully between
the circumstances of one person and another as payers would wish, but the general good is not always advanced by the extended
refinement of rules. Such refinement may well produce an ever-increasing number of justiciable issues which will require to be
resolved largely at public expense. In short, the theoretical attractiveness of the primary submission does not mean that this court
is necessarily able to accept it.

CONCLUSION
I do not think that the right answer to this case is to be found by examination of the precise words used by various judges in
a large number of different cases. The basic principles of our law clearly favour, I think, the primary submission. There are dicta
which support it. The limitations upon the rule of recovery, for which limitations the Revenue contend, seem to me to be
necessarily based, particularly where the limitation is applied so as to protect the Revenue as contrasted with the private citizen,
on policy grounds.
If in this court we were free, as we are not, to approach this matter as a law reform exercise, I would start with a preference
in favour of the law being based upon a prima facie right of recovery, such as contended for by Woolwich, but as in any law
reform exercise, that preference would have to be tested by consideration of the answers given on consultation by those capable
from experience of discerning the difficulties which might be caused by following that preference. We have received the help
(similar in effect to the response on consultation, but necessarily incomplete) of being referred to a number of learned articles and
textbooks, and to the decisions of courts in other jurisdictions, where various possible improvements in the law have been
considered together with possible forms of protection for the Revenue and other recipients of money if the improvements should
be made. I wish to express my gratitude for the assistance and instruction I have obtained from those sources.
Our task, however, is narrower. We cannot mould and limit a cause of action 622 as we might wish to see it defined by
legislation. If the principles of the common law and of the Bill of Rights, properly understood, create the right of recovery for
which Woolwich contends, then we must so find and the Revenue must look for protection to Parliament. If our law has
developed the limitations on recovery which the Revenue say are to be found in the authorities, then we should, in my view, only
set aside those authorities if we are convinced that they are wrong either because of defects in the reasoning upon which they are
based or because they cannot stand in the light of decisions in the House of Lords. It is also relevant, in my view, to the question
whether long-accepted authority should be reversed, to consider how far Parliament itself has apparently accepted the law as set
out in that authority, whether expressly or impliedly, in legislation enacted in the relevant context.
The main cases concerned with claims to recover money exacted on ultra vires demands of public officials or authorities
began in the eighteenth century. There was, then, little direct taxation by central government and most of the cases were
concerned with the exaction of fees or tolls or duties by public officials whether for performance of a duty or for release of goods.
Those cases, accordingly, tend to justify any order for recovery by reference to the circumstances of those cases, namely a
demand for payment of money not lawfully due for performance of a public duty or for release of goods to seize which there was
no lawful right. Even so, as Mr Gardiner has pointed out, there are examples to be found of reliance being placed more upon the
unlawfulness of the demand than upon the coercion exercised by the threat, express or implied, to withhold performance of the
duty or the goods.
Thus, in Irving v Wilson (1791) 4 Term Rep 485, 100 ER 1132 a revenue officer seized goods as forfeited which were not
liable to seizure, and then took money from the owner for the release of the goods. The owner was held by Lord Kenyon CJ,
Ashurst and Groves JJ entitled to recover the money in an action for money had and received. Lord Kenyon CJ said that, since
the taking of the money could not be justified, the payment was not voluntary. Ashurst J described the payment as by coercion.
Groves J held that the money could be recovered because it had been taken for delivery up of the goods.
In Morgan v Palmer (1824) 2 B & C 729, 107 ER 554, before Abbott CJ, Bayley, Holroyd, Littledale JJ, the plaintiff was a
publican. In order to obtain a renewal of his liquor licence he was required by the mayor of Yarmouth, who had the power to
grant and renew licences, to pay a sum of money. The conduct of the mayor was illegal. He had no right to any payment as a
condition for granting or renewing a licence. The plaintiff was held entitled to recover the money paid. Abbott CJ said (2 B & C
729 at 734735, 107 ER 554 at 556):

It has been well argued that the payment having been voluntary, it cannot be recovered back in an action for money
had and received. I agree that such a consequence would have followed had the parties been on equal terms. But if one
party has the power of saying to the other, That which you require shall not be done except upon the conditions which I
choose to impose, no person can contend that they stand upon any thing like an equal footing. Such was the situation of
the parties to this action.

Bayley J agreed on that aspect of the case with Abbott CJ. Holroyd J merely held that the payment was not voluntary. Littledale
J agreed, saying (2 B & C 729 at 739, 107 ER 554 at 557558) that

the plaintiff was merely passive, and submitted to pay the sum claimed, as he could not otherwise procure his licence.
623

In Steele v Williams (1853) 8 Exch 625, 155 ER 1502 the plaintiff, a lawyer, applied to the defendant, a parish clerk, for liberty to
search the register book for burials and baptisms. He did not want certificates but only to make extracts. He was told by the
defendant that the charge would be the same whether he made extracts or had certificates. He was charged 4 7s 6d for 25
extracts. The court (Parke, Platt and Martin BB) held that the charge for extracts was illegal and that, since the payment was not
voluntary, it could be recovered. Parke B said (8 Exch 625 at 630, 155 ER 1502 at 1504):

upon the true construction of the evidence, the payment in this case was not voluntary because, in effect, the
defendant told the plaintiffs clerk, that if he did not pay for certificates when he wanted to make extracts, he should not be
permitted to search.

He continued (8 Exch 625 at 631, 155 ER 1502 at 1505): this payment was not voluntary, but necessary for the exercise of a
legal right. Platt B agreed with Parke B. The decision of Martin B was on wider grounds (8 Exch 625 at 632, 155 ER 1502 at
1505):

As to whether the payment was voluntary, that has in truth nothing to do with the case. It is the duty of a person to
whom an Act of Parliament gives fees, to receive what is allowed, and nothing more. This is more like the case of money
paid without considerationto call it a voluntary payment is an abuse of language.

Hooper v Exeter Corp (1887) 56 LJQB 457 (Lord Coleridge CJ and Smith J) belongs in this category of decisions but goes
further. Mr Grabiner has submitted that it was wrongly decided unless it can be seen as a mistake of fact case. The defendants
were empowered by statute to charge dues upon the landing of stone. There was an exception in favour of limestone landed
for the purpose of being burned into lime. The statute also contained a power of distress in a case of non-payment. The plaintiff
was unaware that he was entitled to the benefit of the exception and paid the dues demanded. He then claimed the return of the
moneys previously paid. The report is brief and unsatisfactory. The plaintiff cited Morgan v Palmer (1824) 2 B & C 729, 107
ER 554 but was stopped by the court. For the defendants it was submitted that the payments were voluntary. The court reversed
the county court judge and held that the plaintiff was entitled to recover what he had paid. By reference, it would appear, to
Morgan v Palmer Lord Coleridge CJ held (at 458) that

where one exacts money from another and it turns out that although acquiesced in for years such exaction is illegal, the
money may be recovered as money had and received, since such payment could not be considered as voluntary so as to
preclude its recovery.

Smith J was of the same opinion.

It was in the 1880s that, in the contention of Woolwich, the courts began to go wrong in deciding the cases on which the
Revenue relies.
About one month after the Divisional Court decided Hooper v Exeter Corp, Slater v Burnley Corp (1888) 59 LT 636 was
also decided by the Divisional Court (Cave and Wills JJ). The plaintiff there claimed to recover an overcharge which he had paid
in respect of water rates. There was no statutory power to distrain for the water rates but the defendant had the power to cut off
the water supply on non-payment. There had been, however, no cutting off of the water, nor any threat to do so, nor legal
proceedings for recovery of the rates. The county court judge held the payments to have been not voluntary and therefore
recoverable, 624because of the powers which were available to the defendants. The Divisional Court reversed that decision.
Reference was made by counsel for the plaintiff to Hooper v Exeter Corp and to Steele v Williams (1853) 8 Exch 625, 155 ER
1502. It was treated as common ground in argument that the plaintiff could have waited for the six year period of limitation
before applying for recovery. (There was then no question of the requirement for proceedings by judicial review within the time
limited for such proceedings under Ord 53.) The reasons for the decision of the Divisional Court were that the payment was not
shown to have been involuntary merely by reason of the existence of the power to stop the water; so to hold would be very far-
reaching and no payment of rent to a landlord would be a voluntary payment. Nothing was said to distinguish the case from
Hooper v Exeter Corp or from Steele v Williams. Mr Grabiner has contended that the court must be taken to have regarded those
two cases as distinguishable because they were within the principle of the colore officii cases, where money is unlawfully
demanded and received in return for the performance of a public office. Although it is not, in my view, possible to fit Hooper v
Exeter Corp into the category so limited, I think Mr Grabiner is correct in his submission as to how the Divisional Court must be
taken to have regarded those two cases.
More than 20 years later came William Whiteley Ltd v R (1909) 101 LT 741, [190810] All ER Rep 639, a decision of
Walton J. This case was concerned with tax demanded by the Revenue on behalf of the Crown. Waiters employed by Whiteley
were said to be male servants within the meaning of a statutory taxing provision and duties were claimed. Whiteley disputed its
liability. It was informed that, if the duties were not paid, it would incur penalties. Whiteley paid. Later, the duties were paid
under protest. Some six years after the dispute first arose, in proceedings by the Revenue to recover penalties, it was held that, on
the true construction of the provision, the duties were not payable but the claim by Whiteley to recover duties previously paid
was rejected. Again, Steele v Williams, Morgan v Palmer and Hooper v Exeter Corp were cited and the submission was advanced
in precisely the terms now put forward for Woolwich, namely that when money is paid under an illegal demand colore officii the
payment can never be voluntary. Walton J referred to the general rule that if money is voluntarily paid under a mistake of law
then it cannot be recovered back. As to the question whether the payments were voluntary, he held that they were because there
had been no duress or compulsion beyond the threat of proceedings for penalties. Then he continued (101 LT 741 at 745746,
[190810] All ER Rep 639 at 642):

But it was suggested that the case came within that class of cases in which money has been held to be recoverable back
if it has been paid in discharge of a demand illegally made under colour of an office. Those cases seem to me all to
come within that class of cases to which I have just referred, which is described in Leake on Contracts (5th edn, 1906, p
 61) in these words: Money extorted by a person for doing what he is legally bound to do without payment, or for a duty
which he fails to perform, may be recovered back. In all those cases in order to have that done which the person making
the payment was entitled to have done without a payment, he had to make the payment, and someone who was bound to do
something which the person paying the money desired to have done, refused to do his duty unless he was paid the money.
If in those circumstances money is paid, then it can be recovered back. There is there an element of duress.

Next, 36 years later in Twyford v Manchester Corp [1946] 1 All ER 621, [1946] Ch 236, Romer J followed and applied the
decision in the William Whiteley case. For the proposition that fees unlawfully charged for permission to recut and 625 regild
monumental stones in a cemetery were recoverable, the plaintiff cited only Somes v British Empire Shipping Co (1860) 8 HL Cas
338, [184360] All ER Rep 844 and relied on the fact that the fees had been paid under protest. Romer J differed from Walton J
in refusing to regard the William Whiteley case as a case of mistake of law but continued ([1946] Ch 236 at 241, cf [1946] 1 All
ER 621 at 627):

Even so, however, I respectfully agree with the rest of Walton J.s judgment, particularly with his statement that a
general rule applies, namely, the rule that, if money is paid voluntarily, without compulsion, extortion, or undue influence,
without fraud by the person to whom it is paid and with full knowledge of all the facts, it cannot be recovered, although
paid without consideration, or in discharge of a claim which was not due or which might have been successfully resisted.

My first impression was that Romer J was right to regard William Whiteley as not having been a case of mistake of law. I am
now not sure. I do not think that the point is of great importance and it is, I think, no more than an issue as to the use of words.
Payment under mistake of law is not, and, I think, has never been itself a ground for relief; frequently it is used to describe a
payment made under mistake where there was no mistake of fact and hence no ground of recovery. Nor, as I have said above,
does mistake of law, by itself, bar recovery if there is a recognised basis of claim, for example duress or actionable
misrepresentation inducing mistaken belief. Accordingly, if payment is made under mistake, in the sense that it would not have
been made but for a mistaken belief which induces the payment, then if it is not a mistake of fact it is probably capable of being
categorised as a mistake of law. The fact that the point of law has been perceived does not by itself prevent there having been an
effective mistake of law by reference to the prospects of success in legal proceedings to settle the point. Mistake of law could be
categorised in such a way as to exclude mistake of law if the point has been perceived. This matter is not, in my view, of
importance. The question whether a right of recovery exists, or does not exist, in the case of payment of an ultra vires demand
should not depend, if the decision can be made on basic principles of justice, upon whether the point of law upon which refusal to
pay could be justified was or was not perceived at the time of payment.
Those three cases, Slater v Burnley Corp in the Divisional Court and William Whiteley and Twyford v Manchester Corp at
first instance, have not hitherto been doubted or commented upon adversely in any decision in this country. Mr Gardiner relied
upon A-G v Wilts United Dairies Ltd (1921) 37 TLR 884 as providing support for his primary submission and therefore as casting
doubt on the three decisions upon which the Revenue case is based. A-G v Wilts United Dairies Ltd contains no matter of
decision upon the recovery of payments made because there had been no payments. In that case the food controller sought to
impose, by means of an agreement to that effect, a charge of 2d per gallon on purchases of milk as a condition of the grant of a
licence to buy milk. Bailhache J gave judgment for the Crown for the sum claimed under the agreement. The question before the
Court of Appeal was whether the food controller had legal authority to impose that condition and it was held that he had not. The
contract was therefore illegal and unenforceable. Atkin LJ in a passage much relied on by Mr Gardiner for Woolwich said (at
887):

It makes no difference that the obligation to pay the money is expressed in the form of an agreement. It was illegal for
the Food Controller to require such an agreement as a condition of any licence. It was illegal for him to enter into such an
agreement. The agreement itself is not enforceable against 626 the other contracting party; and if he had paid under it he
could, having paid under protest, recover back the sums paid, as money had and received to his use.

Atkin LJ did not explain, and it was not necessary in that case to explain, on what ground in law, after payment under protest,
recovery could have been claimed.
In Mason v New South Wales (1959) 102 CLR 108 the colore officii cases in England were considered by the High Court of
Australia. Mr Grabiner cited the case as persuasive authority in support of the submission of the Revenue. The plaintiffs in that
case sued the defendant state for money had and received being fees paid for permits to carry goods for payment issued under a
state statute of 1931. The requirement of payment was held to be ultra vires. It was argued for the plaintiffs that the right to
recover rested on a general principle such as that now contended for by Woolwich, namely that payments in respect of an official
demand for payment, which was illegal, gave rise to a right of recovery. In addition, it was argued that the plaintiffs had paid
under compulsion because (a) the defendants had been withholding the plaintiffs common law right to use the highway except on
payment, (b) the parties were in an unequal situation, (c) the plaintiffs were threatened with ruinous legal proceedings and had no
practical choice but to pay or (d) they were threatened with seizure of their vehicle. Dixon CJ, after reference to the English
cases which seemed to say that moneys paid to the Crown as and for taxes cannot be recovered unless the circumstances
were such that they would be recoverable as between subject and subject (at 117), said that However this might be, the plaintiffs
must I think recover because they had paid only because they apprehended on reasonable grounds that without the permit
the State would or might stop the motor vehicle (at 116). Dixon CJ clearly had doubts whether the possible grounds of
recovery were so limited but found it unnecessary to resolve those doubts. Kitto J accepted, in effect, the primary submission
now made for Woolwich. The majority view, however, was expressed by Menzies and Windeyer JJ, with whom Fullagar and
Taylor JJ agreed. Menzies J held that the charges were unlawfully exacted by a threat to force the plaintiffs vehicles off the road
and recovery was justified on the principles stated in such cases as Morgan v Palmer (1824) 2 B & C 729, 107 ER 554, Steele v
Williams (1853) 8 Exch 625, 155 ER 1502 and Hooper v Exeter Corp (1887) 56 LJQB 457. William Whiteley was distinguished
because in that case there was no compulsion beyond the threat of legal proceedings.
Windeyer J held that it could not be said that any official had extorted or even demanded money by colour of his office. The
plaintiffs could not succeed simply because of the superior position of the defendant. In his view the plaintiffs were required to
go further and establish that there was, in a legal sense, compulsion by something actually done or threatened, something beyond
the implication of duress arising from a demand by person in authority, which suffices in a true colore officii case. It was not
sufficient for the plaintiffs merely to point to the provisions of the statute. They were required to show that the Crown by its
servants was exercising or threatening to exercise power under the statute in such a way as to constitute compulsion in law. A
threat of proceedings for a mere pecuniary penalty did not make a payment made thereafter involuntary because the payer might
have defended the proceedings and relied on the unlawfulness of the demand (see William Whiteley). In the end Windeyer J held
that the evidence did enable the plaintiffs to bring themselves within the principles stated by him.
Although the reasons given by Menzies and Windeyer JJ are not the same they clearly agreed in holding that the claim to
recovery could not be based simply upon the ultra vires nature of the original demand.
627
In my judgment, the principles applied in the colore officii cases decided in this country, and of which some have been
examined above, are accurately summarised by Windeyer J in Masons case (1959) 102 CLR 108 at 140 in the passage cited by
Nolan J in his judgment, namely that they should be confined to cases where a public officer demands and is paid money he is
not entitled to, or more than he is entitled to, for the performance of his public duty. Those cases do not establish a principle
from which the primary case for Woolwich can be derived. If it is to succeed, that primary case must be based in the first place
upon the basic principle stated by Lord Wright in the Fibrosa case [1942] 2 All ER 122 at 135, [1943] AC 32 at 61 and must
demonstrate that the limitations imposed by the William Whiteley case were wrong when devised or must be held to be wrong in
the light of later authority such as the decision of the House of Lords in Tower Hamlets London BC v Chetnick Developments Ltd
[1988] 1 All ER 961, [1988] AC 858.
For my part, I am unable to accept that the grounds of decision in Slater v Burnley Corp (1888) 59 LT 636, in William
Whiteley and in Twyford were wrong in refusing to recognise any general right of recovery of money paid in respect of an
unlawful claim to tax. I acknowledge that the law could have been developed in accordance with the wider basis of decision in
Hooper v Exeter Corp but it was not and the decision that no general right of recovery exists, based simply upon the
unlawfulness of the demand, was clearly based upon the courts assessment of the requirements of the policy of the law. That
view has stood without effective challenge for 100 years.
It is also clear, in my judgment, that when Parliament has accepted the need for additional protection for the taxpayer,
specific statutory provision has been enacted for repayment of money wrongly paid as tax, such as s 9 of the 1967 Act and s 33 of
the Taxes Management Act 1970, on the assumption that there is in law no such general right of recovery as that now asserted by
Woolwich. Thus, in s 33 of the 1970 Act, in the case of an excessive assessment by reason of error or mistake in a return, the
board may give by repayment such relief as is reasonable and just provided that

no relief shall be given under this section in respect of an error or mistake as to the basis on which the liability of the
claimant ought to have been computed where the return was in fact made on the basis or in accordance with the practice
generally prevailing at the time when the return was made.

That provision would, of course, have no application to a case such as this but, if the primary case made for Woolwich is right, I
am, as I have said, unable to see how the alleged right could be limited to cases where the basis of purported charge is non-
existent in law, and, if it is not so limited, there could be concurrent remedies available in some cases to the taxpayer to one of
which the limitations posed by Parliament would not be applicable. It might be said that where Parliament has created a specific
remedy, the taxpayer must be limited to that remedy in cases to which it applies but, to employ such reasoning, it would be
necessary to attribute to Parliament an intention to disapply any relevant common law remedy which was already recognised or
which might thereafter be held to exist, and I find it difficult to see clear justification for so doing.
One other persuasive authority, which in my view supports the Revenue case, should be mentioned. It was not separately
relied on by Mr Grabiner but was discussed in the essay by Professor Birks to which we were referred in argument (Restitution
from the Executive in Finn (ed) Essays on Restitution (1990) pp 164205). I refer to the decision of the Court of Session in
Glasgow Corp v Lord Advocate 6281959 SC 203. It is clear from that decision that, when the rule against recovery of money
paid in respect of an unlawful tax demand, in the absence of duress, was expressly challenged on the constitutional ground put
forward here by Woolwich, the argument was rejected by the Court of Session at least so far as concerns a claim based upon
misconstruction as contrasted with a claim based upon an ultra vires decision. In other words, the Court of Session rejected the
argument which was not advanced in National Pari-Mutuel. Lord Wheatley, in a passage which, in reverse, seems to me to apply
precisely to our consideration of this decision of the Court of Session, said (at 220):

[It is] said that it would be most unfortunate, particularly in regard to exactions of tax, if the law of Scotland and
England were to differ on the question of the right of recovery of tax paid but not due as a result of an error in law, and
while I agree that it would be unfortunate, that in itself is no reason for equiparating the law of Scotland to the law of
England if the principles of the law of Scotland do not justify such a course. On the other hand, if the matter is open it is
always proper to consider the persuasiveness of the English opinions in matters touching the laws of both countries without
being bound by them.

I find the decision persuasive because, although it was concerned with misconstruction and not an invalid provision, the present
argument based upon basic principles of justice was raised, argued and rejected. So far as concerns the force of the basic
principles, there is, in my judgment, no sustainable distinction between cases of misconstruction and cases of ultra vires demand.
I come now to consideration of the later cases which, it was submitted, require or justify the overruling of William Whiteley
and its attendant cases. The main cases relied on were A-G v Wilts United Dairies Ltd, Chetnick Developments and South of
Scotland Electricity Board v British Oxygen Co Ltd (No 2) [1959] 2 All ER 225, [1959] 1 WLR 587, supported by the Canadian
case of Air Canada v British Columbia (1989) 59 DLR (4th) 161 in the Supreme Court of Canada.
Reference has already been made to the passages in the judgments in A-G v Wilts United Dairies Ltd. That case was not
concerned with the recovery of payments made but with an attempt by the Crown through the form of an action upon a contract
to enforce a claim to tax not authorised by Parliament. It provides, in my view, no significant support for the primary case of
Woolwich.
The South of Scotland Electricity Board case was concerned with a claim by British Oxygen to recover from an electricity
board alleged overpayments exacted in breach of s 37(8) of the Electricity Act 1947, which forbade any undue discrimination
against any person in the fixing of tariffs. It was held by the House of Lords that there was nothing in law to prevent the
recovery of sums which could be proved to have been overcharged.
Viscount Kilmuir LC said ([1959] 2 All ER 225 at 232233, [1959] 1 WLR 587 at 596):

the first governing principle is that a tariff which imposes a charge on the respondents involving their being unduly
discriminated against is contrary to s. 37(8) of the Electricity Act, 1947. The respondents were charged more than is
warranted by the statute. Then it is clear that, until a court so declares, the respondents have no alternative but to continue
to pay the charges demanded of them. In principle, the appellants should not be permitted to retain payments for which
they have no warrant to charge.

Lord Tucker ([1959] 2 All ER 225 at 246, [1959] 1 WLR 587 at 615) agreed with 629 the reasons given by Viscount Kilmuir LC.
Lord Merriman said ([1959] 2 All ER 225 at 240, [1959] 1 WLR 587 at 606607):

As regards the claim for the repayment of moneys overpaid It is sufficient to say that, in Maskell v. Horner ([1915]
3 KB 106 at 119, [191415] All ER Rep 595 at 598), LORD READING, C.J., referring in particular to the advice given
by WILLES, J., in Great Western Ry.Co. v. Sutton ((1869) LR 4 HL 226 at 249)where that learned judge said that he had
always understood that when a man pays more than he is bound to do by law for the performance of a duty which the law
says is owed to him for nothing, or for less than he has paid, there is a compulsion or concussion in respect of which he is
entitled to recover the excess by condictio indebiti, or action for money had and receivedsaid, that such claims made in
this form of action are treated as matters of ordinary practice and beyond discussion.

Lord Reid said ([1959] 2 All ER 225 at 241242, [1959] 1 WLR 587 at 609):
 I think there is nothing in law to prevent recovery of any sums which can be proved to have been overcharged.
The only reason advanced for the contrary view was that overcharges made by railway companies were said to be
irrecoverable if they were due to the company having given an undue preference to another customer. It is, therefore,
necessary to look at the railway legislation and the authorities under it. [The report in the Weekly Law Reports says
unnecessarythat must be an error in the report]. The Railways Clauses Consolidation Act, 1845, and certain earlier
private Acts, contained an equality clause which made it illegal for a company to charge one customer more than they
charged another in similar circumstances, and it is quite clear that a person who proved breach of an equality clause could
recover from the company any overcharge which he had paid, i.e., the difference between what he had paid and what he
would have paid if the company had charged him as the equality clause required (Great Western Ry.Co. v. Sutton ((1869)
LR 4 HL 226)) and recovery was not prevented by the fact that, when he paid the charge demanded, he knew that he was
being overcharged.

Later Lord Reid said:

If there were clear and binding authority under the railway legislation that overcharges resulting from undue
preference or prejudice could not be recovered, I might be inclined to hold that the same rule should apply here, but there is
not.

It is to be noted that the decision in the South of Scotland Electricity Board case was dated 16 April 1959 on appeal from the
Court of Session. The decision in Glasgow Corp v Lord Advocate was dated 20 March 1959. Neither case at any stage appears
to have been cited in the other. The references set out above to the speeches of their Lordships are sufficient to demonstrate that
they did not consider the question whether the law applied in William Whiteley was right or wrong. The passage in the speech of
Lord Reid cited above shows the case was argued for the electricity board on the basis that the issue of recovery of overpayments
was to be decided upon the construction of the particular statute and cases decided upon the railway legislation. The comments
of Viscount Kilmuir LC and of Lord Merriman show that the case was seen by them as similar to the colore officii cases in that
the users of electricity had no choice but to pay the price demanded if they were to obtain the electricity and were thus in the
position of the plaintiff in 630 Maskell v Horner, which was, in effect, a duress case. The plaintiff was there held to have paid to
avoid seizure of his goods. There is, in my judgment, nothing in the reasoning of their Lordships which requires this court to
overrule William Whiteley.
The Chetnik Developments case [1988] 1 All ER 961, [1988] AC 858 has been considered above in this judgment. The
ratepayer had paid, through mistake of law, some 51,000 as rates which were not payable. The question was whether, in
refusing to repay the money under the power given by s 9 of the 1967 Act, the council had misdirected itself or acted
unreasonably. The argument was directed to the proper construction of the statutory provisions by which the discretion to make
repayment was conferred. No doubt was cast upon the proposition that, without the statutory power, the council would have been
unable to repay the money paid to it under a mistake of law. Cases such as William Whiteley were not mentioned. The rule of
our law which provides no recovery for money paid under mistake of law, even when the money is paid to a public authority such
as a council receiving rates, was not doubted although it was noted by Lord Goff as a rule much criticised and especially by
comparative lawyers (see [1988] 1 All ER 961 at 973, [1988] AC 858 at 882). The decision, of course, provides support, which
in my view is not required, for the basic principle of our law stated by Lord Wright in the Fibrosa case, namely that a man should
not retain the money of or some benefit derived from another which it is against conscience that he should keep (see [1942] 2 All
ER 122 at 135, [1943] AC 32 at 61); but the decision was not directed at, nor does it in my view cast doubt upon, the validity of
the limitation of the principle long established by William Whiteley and the other cases.
In the end, and after much hesitation, I have reached the conclusion that this appeal should be dismissed. In summary, my
reasons for reaching that conclusion, which are more fully set out above in this judgment, are as follows.
(i) The rules applied in Slater v Burnley Corp, William Whiteley and Twyford v Manchester Corp were based on the rule
which denies recovery of voluntary payments, and the principle that the threat of bona fide legal proceedings is not in law duress,
coupled with the principle that those rules apply to claims against the state as they apply to claims against a private citizen or
corporation. The mistake of law rule was seen as part of the relevant system of rules although, as explained above, the
correctness of the application of the rule in the William Whiteley case is arguable.
(ii) The mistake of law rule can be criticised but has long been part of our law. It is a central part of the law of restitution.
Legislation, which apparently assumes the validity of the rule, has been passed, and Parliament has, apparently, been content not
to abolish it. It was treated, without question, as part of our law with reference to a public body with taxing powers in Chetnik
Developments Ltd. If the primary submission is right, the mistake of law rule would be set aside in cases of ultra vires demand if
National Pari-Mutuel is distinguished, but would be applicable in cases of mere misconstruction by reason of the decision in
National Pari-Mutuel. I am not persuaded by a submission which, if right, disturbs the long-established mistake of law rule in
one class of case, that of ultra vires demand, but cannot be applied in another class of case, that of misconstruction of a valid
provision, although there is no satisfactory distinction in principle between the two classes.
(iii) The rules in Slater v Burnley Corp, William Whiteley and Twyford v Manchester Corp have stood unquestioned in our
courts for 100 years. A large number of claims, by taxpayer or the Revenue, must have been settled or not pursued or not
defended upon the assumption that the rules are good law. If this 631 court should overrule those cases and accept the primary
submission for Woolwich, the law must be regarded as always having provided for that cause of action; we cannot provide for it
to exist only from the date of our decision or attach limitations upon the advancing of other existing or past claims. Such claims
could be advanced or revived on the basis that the cause of action has always existed, subject to any effective defences or answers
based upon limitation, compromise or estoppel.
(iv) The reasoning upon which the rules in those cases were based rests substantially upon an assessment of the policy
consequences of recognising the existence of the cause of action contended for. In my judgment, the policy consequences could,
with no less convincing reasoning, have been assessed differently; and if the cause of action contended for had been recognised
long ago, it would rapidly have been assimilated into the law with such special legislative provisions as would have been judged
to be necessary. That, however, does not in my judgment justify the upheaval and potential consequences which would be likely
to follow from overruling at this date Slater v Burnley Corp, William Whiteley and Twyford v Manchester Corp.
(v) The argument based upon legality, constitutional propriety and simple fairness was as clear and compelling in 1888 when
Slater v Burnley Corp was decided or in 1959 when the Court of Session decided Glasgow Corp v Lord Advocate and the High
Court of Australia decided Masons case as it is today. There are, however, respectable reasons of public interest and the
convenience of public administration for retaining the rules as they are. The nature of the consequences of overruling the long-
standing authorities is such that, in my judgment, that course should be left to legislation.

BUTLER-SLOSS LJ. The Woolwich Building Society (Woolwich) paid the Inland Revenue Commissioners (the Revenue)
nearly 57m in response to an income tax demand formulated under provisions of the Income Tax (Building Societies)
Regulations 1986, SI 1986/482, found by the House of Lords to be ultra vires (see Woolwich Equitable Building Society v IRC
[1991] 4 All ER 92, [1990] 1 WLR 1400). The Revenue repaid the 57m but have refused to pay interest claimed by Woolwich
of approximately 7m. I gratefully adopt the summary of the facts set out in the judgment of Ralph Gibson LJ, which I have had
an opportunity of reading in draft. In order to decide whether and, if so, on what basis Woolwich is entitled to claim interest on
the money paid to the Revenue in response to an unlawful demand, it is necessary to consider first the bases upon which the
payments were made by Woolwich and the repayment made by the Revenue. If a cause of action arose at the dates of payment of
the tax, interest would be payable, but if the right to repayment arose at the date of judgment or did not arise at all, no interest
would be payable. Woolwich makes two main submissions. (1) The primary submission, that as a matter of principle a subject
who makes a payment in response to an unlawful demand for tax (or other like demand) from the Crown, thereby acquires a
prima facie right to its repayment forthwith as money had and received. (2) In the alternative, there is a right to restitution on the
basis of duress or practical compulsion. In either case, the cause of action would arise at the date of payment and interest would
be payable on a claim for the recovery of a debt within the meaning of s 35A of the Supreme Court Act 1981.
If both submissions fail, Woolwich contends that the implied agreement as found by the judge (see [1989] STC 111)
included repayment of the sum from the dates of payment and not the date of judgment and consequently interest would be
payable.
632
The Revenue contend that there is no general principle of restitution, that the payment by Woolwich was made voluntarily
and not under duress and was repaid by the Revenue either (1) by virtue of the implied agreement found by the judge, which did
not include the payment of interest, or (2) alternatively an ex gratia payment made in accordance with their general powers under
the Taxes Management Act 1970 to settle disputed claims and make compromises with taxpayers in pursuance of their duties to
collect taxes (see IRC v Nuttall [1990] STC 194, [1990] 1 WLR 631). There was no question of the Revenue not repaying the
57m to Woolwich.

THE PRIMARY SUBMISSION

This is the general principle of restitution of moneys had and received through unjust enrichment. I start, as Nolan J did,
with the speech of Lord Wright in Fibrosa Spolka Akcyjna v Fairbairn Lawson Combe Barbour Ltd [1942] 2 All ER 122 at 135,
[1943] AC 32 at 61:

It is clear that any civilised system of law is bound to provide remedies for cases of what has been called unjust
enrichment or unjust benefit, that is, to prevent a man from retaining the money of, or some benefit derived from, another
which it is against conscience that he should keep. Such remedies in English law are generically different from remedies in
contract or in tort, and are now recognised to fall within a third category of the common law which has been called quasi-
contract or restitution.

Historically, these claims were brought in the Court of Kings Bench in the action of indebitatus assumpsit and during the
eighteenth century actions for money had and received had increased in number and variety. Lord Wright in his speech in
Fibrosa said ([1942] 2 All ER 122 at 136, [1943] AC 32 at 6263):

LORD MANSFIELD, in a familiar passage in Moses v. Macferlan ((1760) 2 Burr 1005 at 1012, [15581774] All ER
Rep 581 at 585) sought to rationalise the action for money had and received, and illustrates it by some typical instances.
He said: It lies for money paid by mistake; or upon a consideration which happens to fail; or for money got through
imposition (express, or implied); or extortion; or oppression; or an undue advantage taken of the plaintiffs situation,
contrary to laws made for the protection of persons under those circumstances. In one word the gist of this kind of action
is, that the defendant, upon the circumstances of the case, is obliged by the ties of natural justice and equity to refund the
money. LORD MANSFIELD prefaced this pronouncement by observations, which are to be noted. If the defendant be
under an obligation from the ties of natural justice, to refund; the law implies a debt, and gives this action [ sc. indebitatus
assumpsit] founded in the equity of the plaintiffs case, as it were, upon a contract (quasi ex contractu as the Roman law
expresses it. LORD MANSFIELD does not say that the law implies a promise. The law implies a debt or obligation
which is a different thing. In fact he denies that there is a contract. The obligation is as efficacious as if it were upon a
contract. The obligation is a creation of the law, just as much as an obligation in tort. The obligation belongs to a third
class, distinct from either contract or tort, though it resembles contract rather than tort. This statement of LORD
MANSFIELD has been the basis of the modern law of quasi-contract, notwithstanding the criticisms which have been
launched against it. Like all large generalisations, it has needed and received qualifications in practice. There is, for
instance, the qualification that an action for money had and received does not lie for money paid under an erroneous
judgment or 633 for moneys paid under an illegal or excessive distress. The law has provided other remedies as being
more convenient. The standard of what is against conscience in this context has become more or less canalised or defined;
but in substance the juristic concept remains as LORD MANSFIELD left it.

The question is whether there is a general right to repayment of moneys unlawfully demanded subject to certain defences which
may be raised, or whether a specific right arises in certain narrow categories and there is no redress for those outside those
categories. Goff and Jones in Law of Restitution (3rd edn, 1986) p 15 of the introduction said: In our view the case law is now
sufficiently mature for the courts to recognise a generalised right to restitution. But the learned editors then point out that this is
not a recognition of palm-tree justice. The law of restitution has its own highly developed and reasonably systematic complex of
rules.
The judge found ([1989] STC 111 at 114, [1989] 1 WLR 137 at 140):

It is plain, however, from the decided cases that the courts have not extended the general principle of restitution to
those who have submitted to unauthorised demands for tax. On the contrary, the general rule has been that the maker of the
payment has no right to recover the principal sum paid, let alone to receive interest on it.

That conclusion is challenged by Mr Gardiner QC for Woolwich and from the many decisions cited to us he has sought to extract
the general proposition contained within his primary submission. Mr Grabiner QC for the Revenue has sought to limit restitution
to specific categories also derived from the cases cited.
I respectfully agree with Glidewell LJ, whose judgment I have had an opportunity of reading in draft, that a distinction
should be drawn between public and private law. In the category of public law, someone with actual or ostensible authority to
require payment in respect of tax, duty, licence fee or other payment on behalf of central or local government makes the demand
for payment by a private individual or company or other organisation. In respect of such a demand no question of consideration
arises. If demanded unlawfully, however, is it, to use Lord Mansfield CJs phrase, money obtained by imposition, express or
implied, which the authority is obliged by the ties of natural justice and equity to repay to the payer? Lord Mansfield CJ applied
the general obligation to repay by the ties of natural justice and equity to demands imposed by the Crown in Campbell v Hall
(1774) 1 Cowp 204, [15581774] All ER Rep 252. This was an action by a plantation owner in the island of Grenada against the
collector of duty unlawfully imposed on the export of sugar from the island after its capture by the British from the French. He
paid the duty and claimed it back. Lord Mansfield CJ said (1 Cowp 204 at 205, 98 ER 1045 at 10451046):

The action is an action for money had and received; and it is brought upon this ground; namely, that the money was
paid to the defendant without any consideration; the duty, for which, and in respect of which he received it, not having been
imposed by lawful or sufficient authority to warrant the same.
The plantation owner was held entitled to recover the duty paid.
There is one group of cases described as colore officii or withholding cases where the private citizen has successfully
recovered money demanded under claim of authority. The narrow definition of this group was expressed by Windeyer J in
Mason v New South Wales (1959) 102 CLR 108 at 140 to be:
634

Extortion by colour of office occurs when a public officer demands and is paid money he is not entitled to, or more
than he is entitled to, for the performance of his public duty. Examples of such exactions are overtolls paid to the keepers
of toll-bridges and turnpikes, excessive fees demanded by sheriffs, pound-keepers, &c. The parties were not on an equal
footing; and generally the payer paid the sum demanded in ignorance that it was not due.

Examples of this group where the plaintiff succeeded include Irving v Wilson (1791) 4 Term Rep 485, 100 ER 1132, Morgan v
Palmer (1824) 2 B & C 729, 107 ER 554 and Maskell v Horner [1915] 3 KB 106, [191415) All ER Rep 595.
Nolan J held, in my view correctly, that the present case could not fall within the definition of colore officii cases.
There are, however, other decisions which do not come within Windeyer Js definition but are wider in ambit. They include
Campbell v Hall (1774) 1 Cowp 204, [15581774] All ER Rep 252, Dew v Parsons (1819) 2 B & Ald 562, 106 ER 471, Steele v
Williams (1853) 8 Exch 625, 155 ER 1502 and Hooper v Exeter Corp (1887) 56 LJQB 457. I have already referred briefly to the
facts in Campbell v Hall. In Hooper v Exeter Corp, a decision of the Divisional Court, the Corporation of Exeter was entitled to
charge dues on all stone landed at Exeter docks. There was an exception that dues were not payable on limestone to be burned
into lime. The plaintiff landed considerable quantities of limestone over many years in ignorance of this exemption and, on
becoming aware of it, reclaimed the dues already paid from the corporation. He succeeded in his claim. In his judgment Lord
Coleridge CJ referred to Morgan v Palmer and said (at 458):

From the case cited in the course of argument it is shewn that the principle has been laid down that, where one exacts
money from another and it turns out that although acquiesced in for years such exaction is illegal, the money may be
recovered as money had and received, since such payment could not be considered as voluntary so as to preclude its
recovery. I am of opinion that that principle should be adopted here, and that accordingly the plaintiff is entitled to recover
his money on the ground that he has paid it involuntarily.

Those observations of Lord Coleridge CJ supported by Smith J are much wider than the definition of colore officii cases and both
Campbell v Hall and Hooper v Exeter Corp in my view support the primary submission of Woolwich.
Support for the principle of repayment of tax unlawfully demanded is also to be found in the decision of the House of Lords
in Tower Hamlets London BC v Chetnik Developments Ltd [1988] 1 All ER 961, [1988] AC 858. The facts related to repayment
of rates which the applicant was not liable to pay but the principles enunciated by Lord Bridge in his speech are of more general
application. He said ([1988] 1 All ER 961 at 969970, [1988] AC 858 at 876877):

So it emerges from these authorities that the retention of moneys known to have been paid under a mistake at law,
although it is a course permitted to an ordinary litigant, is not regarded by the courts as a high-minded thing to do, but
rather as a shabby thing or a dirty trick and hence is a course which the court will not allow one of its own officers,
such as a trustee in bankruptcy, to take.

Later he said:

I should myself have been content to derive the same conclusion from the broader consideration that Parliament
must have intended rating authorities to act in the same high-principled way expected by the court of 635 its own officers
and not to retain rates paid under a mistake of law, or on an erroneous valuation (s 9(1)( a)), unless there were, as
Parliament must have contemplated there might be in some cases, special circumstances in which a particular overpayment
was made such as to justify retention of the whole or part of the amount overpaid.

There are two categories of cases in which it is clear from decisions binding upon this court that a plaintiff cannot succeed. The
first is where he has paid voluntarily in order to close the transaction. In Maskell v Horner [1915] 3 KB 106 at 118, [191415]
All ER Rep 595 at 597 Lord Reading CJ said:

If a person with knowledge of the facts pays money, which he is not in law bound to pay, and in circumstances
implying that he is paying it voluntarily to close the transaction, he cannot recover it. Such payment is in law like a gift,
and the transaction cannot be reopened.

The second is a payment under a mistake of law (subject to the observations of Lord Bridge in Chetnik Developments).
The Revenue relied upon a number of decisions to demonstrate that there is no general principle of restitution. In Slater v
Burnley Corp (1888) 59 LT 636 Wills J in the Divisional Court did not refer to Hooper v Exeter Corp which had been cited in
argument and held that the overpayment of water rates by the plaintiff was a voluntary transaction and not paid under duress. In
William Whiteley Ltd v R (1909) 101 LT 741, [190810] All ER Rep 639, a decision of Walton J much relied upon by the
Revenue, Whiteley paid fees under protest to the Revenue in respect of male employees for six years. It refused to pay the fees
for the seventh year and was held to be correct in its interpretation of the relevant regulations. Walton J held that the payments
were voluntary and not under compulsion and had been paid under mistake of law. In National Pari-Mutuel Association Ltd v R
(1930) 47 TLR 110 the company without making any objection paid betting duty on the operation of a totalisator, but after
another company was held not liable to pay the duty, sought the repayment of the duty it had paid. This court held that the
question of liability was one of law and the construction of an Act of Parliament and the company had made a mistake of law in
respect of which it could not recover. In Twyford v Manchester Corp [1946] 1 All ER 621, [1946] Ch 236 the corporation
unlawfully levied fees on a monumental mason working on memorials in the cemetery, which he paid under protest. He brought
an action to recover the fees and Romer J held that the payments were not made under duress or colore officii and were therefore
voluntary.
This question has also been considered in the United States and Australia. Holmes J, sitting in the United States Supreme
Court on error to the US Circuit Court for the District of Colorado, in Atchison Topeka and Santa Fe Rly Co v OConnor (1912)
223 US 280 found for the taxpayer who had paid under a law later found to be unconstitutional, in circumstances very similar to
those of the present case and on grounds supporting the argument advanced by Woolwich. In two decisions, Sargood Bros v
Commonwealth (1910) 11 CLR 258 and Masons case (1959) 102 CLR 108, the first relating to custom duty unlawfully
demanded and the second to the payment of a fee for a licence for a road haulier which was also held later to have been
demanded unlawfully, the High Court of Australia found that the money should be repaid. In Sargood Bros v Commonwealth 11
CLR 258 at 276 OConnor J, in coming to that conclusion, set out principles which support the contentions of Woolwich. In
Masons case the majority of the court held the money repayable on the narrow ground of duress. However, Kitto J clearly and
636 Dixon CJ by implication enunciated wider principles which support the primary submission of Woolwich (see 102 CLR 108
at 125, 129, 117).
 Both in principle and from decided cases, I consider that there is a general principle of repayment of tax unlawfully
demanded. The decisions to the contrary can be distinguished as coming within the well-established categories of a voluntary
payment to close the transaction or a mistake of law. The decisions in William Whiteley, Slater v Burnley Corp and Twyford v
Manchester Corp have stood for many years but I am inclined to the view that they were wrongly decided.
We were urged not to extend the law and to leave it to Parliament to deal with any injustice which may arise. But,
significantly, Parliament in the legislative structure which governs taxation has provided for repayment of tax which has been
overpaid under regulations which are intra vires. No structure is in place to deal with the demand for and payment of tax which
has been unlawfully demanded under legislation found to be ultra vires. To deal with that eventuality the courts are thrown back
on the common law and precedent. Although there is no decision on facts which are entirely similar, I do not see an enunciation
of the general principle of restitution subject to limitations as an extension of the law but rather as a redefining of long-
established principles, enshrined in the Bill of Rights, established and acted upon in many decisions both in this jurisdiction and
in the United States and Australia. It accords also with the general standards of fair dealings between the taxpayer and the
emanations of government where the individual is likely to be at a disadvantage.
In the present case, the judge found that, although the Revenue would not have instituted collection proceedings pending the
judicial review proceedings, none the less

Subject to the outcome of the present case, the scales in this respect were tilted heavily in favour of the Revenue. I
accept that, as a practical matter, Woolwich had little choice but to make the three payments.

(See [1989] STC 111 at 116, [1989] 1 WLR 137 at 143.)

I agree with the judge that the demand from the Revenue did not amount to duress. But it was clearly not a voluntary
payment made to close the transaction, nor was there any mistake of law. The money was paid throughout under protest and
proceedings were immediately instituted to establish that the regulations were ultra vires. In my judgment, for the reasons I have
set out above, I consider the judge was wrong to find there was no general principle of restitution and to limit categories of relief
to mistake of fact or duress.
Had it been necessary to consider the alternative argument of the implied agreement, I agree with the judge that an
agreement could well be implied in these circumstances that the money was to be repaid to Woolwich. I do not consider,
however, that into that agreement could be inferred a term to pay interest. Equally, I do not consider that the repayment by the
Revenue was ex gratia. But, having come to the conclusion that the primary submission of Woolwich is correct, it is not
necessary further to explore the alternative arguments.
I would allow the appeal.

Appeal allowed. Leave to appeal to the House of Lords granted.

Solicitors: Clifford Chance; Solicitor of Inland Revenue. (for the Crown).

Rengan Krishnan Esq Barrister.

637
[1991] 4 All ER 638

Bumper Development Corp Ltd v Commissioner of Police of the Metropolis

and others (Union of India and others, claimants)
CONFLICT OF LAWS: CIVIL PROCEDURE

COURT OF APPEAL, CIVIL DIVISION

PURCHAS, NOURSE, LEGGATT LJJ
3, 4, 5, 6, 9, 10, 11, 12, 13, 16, 17, 18, 19, 20 JULY 1990, 13 FEBRUARY 1991

Practice Parties Foreign party Entitlement to sue in English courts Foreign legal institution Institution having no
animate content Hindu temple Whether institution having sufficient legal personality entitling it to sue in English courts.

Conflict of laws English proceedings Entitlement of party to sue in English courts Foreign religious institution Institution
having no animate content Hindu temple Whether comity of nations and public policy permitting institution without animate
content to sue in English courts.Evidence Foreign law Proof Whether court can reject expert witnesses agreed evidence as
to effect of foreign law and make finding on foreign law according to its own researches.

Since it accords with the principle of the comity of nations and does not offend English principles of public policy to permit a
foreign institution with no animate content to sue in the English courts to recover its property, a foreign religious institution, eg a
Hindu temple, which has legal personality under the law of the country where it is situated and which is empowered by that law
to sue by an officer properly appointed under the foreign law to protect and recover objects belonging to it is entitled to sue
through its proper officer in the English courts to recover an object belonging to it even though due to lack of any animate content
in the institution English law itself would not recognise the institution as having legal personality entitling it to sue. Furthermore,
its proper officer can be made responsible in English proceedings for such matters as security for costs and discovery. The fact
that RSC Ord 80 (which contains procedural rules for parties under disability) makes no provision for proceedings by a foreign
religious institution is not a reason for objecting to the institution being a party to English proceedings, since the court can
regulate the English proceedings under its inherent jurisdiction (see p 648 b to h, post); dicta of Cardozo J in Loucks v Standard
Oil Co of New Jersey (1918) 224 NY 99 at III and of Viscount Simonds in National Bank of Greece and Athens SA v Metliss
[1957] 3 All ER 608 at 612 applied.
In regard to proof of foreign law in an English court, the court cannot reject the evidence of expert witnesses if they agree as
to the effect of The foreign law and instead conduct its own researches into the effect of that law by recourse to textbooks and
foreign law reports; The court base its findings on the effect of that law on the evidence given by the expert witnesses (see p 646
e, post).

Notes
For the general rule as to parties to proceedings, see 37 Halsburys Laws (4th edn) para 215, and for cases on the subject, see
37(2) Digest (Reissue) 341343, 21282138.
638
 For which law governs who is capable of suing or being sued, see 8 Halsburys Laws (4th edn) para 772, and for cases on
the subject, see 11 Digest (Reissue) 626628, 16481666.
For the duty of the court in regard to expert evidence on the effect of foreign law, see 17 Halsburys Laws (4th edn) para 94,
and for cases on the subject, see 22(1) Digest (2nd reissue) 181182, 21222132.

Cases referred to in judgment

Dalmia Dairy Industries Ltd v National Bank of Pakistan [1978] 2 Lloyds Rep 223, CA.
Di Sora (Duchess) v Phillipps (1863) 10 HL Cas 624, 11 ER 1168.
Fulds estate, Re (No 3), Hartley v Fuld (Fuld intervening) [1965] 3 All ER 776, [1968] p 675, [1966] 2 WLR 717.
Hip Foong Hong v H Neotia & Co [1918] AC 888, PC.
Lazard Bros & Co v Midland Bank Ltd [1933] AC 289, [1932] All ER Rep 571, HL.
Loucks v Standard Oil Co of New York (1918) 224 NY 99, NY Ct of Apps.
National Bank of Greece and Athens SA v Metliss [1957] 3 All ER 608, [1958] AC 509, [1957] 3 WLR 1056, HL.
Nelson (Earl) v Lord Bridport (1845) 8 Beav 527, [184360] All ER Rep 1032, 50 ER 207.
Parkasho v Singh [1967] 1 All ER 737, [1968] P 233, [1967] 2 WLR 946, DC.
Reddy v Reddy AIR 1967 SC 436 Ind SC.
Sussex Peerage Case (1844) 11 CL & Fin 85, [184360] All ER Rep 55, 8 ER 1034, HL.
Vikrama Das v Daulat Ram AIR 1956 SC 382 Ind SC.

Appeal
By a writ issued on 24 September 1982 the plaintiffs, Bumper Development Corp Ltd (Bumper), claimed as against the
defendants, the Commissioner of Police of the Metropolis and two of his officers, delivery up of a twelfth century bronze
sculpture of Siva, King of the Dancers, known as the Nataraja, and damages arising from its detention. Following claims to the
Nataraja made by (1) the Union of India, (2) the State of Tamil Nadu, (3) Thiru R Sadagopan, suing as the fit person and/or next
friend of the Arul Thiru Viswanatha Swamy Temple (the temple), and (4) the temple, a juristic entity under Indian law by its fit
person, custodian or next friend the third claimant, Master Waldman ordered on 7 February 1983 trial of the preliminary issue
whether (1) the so-called London Nataraja and Pathur Nataraja were one and the same object and (2) if it was established that
they were one and the same object, whether any of the claimants had a title to the Nataraja claimed by Bumper superior to
Bumpers title. The Sivalingam, a stone relic which was an idol of the temple, being a juristic entity under Indian law, was
subsequently added as fifth claimant. On 17 April 1989 Ian Kennedy J gave judgment on the preliminary issue holding that the
London Nataraja and the Pathur Nataraja were one and the same and declaring that the temple, alternatively the Sivalingam or in
the further alternative the State of Tamil Nadu had proved a title to the Natarja superior to Bumpers title. The judge awarded the
temple damages of 5 against Bumper. Bumper appealed, seeking (i) an order that the London and the Pathur Natarajas were not
one and the same and also that its title to the Nataraja was superior to that of the second to fifth claimants and (ii) a declaration
that those claimants had failed to prove they had any title which would be recognised in the English courts. The claimants cross-
appealed, asserting that the judgment should be upheld on metallurgical 639 evidence which was not relied on by the judge and
seeking an award of damages of 236,250. The facts are set out in the judgment of the court.

David Calcutt QC and John Stephens for Bumper.

Adrian Hamilton QC and B Y Ghorpade for the claimants.

Cur adv vult

13 February 1991. The following judgment was delivered.

PURCHAS LJ

General introduction
In August or September 1976 an Indian, variously described as a coolie or landless labourer, called Ramamoorthi who
lived in a hut near the site of ruined Hindu temple at Pathur in the State of Tamil Nadu was excavating sand or similar material
when his spade struck a metal object. There was a suggestion that it might have been a year earlier, but this was not accepted by
Ian Kennedy J, whose finding has not been questioned. The place where he was excavating was close to the hut in which he
lived and was either immediately adjacent to or formed part of the site of the temple. The name of the temple was the Arul Thiru
Viswanatha Swamy Temple, to which we shall refer as the temple. The object which Ramamoorthi struck formed part of a
series of bronze Hindu idols later identified as members of a family and was a major idol known as a Siva Nataraja. We shall
refer to the Siva Nataraja as the Pathur Nataraja and the assembly of idols as the Pathur bronzes. The overwhelming
probability is that they formed part of the religious objects in the temple which had been endowed in the late thirteenth century by
a Hindu notable called Avui Thiru Viswanatha. It was later accepted by all parties that the temple had lain in ruins and
unworshipped for a matter of centuries.
Notwithstanding his lowly status Ramamoorthi realised that he had discovered objects of value. He reburied them
temporarily in the same pit and contacted a friend called Dorai. Dorai came to Pathur, inspected the find and departed saying that
he would find a buyer. A few days later Dorai returned with two men, Pillai and Meivel, who proposed to the Nataraja away to
sell it. This was not acceptable to Ramamoorthi unless he was paid for it. The three men departed but a few days later they
returned again, this time accompanied by a dealer called Chandran, for whom Meivel was a runner. Chandran was not called to
give evidence, but two others, who were in the party, were called as witnesses. These were Hussain, who was a part-time dealer
in stolen idols and a local government official, and Balraj Nadur, who was a major dealer in stolen idols. Of the objects
discovered by Ramamoorthi, the Nataraja attracted particular attention from the dealers and was quickly sold, first to the
Chandran, who sold it on down the line via Hussain and Balraj Nadar. The last identified buyer was a man called Valar Prakash,
who has not been traced but was last known to be in Madras.
Of the religious objects discovered by Ramamoorthi which were recognised as being of the Chola period it is necessary only
to describe the Nataraja in detail. The Siva Nataraja are representations of the Hindu god Siva, who is found in various forms.
The Siva Nataraja can be described in a thumb-nail sketch as the god standing with his right foot upon a dwarf and surrounded by
a halo which represents the flames issuing from the mouths of two crocodiles situated to the left and right of the dwarf. At the
top of the halo in some Natarajas there is to be 640 found a design either in the form of a mask or a rosette or similar adornment
known as Kurti Muka. Round the halo there are a number of flames issuing radially from the halo. Depending upon the
period when and the area in which they were made the Siva Natarajas vary in many respects. The one with which this appeal is
concerned is circular; but many others are oval in shape. The Nataraja with which this appeal is concerned had a lotus base
mounted on a squareshaped peedam or pedestal.
Returning to Siva, the design again varies according to date and place. The Chola Natarajas have a number of identifying
features, some of which are relevant and to which it would be convenient to refer in outline. The god has two right and two left
arms and hands but only two legs, right and left. He has on each side of his head horizontally flowing hair described as jettas.
Various objects and representations are imposed upon or incorporated in the jettas, including a particular one called a ganga. In
one of his right hands and around the wrist there is coiled a snake-a cobra. In one of his left hands he holds another flame. This
very brief description will suffice for the moment.
Between 1974 and 1977 there were circulating in London at least two and almost certainly more Siva Natarajas. It was
common ground that throughout the world there are many hundreds if not thousands of Siva Natarajas, most of which were, of
course, associated with the many Hindu temples and which over the centuries have been objects of worship both in India and in
other places where the inhabitants embraced the Hindu religion. There were and are Siva Natarajas in many leading museums
and in the present century at least they have been recognised and valuable artefacts dealt in by those who specialise in Eastern
religious items. However, it may fairly be assumed that there were not very many Siva Natarajas circulating in the London
market in the 1970s and fewer which showed signs of having been buried for centuries. There were certainly two which had been
traced as having been stolen from temples in India in current worship and which were impounded by the Metropolitan Police and
returned to their appropriate owners. The Siva Nataraja or Natarajas with which this appeal is concerned were, however, objects
which had long been buried and had accordingly deteriorated as a result.
Returning to the position in London in the years 197477 an antique Nataraja, that is to say one which had been buried and
had suffered accordingly, was, according to the evidence of Dr Presencer, shown to have in May 1976 in London. We will refer
to this as the London Nataraja since there seems to be little dispute that this was the same Nataraja that was bought by the
plaintiffs, Bumper Development Corp Ltd (Bumper). If this was true then it would establish that the London Nataraja could not
have been the one excavated by Ramamoorthi. There is now, as a result of additional evidence which was admitted during the
appeal, further evidence of an antique Nataraja being offered on the London market as early as Easter 1974. This evidence came
from an American dealer who specialised in these objects named Robert Ellsworth.
Information came to the state officials in Tamil Nadu as a result of which criminal investigations were put in hand.
Statements were taken from Ramamoorthi and the others about the discovery and subsequent history both of the Pathur Nataraja
and of the Pathur bronzes. The statements taken in India from Ramamoorthi, Hussain and others have formed part of the
evidence at the trial from which this appeal results.
On 10 June 1982 Bumper purchased in good faith the London Nataraja from a dealer called Sherrier. It is common ground
that Sherrier produced a false provenance of the Nataraja for the purpose of the sale. It was whilst it had been sent to the British
Museum for appraisal and conservation that the London 641 Nataraja was seized by the Metropolitan police as part of a policy of
returning religious artefacts, which it was thought had been stolen, to their owners in India. Bumper brought the action against
the Commissioner of Police of the Metropolis and two of his officers in detinue and conversion claiming the return of the
Nataraja and damages. The present proceedings result from the position taken by the defendants as interpleaders and the addition
of others as claimants to the London Nataraja. Returning to the temple site at Pathur, amongst the surviving ruins and materials
there was a stone object of religious worship known as a Sivalingam. In the normal Hindu temple of this period this stone would
have been positioned in the sanctum and would be the focus of religious worship. It is a carefully fashioned stone object
representing a phallus. It has survived and was discovered amongst the ruined remains of the temple. Since the inception of
these proceedings it has been reinstated as an object of religious worship at the site of the temple.

Current proceedings
The court has before it an appeal by Bumper from an order of Ian Kennedy J made on 17 April 1989 as a result of a
judgment delivered by him on the trial of a preliminary issue. The claimants are the Union of India as first claimant, the State of
Tamil Nadu as second claimant, Thiru Sadagopan who claims as the fit person of the temple on his own behalf as third claimant
and on behalf of the temple itself as fourth claimant. The Sivalingam was added as fifth claimant at a late stage of the trial of the
issue. The nature and locus standi of the fifth claimant will be described subsequently in this judgment. Although the Union of
India now makes no claim to the London Nataraja, it underwrites any liability in costs which may be incurred by the other
claimants in the present proceedings.
The issue which was tried by the judge related to the title possessed by the various parties to the London Nataraja. The
matter fell for consideration into two separate stages, namely (1) were the London Nataraja and the Pathur Nataraja one and the
same object? and (2) if, and only if, it was established that they were, did any of the claimants have a title to the Nataraja
superior to Bumpers? The judge delivered his judgment in two parts accordingly and in this court the argument has been dealt
with in the same way.
The claimants case was based upon the evidence of Ramamoorthi and others who were involved with the Pathur Nataraja in
India in 1976 and who purported to identify the London Nataraja as being the same as the Pathur Nataraja. The claimants case
was supported by expert evidence relying upon a stylistic similarly between the London Nataraja and the Pathur bronzes and by
expert metallurgical and geological and entomological evidence intended to support a connection between the Pathur bronzes and
the London Nataraja. Bumpers case depended upon the direct evidence of Dr Presencer, who identified the London Nataraja as
an object which he saw in London on 13 May 1976. This date was some four or five months prior to the excavation of the Pathur
Natarajas and, if established, effectively disposed of the claimants case. This evidence was supported by a soil analysis which
demonstrated that material attached to or inside the base of the London Nataraja was geomorphologically incompatible with the
geology of the excavation site. Bumper in its turn relied upon metallurgical evidence to show no similarity but dissimilarity
between the London Nataraja and the other Pathur bronzes.
After a trial lasting some 34 days between 17 November 1986 and 26 April 1987, Ian Kennedy J reserved judgment, which
he delivered on 17 February 1988. 642On the question of identity the judge preferred the evidence of the claimants and rejected
the evidence of Dr Presencer. On the second stage the judge held that the fourth claimant, namely the temple, suing by its fit
person, custodian or next friend, the third claimant, had proved a title to the Nataraja superior to that of the title of Bumper.
Alternatively, the judge held that the pious intention of the twelfth century notable who gave the land and built the Pathur
temple remained in being and was personified by the Sivalingam of the temple, which itself had a title superior to that of Bumper.
Finally he held that the second claimant had a superior title to that of Bumper. This was based upon the states right under local
legislation.
With the consent of the parties, Ian Kennedy J further assessed damages flowing from the alleged conversion and detinue of
the Nataraja by Bumper and ordered damages in the sum of 5 to be paid to the fourth claimant. Bumper appeals against the
finding that the London Nataraja was the same as the Pathur Nataraja. They further appeal against the findings that they did not
have a title to the London Nataraja superior to the claimants and claim a declaration that each of the plaintiffs in the issue
(claimants) had failed to prove that it had any title which would be recognised by the English court; alternatively, Bumper seeks
an order for a retrial of the issue; in the further alternative, Bumper seeks a retrial of that part of the trial of the issue relating to
the legal capacity in India of the temple and/or the Sivalingam to hold title to property and pursue an action in England either
directly or through the third claimant in respect thereof. In addition, Bumper applied for leave to adduce further evidence in
support of their appeals against the judges order.
On their part the claimant respondents cross-appeal, firstly asserting that the judgment ought to be upheld on metallurgical
evidence which was not relied upon by the learned judge. They further appeal against the judges order in damages, seeking an
award in the sum of 236,250. It is now convenient to deal with the two stages independently.
[His Lordship considered the evidence regarding the identity of the Natarajas and, having said that the test which an
appellant had to satisfy in order to achieve a retrial in circumstances such as these before the court was that stated by Lord
Buckmaster in delivering the judgment of the Privy Council in Hip Foong Hong v H Neotia & Co [1918] AC 888 at 894, stated
that the court was of the opinion that Ian Kennedy J had reached the right conclusion, namely that the London Nataraja and the
Pathur Nataraja were one and the same object. Accordingly, the court dismissed Bumpers appeal on that issue. His Lordship
then considered the second issue, whether, if it was established that the London Nataraja and the Pathur Nataraja were the same
object, any of the second to fifth claimants had established a better title than Bumper to the Nataraja. His Lordship went on to
refer to the grounds of appeal, to the events at Pathur and in Tamil Nadu consequent on the discovery of the Nataraja and the
Pathur bronzes, and to the relevant Hindu legislation, and continued:]

Proof of foreign law

It is clear that the true status in Hindu law of the third, fourth and fifth claimants in the sense that they can enjoy a title to the
Nataraja is central to the issues raised. We propose to use the expression juristic entity as being a person, body of persons or
object who or which is recognised by the law concerned as being capable of enjoying legal possession of or title to an object and
of suing or being sued in respect thereof.
643
Ian Kennedy J reviewed at length not only the evidence of Hindu law as set out by text book writers and in judgments
delivered in the Indian courts, but also the oral evidence given before him by the expert witnesses before reaching his conclusions
as to which claimants would be acceptable as juristic entities in the courts of Tamil Nadu, and whether, and if so in what
circumstances, such a party could claim a title to the Nataraja. However, before coming to consider the evidence on this aspect of
the case, it is convenient to consider the position in the English courts. It is trite law that foreign law in our courts is treated as a
question of fact which must be proved in evidence. In the absence of any evidence to the contrary, it is to be assumed to be the
same as English law. It is however the duty of the judge when faced with conflicting evidence from witnesses about a foreign
law to resolve those differences in the same way as he must in the case of other conflicting evidence as to facts.
What is not so plain, however, is how he should deal with documentary evidence in the form of textbooks and reports of
judgments and decisions in foreign courts. Ian Kennedy J expressed a firm view when rejecting the evidence upon one issue over
which both expert witnesses were agreed. This was to the effect that the third claimant did not have a sufficient continuity of
association with the temple to qualify as a de facto trustee:

I think they are both mistaken, and have failed to read in their true import the judgments to which I have just referred
[Reddy v Reddy AIR 1967 SC 436 and Vikrama Das v Daulat Ram AIR 1956 SC 382]. It is well settled that the English
courts will take the exposition of its own law by the Supreme Court of another jurisdiction as wholly authoritative, and an
opinion to be preferred to that of any witness; that I do.

Unfortunately, the learned judge did not refer to any authority for this proposition, nor were we in argument referred to any
such authority. Mr Calcutt QC attacked this part of the judgment and in our view rightly so. This proposition as stated without
qualification does not find any support in Dicey and Morris The Conflict of Laws (11th edn, 1987) r 18, p 217:

(1) In any case to which foreign law applies, that law must be pleaded and proved as a fact to the satisfaction of the
judge by expert evidence or sometimes by certain other means. (2) In the absence of satisfactory evidence of foreign law,
the court will apply English law to such a case.

The propositions in the notes to this rule, so far as relevant to this appeal, are based on well-established authority, especially
the judgment of Lord Langdale MR in Earl Nelson v Lord Bridport (1845) 8 Beav 527, [184360] All ER Rep 1032. In our
judgment the following extracts from the notes in Dicey and Morris accurately set out the relevant aspects of English law in
regard to the proof of a foreign law.
(1) An English court will not conduct its own researches into foreign law; (Dicey and Morris p 222)see Duchess Di Sora
a Phillipps (1863) 10 HL Cas 624 at 640, 11 ER 1168 at 1175 per Lord Chelmsford:

It seems, however, rather questionable whether the Judge has a right to resort to the foreign law itself for information,
when the evidence of the witnesses is not satisfactory to his mind. The witnesses are at liberty to adduce, in support or
confirmation of their testimony, test books, decisions of the foreign courts, or rather authorities, which, becoming a part of
their evidence, may enable the Judge to form his own opinion upon the particular text of foreign law thus laid before him.
But it seems contrary to the nature 644 of the proof required in these cases, that the judge should be at liberty to search for
himself into the sources of knowledge from which the witnesses have drawn, and produce for himself the fact which is
required to be proved as a part of the case before him. As my noble and learned friend, Lord Brougham, said in the Sussex
Peerage Case ((1844) 11 Cl & Fin 85 at 115, [184360] All ER Rep 55 at 62), the Judge has not organs to know and to
deal with the text of the foreign law, and therefore requires the assistance of a lawyer who knows how to interprete it.

(2) If the evidence of several expert witnesses conflicts as to the effect of foreign sources, the court is entitled, and indeed
bound, to look at those sources in order itself to decide between the conflicting testimony ( Dicey and Morris p 223)see Earl
Nelson v Lord Bridport (1845) 8 Beav 527 at 537, [184360] All ER Rep 1032 at 1036 per Lord Langdale MR:

Such I conceive to be the general rule; but the cases to which it is applicable admit of great variety. Though a
knowledge of foreign law is not to be imputed to the Judge, you may impute to him such a knowledge of the general art of
reasoning, as will enable him, with the assistance of the bar, to discover where fallacies are probably concealed, and in
what cases he ought to require testimony more or less strict. If the utmost strictness were required in every case, justice
might often have to stand still; and I am not disposed to say, that there may not be cases, in which the Judge may, without
impropriety, take upon himself to construe the words of a foreign law, and determine their application to the case in
question, especially, if there should be a variance or want of clearness in the testimony.

This was the approach made by Scarman J to a mass of conflicting expert evidence on German private international law in
Re Fulds estate (No 3), Hartley v Fuld [1968] P 675 at 700703 (not reported on this point in [1965] 3 All ER 776).
(3) The Court of Appeal, whilst slow to interfere as in all cases where the decision involves findings of fact, may in
appropriate cases be somewhat more ready to question the trial judges conclusions than in normal casessee Parkasho v Singh
[1967] 1 All ER 737 at 746, [1968] P 233 at 250 per Cairns J giving the leading judgment:

We are asked by the wife to say that that decision was wrong; that the justices were wrong in their interpretation of the
foreign law. The question of foreign law being a question of fact in our courts, must this court regard itself as bound by the
findings of the justices on this matter? In my view, the question of foreign law, although a question of fact, is a question of
fact of a peculiar kind, and the same considerations do not apply in considering whether and to what extent this court
should interfere with the decision of the magistrates, as in the case of the ordinary questions of fact which come before a
magistrates court. It is not, I think, inappropriate to bear in mind that, under the provisions of s 102 of the Supreme Court
of Judicature (Consolidation) Act, 1925, it is provided that an issue of foreign law in a case which is being tried by a jury is
a question of fact for the judge and not the jury. Bearing that in mind, and bearing also in mind the provisions of r. 73(7) of
the Matrimonial Causes Rules, 1957(SI 1957/619), which enable this court to draw any inference of fact which might have
been drawn in the justices court, I think that it is our duty in this case to examine the evidence of foreign law which was
before the justices and to decide for ourselves whether that evidence justifies the conclusion to which they came.
 645

Later in his judgment in Parkasho v Singh [1967] 1 All ER 737 at 747, [1968] P 233 at 250 Cairns J referred to the speech of
Lord Wright in Lazard Bros & Co v Midland Bank Ltd [1933] AC 289 at 298, [1932] All ER Rep 571 at 576577, where
reference is made to the Sussex Peerage Case (1844) 11 Cl & Fin 85 at 116, [184360] All ER Rep 55 at 62, and then to the
passage from the judgment of Lord Langdale MR in Earl Nelson v Lord Bridport (1845) 8 Beav 527 at 537, [184360] All ER
rep 1032 at 1036 cited above.
The approach of the Divisional Court in Parkasho v Singh was approved in the Court of Appeal in Dalmia Dairy Industries
Ltd v National Bank of Pakistan [1978] 2 Lloyds Rep 223 at 286 per Megaw LJ:

But a finding of fact on an issue of foreign law is a finding of fact of a very different character from the normal issue
of fact: we would adopt as correct the observations of Mr Justice Cairns (as he then was) in Parkasho v Singh ([1967] 1
All ER 737 at 746, [1968] P 233 at 250) as to the position of an Appellate Court on a matter of this kind. An Appellate
Court must not by uncritical acceptance of a trial Judges conclusions of fact shirk its function of considering the evidence
afresh and forming its own view of the cogency of the rival contentions, whilst of course always remembering that the trial
Judge had the undoubted initial advantage of having seen and heard the witnesses.

With these authorities in mind we have come to the conclusion that the learned judge was not entitled to reject the evidence
of the experts to the effect that Sadogopan did not have a sufficient continuity of association with the temple to qualify as a de
facto trustee. Furthermore, we have also come to the conclusion that Mr Calcutt was correct in submitting that Ian Kennedy J
was not entitled to rely upon his own researches based on passages from Mukherjea Hindu Law of Religious and Charitable
Trusts (1951) without having the assistance of the expert witnesses and the submissions of counsel. However, when the transcript
of the evidence of one of Bumpers three witnesses, a Mr Yadivelu, a commissioner and secretary to the government of Tamil
Nadu, is considered, it is clear that the paragraphs to which the judge referred had already been referred to by Mr Vadivelu in his
reports and were adopted by him in evidence. There is therefore admissible evidence in support of the paragraphs in the textbook
upon which the judges research was based. Mr Calcutts submission therefore becomes largely academic.
(His Lordship then considered the evidence relating to the third claimant and to the claim of the temple and stated that in the
courts judgment there was sufficient evidence before Ian Kennedy J to justify his findings that under Hindu law the temple (the
fourth claimant) was a juristic entity and the third claimant, Thiru Sadagopan, had the right to sue and be sued on behalf of the
temple. His Lordship continued:]

The English courts

Having held that the temple is a legal person under the law of Tamil Nadu acceptable in the courts of that state as a party
which, with the third claimant acting as representative, could have sued for the recovery of the Nataraja, we must now decide
whether, as the judge held, it is likewise acceptable in the courts of this country.
The question whether a foreigner can be a party to proceedings in the English courts is one to be determined by English law
(as the lex fori). In the case of an individual no difficulty usually arises. And the same can be said of foreign legal 646 persons
which would be recognised as such by our own law, the most obvious example being a foreign trading company. It could not be
seriously suggested that such a company could not sue in the English courts to recover property of which it was the owner by the
law of the country of its incorporation.
The novel question which arises is whether a foreign legal person which would not be recognised as a legal person by our
own law can sue in the English courts. The particular difficulty arises out of English laws restriction of legal personality to
corporations or the like, that is to say the personified groups or series of individuals. This insistence on an essentially animate
content in a legal person leads to a formidable conceptual difficulty in recognising as a party entitled to sue in our courts
something which on one view is little more than a pile of stones.
There is an illuminating treatment of legal personality in Salmond on Jurisprudence (12th edn, 1966) pp 306308, from
which we take two passages:

Legal persons, being the arbitrary creations of the law, may be of as many kinds as the law pleases. Those which are
actually recognised by our own system, however, are of comparatively few types. Corporations are undoubtedly legal
persons, and the better view is that registered trade unions and friendly societies are also legal persons though not verbally
regarded as corporations No other legal persons are at present recognised by English law. If, however, we take account
of other systems than our own, we find that the conception of legal personality is not so limited in its application, and that
there are several distinct varieties, of which three may be selected for special mention. They are distinguished by reference
to the different kinds of things which the law selects for personification. 1. The first class of legal persons consists of
corporations, as already defined, namely, those which are constituted by the personification of groups or series of
individuals. The individuals who thus form the corpus of the legal person are termed its members 2. The second class
is that in which the corpus, or object selected for personification, is not a group or series of persons, but an institution. The
law may, if it pleases, regard a church or a hospital, or a university, or a library, as a person. That is to say, it may attribute
personality, not to any group of persons connected with the institution, but to the institution itself. Our own law does not,
indeed, so deal with the matter. The person known to the law of England as the University of London is not the institution
that goes by that name, but a personified and incorporated aggregate of human beings, namely, the chancellor, vice-
chancellor, fellows, and graduates. It is well to remember, however, that notwithstanding this tradition and practice of
English law, legal personality is not limited by any logical necessity, or, indeed, by any obvious requirement of expediency,
to the incorporation of bodies of individual persons.

Thus Salmond recognises the possibilities, which may not be far-fetched, of (say) a foreign Roman Catholic cathedral
having legal personality under the law of the country where it is situated; and, in order to make the concept more comprehensible,
let it be assumed that it is given that personality by legislation specifically empowering it to sue by its proper officer for the
protection and recovery of its contents. It would, we think, be a strong thing for the English court to refuse the cathedral access
simply on the ground that our own law would not recognise a similarly constituted entity as a legal person. The touchstone for
determining whether access should be given or refused is the comity of nations, defined by the Shorter Oxford English
Dictionary (3rd edn, 1944) as:
647

The courteous and friendly understanding by which each nation respects the laws and usages of every other, so far as
may be without prejudice to its own rights and interests.

Arguing from the example of a Roman Catholic cathedral and in the belief that no distinction between institutions of the
Christian church and those of other major religions would now be generally acceptable, we cannot see that in the circumstances
of this case there is any offence to English public policy in allowing a Hindu religious institution to sue in our courts for the
recovery of property which it is entitled to recovery by the law of its own country. Indeed we think that public policy would be
advantaged. As Cardozo J said in Loucks v Standard Oil Co of New York (1918) 224 NY 99 at 111:
 The courts are not free to refuse to enforce a foreign right at the pleasure of the judges, to suit the individual notion of
expediency or fairness. They do not close their doors unless help would violate some fundamental principle of justice,
some prevalent conception of good morals, some deep-rooted tradition of the common weal.

As Viscount Simonds said in National Bank of Greece and Athens SA v Metliss [1957] 3 All ER 608 at 612, [1958] AC 509
at 525, in reference to a comparable question of private international law:

in the end and in the absence of authority binding this House, the question is simply: What does justice demand in
such a case as this?

The form of Viscount Simondss question suggests that it is undesirable for us to go further than is necessary for a decision
in this case. We emphasise that it is essential to our decision that the third claimant, although not himself a competent party, is
empowered by the constitution of the temple to take all necessary steps in the proceedings on its behalf, very much as they would
be taken by the next friend or guardian ad litem of a minor or a patient. Steps for which the third claimant is responsible will
therefore include giving security for costs, affording discovery and doing other acts at interlocutory stages and in course of the
trial itself. It is, however, no objection to the temples participation in the proceedings that RSC Ord 80 makes no provision for
such a case. The court will provide for all necessary steps to be taken under its inherent jurisdiction to regulate its own
procedure.
We therefore hold that the temple is acceptable as a party to these proceedings and that it is as such entitled to sue for the
recovery of the Nataraja.
We are fortified in reaching this conclusion since it accords with what we consider to be the intent and purpose behind the
principles of comity. Furthermore, it avoids the danger of there being any fetter of an artificial procedural nature imported from
the lex fori which might otherwise stand between a right recognised by and enforceable under the lex causae.
[His Lordship considered the claim of the Sivalingam and said that in view of the courts conclusion that the fourth claimant
(the temple) had a title to sue it was unnecessary to decide whether the Sivalingam was a juristic entity for the purpose of English
law. His Lordship then considered whether any of the claimants claims was defeated by the provisions of the Limitation Act
1980 and upheld Ian Kennedy Js conclusion that in taking and keeping the idols he had found Ramamoorthi acted dishonestly so
as to bring his conduct within s 4(5) of the 1980 Act. Finally, his Lordship considered the effect of the Indian Treasure Trove Act
1878. He concluded as follows:]
648
For the reasons set out in this judgment we dismiss the appeal on the ground that Ian Kennedy J correctly decided that the
temple had a title to the Nataraja superior to that enjoyed by Bumper.

Appeal dismissed; cross-appeal allowed. Leave to appeal to the House of Lords refused. Stay of order pending petition to House
of Lords.

21 May. The Appeal Committee of the House of Lords (Lord Bridge of Harwich, Lord Ackner and Lord Lowry) refused leave to
appeal.

Solicitors: Stewarts; Zaiwalla & Co.

Wendy Schocket Barrister.

[1991] 4 All ER 649

R v Rowley
CRIMINAL; Criminal Law

COURT OF APPEAL, CRIMINAL DIVISION

TAYLOR LJ, IAN KENNEDY AND MORLAND JJ
4 JULY 1991

Criminal law Public decency Act outraging public decency Common law offence Act not in itself lewd, obscene or
disgusting Appellant leaving notes in public places with intention of luring boys for immoral purposes Notes not themselves
lewd, obscene or disgusting Whether evidence of appellants motive or intention admissible Whether appellant guilty of
committing act outraging public decency.Criminal law Attempt Acts preparatory to offence Act no more than merely
preparatory to commission of offence Gross indecency with child Attempted incitement to commit act of gross indecency
Appellant leaving notes in public places with intention of luring boys for immoral purposes Notes not containing any
proposition or incitement Whether appellant doing more than merely preparatory act Whether appellant guilty of attempted
incitement of child to commit act of gross indecency.

The appellant left notes in public places over a period of three weeks offering money and presents to boys. The Crown alleged
that the notes were designed to lure boys for immoral purposes, but there was nothing lewd, obscene or disgusting in the notes.
The appellant was charged with committing acts outraging public decency and attempted incitement of a child under the age of
14 years to commit an act of gross indecency contrary to s 1(1) a of the Criminal Attempts Act 1981. Entries were found in the
appellants diary indicating a desire for sexual activity with boys and linking him with the notes. At his trial he submitted that the
writing and placing of the notes could not support charges of outraging public decency and that with regard to the attempted
incitement to commit gross indecency the acts done were no more than preparatory to the commission of an offence. The judge
rejected those submissions, admitted the dairy entries in evidence and directed the jury in his summing up that they were entitled
to look at the purpose behind the notes in deciding whether they were lewd or disgusting. The appellant was convicted on five
counts of committing acts outraging public decency and one count of attempted incitement to commit gross indecency. He
appealed on the grounds that the judge had erred in holding that writing and 649 placing the notes were acts which outraged
public decency, in admitting evidence of the appellants diary and in his direction to the jury.
________________________________________
a Section 1(1) is set out at p 654 c, post.

Held The common law offence of committing an act outraging public decency consisted of the deliberate commission of an act
which was in itself of a lewd, obscene or disgusting nature and outraging public decency. The issue to be decided was whether a
member of the public was outraged by the act itself, and the intention and motive for doing an act could not supply lewdness or
obscenity to an act which in itself lacked those qualities. It followed that the appellants motive or purpose in leaving the notes
was irrelevant and since there was nothing in the notes themselves capable of outraging public decency the convictions relating to
the charges of committing acts outraging public decency would be quashed. Furthermore, since the notes went no further than to
seek to engineer preliminary meetings with boys and contained no proposition or incitement they could not be regarded as more
than a preparatory act even on the assumption that the appellants ultimate intention was gross indecency. Accordingly, the
conviction of attempting to incite a child under the age of 14 years to commit an act of gross indecency would also be quashed
(see p 653 d e j to p 654 b e to h, post).

Notes
For outraging public decency, see 11(1) Halsburys Laws (4th edn reissue) para 372.
For gross indecency, see ibid paras 506, 523, and for cases on the subject, see 15 Digest (Reissue) 10521054, 90599075.
For the Criminal Attempts Act 1981, s 1, see 12 Halsburys Statutes (4th edn) (1989 reissue) 776.

Cases referred to in judgment

Knuller (Publishing Printing and Promotions) Ltd v DPP [1972] 2 All ER 898, [1973] AC 435, [1972] 3 WLR 143, HL.
R v Gibson [1991] 1 All ER 439, [1990] 2 QB 619, [1990] 3 WLR 595, CA.
R v Graham-Kerr [1988] 1 WLR 1098, CA.
R v Ransford (1874) 31 LT 488, CCR.

Cases also cited

R v Gullefer (1986) [1990] 3 All ER 882, [1990] 1 WLR 1063, CA.
R v Jones (Kenneth) [1990] 3 All ER 886, [1990] 1 WLR 1057, CA.
R v Woods (1930) 22 Cr App R 41, CCA.

Appeal against conviction

Michael Rowley appealed by leave of Leggatt J so far as was necessary against his conviction on 11 September 1989 in the
Crown Court at Lewes before Judge Hammerton and a jury on five counts of committing an act outraging public decency and one
count of attempted incitement of a child under 14 years to commit an act of gross indecency, contrary to s 1(1) of the Criminal
Attempts Act 1981 for which he was sentenced to nine months imprisonment concurrent on each count. The facts are set out in
the judgment of the court.

Richard Cherrill for the appellant.

Louis French for the Crown.

4 July 1991. The following judgment was delivered.

TAYLOR LJ delivered the following judgment of the court. On 11 September 1989 in the Crown Court at Lewes the appellant
was convicted following a six-day trial of five counts of committing an act outraging public decency. Those were counts 1, 3, 8,
11 and 15 of the indictment. He was also convicted of one 650 count of attempted incitement of a child under the age of 14 years
to commit an act of gross indecency (count 14). He had pleaded not guilty to the whole of the indictment. There were other
counts which charged attempted incitement of a child under 14 years to commit an act of gross indecency and other counts again
charging attempting to procure an act of gross indecency. Those counts were left on the file on the usual terms. There was a final
count (count 16) of persistently importuning. A verdict of not guilty was entered on that count by direction of the court. The
appellant was sentenced to a period of nine months imprisonment on each of the six counts on which he had been convicted, the
sentences to run concurrently.
He now appeals against conviction by leave of the single judge.
All the counts relate to notes left by the appellant in public places in Brighton between 21 February and 11 March 1989.
The notes were designed, said the Crown, to lure boys for immoral purposes. They were specimen counts.
The facts may be stated quite shortly. On 21 February the first note was found in Carden Avenue, Brighton, at about 2
oclock in the afternoon. A second note was found about half an hour later and a third note at about 9 oclock in the evening.
The police were contacted and began surveillance of the area on 23 February.
Further notes were found over the next few days in various public places in that area and the appellant was seen entering and
spending periods of a quarter of an hour or more in public lavatories also in that area.
The contents of most of the notes were in similar terms. It is sufficient to give two examples. One read:

I need a boy to be my pretend son. In return you will get pocket money, presents, etc. We will not even meet for quite
a while. If you are interested, fill in the back of this note, then go to the toilets at the bottom of Carden Hill. Put this note
behind the toilets under a stone. Then look there tomorrow for a reply.

The other side of that note was marked: Boy wanted. Money for you. The second example was a note which read:

I need a Patcham-Fawcett boy to collect and deliver secret messages. If you can do this you will be well paid! Fill in
the back of this note, and take it to Crowhurst Road. By the phone box you will find a paper with message point written
on it. Leave this note there, then look tomorrow. Dont tell anyone, and youll soon be collecting your money.

It is right to say that there were two notes, out of the many, which were in more explicit sexual terms. They were the subject of
offences of attempting to incite young boys to commit acts of gross indecency and the particular counts they supported were
counts which the Crown accepted in argument it could not pursue because there was no indication as to whether the activity
which the notes contemplated was to be conducted in private, which would not have been an offence if it had been with someone
of full age, or in public.
The notes were examined by a handwriting expert in due course. He concluded that there was a very high degree of
certainty that the writing was the appellants. Eventually at the trial it was not challenged that the notes had been written and
placed by the appellant.
He was arrested at his home on 10 March 1989 and entries were found in his diary which were indicative of a desire for
sexual activity with boys and which linked with the notes that were left. Those diaries were admitted in evidence by the learned
judge.
651
The form of each count charging the common law offences followed the precedent in Archbolds Pleading Evidence and
Practice in Criminal Cases (43rd edn, 1988) p 2179, para 20466 and was as follows:
 STATEMENT OF OFFENCE

COMMITTING AN ACT OUTRAGING PUBLIC DECENCY.

PARTICULARS OF OFFENCE
MICHAEL ROWLEY on 21 February 1989 committed an act of a lewd, obscene and disgusting nature and outraging
public decency, by leaving a note in a public place designed to lure boys for immoral purposes to the great disgust and
annoyance of Her Majestys subjects within whose purview such act was committed.

At the outset of the trial defence counsel made an application to quash the indictment on the basis that the papers did not
contain evidence which founded the counts charging the commission of acts outraging public decency. He had another ground
with regard to the lack of correspondence between the committal charge and the charges on the indictment. He also submitted in
relation to the last count (count 14), upon which the appellant was eventually convicted, that there was no evidence to support the
charges which related to criminal attempt. He submitted that, so far as the offences of committing acts outraging public decency
were concerned, the acts that were committed, the writing of the note and the leaving of the note, did not fall into that category
and the evidence about those acts could not support the charge. So far as criminal attempt was concerned, he submitted that the
acts done were no more than preparatory.
The learned judge rejected those submissions and they were in effect repeated at the end of the prosecution case, when again
the learned judge rejected them.
The appellant did not go into the witness box nor was any evidence called on his behalf. The matter then proceeded to the
learned judges summing up. With regard to that, if his other arguments fail, Mr Cherrill on behalf of the appellant argues today
that the learned judge not only was wrong in rejecting the submissions made earlier but was wrong in directing the jury as he did,
expressing the views which led him to reject the submission. He was also wrong, submits Mr Cherrill, in admitting the diaries
because they were not relevant to the common law charges.
Mr Cherrill submits that the common law offence of committing an act outraging public decency requires proof of two
matters only: first, that the act itself was lewd, obscene and of a disgusting nature outraging public decency and, secondly, that
the defendant committed it deliberately. Looking at the notes relied upon in support of the common law charges, there was
nothing lewd, obscene or of a disgusting nature in them. They contained no obscene language. They referred to no lewd acts.
No doubt they were pregnant with the possibility that if responded to they might lead to lewd acts. But on their face they were
not within the scope of the offence. Just as it was not necessary to prove intent to support this charge (see R v Gibson [1991] 1
All ER 439 at 447, [1990] 2 QB 619 at 629), so intent could not be relied upon to supply the missing elements of lewdness or
obscenity in the act itself.
Mr Cherrill submitted that the offence is primarily concerned with indecent exhibitions or overtly sexual activity committed
in a public place or offensive advertisements for clearly lewd activity. In the last context Mr French for the Crown sought to rely
upon Knuller (Publishing Printing and Promotions) Ltd v DPP [1972] 2 All ER 898, [1973] AC 435. In that case advertisements
were put in certain columns of a magazine in terms which were unambiguously invitations to take part in homosexual activity.
The defendants were convicted of two counts: 652first, a count of conspiring to corrupt public morals and, secondly, a count of
conspiring to outrage public decency. By a majority the House of Lords dismissed the appeal on count 1 but allowed the appeal
on count 2. There was an issue as to whether a conspiracy to outrage public decency was an offence known to the law. But the
House of Lords did decide that the substantive offence of committing an act outraging public decency did exist at common law.
Even assuming that the facts in the Knuller case were capable of supporting the substantive offence, it is to be noted that the
context of the advertisements was a section of a magazine which was overtly related to homosexual activity and the
advertisements themselves were, as already indicated, unambiguous. It is also significant that Lord Simon of Glaisdale said
([1972] 2 All ER 898 at 936, [1973] AC 435 at 495):

It should be emphasised that outrage, like corrupt, is a very strong word. Outraging public decency goes
considerably beyond offending the susceptibilities of, or even shocking, reasonable people. Moreover the offence is, in my
view, concerned with the recognised minimum standards of decency, which are likely to vary from time to time.

In our judgment the offence consists in the deliberate commission of an act which is per se of a lewd, obscene or disgusting
nature and outraging public decency. The crux of it is therefore the nature and effect of the act itself. Although the ultimate
intention of the actor and his motive for his act may be the subsequent performance of lewd, obscene or disgusting acts, his
intention and motive cannot, in our judgment, supply lewdness or obscenity to the act if the act itself lacks those qualities. A
member of the public is either outraged by the act or not. He will not be affected in his reaction by whether thoughts or fantasies
may be in the actors mind or his diary. Evidence of those would not be before him. Accordingly, in our view, the learned judge
was in error in holding that regard should be paid to what had motivated the appellant in leaving the notes. His view of the
matter appears from his direction to the jury in the summing up where he said in various passages:

You are entitled to look at the motive and purpose behind the notes in deciding whether they are lewd and disgusting.
You have to ask yourselves: was the purpose indecent or lewd and outraging public decency? The purpose and motive of
the notes and the defendants state of mind and his reasons for leaving them are all matters you are entitled to take into
account when deciding whether the act of the defendant was lewd and outraging public decency.

At a late stage of the hearing before this court counsel for the Crown, very properly, drew our attention to a case which is
somewhat analogous, though not entirely on all fours, which is in favour of the appellant. It is R v Graham-Kerr [1988] 1 WLR
1098. That was a case in which the appellant was charged with taking indecent photographs of a seven-year-old boy, contrary to
s 1(1)(a) of the Protection of Children Act 1978. There was an issue as to what evidence could go before the jury and as to
whether any other evidence than the photographs themselves was admissible on the question as to whether the photographs were
indecent. In allowing the appeal it was held:

the only relevant evidence was the photographs themselves, and in such circumstances a trial judges ruling that
evidence of surrounding circumstances and motivation were relevant and admissible for the purposes of determining
whether photographs were indecent was incorrect.

It follows that in our judgment the learned judge was in error in rejecting the submissions that were made to him based upon the
notes themselves, because 653 there was nothing in the acts complained of here capable of outraging public decency. We
therefore hold that the learned judge ought to have acceded to the submissions. Even Mr French, although he contested that
issue, conceded that the learned judge was in error in his summing up in inviting the jury to have regard to the contents of the
admittedly obscene diaries in considering whether the common law offences had been committed.
 We turn next to the single offence of attempting to incite a child under 14 years to commit an act of gross indecency (count
14).
To found a charge of attempt, there must be evidence of an act which is more than preparatory to the commission of the full
offence. Attempts are now governed by statute. Section 1(1) of the Criminal Attempts Act 1981 provides:

If, with intent to commit an offence to which this section applies, a person does an act which is more than merely
preparatory to the commission of the offence, he is guilty of attempting to commit the offence.

Section 4(3) provides:

Where, in proceedings against a person for an offence under section 1 above, there is evidence sufficient in law to
support a finding that he did an act falling within subsection (1) of that section, the question whether or not his act fell
within that subsection is a question of fact.

The effect of that latter subsection is that it is for the jury to determine whether the act is more than preparatory or not, but
only in circumstances upon which the judge has to rule, where there is some evidence fit for their consideration on that issue.
Here the notes relied upon went no further than to seek to meet with the boy or boys in question. In our judgment this could
not be regarded as more than a preparatory act, even on the assumption that the ultimate intention of the appellant was gross
indecency. Incitement to commit gross indecency would require a proposition to be made for that specific purpose. A letter sent
by an accused inviting a boy to commit gross indecency which did not reach him would be an attempted incitement. R v
Ransford (1874) 31 LT 488 was such a case. It involved a letter sent to a boy at school, the letter being intercepted and handed to
the school authorities. That was an attempt because the accused had done all he could towards inciting the boy to commit an
unnatural offence. Here, however, the note went no further than to seek to engineer a preliminary meeting. No proposition or
incitement to the offence had emanated from the appellant. At most he was preparing the ground for an attempt.
Accordingly, in our judgment, there was no evidence upon which he could be convicted.
We are wholly sympathetic to the need perceived by the prosecuting authorities to take action in the circumstances of this
case, but in our judgment the evidence was not capable of supporting the charges laid. Accordingly, this appeal must be allowed.

Appeal allowed. Conviction quashed.

Solicitors: Registrar of Criminal Appeals; Crown Prosecution Service, Brighton.

Kate OHanlon Barrister.

654
[1991] 4 All ER 655

Garcin and others v Amerindo Investment Advisors Ltd and others

CIVIL PROCEDURE

CHANCERY DIVISION
MORRITT J
4, 5, 6, 7 JUNE 1991

Evidence Witness Witness in foreign jurisdiction Examination of witness by live television link Whether court having
jurisdiction to order that evidence of witness in foreign jurisdiction may be given by live television link with court RSC Ord 38,
r 3.

The courts jurisdiction under RSC Ord 38, r 3 a to order that evidence shall be given at the trial in such manner as may be
specified by the court includes jurisdiction to order that evidence may be given by a witness in a foreign jurisdiction by means of
a live television link with the court (see p 657 g h, post).
________________________________________
a Rule 3 is set out at p 656 c to e, post.

Notes
For examination of witness outside the jurisdiction, see 17 Halsburys Laws (4th edn) para 248.

Application
The plaintiffs, Alberto Garcin, Lorenza Garcin and Garveral Inc, a company incorporated in Panama, in an action commenced by
them against the defendants, Amerindo Investment Advisors Ltd, Amerindo Management Ltd (companies incorporated in Hong
Kong and subsidiaries of Merrill Lynch Pierce Fenner & Smith Inc (Merrill Lynch) of New York) and Albert Villar, claiming
repayment of sums alleged to be due to them pursuant to the terms of an investment management agreement made between the
first and second plaintiffs and the first and second defendants on 17 February 1984, applied for an order under RSC Ord 38, r 3
for Robert St Angelo, a manager employed by Merrill Lynch, to give evidence on oath in New York by means of a live television
link-up with the court. The defendants applied for an order for letters of request to be directed to the competent judicial authority
of the US District Court for the Southern District of New York requiring the attendance of Mr St Angelo in New York to be
examined on oath, requesting the production for inspection and copying the original files held by Merrill Lynch or their
associates or agents regarding all accounts operated by the defendants or any of their associated companies, and that the
testimony under oath be reduced into writing and all documents produced on examination marked for identification,
authenticated and returned to the Royal Courts of Justice in London. The facts are set out in the judgment.

Anthony P Colman QC and Jeffrey Gruder for the plaintiffs.

Jonathan Marks for the defendants.

Cur adv vult

655
7 June 1991. The following judgment was delivered.

MORRITT J. The first question for my decision is whether RSC Ord 38, r 3 gives me jurisdiction to order that evidence of a
particular fact or facts may be given by a particular witness in the United States by means of a television linkage between him in
the United States and this court. If I conclude that I have such jurisdiction, the question will then arise whether I should exercise
it.
The general rule, as reproduced in Ord 38, r 1 is that any fact required to be proved at the trial by the evidence of witnesses
shall be proved by the examination of the witnesses orally and in open court. But that requirement is subject to any other
provision of the Rules of the Supreme Court, the Civil Evidence Acts 1968 and 1972 and any other enactment relating to
evidence.
Order 38, r 3 provides as follows:

(1) Without prejudice to rule 2, the Court may, at or before the trial of any action, order that evidence of any particular
fact shall be given at the trial in such manner as may be specified by the order.
(2) The power conferred by paragraph (1) extends in particular to ordering that evidence of any particular fact may be
given at the trial(a) by statement on oath of information or belief, or (b) by the production of documents or entries in
books, or (c) by copies of documents or entries in books, or (d) in the case of a fact which is or was a matter of common
knowledge either generally or in a particular district, by the production of a specified newspaper which contains a
statement of that fact.

Thus, the court has power to determine the manner in which evidence is given but does not, as it seems to me, have power to
enlarge the evidence which may be given beyond that which is legally admissible, except possibly in the particular categories set
out in para (2).
Accordingly the first point to consider is whether evidence given by a witness abroad by means of a television linkage is
admissible at all. Such evidence would be given by the witness in the place where he made his oral statement, namely the United
States. As such, it would be admissible under s 2 of the Civil Evidence Act 1968 if proved by one who heard it. Moreover, any
video tape of the examination and cross-examination would be similarly admissible as a document in which the statement was
made (see s 10). Thus, if both parties and the witness co-operate, a video tape of the examination and cross-examination of a
witness overseas would be admissible in evidence in proceedings in England.
Moreover, in such a case, the evidence so obtained would be of greater weight than the ordinary Civil Evidence Act
statement, because the witness would have been cross-examined and the judge would have had some opportunity to observe the
demeanour of the witness.
But the defendants do not consent to such a procedure. They contend that I have no jurisdiction to make the order sought.
First, they point to the provisions of s 32 of the Criminal Justice Act 1988, which came into force in November 1990 in
relation to certain classes of prosecution. Subsections (1) and (3) provide as follows:

(1) A person other than the accused may give evidence through a live television link on a trial on indictment or an
appeal to the criminal division of the Court of Appeal or the hearing of a reference under section 17 of the Criminal Appeal
Act 1968 if(a) the witness is outside the United Kingdom
(3) A statement made on oath by a witness outside the United Kingdom and given in evidence through a link by virtue
of this section shall be treated 656 for the purposes of section 1 of the Perjury Act 1911 as having been made in the
proceedings in which it is given in evidence.

Subsections (4) and (5) authorise the making of rules necessary or expedient for the purposes of the section.
From those provisions the defendants derive two propositions; namely, that it is for Parliament to decide whether to
introduce a similar alteration to the general principle that evidence is given orally and in court in the case of civil proceedings.
Secondly, they contend by reference to s 32(3) of the 1988 Act and s 1(1) and (5) of the Perjury Act 1911, that there is no
sanction under English law for a knowingly false answer to the question.
I do not think either of those points requires me to hold that Ord 38, r 3 does not confer the necessary jurisdiction.
Prior to the 1988 Act there was no provision applicable to criminal trials comparable to Ord 38, r 3. Thus, the fact that s 32
of the 1988 Act was confined to criminal proceedings does not indicate a lack of jurisdiction in civil proceedings. If anything, it
suggests the opposite.
Similarly, the fact that s 1 of the 1911 Act would impose no sanction for knowingly false answers does not indicate a lack of
jurisdiction, because there is no such sanction in respect of a statement made by a person overseas which is admissible under s 2
of the Civil Evidence Act 1968.
The defendants also relied on the fact that Ord 38, r 3 does not enable this court to compel a witness overseas to give
evidence or, if he is prepared to do so, to compel him to answer questions put to him which under English law he could be
required to answer. This is true, but it does not seem to me to go to jurisdiction under Ord 38, r 3 so much as the exercise of my
discretion, if I have one, and the weight to be given to the evidence so obtained if I exercise it.
An order under Ord 38, r 3 does not have to specify that the evidence must be given by a particular witness or that the
evidence of a particular fact must be given in the manner specified in the order to the exclusion of all other evidence relevant to
that fact.
I was told that facilities for a television linkage have existed for about ten years but, except in an arbitration the details of
which could not be recalled, no counsel was aware of any case in which an attempt had been made to use those facilities in
conjunction with Ord 38, r 3 to obtain evidence from a witness abroad. There may be many reasons for this, but it is not in my
judgment any ground for denying jurisdiction under Ord 38, r 3 if the words of the rule admit it.
Given that the evidence of the overseas witness is admissible, then its transmission to the court by means of the television
linkage is, in my judgment, a manner in which such evidence is given so as to fall squarely within the words of Ord 38, r 3.
I conclude therefore that I have jurisdiction to make the order sought.
In the action, the plaintiffs claim payment of sums due to them by the defendants as their discretionary investment managers.
Their money and investments were held by a subsidiary of Merrill Lynch Pierce Fenner & Smith Inc (Merrill Lynch) and from
time to time accounts were provided by Merrill Lynch to the defendants and were produced by the defendants to the plaintiffs.
The defendants claim that they have already repaid to the plaintiffs all moneys due to them. The plaintiffs claim that this is
not so according to the accounts the defendants have produced, which they contend are binding on the defendants as a matter of
law.
In relation to that issue, it is the allegation of the plaintiffs that the third defendant on his own behalf, and as agent for the
other defendants, produced to the first plaintiff an account apparently emanating from Merrill Lynch which he 657 knew to be
false. The document so produced is a photocopy said to have been created by the defendants by cutting out from the original
Merrill Lynch account the parts which showed the liabilities on the account and pasting the rest together and photocopying it so
as to show in an apparently complete account only the assets.
This allegation was made for the first time in the opening speech by counsel for the plaintiffs, who accepted that the
defendants must have an adequate opportunity to deal with it.
 The defendants response was to refer to two other comparable short form statements obtained from Merrill Lynch under
subpoena from Merrill Lynch in New York, and to apply for letters of request addressed to the appropriate authority in the State
of New York for the examination of Mr Robert St Angelo, an officer of Merrill Lynch, and the production of all Merrill Lynchs
files relating to all accounts of the plaintiffs with Merrill Lynch.
The topics on which the letter of request seeks the examination of Mr St Angelo are described in para 19 in the following
terms:

The Court is interested in whether or not the one page Merrill Lynch statement for the period from 30th August 1986
to 26th September 1986 for the Merrill Lynch account is a genuine document emanating from Merrill Lynch and in all
matters concerning the provenance and making of that document. There are two other statements in similar form before the
Court, a statement for the period from 1st January 1986 to 31st January 1986 for the MI account and a statement for the
period from 28th June 1986 to 25 July 1986 for the G2 account. The Court is therefore interested in all matters concerning
the provenance and making of those documents in whether or not other such documents exist and, if so, in their number
and whereabouts and in all matters concerning their provenance and making.

I was told that if I made the order the defendants sought it would necessitate an adjournment of the trial for about three or four
months. The application for an order for such letters of request was opposed by the plaintiffs. They are resident in Mexico and
have come to England to prepare to give evidence and attend the trial at no little expense. They contended that the order was not
necessary for the purposes of justice, at least at this stage, because Mr St Angelo is prepared to give oral evidence on oath in New
York, transmitted by the television linkage to this court, but is not prepared to attend the trial here. Accordingly, they seek an
order under Ord 38, r 3.
On the question of discretion, as on jurisdiction, the defendants relied on the fact that Mr St Angelo could not be compelled
to answer a question put to him, and that there would be no sanction under English law to reinforce the oath he is apparently
prepared to take. They point to the fact that the information they have received from counsel in New York for Merrill Lynch as to
what Mr St Angelo would say is materially different from the information similarly obtained by the plaintiffs. They are
concerned that the procedure suggested by the plaintiffs will not compel Merrill Lynch to produce the documents they seek, so
that, as they suggest, the search for them will not be as thorough as it would otherwise be.
There is no doubt that the procedure suggested by the plaintiffs will be much cheaper and more expeditious than the
procedure suggested by the defendants, or the alternative possible procedure raised this morning, namely the appointment of a
commissioner.
So far as documents are concerned, I have no reason to think that given reasonable time Merrill Lynch will not diligently
search for those which the defendants want, and the question of what searches have been made could be pursued in the
examination of Mr St Angelo. If, as I am told, Mr St Angelo is 658 prepared to give evidence on oath, I should not assume at this
stage that the lack of sanction would lead him to give false answers which he would not have given if he gave oral evidence here.
Nor should I assume now, given his apparent willingness to give evidence, that when the television linkage is set up he will then
refuse to answer.
Moreover, as the plaintiffs accepted, if I make the order sought by them, and Mr St Angelos evidence in the event turns out
to be unsatisfactory in a manner which might be overcome by making the order for letters of request or for evidence on
commission sought by the defendants, then the defendants can at that stage renew their application. With some slight redrafting,
para 19 of the letters of request can be used to set out the particular facts required by Ord 38, r 3 to be contained in any order I
make.
In all these circumstances, it seems to me that the opportunity provided by Ord 38, r 3 to obtain the evidence of Mr St
Angelo by means of modern technology should be seized. It would be much cheaper than letters of request or evidence on
commission. It will not now and may never be necessary to have a substantial (if any) adjournment, and if in the event it proves
to be an unsatisfactory method of obtaining evidence from Mr St Angelo it will not preclude an order for letters of request or for
evidence on commission hereafter. Accordingly, I will make an order under Ord 38, r 3, in a form to be considered with counsel,
for the evidence of Mr St Angelo on the particular facts referred to in para 19 of the letters of request to be given by television
linkage.
I refuse at this stage to make an order for letters of request as sought by the defendants, but without prejudice to a renewal of
that application hereafter, or alternatively for an application hereafter for evidence to be given on commission.

Order accordingly.

Solicitors: Howard Kennedy; Lovell White Durrant.

Hazel Hartman Barrister.

[1991] 4 All ER 659

Rockeagle Ltd v Alsop Wilkinson (a firm)

LAND; Sale of Land

COURT OF APPEAL, CIVIL DIVISION

LORD DONALDSON OF LYMINGTON MR, STAUGHTON AND FARQUHARSON LJJ
3 JULY 1991

Sale of land Stakeholder Deposit paid to stakeholder Payment over of deposit on instructions of vendor and purchaser
Solicitor stakeholder Vendor owing fees to solicitor Vendor assigning interest in land to plaintiff Plaintiff and purchaser
requiring solicitor to transfer deposit to new stakeholder Whether solicitor holding deposit in contract or quasi-contract or as
trustee Whether solicitor required to comply with request Whether solicitor entitled to retain amount of fees owing.

The vendor, a client of the defendant firm of solicitors, agreed to sell a parcel of land to the purchasers and it was agreed that the
deposit of 35,000 should be held by the defendants as stakeholders. The vendor subsequently went into receivership owing
substantial fees to the defendants. The receiver assigned the vendors interest in the sale to the plaintiffs, who, together with the
purchasers, requested the defendants to transfer the deposit in respect of the uncompleted sale to the plaintiffs solicitors. The
defendants refused to do so. When the sale was completed the defendants paid over 25,000 to the plaintiffs and retained the
balance of the deposit on account of fees owing by the vendor. The plaintiffs brought an action against the defendants to recover
the balance of the deposit and obtained summary judgment on the order of the judge. The defendants appealed.
 659

Held Since the duties and authority of a stakeholder lay in contract or quasi-contract and he was not a trustee, a solicitor who
held a deposit on a contract for the sale of land as stakeholder was obliged to pay over the deposit to a new stakeholder if both
vendor and purchaser instructed him to do so, notwithstanding that one of the parties owed fees to the solicitor. A stakeholder
who wished to make sure that he had some contingent security in respect of fees owing had to stipulate for that when the deposit
was placed with him. It followed that the defendants were obliged to comply with the joint instruction of the purchaser and the
plaintiffs (as the vendors assignee) and to pay over the deposit in full to the new stakeholder without retaining any moneys by
way of set-off or lien. The appeal would therefore be dismissed (see p 661 j and p 662 f to p 663 e g to j, post).

Notes
For stakeholders, see 9 Halsburys Laws (4th edn) para 681, and for cases on the subject, see 12(2) Digest (2nd reissue) 538539,
85068510.
For deposits paid under a contract for the sale of land, see 42 Halsburys Laws (4th edn) paras 92, 244, and for cases on the
subject, see 40 Digest (Reissue) 122123, 319320, 886887, 27892796.

Cases referred to in judgments

Harington v Hoggart (1830) 1 B & Ad 577, [182434] All ER Rep 471, 109 ER 902.
Potters (a firm) v Loppert [1973] 1 All ER 658, [1973] Ch 399, [1973] 2 WLR 469.

Cases also cited or referred to in skeleton arguments

Annesley v Muggridge (1816) 1 Madd 593, 56 ER 218.
Collins v Stimson (1883) 11 QBD 142, [18815] All ER Rep 382, DC.
Hastingwood Property Ltd v Saunders Bearman Anselm (a firm) [1990] 3 All ER 107, [1991] Ch 114.
Roxburghe v Cox (1881) 17 Ch D 520, CA.
Wiggins v Lord (1841) 4 Beav 30, 40 ER 248.

Interlocutory appeal
The defendants, Aslop Wilkinson, a firm of solicitors, appealed from the judgment of Thorpe J on 12 November 1990 whereby he
allowed an appeal from the order of the deputy district registrar on 19 September 1990 and entered summary judgment for the
plaintiffs, Rockeagle Ltd (formerly Mallinson-Denny (Estates) Ltd), in respect of their claim by writ issued out of the Exeter
district registry on 24 May 1990 against the defendants for 9,200, being the balance of money paid as a deposit to the defendants
as stakeholders pending the completion of the sale of land at Huntworth, Somerset by the plaintiffs, as assignees of the interest in
the contract of sale of the original vendors, Moorlock Ltd, to the purchasers, Hunter Estates Ltd, together with interest. The facts
are set out in the judgment of Staughton LJ.

Fernanda Pirie for the defendants.

W R Stewart Smith for the plaintiffs.

3 July 1991. The following judgments were delivered.

STAUGHTON LJ (giving the first judgment at the invitation of Lord Donaldson MR). This case is possibly of some importance
to solicitors, as the question arises whether a solicitor, taking a deposit on a contract for the sale of land as stakeholder, acquires
any contingent security for money that is owed to him by his client, being either the vendor or the purchaser.
In the action Rockeagle Ltd claim 9,200 from Alsop Wilkinson, a firm of solicitors. On 12 November 1990 Thorpe J gave
summary judgment for that sum and interest in favour of Rockeagle Ltd. Alsop Wilkinson appeal.
The facts are simple, not in dispute and set out in a chronology very helpfully 660 prepared on behalf of Alsop Wilkinson.
On some date prior to 26 May 1988 a total of 10,749 became due to Alsop Wilkinson from their clients, Moorlock Ltd. On 26
May 1988 Moorlock Ltd agreed to sell some land at Huntworth in Somerset to Mallinson-Denny (Estates) Ltd; and it was agreed
that there should be a deposit of 35,000 held by Alsop Wilkinson as stakeholders. Then a further sum became due to Alsop
Wilkinson from Moorlock Ltd for fees amounting to 4,025.
On 8 July 1988, by which time Moorlock had gone into receivership, the receiver assigned their interest in the sale contract
to Rockeagle Ltd. Then there was a pause for some 18 months. On 4 January 1990, while the sale contract was still
uncompleted, the solicitors for the purchasers under the contract required Alsop Wilkinson to transfer the deposit to other
solicitors who were acting for Rockeagle Ltd. The purchasers had by that time changed their name from Mallinson-Denny
(Estates) Ltd to Hunter Estates Ltd. Rockeagle Ltd, the assignees of the original vendors, joined in that request. Alsop
Wilkinson, the stakeholders, did not comply with it.
On 4 April 1990 the sale contract was completed. Thereupon the deposit became unconditionally due from Alsop Wilkinson
to Rockeagle Ltd, subject to the question of set-off or lien. A demand was made upon Alsop Wilkinson on 5 April 1990. On 24
May they paid the sum of 25,800 to Rockeagle Ltd, retaining the balance of 9,200. This, it would seem, was what was owing
to them from Moorlock Ltd, the original vendors, some 14,000, less interest that had accrued on the deposit meanwhile. On the
same day these proceedings were commenced.
The deputy district registrar at Exeter refused to order summary judgment, but on appeal Thorpe J made the order sought.
It seems to me that there are potentially three issues here. First, can a stakeholder ever set off against his liability a sum
which he maintains is due to him from the person entitled to the stake even after the money has turned out to be unconditionally
due to that person; or, which is much the same thing, can he claim a lien? I am not sure if that question is still at issue between
the parties here. It seems to me that it was argued below that a stakeholder could never have a right of set-off or lien.
The second question depends upon what happened on 4 January 1990 when both parties, Rockeagle Ltd and the purchasers,
Hunter Estates Ltd, through their solicitors required Alsop Wilkinson to transfer the money to a new stakeholder, and Alsop
Wilkinson did not comply with that requirement. Were they obliged to comply with it?
The third question is whether the assignment on 8 July 1988 makes any difference. If Alsop Wilkinson would have been
entitled to set off or a lien against their original client, Moorlock Ltd, is that right no longer available to them because there was
an assignment to Rockeagle Ltd before the event had occurred upon which the deposit became unconditionally payable to the
vendor?
I say nothing on either the first or the third question. As I say, I am not sure that the first question is still in issue. The third
question we have not heard argument upon, and at first sight is not easy. I turn to deal with the second question, whether Alsop
Wilkinson were on 4 January 1990 obliged to transfer the deposit to a new stakeholder because both parties required them to do
so.
The analysis of what happens when money is deposited with the stakeholder in the ordinary way is, I think, this. Besides the
sale contract between the vendor and the purchaser there is concluded a second tripartite contract between the vendor, the
purchaser and the stakeholder. What are the terms of that contract? Miss Pirie, who has appeared for Alsop Wilkinson, says that
they are set out in a passage from Williams Contract of Sale of Land (1930) p 104 cited by Pennycuick V-C in Potters (a firm) v
Loppert [1973] 1 All ER 658 at 664, [1973] Ch 399 at 409:
661

Where a deposit is paid to any person as stakeholder, he shall hold it to abide the event of the contract, and shall be
bound to pay the amount thereof to the vendor upon (but not before) the completion of the sale or the forfeiture of the
deposit, or to the purchaser if and when the purchaser shall acquire the right to the return of the deposit; but until the event
of the contract shall be decided the stakeholder shall not pay over the deposit to either party without the other partys
consent.

It does not say there expressly that, if both parties do require the stakeholder to pay over the money before either of the events
mentioned has happened, the stakeholder is obliged to do so. Miss Pirie says that no such obligation is to be implied. The
question, as it seems to me, is whether there is such an implication.
There is virtually no authority on the topic, although one may perhaps refer to Harington v Hoggart (1830) 1 B & Ad 577,
[182434] All ER Rep 471. There the question was whether a stakeholder was obliged to invest the stake in a manner required
by one party without the consent of the other, and it was held that he was not. Parke J said (1 B & Ad 577 at 589590, [182434]
All ER Rep 471 at 473):

One party was not competent by himself to alter the contract on which the money was placed in the defendants hands.
If the plaintiff wished to vary that contract, and make the fund productive to either party, according as one or other would
be entitled to receive the money, whether the purchase was completed or notif he had the intention of altering the terms
of the contract, meaning to take to the fund, whether it was diminished or increased at the end of the time,it was his duty
to procure the consent of the other party

I suppose it may be said that there is an implication there that, if the other party did consent, the stakeholder would be obliged to
comply with their joint requirement; but that is the very highest at which it could be put as a matter of authority.
So I consider the point as one of principle. In the ordinary case I would have thought that it must be implied in the tripartite
contract that the vendor and the purchaser may change their stakeholder if they wish. After all, the stakeholder may become of
doubtful financial ability. There is no suggestion of that happening in this case, of course. I can see no reason in general why it
should be implied that the parties may not change their stakeholder if they wish, and good reason why they should have that right.
Is there then a different implication in the particular circumstances of this case? As it happens, Moorlock Ltd, the original
client, owed Alsop Wilkinson some 10,000 on the date when the contract of sale was made and the tripartite contract relating to
the deposit concluded. Should one imply a term that would protect a contingent right to security of Alsop Wilkinson, in the event
that the contract went through and the deposit became payable to the vendor?
I do not think that one should make that implication, because there are other means by which the value of the stake as
security could be worthless to the stakeholder. The parties, for example, could agree to cancel the sale contract, in which case the
deposit would be repayable to the purchaser. They could then, on the very next day, make a new sale contract and find a different
stakeholder. The notion that the deposit was in any practical sense security to the stakeholder for the obligation of one party or
the other will not survive examination. Consequently, I do not think that it would be right to imply a term that there shall be no
change of stakeholder even when, as here, at the date of the contract one party owes a substantial sum of money to the
stakeholder. If the stakeholder wishes to make sure that he has some contingent security he may stipulate for 662 that when the
deposit is placed with him, or at any rate he may try to do so. The parties might then answer, We are not placing the deposit with
you but rather with somebody else. Absent any express arrangement of that kind, I cannot see that any such term should be
implied.
Accordingly, I would hold that Alsop Wilkinson were obliged on 4 January 1990 to comply with the joint instruction of the
vendors assignee and the purchaser, and pay the stake over to a new stakeholder. As at that date there was no question of the
money being unconditionally payable to the vendors because the sale had not been completed. There could be no question at that
date of Alsop Wilkinson having either a set-off or a lien. They should have paid over the money in full on that date. That being
so, it seems to me that they have no defence to this action, and that the order of Thorpe J was rightly made. I would dismiss this
appeal.
I would perhaps add, although in the event it does not arise, that, had we been of the opposite view and found that Alsop
Wilkinson did have a right of set-off or lien, there would be no question of sending the action for trial. The facts are not in
dispute. We should have had to give judgment for the defendants, either by agreement between the parties or under the new RSC
Ord 14A.

FARQUHARSON LJ. I agree. It is clear from the authorities, and in particular Potters (a firm) v Loppert [1973] 1 All ER 658,
[1973] Ch 399, that the duties and authority of a stakeholder lie in contract or quasi-contract and not as trustee. The task of a
stakeholder, when paid a deposit by the parties to a contract of sale of a property or as may be, is to hold the stake upon the
happening of the events that are specified in the contract. Thus, if in due course the sale of the property is completed or for any
reason the deposit is forfeited, it would be his duty to pay over that money to the vendor. Alternatively, if for any other reason the
sale is not proceeded with, he must pay the money to the original depositor, that is to say the purchaser.
The problem arises whether there is a right on the part of the contracting parties to require the surrender of the stake from
the stakeholder and to terminate that authority before either of those specified events take place. As pointed out by Staughton LJ,
there is virtually no authority which assists the court in regard to that question. Harington v Hoggart (1830) 1 B & Ad 577,
[182434] All ER Rep 471, and indeed other authorities drawn to our attention, show, as must plainly be the case, that a
stakeholder has no authority to part with the stake at the instigation of one of the parties and not of the other. Mr Stewart Smith,
in referring to those authorities, argues therefore that, by implication, if both parties agree as to the way in which the stake should
be paid or otherwise transferred, the stakeholder is obliged to follow that requirement.
In my judgment, that contention is correct. There must be an implied term in the contract made between the original parties
and the stakeholder that they can, should they so desire, withdraw that authority and direct him to apply the money in the way
both agree. The reasons why they have that right have been set out by Staughton LJ.
For those reasons, I agree that this appeal should be dismissed.

LORD DONALDSON OF LYMINGTON MR. I agree with both the judgments that have been delivered and with the orders
proposed by Staughton and Farquharson LJJ.

Appeal dismissed.

Solicitors: Alsop Wilkinson; Michelmores, Exeter.

Francis Rustin Barrister.

663
 [1991] 4 All ER 664

Wai Yu-tsang v R
CRIMINAL; Criminal Law

PRIVY COUNCIL
LORD BRIDGE OF HARWICH, LORD GRIFFITHS, LORD GOFF OF CHIEVELEY, LORD JAUNCEY OF TULLICHETTLE, LORD LOWRY
15, 16 JULY, 14 OCTOBER 1991

Criminal law Conspiracy Conspiracy to defraud Mental element Chief accountant of bank conspiring with others to
conceal in banks accounts dishonouring of cheques Chief accountant acting in best interests of bank so as to prevent run on
bank Whether sufficient to constitute fraud that conspirators realised they would or might imperil victims economic interests
Whether fact that conspirators motive benign sufficient in itself to prevent agreement from constituting conspiracy to defraud.

The appellant was the chief accountant of a bank in Hong Kong. Unknown to him a cheque-kiting cycle, under which batches of
cheques were drawn to finance an earlier batch taking advantage of time lags in clearing cheques through the international
banking system, was operated by an associate of the managing director of the bank using a number of companies as the principal
vehicles for the fraud. In 1982, in order to end that cycle, a new cycle was set up with the purpose of creating funds for transfer
into the first cycle so that the final cheques in circulation in that cycle could be met. The bank had purchased US dollar cheques
from that cycle but as a result of a rumour there was a run on the bank and the managing director of the bank ordered that no
further cheques or drafts in that currency were to be purchased by the bank. That had the effect of bringing the second cheque-
kiting cycle to a premature end and cheques then in circulation from the cycle were dishonoured. The total face value of such
cheques which had been purchased by the bank and which could not be honoured exceeded the assets of the bank at that time.
The appellant did not report the dishonour of the cheques to the relevant authorities or register the dishonouring in the banks
computerised ledgers, thereby giving a false picture of the balances held by the bank. Details of the transactions were recorded
only in private ledgers. The appellant was charged with conspiring with the managing director and others to defraud the bank and
its existing and potential shareholders, creditors and depositors, by dishonestly concealing in the accounts of the bank the
dishonouring of the US dollar cheques. The appellants defence at his trial was that he was acting under the instructions of the
managing director of the bank, that the confidential system of accounting was created for the purpose of preventing junior staff at
the bank from hearing of the dishonouring and precipitating a second run on the bank and that he had acted in the belief that the
subsequent balancing transactions were bona fide and that he was acting in the best interests of the bank. The appellant was
convicted. He appealed to the Court of Appeal of Hong Kong, which dismissed his appeal. The appellant appealed to the Privy
Council, contending that the judges direction to the jury on the mental element required for a conspiracy to defraud was
erroneous in so far as the judge stated that, for the purpose of establishing the mental element, the imperilling of an economic
interest or the threat of financial prejudice was sufficient to establish fraud, whatever the motive of the accused might have been.

Held The question whether particular facts revealed a conspiracy to defraud depended on what the conspirators had dishonestly
agreed to do, and in particular whether they had agreed to practice a fraud on somebody. It was sufficient that 664 the
conspirators had dishonestly agreed to bring about a state of affairs which they realised would or might deceive the victim into so
acting or failing to act that he would suffer economic loss or his economic interests would be put at risk. A conspirators
intention (or immediate purpose) dishonestly to bring about such a state affairs was to be distinguished from his motive (or
underlying purpose), and accordingly the mere fact that a conspirators motive was benign in that he did not wish the victim or
potential victim to suffer harm would not of itself prevent the agreement from constituting a conspiracy to defraud. It followed
that there was no misdirection by the judge and the appeal would be dismissed (see p 671 j to p 672 e, post).
R v Allsop (1976) 64 Cr App R 29 applied.
Per curiam. Cases concerned with persons performing public duties, where it is not necessary to show an intention on the
part of the deceiver to inflict pecuniary or economic harm to convict him of an intention to defraud, are not to be regarded as a
special category, but rather as exemplifying the general principle that conspiracies to defraud are not restricted to cases of
intention to cause the victim economic loss (see p 669 b p 670 a b b and p 671 g, post); dictim of Lord Radcliffe in Welham v
DPP [1960] 1 All ER 805 at 808 approved; dictum of Lord Diplock in Scott v Comr of Police for the Metropolis [1974] 3 All ER
1032 at 1040 doubted.

Notes
For conspiracy to defraud, see 11(1) Halsburys Laws (4th edn reissue) para 61, and for the mental element in conspiracy to
defraud, see ibid para 65, and for cases on the subject, see 15 Digest (Reissue) 13981403, 12236122297.

Cases referred to in judgment

Hyam v DPP [1974] 2 All ER 41, [1975] AC 55, [1974] 2 WLR 607, HL.
R v Allsop (1976) 64 CR App R 29, CA.
R v Olan [1978] 2 SCR 1175, Can SC.
Scott v Comr of Police for the Metropolis [1974] 3 All ER 1032, [1975] AC 819, [1974] 2 WLR 741, HL.
Vzina v R, Ct v R [1986] 1 SCR 2, Can SC.
Welham v DPP [1960] 1 All ER 805, [1961] AC 103, [1960] 2 WLR 669, Hl.

Appeal
Wai Yu-tsang appealed by special leave of the Judicial Committee of the Privy Council granted by an Order in Council on 20
November 1990 against the decision of the Court of Appeal of Hong Kong (Silke V-P, Penlington and MacDougal JJA) on 28
June 1990 dismissing his appeal against his conviction on 9 September 1988 in the High Court of Hong Kong before Barnett J
and a jury of conspiracy to defraud, for which he was sentenced to three years imprisonment. The facts are set out in the
judgment of the Board.

Martin Wilson QC and Barry Sceats (both of the Hong Kong Bar) for the appellant.
Clive Grossman and Robert Lee (both of the Hong Kong Bar) for the Crown.

Cur adv vult

14 October 1991. The following opinion was delivered.

LORD GOFF OF CHIEVELEY (Reading the judgment of the Court): The appellant, Wai Yu-tsang, appeals from a judgment
of the Court of Appeal of Hong Kong dated 28 June 1990, dismissing his 665 appeal against conviction on one count of
conspiracy to defraud returned after trial in the High Court of Hong Kong before Barnett J and a jury.
The appellant was the chief accountant of the Hang Lung Bank (the bank). He was charged that, between 7 September and
13 November 1982, he conspired together with Cheng Eng-Kuan, Lee Hoi-Kwong and others to defraud the bank and its existing
and potential shareholders, creditors and depositors, by dishonestly concealing in the accounts of the bank the dishonouring of
US dollar cheques in the sum of $US124m, drawn on the account of Overseas Maritime Co Ltd SA with Citibank International,
Chicago, such cheques having been purchased by the bank. Of the other members of the alleged conspiracy. Cheng was the
managing director of the bank and Lee was the general manager. Cheng fled the jurisdiction, as did another associate of his, John
Mao. Lee originally stood trial with the appellant but, following preliminary argument on the admissibility of certain evidence,
the Crown abandoned its case against him. In the result, the appellant stood trial alone.
The events giving rise to the charge against the appellant were as follows. For some years a cheque-kiting cycle, known as
the Capri cycle, had been run by John Mao, using a number of companies as its principal vehicle. In May 1982, in order to bring
the Capri cycle to an end, a new cheque-kiting cycle (known as the OMC cycle) was set up to create funds for Overseas Maritime
Co Ltd SA (OMC). The object was to transfer the funds into the Capri cycle so that the final cheques in circulation in that cycle
could be met. The bank purchased cheques in US currency via a company called Southseas Finance Co Ltd (SSF). The cheques,
drawn on the OMC account, were purchased by the bank from SSF. The proceeds were credited to the account of SSF with the
bank, and the cheques were cleared through the banks foreign exchange with Chemical Bank. Those purchases required the
approval of Cheng as the managing director of the bank. However, on 7 September 1982 a rumour started by a taxi-driver caused
a run on the bank, and in consequence Cheng gave instructions that no further US dollar cheques or drafts were to be purchased.
This had the effect that the second cheque-kiting cycle was brought to a premature end, and that cheques then in circulation could
not be met. On 14 September Chemical Bank advised the bank that two or three of the OMC cheques had been returned, and on
18 September another seven. The total face value of those cheques (which had been purchased by the bank from SSF) was
$US124m (the equivalent of $HK755m), an amount which exceeded the assets of the bank at that time.
There was no suggestion that the appellant was in any way involved in either of the two cheque-kiting cycles. It was
however alleged that he conspired with Cheng and others to defraud the bank and its existing and potential shareholders, creditors
and depositors, by dishonestly concealing in the banks accounts the dishonouring of the US dollar cheques in the sum of
$US124m which had been purchased by the bank. During the run on the bank, it had been supported by the Standard Chartered
Bank, to which the appellant was under a duty to report, as he was to the Commissioner of Banking. He did not however report
the dishonour of the cheques, nor did he cause the dishonour to be recorded in the banks computerised ledgers. The details of
the transactions were recorded only in private ledgers, called K vouchers. Instead there were recorded in the banks accounts
entries purporting to show that the bank had drawn 16 US dollar drafts on Chemical Bank in amounts equivalent to the total
amount of the dishonoured cheques, and had sold them to SSF, that short-term loans had been granted to two companies called
Thring Trading Ltd (Thring) and Texas Finance Ltd (Texas), and that SSF had paid for the drafts with cheques drawn on its own
account and on the accounts of Thring and Texas. The drafts were never presented for payment 666, although the accounts were
debited with the amounts of the cheques. This gave the false picture of balances in the Chemical Bank account and in the SSF
account which were approximately the same as they would have been if the dishonoured cheques had been recorded as debits in
the SSF account and credits in the Chemical Bank account.
The case for the defence at the trial was that the appellant was acting under the instructions of Cheng, that the confidential
system of accounting was created for the purpose of preventing junior staff at the bank from hearing of the dishonour and
precipitating a second run on the bank, and that the appellant acted in the belief that the subsequent balancing transactions were
bona fide and that he was acting in the best interests of the bank. The jury however returned a unanimous verdict of guilty after a
trial which lasted for about five months. The appellant was sentenced to three years imprisonment.
Before the Court of Appeal, a number of issues were raised by the appellant founded upon criticisms of the summing up of
the learned judge. All of those criticisms were rejected by the Court of Appeal. Before their Lordships, however, the appellants
case was directed solely to the judges direction on the mental element required for a conspiracy to defraud. The judge explained
to the jury that the appellant must have been party to an agreement with one or more of the other named conspirators which had a
common intention to defraud one or more of the persons or categories of persons named in the indictment. He explained that
such an intention must involve dishonesty on the part of the conspirators, and continued as follows:

It is fraud if it is proved that there was the dishonest taking of a risk which there was no right to take, whichto Mr
Wais knowledge at leastwould cause detriment or prejudice to another, detriment or prejudice to the economic or
proprietary rights of another. That detriment or prejudice to somebody else is very often incidental to the purpose of the
fraudsman himself. The prime objective of fraudsmen is usually to gain some advantage for themselves, any detriment or
prejudice to somebody else is often secondary to that objective but nonetheless is a contemplated or predictable outcome of
what they do. If the interests of some other personthe economic or proprietary interests of some other person are
imperilled, that is sufficient to constitute fraud even though no loss is actually suffered and even though the fraudsman
himself did nor desire to bring about any loss.

It is plain that that direction was founded upon the judgment of the Court of Appeal in R v Allsop (1976) 64 Cr App R 29. It was
the contention of the appellant that the direction was erroneous in so far as it stated that, for this purpose, the imperilling of an
economic interest or the threat of financial prejudice was sufficient to establish fraud, whatever the motive of the accused may
have been; and that in so far as Allsops case so decided, it was wrong and should not be followed.
In the course of argument, their Lordships were referred to a number of authorities as well as to Allsops case itself. They do
not however find it necessary for the present purposes to refer to more than a few of these authorities. The first is Welham v DPP
[1960] 1 All ER 805, [1961] AC 103. That case was in fact concerned with forgery, and in particular with the meaning of the
words intent to defraud in s 4(1) of the Forgery Act 1913. The case has however since been referred to as providing guidance in
cases of conspiracy to defraud (see Scott v Comr of Police for the Metropolis [1974] 3 All ER 1032 at 1037, [1975] AC 819 at
838 per Viscount Dilhorne), a proposition with which their Lordships are 667 respectfully in agreement. In Welhams case the
appellant had witnessed forged hire-purchased agreements, on the basis of which finance companies advanced large sums of
money. His defence was that he had no intention of depriving the finance companies by deceit of any economic advantage, his
belief being that the only function of the agreements was to enable the companies to circumvent certain credit restrictions. His
only purpose was to mislead the authority which might inspect the records and whose duty was to prevent contravention of the
credit restrictions. The House of Lords held that there was no warrant for confining the words intent to defraud to an intent to
deprive a person by deceit of an economic advantage or to inflict upon him an economic loss, and further that such an intent
could exist where there was no other intention than to deceive a person responsible for a public duty into doing something, or
failing to do something, which he would not have done, or failed to have done, but for the deceit. Lord Denning, who delivered
the leading speech, rejected the argument that an intention to defraud involves an intention to cause economic loss. He referred
to opinions of academic lawyers to that effect, and said ([1960]) 1 All ER 805 at 814, [1961] AC 103 at 131):

I cannot agree with them on this. If a drug addict forges a doctors prescription so as to enable him to get drugs from a
chemist, he has, I should have thought, an intent to defraud, even though he intends to pay the chemist the full price and no
one is a penny the worse off.
Later, Lord Denning referred to a passage in Easts Pleas of the Crown (2, East PC 852), to the effect that forgery at common law
denotes a false makinga making malo animoof any written instrument for the purpose of fraud and deceit. He then said
([1960] 1 All ER 805 at 815, [1961] AC 103 at 133):

That was written in 1803, but it has been always accepted as authoritative. It seems to me to provide the key to the
cases decided since it was written, as well as those before. The important thing about this definition is that it is not limited
to the idea of economic loss, nor to the idea of depriving someone of something of value. It extends generally to the
purpose of fraud and deceit. Put shortly, with intent to defraud means with intent to practise a fraud on someone or
other. It need not be anyone in particular. Someone in general will suffice. If anyone may be prejudiced in any way by the
fraud, that is enough.

Lord Radcliffe agreed with the speech of Lord Denning, but went on to express in his own words his view of the meaning of the
words intent to defraud in s 4(1) of the 1913 Act. He rejected the proposition that in ordinary speech to defraud is confined to
the idea of depriving a man by deceit of some economic advantage or inflicting upon him some economic loss, and continued
([1960] 1 All ER 805 at 808, [1961] AC 103 at 124):

Has the law ever so confined it? In my opinion, there is no warrant for saying that it has. What it has looked for in
considering the effect of cheating on another person and so in defining the criminal intent is the prejudice of that person;
what BLACKSTONES COMMENTARIES (4 Bl Com (18th edn) 247) called to the prejudice of another mans right.
EASTS PLEAS OF THE CROWN (2 East PC (1803) 852854), makes the same point in the chapter on forgery: in all
cases of forgery, properly so called, it is immaterial whether any person be actually injured or not, provided any may be
prejudiced by it.

He went on to say that the special line of cases where the person deceived is a public authority or a person holding public office,
and there is no intention on 668 the part of the deceiver to inflict upon him any pecuniary or economic harm, shows that such an
intention is not necessary to convict a man of an intention to defraud. The remainder of the Appellate Committee agreed with
both Lord Radcliffe and Lord Denning.
This authority establishes that the expression intent to defraud is not to be given a narrow meaning, involving an intention
to cause economic loss to another. In broad terms, it means simply an intention to practise a fraud on another, or an intention to
act to the prejudice of another mans right.
Their Lordships turn next to Scott v Comr of Police for the Metropolis [1974] 3 All ER 1032, [1975] AC 819. That case was
concerned with a conspiracy temporarily to abstract films from a cinema to enable the appellant to make and distribute copies of
the films on a commercial scale, the operation being carried on without the consent of the owners of the copyright or distribution
rights in the films. The appellants argument was to the effect that he could not be guilty of any conspiracy, because the facts did
not disclose an agreement to deceive the persons alleged to have been the object of the conspiracy. This argument was rejected
by the House of Lords. The leading speech was delivered by Viscount Dilhorne, with whom the remainder of the Appellate
committee agreed. He reviewed the authorities, including Welham v DPP, and said ([1974] 3 All ER 1032 at 1038, [1975] AC
819 at 839):

I have not the temerity to attempt an exhaustive definition of the meaning of defraud. As I have said, words take
colour from the context in which they are used, but the words fraudulently and defraud must ordinarily have a very
similar meaning. If, as I think, and as the Criminal Law Revision Committee [Theft and Related Offences (Cmnd 2977
(1966)) para 35] appears to have thought, fraudulently means dishonestly then to defraud ordinarily means in my
opinion to deprive a person dishonestly of something which is his or of something to which he is or would or might but for
the perpetration of the fraud be entitled. In Welham v Director of Public Prosecutions [1960] 1 All ER 805 at 808, [1961]
AC 103 at 124 Lord Radcliffe referred to a special line of cases where the person deceived is a person holding public office
or a public authority and where the person deceived was not caused any pecuniary or economic loss. Forgery whereby the
deceit has been accomplished had, he pointed out, been in a number of cases treated as having been done with intent to
defraud despite the absence of pecuniary or economic loss. In this case it is not necessary to decide that a conspiracy to
defraud may exist even though its object was not to secure a financial advantage by inflicting an economic loss on the
person at whom the conspiracy was directed. But for myself I see no reason why what was said by Lord Radcliffe in
relation to forgery should not equally apply in relation to conspiracy to defraud.

In a brief speech Lord Diplock (although he, like the remainder of the Appellate Committee, agreed with the speech of Viscount
Dilhorne) was more specific. He said ([1974] 3 All ER 1032 at 1040, [1975] AC 819 at 840841):

(2) Where the intended victim of a conspiracy to defraud is a private individual the purpose of the conspirators
must be to cause the victim economic loss by depriving him of some property or right, corporeal or incorporeal, to which is
is or would or might become entitled (3) Where the intended victim of a conspiracy to defraud is a person performing
public duties as distinct from a private individual it is sufficient if the purpose is to cause him to act contrary to his public
duty
669
With the greatest respect to Lord Diplock, their Lordships consider this categorisation to be too narrow. In their opinion, in
agreement with the approach of Lord Radcliffe in Welhams case, the cases concerned with persons performing public duties are
not to be regarded as a special category in the manner described by Lord Diplock, but rather as exemplifying the general principle
that conspiracies to defraud are not restricted to cases of intention to cause the victim economic loss. On the contrary, they are to
be understood in the broad sense described by Lord Radcliffe and Lord Denning in Welhams casethe view which Viscount
Dilhorne favoured in Scotts case, as apparently did the other members of the Appellate Committee who agreed with him in that
case (apart, it seems, from Lord Diplock).
With these principles in mind, their Lordships turn to R v Allsop (1976) 64 Cr App R 29 itself. In that case the defendant
was a sub-broker for a hire-purchase company. Acting in collusion with others, he entered false particulars in forms submitted to
the company, to induce it to accept applications for hire-purchase facilities which it might otherwise have rejected, although the
defendant both expected and believed that the transactions in question would be completed satisfactorily and that the company
would achieve its contemplated profit, as it appears in fact to have done. Examples of the false particulars were that the price of
the car concerned would be inflated so as to allow an illusory deposit to be shown as having been paid by the intending hire-
purchaser; or the value of the car taken in part exchange would be stated at more than the true figure; or a car dealer would be
named as the seller when the transaction was a private one and no established car dealer played any part in it. What the defendant
sought to achieve was an increase in the companys business, and therefore of his own commission. The defendant was charged
with conspiracy to defraud. The judge directed the jury that they must be sure that the conspirators knew that they were inducing
the company to act in circumstances in which they might cause or create the likelihood of economic loss or prejudice. The jury
convicted the defendant. He appealed on the ground that the judges direction was too wide; he should, it was submitted, have
directed the jury that they must be sure that the defendant intended to cause economic loss to the company. The Court of Appeal
dismissed the appeal. The judgment of the court was delivered by Shaw LJ. The central passage in the judgment reads as
follows (at 31):

It seemed to this Court that Mr Healds argument [for the defendant] traversed the shadowy region between intent and
motive. Generally the primary objective of fraudsmen is to advantage themselves. The detriment that results to their
victims is secondary to that purpose and incidental. It is intended only in the sense that it is a contemplated outcome of
the fraud that is perpetrated. If the deceit which is employed imperils the economic interest of the person deceived, this is
sufficient to constitute fraud even though in the event no actual loss is suffered and notwithstanding that the deceiver did
not desire to bring about an actual loss.

In reaching this conclusion, the Court of Appeal found it necessary to reconcile it with the narrow definition of conspiracy to
defraud expressed in the speech of Lord Diplock in Scott v Comr of Police for the Metropolis, to which their Lordships have
already referred. This it did on the basis that economic loss may be ephemeral and not lasting, or potential and not actual; but
even a threat of financial prejudice while it exists may be measured in terms of money. It continued (at 32):
670

In the present case, the part of the history which is common ground reveals that in this sense [the company] did suffer
actual loss for they paid too much for cars worth less than their pretended value; and they relied upon the creditworthiness
of hire-purchasers as measured by the deposit stated to have been paid when none had been paid. It matters not that in the
end the hire-purchasers concerned paid to [the company] what was due to them.

They concluded by praying in aid a passage from the speech of Lord Diplock in Hyam v DPP [1974] 2 All ER 41 at 63, [1975]
AC 55 at 86a case concerned with the mental element in the crime of murder.
In the context of conspiracy to defraud, it is necessary to bear in mind that such a conspiracy is an agreement to practise a
fraud on somebody of (cf Welham v DPP [1960] 1 All ER 805 at 815, [1961] AC 103 at 133 per Lord Denning). In Allsops case
(1976) 64 Cr App R 29 what the defendant agreed to do was to present the company with false particulars, in reliance upon
which, as he knew, the company would decide whether to enter into hire-purchase transactions. It is then necessary to consider
whether that could constitute a conspiracy to defraud, notwithstanding that the defendants underlying purpose or motive was not
to damage any economic interest of the company but to ensure that the transaction went through so that he would earn his
commission. Their Lordships can see no reason why such an agreement should not be a conspiracy to defraud the company,
substantially for the reasons given by the Court of Appeal. The defendant was, for his own purposes, dishonestly supplying the
company with false information which persuaded it to accept risks which it would or might not have accepted if it had known the
true facts. Their Lordships cannot see why this was not an agreement to practise a fraud on the company, because, as Shaw LJ
said, it was a dishonest agreement to employ a deceit which imperilled the economic interests of the company.
The attention of their Lordships was drawn to a critique of Allsops case in Smith and Hogan Criminal Law (6th edn, 1988) p
273, to which they have given careful consideration. The learned authors first criticise the reference by the Court of Appeal to
Hyam v DPP. With this criticism, their Lordships are inclined to agree, doubting whether an authority on the mental element in
the crime of murder throws much light on the nature of a conspiracy to defraud. However, the Court of Appeal only felt it
necessary to pray in aid Lord Diplocks speech in Hyam v DPP in order to circumnavigate the dictum of Lord Diplock in Scotts
case, an exercise which their Lordships do not need to embark upon since they consider that dictum to be, for the reasons they
have explained, too narrowly expressed. Next, the authors suggest that Allsops case can be explained on the basis that there was
an intention on the part of the defendant to defraud the company, since the intended the company to pay, as indeed it did pay,
money for cars which it would not have paid, even though in the outcome if suffered no loss. There is force in this suggestion, as
was recognised by the Court of Appeal itself (see 64 Cr App R 29 at 32). But the Court of Appeal was concerned with the
question whether the conviction could stand on the basis of the summing up of the trial judge; and their Lordships are now
concerned with the correctness of the reasoning of the Court of Appeal on that question (at 31).
Lastly, it is suggested that, on the rationalisation which the authors prefer, the case was not about recklessness, and did not
decide that anything less than intention in the strict sense would suffice for conspiracy to defraud. Their Lordships are however
reluctant to allow this part of the law to become enmeshed in a distinction, sometimes artificially drawn, between intention and
recklessness. The question whether particular facts reveal a conspiracy to defraud depends 671 upon what the conspirators have
dishonestly agreed to do, and in particular whether they have agreed to practise a fraud on somebody. For this purpose it is
enough for example that, as in R v Allsop and in the present case, the conspirators have dishonestly agreed to bring about a state
of affairs which they realise will or may deceive the victim into so acting, or failing to act, that he will suffer economic loss or his
economic interests will be put at risk. It is however important in such a case, as the Court of Appeal stressed in Allsops case, to
distinguish a conspirators intention (or immediate purpose) dishonestly to bring about such a state of affairs from his motive (or
underlying purpose). The latter may be benign to the extent that he does not wish the victim or potential victim to suffer harm;
but the mere fact that it is benign will not of itself prevent the agreement from constituting a conspiracy to defraud. Of course, if
the conspirators were not acting dishonestly, there will have been no conspiracy to defraud; and in any event their benign purpose
(if it be such) is a matter which, if they prove to be guilty, can be taken into account at the stage of sentence.
In forming this view of the matter, their Lordships draw comfort from the fact that R v Allsop has been accepted as good
authority by the Supreme Court of Canada in R v Olan [1978] 2 SCR 1175 at 1182 per Dickson J delivering the judgment of the
court, in a passage subsequently followed by the Supreme Court of Canada in Vezina v R, Ct v R [1986] 1 SCR 2 at 2223 per
Lamer J likewise delivering the judgment of the court.
For these reasons their Lordships, like the Court of Appeal, are satisfied that there was no misdirection by the judge in the
present case. Their Lordships will humbly advise Her Majesty that this appeal should be dismissed.

Appeal dismissed.

Solicitors: Charles Russell; Macfarlanes.

Mary Rose Plummer Barrister.

672
[1991] 4 All ER 673

R v Le Brun
CRIMINAL; Criminal Law
COURT OF APPEAL, CRIMINAL DIVISION
LORD LANE CJ, AULD AND JUDGE JJ
19 JULY 1991

Criminal law Homicide Causation Cause of death Manslaughter Actus reus and mens rea not coinciding in point of
time Defendant knocking victim to ground during course of argument Defendant attempting to drag unconscious victim from
scene Victims head hitting pavement causing fatal fracture to skull Whether defendant guilty of manslaughter.

After spending the evening at the house of some friends who lived nearby the appellant and his wife left at about 2 am to walk
home. While they were walking home they got into a heated argument in the course of which the appellant hit his wife on the
jaw knocking her down unconscious. The appellant attempted to lift or drag the body of his unconscious wife away from the
scene but she slipped from his grasp and her head hit the pavement causing a fracture to the skull from which she died. The
appellant was charged with murder. At his trial the judge directed the jury that they could convict the appellant of murder or
manslaughter (depending on the intention with which he had previously assaulted the victim) if they were sure that, having
committed the assault with no serious injury resulting, the appellant had accidentally dropped the victim causing her death whilst
either attempting to move her to her home against her wishes, including any wishes she may have expressed prior to the previous
assault, and/or attempting to dispose of her body or otherwise cover up the previous assault. The appellant was convicted of
manslaughter. He appealed on the ground that the judge had misdirected the jury.

Held Where the unlawful application of force and the eventual act causing death were parts of the same sequence of events
albeit the mens rea was contained in the initial unlawful assault while the actus reus was the eventual act causing death, the fact
that there was an appreciable interval of time between the two acts did not serve to exonerate the defendant from liability for
murder or manslaughter (depending on whether the initial unlawful blow was intended to cause serious harm to the victim), since
the act which caused death and the necessary mental state did not have to coincide in point of time. It followed that the judges
direction was satisfactory in so far as it related to manslaughter. The appeal would therefore be dismissed (see p 678 h to p 679 a
and p 681 h, post).
R v Church [1965] 2 All ER 72 applied.
Dictum of Lord Reid in Thabo Meli v R [1954] 1 All ER 373 at 374 considered.

Notes
For causation in offences of homicide, see 11(1) Halsburys Laws (4th edn reissue) para 430, for killing by an unlawful act, see
ibid para 444, and for cases on the subject, see 15 Digest (Reissue) 11141117, 11361140, 93559392, 96099656.

Cases referred to in judgment

R v Church [1965] 2 All ER 72, [1966] 1 QB 59, [1965] 2 WLR 1220, CCA.
R v Moore and Dorn [1975] Crim LR 229, CA.
Thabo Meli v R [1954] 1 All ER 373, [1954] 1 WLR 228, PC.
673

Appeal against conviction

John Le Brun appealed with the leave of the single judge against his conviction on 31 March 1990 in the Crown Court at
Plymouth before Hutchison J and a jury of manslaughter for which he was sentenced to four years imprisonment. The facts are
set out in the judgment of the court.

Christopher Wilson-Smith QC and Andrew Spink for the appellant.

Rosina Hare QC and Nigel Seed for the Crown.

19 July 1991. The following judgment was delivered.

LORD LANE CJ. On 31 March 1990 in the Crown Court at Plymouth before Hutchison J and a jury the appellant, John Le
Brun, was convicted on a majority verdict of manslaughter. He was found not guilty of murder, with which he had originally
been charged. He was sentenced to four years imprisonment. He now appeals against conviction by leave of the single judge.
The facts giving rise to the charge were these. In September 1989 the appellant, who was then serving in the Royal Navy,
was living at an address in Plymouth with his wife, who was the victim in the present case. They went out for the evening to
some friends, the Cartwrights, on 23 September 1989. They left the house of the friends in the early hours at about 2 am. They
did not have very far to go to their own home. They had been drinking. They were both described as merry, but neither, it was
said, was drunk.
It was only two or three minutes walk to get to their own home. But during that short journey it is quite plain that a heated
argument developed between the two of them. To come to the end of the story, after a short interval, which was really only
sufficient for the friends whose house they had visited to have tidied up the house, taken the dog for a walk and prepared for bed,
the appellant returned to the Cartwrights, banged on the door and shouted, Its Joannie shes collapsed. Theres blood
everywhere. Get an ambulance.
In fact the wife (as I shall call her now) was lying near the top of some steps leading from the pathway to their home. She
had sustained two wounds to the back of her head: a fracture to the back of the skull and a severe injury to her chin, which had
produced what might be described as a star-shaped wound. That wound had broken the jaw and caused bleeding into the joints
on each side. She had sustained also a bruise on the outer edge of the lip on the left, a fracture to both wings of the hyoid bone at
the top of the neck. As can be seen from the photographs, there was a good deal of blood at the scene anda matter of some
importancesome hair which had plainly been pulled by the roots out of her scalp was lying at the scene.
The cause of death was bruising to the brain, which in its turn had been caused by the fracture to the back of the skull.
There was abundant evidence from the neighbours of the argument which had taken place between these two. For example
Mrs Luke, whose house overlooked the area where the incident took place, heard a man sounding very angry and aggressive,
plainly wanting a woman (the wife in this case) to go into the house. Indeed it is plain from her evidence and from the evidence
of other eye witnesses or other witnesses who heard what was going on that one reason for the altercation between these two was
the womans wish not to go into the house and the mans wish that she should.
Mrs Luke saw two people arguing. Eventually she heard a thump and a moan and saw the woman kneeling against the
metal railing and the man take hold of 674 her with a hand on her head. She next saw the woman lying on the ground, the man
telling her to get up and then pulling her by the arms or shoulders towards the road. It then seemed to her that he let go of her.
So she fell and her head hit the ground and that thump could be heard.
Mr Hislop, whose evidence is referred to by the judge in his summing up, said that the man was shouting, Get on home,
and the woman was saying, Get off me. They were saying that sort of thing repeatedly and there was a lot of swearing, he said,
from both of them. He said that he went to the window and saw a man and a woman struggling in the middle of the road, pulling
and pushing at each other. He tried to pull her in the direction which it emerged was the direction of the appellants house and
she resisted.
Further evidence was given by a Mrs Bradford,whose evidence had certain unsatisfactory features about it.
There was medical evidence from a pathologist and also an expert in dental and facial injuries. The effect of that evidence
was that the injury to the back of the skull would have to have been caused by the body falling at least from waist height. The
importance of that evidence was that there was one witness who had said that the head had been lifted an inch or two from the
ground and let fall. On the pathological evidence it seems that that would not have been sufficient to cause the fracture to the
back of the skull which in its turn was responsible for the death.
The injury to the chin, it was said, was probably caused by the deceased falling onto or receiving a blow from a blunt spiked
object with considerable force. An intensive search was made of the area, but nothing was found in the shape either of a weapon
or of an extrusion or excrescence from the the ground which could have been responsible for that injury. The source of that
particular severe injury remains a mystery, although it is plain that one way or another it must have been caused by the appellant.
When the police arrived at the scene they found the appellant in a hysterical state trying to revive his wife. He was arrested.
He continued to struggle on his way to the police station, shouting that he wanted to see his wife. He said that she had slipped on
the steps and hit her head. He had not touched her. When interviewed he declined to answer any questions.
He gave evidence at the trial. He said the two of them had been happy when they left the house of the Cartwrights, but an
argument which became heated developed as they made their way towards home. He had asked his wife for the house keys,
which she had. She was standing by the railings at the steps. She would not give him the keys. He tried to persuade her. He
took hold of her arm, whereupon she shouted, Get off me, as one of the witnesses had heard. He started walking back to the
house away from her, and all of a sudden he heard a scream, a thud behind him, he turned round and saw the deceased on the
ground. He told her to get up. She seemed to be unconscious. He described how he had tried to lift her, but she had slipped from
his hold and had fallen. Eventually he held her upright against himself, with her legs trailing along the ground, and tried to drag
her backwards, but she slipped through his arms so that her back and then her head hit the roadway. He than realised she was
seriously hurt and went for help. He never hit her, he said. He did not know how she had sustained her injuries. He had tried to
revive her and then all he had wanted to do was to get her home.
Those are the facts in prcis which lay behind this case.
The first ground of appeal advanced by Mr Wilson-Smith QC before this court is that 675 the judge should not have allowed
the jury to consider the possibility that the blow to the chin which we have described, which was undoubtedly heavy but not life-
threatening, caused the wife to fall and there and then her skull to be fractured.
We disagree with that submission. It was a submission made to the judge that he should withdraw that aspect of the case
from the jury. The pathological evidence was on this point not unanimous. A Dr Anscombe regarded that as a viable possibility,
namely a blow to the chin caused the immediate fall and the immediate fracture of the skull. Dr Crewe on the other hand did not
consider that to be a viable possibility.
In the view of this court it was not for the judge to decide between them. In fact the judge made his view of the matter quite
plain to the jury and made it plain in a sense that was favourable to the appellant, because this is what he said:

If it had started with his knocking her down, are you sure that it was as a result of that that then and there she sustained
the fatal injury? I suggest you would find it difficult to be sure of that, given that there is evidence not only from the
defendant but from Mrs Bradford that on at least one subsequent occasion Mrs Le Bruns head was dropped from waist
height and the evidence of the doctors that that could have caused the fractured skull.

There the judge is making it plain what his view of that particular issue was.
In any event that submission was not the main thrust of Mr Wilson-Smiths argument. The main thrust of his argument is to
be found in ground 3 of the notice of appeal, which I will now read:

The learned judge erred in law in directing the jury that they could convict the appellant of murder or manslaughter
(depending on the intention with which he had previously assaulted the victim) if they were sure that, having committed
the assault with no serious injury resulting, the appellant had accidentally dropped the victim causing her death whilst
either: (a) attempting to move her to her home against her wishes, including any wishes she may have expressed prior to
the previous assault, and/or (b) attempting to dispose of her body or otherwise cover up the previous assault.

Problems of causation and remoteness of damage are never easy of solution. We have had helpful arguments from both
counsel on this point, the point in the present case being, to put it in summary before coming to deal with it in more detail, that
the intention of the appellant to harm his wife one way or another may have been separated by a period of time from the act
which in fact caused the death, namely the fact of her falling to the ground and fracturing her skull. That second incident may
have taken place without any guilty mind on the part of the appellant.
The learned editors of Smith and Hogan Criminal Law (6th edn, 1988) p 320 say:

An intervening act by the original actor will not break the chain of causation so as to excuse him, where the
intervening act is part of the same transaction; but it is otherwise if the act which causes the actus reus is part of a
completely different transaction. For example, D, having wounded P, visits him in hospital and accidentally infects him
with smallpox of which he dies.

The problem in the instant case can be expressed in a number of different ways, of which causation is one. Causation on the
facts as the jury in this case must have found themI say at the best from the point of view of the appellantis in one sense
clear. Death was caused by the victims head hitting the ground as she was 676 being dragged away by the appellant. The only
remoteness was that between the initial unlawful blow and the later moment when the skull was fractured causing death.
The question can be perhaps framed in this way. There was here an initial unlawful blow to the chin delivered by the
appellant. That, again on what must have been the jurys finding, was not delivered with the intention of doing really serious
harm to the wife. The guilty intent accompanying that blow was sufficient to have rendered the appellant guilty of manslaughter,
but not murder, had it caused death. But it did not cause death. What caused death was the later impact when the wifes head hit
the pavement. At the moment of impact the appellants intention was to remove her, probably unconscious, body to avoid
detection. To that extent the impact may have been pro tanto accidental. May the earlier guilty intent be joined with the later
non-guilty blow which caused death to produce in the conglomerate a proper verdict of manslaughter?
It has usually been in the context of murder that the problem has arisen in the previous decisions. We have had our attention
directed to a Privy Council case, Thabo Meli v R [1954] 1 All ER 373, [1954] 1 WLR 228. It is to be observed that two members
of the Judicial Committee on that occasion were Lord Goddard CJ and Lord Reid. The facts of the case were these. The
appellants, all in accordance with their preconceived plan, took a man to a hut, gave him beer so that he was partially intoxicated
and then struck him over the head. They thought he was dead. They took what they thought was his lifeless body, rolled it over a
cliff and then dressed up the scene as though the whole affair was an accident. In fact the man was not dead. It was established
from medical evidence that the final cause of his death was exposure. He had been left at the bottom of the cliff over which he
had been rolled.
 At their trial for murder the appellants contended that the two acts were separate acts and that, while the first act was
accompanied by a guilty mind, it was not the cause of death. The second act, while it was the cause of death, was not
accompanied by the guilty mind. Therefore they were not guilty of murder, a similar situation to that which exists in the present
case.
Lord Reid delivering the judgment of the Board said ([1954] 1 All ER 373 at 374, [1954] 1 WLR 228 at 230):

It appears to their Lordships impossible to divide up what was really one series of acts in this way. There is no doubt
that the accused set out to do all these acts in order to achieve their plan, and as parts of their plan; and it is much too
refined a ground of judgment to say that, because they were under a misapprehension at one stage and thought that their
guilty purpose had been achieved before, in fact, it was achieved, therefore they are to escape the penalties of the law.

That decision of course is not binding upon us. It is of very persuasive authority and it was adopted by another division of this
court in R v Moore and Dorn [1975] Crim LR 229.
However, it will be observed that the present case is different from the facts of those two cases in that death here was not the
result of a preconceived plan which went wrong, as was the case in those two decisions which we have cited. Here the death,
again assuming the jurys finding to be such as it must have been, was the result of an initial unlawful blow, not intended to cause
serious harm, in its turn causing the appellant to take steps possibly to evade the consequences of his unlawful act. During the
taking of those steps he commits the actus reus but without the mens rea necessary for murder or manslaughter. Therefore the
mens 677 rea is contained in the initial unlawful assault, but the actus reus is the eventual dropping of the head on the ground.
Normally the actus reus and the mens rea coincide in point of time. What is the situation when they do not? Is it
permissible, as the Crown contends here, to combine them to produce a conviction for manslaughter?
The answer is perhaps to be found in the next case to which we were referred, and that was R v Church [1965] 2 All ER 72,
[1966] 1 QB 59. In that case the defendant was charged with the murder of a woman whose body was found in a river. The
cause of death was drowning. The defendant had it seemed attacked the woman and rendered her semi-conscious. He thought
she was dead and in his panic he threw her into the river. He was acquitted of murder but convicted of manslaughter. Edmund
Davies J, giving the judgment of the court, said ([1965] 2 All ER 72 at 76, [1966] 1 QB 59 at 70):

the conclusion of this court is that an unlawful act causing the death of another cannot, simply because it is an
unlawful act, render a manslaughter verdict inevitable. For such a verdict inexorably to follow, the unlawful act must be
such as all sober and reasonable people would inevitably recognise must subject the other person to, at least, the risk of
some harm resulting therefrom, albeit not serious harm In the light of Thabo Meliv. R. ([1954] 1 All ER 373, [1954] 1
WLR 228), it is conceded on behalf of the appellant that, on the murder charge, the trial judge was perfectly entitled to
direct the jury, as he did: Unless you find that something happened in the course of this evening between the infliction of
the injuries and the decision to throw the body into the water, you may undoubtedly treat the whole course of conduct of
the [appellant] as one. For some reason, however, which is not clear to this court, counsel for the appellant denies that
such an approach is possible when one is considering a charge of manslaughter. We fail to see why. We adopt as sound
DR. GLANVILLE WILLIAMS view in [Criminal Law: The General Part (2nd edn, 1961) p 174] that, If a killing by the
first act would have been manslaughter, a later destruction of the supposed corpse should also be manslaughter. Had Mrs.
Nott [the victim] died of her initial injuries, a manslaughter verdict might quite conceivably have been returned on the basis
that the appellant inflicted them under the influence of provocation or that the jury were not convinced that they were
inflicted with murderous intent. All that was lacking in the direction given in this was that, when the judge turned to
consider manslaughter, he did not again tell the jury that they were entitled (if they thought fit) to regard the conduct of the
appellant in relation to Mrs. Nott as constituting throughout a series of acts which culminated in her death, and that, if that
was how they regarded the appellants behaviour, it mattered not whether he believed her to be alive or dead when he threw
her in the river.

It seems to us that where the unlawful application of force and the eventual act causing death are parts of the same sequence
of events, the same transaction, the fact that there is an appreciable interval of time between the two does not serve to exonerate
the defendant from liability. That is certainly so where the appellants subsequent actions which caused death, after the initial
unlawful blow, are designed to conceal his commission of the original unlawful assault.
It would be possible to express the problem as one of causation. The original unlawful blow to the chin was a causa sine qua
non of the later actus reus. It was the opening event in a series which was to culminate in death: the first link in the chain of
causation, to use another metaphor. It cannot be said that the actions of 678 the appellant in dragging the victim away with the
intention of evading liability broke the chain which linked the initial blow with the death.
In short, in circumstances such as the present, which is the only concern of this court, the act which causes death and the
necessary mental state to constitute manslaughter need not coincide in point of time.
We now turn to the summing up given by the judge to the jury in order to see whether the judge, in the way he put the matter
to the jury, fell within those principles which we have endeavoured to state. The judge embarked upon this problemit is
necessary to read a considerable portion of the summing up in order to make it clear the points made by the appellant on the one
hand and the Crown on the otherand said:

Well, the first matter you must determine is this. Have the Crown proved that the defendant unlawfully assaulted his
wife, which in the context of this case means deliberate use of unlawful violence upon her. He has told you that he had
nothing to do with the events which led to her collapse and that everything he did thereafter was done in his anxiety to get
her to the comfort of their home. Members of the jury, if that is true then he is guilty of no offence, accordingly you must
be sure that his account of her collapse is untrue; if you are not sure it is untrue then you must acquit him, but if you are
sure that he assaulted her the next thing to ask yourselves is whether you are sure that what he did to her in the course of
that assault was the cause of her death. If what he did was the cause of her death he would be guilty of manslaughter at
least no doubt you will be asking yourselves what I mean when I talk about the assault by him being the cause of her
death. That is where the problems arise in this case. I will try to help you in that supposing the victim of an unlawful
assault, say a deliberate punch in the jaw, merely falls to the ground unconscious but not seriously hurt or harmed and in
falling does himself no further harm, suppose the attacker in a panic may be fearful of detection, tries to push the victim out
of sight and in so doing inadvertently lets him fall to the ground and he hits his head and fatally fractures his skull. Is he
the cause of death? The answer is Yes and he will be guilty of murder or manslaughter according to the intention he had
when he delivered the initial blow which made the victim fall down. In a case such as I have just put of a simple punch to
the jaw, the verdict would be one of not guilty of murder but guilty of manslaughter because the intent could hardly be said
to cause really serious harm. Such a case of trying to get the victim out of sight or in some other way furthering the
original crime or avoiding detection is contrasted with the quite different case with a man, after his initial attack on the
victim is making genuine efforts in an attempt to help the victim if when doing such a well-intentioned act the
defendant inadvertently causes a fatal injury he would not be guilty of murder or manslaughter.

Then he put the matter more in prcis as follows:

 If you are sure that it has been proved that the defendant unlawfully attacked his wife and whatever he did to her
caused her to fall and sustain in the fall fatal brain damage then he is guilty of murder or manslaughter depending on the
intent with which he assaulted her. If you are sure that it has been proved that the defendant unlawfully attacked his wife
and that it was whatever he did to her that rendered her unconscious or helpless even though that did not cause fatal brain
damage he would still be guilty if the 679 fatal brain damage [resulted] from his dropping her or dropping her head while
trying to manoeuvre her up the steps and towards the house, if he was doing that because he was determined to make her
come home even though she had refused to do so, or because having injured her he was in panic and wanted to conceal
what he had done and to avoid detection and not because he was trying to assist her. [I interpolate that at this stage the text
becomes a little corrupt, because the shorthand writer in the transcript has got the punctuation wrong. I will read it as it
should be read:] In such a case he would be guilty of murder if the initial attack was with the intention of causing really
serious harm or, if you are not sure that was his intent, of manslaughter. But if the fatal injury happened in the course of
well-intentioned efforts to help her he would not be guilty of murder or manslaughter.

Finally, in answer to a question from the jury, the judge said:

if the fatal injury happened in the course of, and we come to the phrase again, well-intentioned efforts to help her,
he would be guilty neither of murder nor of manslaughter and I hope I have said enough to show you the distinction that I
am drawing between as it were an extension or a furtherance or a continuation of the unlawful conduct and a different tack
where whatever he has done to her before he is trying his best to help or comfort her even if in a misguided way, even in a
way in which other people might think it was foolish to act.

The complaint made by Mr Wilson-Smith is primarily directed at the portion of that passage which we have read, namely
the passage which runs: if he was doing that because he was determined to make her come home even though she had refused to
do so
The argument advanced on behalf of the appellant is this. There has to be shown by the Crown in order to succeed a
continuing transaction, or an unbroken chain of causation between the act which proved the mens rea and the final incident which
resulted in death before it can be said that there is a sufficient connection between the mens rea and the actus reus. The mere fact
that this man attempts to get his wife home when she is unconscious, it is argued, coupled with her earlier unwillingness to go
home, is not enough to show a continuing transaction of an unbroken chain as has to be shown.
In every case, and this is no exception, the summing up has to be read against the background of fact which lies behind the
whole of the case. Part of the background is, as we have already indicated when trying to set out the facts of the case, that the
dispute between the two was certainly in part, and probably very largely, about whether she was going to go home or not. If one
looks where the judge is dealing with Mrs Lukes evidence, this is what he said:

She said: The man was swearing and wanted the woman to get in the house, he sounded very angry and she was
saying: Get off you fucking bastard. She said she had heard domestic arguments from time to time but this was
different. She said the woman seemed scared and wanted the man to get away and the argument was very heated and very
aggressive and she spoke of hearing a womans footsteps hurrying along.

Again Mr Hislop, as already cited:

the man was shouting, Get on home. The woman was saying, Get off me. They were saying that sort of thing
repeatedly and there was a lot of swearing from both of them.
680

The second matter which has to be borne in mind when viewing a summing up is that it must be read as a whole and not
merely one passage taken out of its context. If one reads the whole of the passage to which attention has been primarily directed,
it runs as follows:

if he was doing that because he was determined to make her come home even though she had refused to do so, or
because having injured her he was in panic and wanted to conceal what he had done and to avoid detection and not because
he was trying to assist her

The judge was drawing a sharp distinction between actions by the appellant which were designed to help his wife and actions
which were not so designed: on the one hand that would be a way in which the prosecution could establish the connection if he
was not trying to assist his wife; on the other hand if he was trying to assist his wife, the chain of causation would have been
broken and the nexus between the two halves of the prosecution case would not exist.
That is emphasised if one turns to another passage altogether later on in the summing up. There the judge said:

May it be true that having attacked her his attitude changed and all that followed was done with good intentions, he
feeling that what he was doing was appropriate to get her to the comfort of her own home, or are you sure that what he did
was not well intentioned but a product of his anger and impatience, his continued determination to get her home or his fear
of discovery? If you are sure of that, he would be guilty of murder or manslaughter depending upon the intention with
which the initial attack was made. If you conclude that you may be sure that he deliberately inflicted the chin wound and
you were impressed with some of Mr Wilson-Smiths submissions on that part of the case, I suggest you will readily
conclude that you cannot be sure that he had the intent necessary for murder when he carried out the initial attack if that is
what he did. If that was your view then if you conclude that he was not well intentioned in what he did subsequently of
trying to get her home for other purposes or was trying to conceal what he had done or escape detection, he would be
guilty, not of murder but of manslaughter.

We say, in order to provide completeness to the argument, that the jury came back after having been in retirement for a short
time and asked the judge to assist them again on this somewhat difficult point of the chain of causation and the nexus between the
original assault and the eventual fracture of the skull. What he did there was to repeat what he had earlier said which we have
already read.
Having said that, we conclude that the direction of the judge taken as a whole was satisfactory. It was satisfactory in so far,
and only in so far, as the directions related to manslaughter. In that respect, in our judgment, they comply with the view of the
law which we have endeavoured to set out by reference to the authorities. In short the criticisms of the judges treatment of
submissions and the criticisms of the summing up are not justified. In our judgment accordingly the appeal fails and must be
dismissed.

Appeal dismissed.

Solicitors: Registrar of Criminal Appeals; Crown Prosecution Service, Plymouth.

 N P Metcalfe Esq Barrister.
681
[1991] 4 All ER 682

Motala and others v Attorney General

COMMONWEALTH; Commonwealth Countries

HOUSE OF LORDS
LORD BRIDGE OF HARWICH, LORD ACKNER, LORD OLIVER OF AYLMERTON, LORD JAUNCEY OF TULLICHETTLE AND LORD LOWRY
2, 3 OCTOBER, 7 NOVEMBER 1991

Citizenship United Kingdom citizenship Entitlement Citizen of United Kingdom and Colonies by descent Citizen of United
Kingdom and Colonies resident in Northern Rhodesia before independence of Zambia Whether also British protected person
Whether citizen of United Kingdom and Colonies by descent retaining citizenship of United Kingdom and Colonies after
independence of Zambia British Nationality Act 1948, ss 5(1), 32(1) Zambia Independence Act 1964, s 3(3) British
Protectorates, Protected States and Protected Persons Order in Council 1949, s 9(1)(a) Zambia Independence Order 1964, Sch
2, s 3(1).

The two respondents were born in the British protectorate of Northern Rhodesia before it became the independent state of
Zambia on 24 October 1964. They were citizens of the United Kingdom and Colonies by descent at birth under s 5(1) a of the
British Nationality Act 1948 because their father, who had been born in India, had already become a citizen of the United
Kingdom and Colonies by registration in Northern Rhodesia. In 1979 the respondents applied for but were refused United
Kingdom passports on the ground that they were not citizens of the United Kingdom and Colonies because their parents
marriage was invalid for want of registration and they were therefore illegitimate. In 1983 the respondents applied for a
declaration that they were legitimate and that they were citizens of the United Kingdom and Colonies by descent. The judge
granted the declaration. The Attorney General appealed, contending that although the respondents had been entitled to
citizenship of the United Kingdom and Colonies by descent they were also British protected persons within s 32(1) b of the 1948
Act and therefore by virtue of s 3(3) c of the Zambia Independence Act 1964 and s 3(1) d of the Constitution of Zambia, as set out
in Sch 2 to the Zambia Independence Order 1964, they lost their status as citizens of the United Kingdom and Colonies by
descent on 23 October 1964, the day before Zambia became independent, and became citizens of Zambia on Independence Day,
24 October 1964. The Court of Appeal dismissed the appeal on the ground that a person could not be both a citizen of the United
Kingdom and Colonies and a British protected person at one and the same time under the 1948 Act and accordingly the
respondents were not British protected persons immediately before Zambian Independence Day and, in the absence of express
provision in the 1964 Act, did not become Zambian citizens on that day but retained their status as citizens of the United
Kingdom and Colonies notwithstanding independence. The Attorney General appealed to the House of Lords.
________________________________________
a Section 5(1), so far as material, provided: Subject to the provisions of this section, a person born after the commencement of this Act shall
be a citizen of the United Kingdom and Colonies by descent if his father is a citizen of the United Kingdom and Colonies at the time of his
birth .
b Section 32(1), so far as material is set out at p 687 f, post.
c Section 3(3) is set out at p 685 c, post.
d Section 3(1) is set out at p 685 e, post.

Held Although the status of a British protected person was different from that of a citizen of the United Kingdom and Colonies
the one status was not 682 inconsistent with the other and therefore a British protected person did not cease to be such on
becoming a British subject. The respondents were from their birth in Northern Rhodesia until Zambia became independent both
citizens of the United Kingdom and Colonies by descent under s 5(1) of the 1948 Act and British protected persons by virtue of s
32(1) of that Act, read with s 9(1) e of the British Protectorates, Protected States and Protected Persons Order in Council 1949,
and therefore by virtue of s 3(3) of the 1964 Act they ceased to be citizens of the United Kingdom and Colonies and became
citizens of Zambia on 24 October 1964 under s 3(1) of the Constitution of Zambia. The appeal would therefore be allowed (see p
688 b d e, p 689 g h and p 690 g to p 691 b, post).
________________________________________
e Section 9(1), so far as material, is set out at p 687 g, post.

Decision of the Court of Appeal [1991] 2 All ER 312 reversed.

Notes
For citizenship by descent and British protected persons, see Supplement to 4 Halsburys Laws (4th edn) paras 947B.9, 947H.
For the British Nationality Act 1948, ss 5, 32, see 31 Halsburys Statutes (4th edn) 14, 26.
As from 1 January 1983, ss 5 and 32 of the 1948 Act were repealed by the British Nationality Act 1981, s 52(8) and Sch 9,
and fresh provision in place thereof was made by ss 2, 14 and 50 of that Act.
As from 1 January 1983 s 3 of the Zambia Independence Act 1964 was repealed by s 52(8) of and Sch 9 to the 1981 Act.

Cases referred to in opinions

A-G v Clarkson [1900] 1 QB 156, CA.
Cape Brandy Syndicate v IRC [1921] 2 KB 403, CA.
Ormond Investment Co Ltd v Betts [1928] AC 143, [1928] All ER Rep 709, HL.

Appeal
The Attorney General appealed with leave of the Court of Appeal from the decision of that court (Lord Donaldson MR, Beldam
and Nolan LJJ) ([1991] 2 All ER 312) on 30 January 1991 dismissing the Attorney Generals appeal from that part of the
judgment and order of Sir Stephen Brown P ([1990] 2 FLR 261) dated 17 November 1989 declaring that the first and second
plaintiffs, Safiya Motala and Faruq Motala (the respondents), remained citizens of the United Kingdom and Colonies by descent
after 24 October 1964 for the purposes of the British Nationality Act 1984 and became British overseas citizens on 1 January
1983 and now had that status for the purposes of the British Nationality Act 1981. The facts are set out in the opinion of Lord
Bridge.

E James Holman QC and Andrew Moylan for the Attorney General.

Andrew Collins QC and S P Dhama for the respondents.

Their Lordships took time for consideration.

683

7 November 1991. The following opinions were delivered.

LORD BRIDGE OF HARWICH. My Lords, the issue in this appeal is whether the respondents, Safiya and Faruq Motala, are,
as the courts below have held, British overseas citizens for the purposes of the British Nationality Act 1981 or, as the Attorney
General contends, citizens of Zambia. The resolution of that issue depends on their status at birth and the effect upon that status
of the legislation which brought into existence the independent state of Zambia. There is now no dispute that at birth Safiya and
Faruq became citizens of the United Kingdom and Colonies for the purposes of the British Nationality Act 1948. The central
question is whether they also became, for the purposes of the 1948 Act, British protected persons. If they did, then, subject to a
subsidiary argument, the effect of the relevant independence legislation was that, on Zambia becoming independent, they became
citizens of Zambia and ceased to be citizens of the United Kingdom and Colonies. If they did not, it is common ground that they
remained citizens of the United Kingdom and Colonies and consequentially became British overseas citizens under the Act of
1981. The central question in turn depends on whether or not it was possible under the 1948 Act for any person at the same time
to be both a citizen of the United Kingdom and Colonies and a British protected person. This is the primary and important
question of law which your Lordships have to determine.
Ismail and Ayshabibi Motala, the father and mother of the respondents, were both born in India. In 1950 they were both
living in Northern Rhodesia where they went through a ceremony of marriage (the 1950 marriage). In 1953 the father became a
citizen of the United Kingdom and Colonies by registration in Northern Rhodesia. Safiya was born in Northern Rhodesia on 2
December 1962. Faruq was born in Northern Rhodesia on 16 June 1964. Northern Rhodesia became the independent state of
Zambia on 24 October 1964. After independence the father and mother had three more children, Abubaker, Osman and Fatima,
born in Zambia in 1965, 1968 and 1973 respectively. On a date in 1968 after the birth of Osman the father and mother went
through a second ceremony of marriage (the 1968 marriage). Also in 1968 the mother became a citizen of the United Kingdom
and Colonies by registration.
In 1978 the mother came to live in England. She applied for a British passport for herself and the five children. It was
accepted by the Foreign and Commonwealth Office (the FCO) that the mother was entitled to a British passport as a citizen of the
United Kingdom and Colonies by registration. Of the five children, however, the FCO were only prepared to recognise Fatima as
a citizen of the United Kingdom and Colonies. This was because the FCO accepted the validity of the 1968 marriage but denied
that of the 1950 marriage. Citizenship of the United Kingdom and Colonies by descent was only acquired under s 5 of the 1948
Act by the legitimate child of a father who was a citizen of the United Kingdom and Colonies at the time of the childs birth. On
this ground the FCO denied the entitlement of the four older children to hold British passports. But in the case of Safiya and
Faruq they denied it on the additional ground that, even if they were citizens of the United Kingdom and Colonies at birth, they
lost that citizenship when Zambia became independent.
In due course proceedings were instituted by the Motala family, with the Attorney General as respondent, seeking
declarations that the four older children were citizens of the United Kingdom and Colonies before the coming into force of the
1981 Act and thereafter consequentially were British overseas citizens. The technical form of the proceedings need not concern
us. They came before Sir 684 Stephen Brown P in the Family Division, who resolved both issues in the Motalas favour and
made the declarations sought (see [1990] 2 FLR 261). The Attorney General did not challenge the judgment in so far as it held
that the 1950 marriage was valid and that all four children therefore acquired citizenship of the United Kingdom and Colonies at
birth by descent, but appealed in respect of Safiya and Faruq only on the ground that Sir Stephen Brown P had wrongly held that
they retained their citizenship of the United Kingdom and Colonies after Zambia became independent. The Court of Appeal
(Lord Donaldson MR, Beldam and Nolan LJJ) dismissed the appeal but gave leave to appeal to your Lordships House (see
[1991] 2 All ER 312). The Attorney General now appeals.
The Zambia Independence Act 1964 by s 3(3) provides:

Except as provided by section 4 of this Act, any person who immediately before the appointed day is a citizen of the
United Kingdom and Colonies shall on that day cease to be such a citizen if he becomes on that day a citizen of Zambia.

In the courts below it was contended that this provision did not apply to the respondents on the ground that they came within the
exception provided by s 4; but that contention was abandoned before your Lordships. The Constitution of Zambia, given effect
by the Zambia Independence Order 1964, SI 1964/1652, and therein set out as Sch 2, provides by s 3(1):

Every person who, having been born in the former protectorate of Northern Rhodesia, is on 23rd October 1964, a
British protected person shall become a citizen of Zambia on 24th October 1964.

It will be seen at once how the combined operation of these two provisions gives rise to the main issue which I have adumbrated
in the opening paragraph of this opinion. If Safiya and Faruq were British protected persons on 23 October 1964 they certainly
became citizens of Zambia on 24 October 1964, which was the appointed day. On the face of s 3(3) of the Act this appears,
subject to Mr Collins QCs subsidiary argument, which I will consider later, to lead to the consequence that they thereupon
ceased to be citizens of the United Kingdom and Colonies. Hence the critical question is whether from birth until 23 October
1964 they each had the dual status of citizen of the United Kingdom and Colonies and British protected person or whether, under
the 1948 Act, that was an impossibility.
Before addressing that question I must say at once that the courts below were denied the advantage which your Lordships
have enjoyed of being referred to J Mervyn Jones British Nationality Law and Practice (1st edn, 1947), which is a valuable
source of information with respect to the status of British protected persons at common law, or to the British Protected Persons
Order 1934, SR & O 1934/499, which shows how the status was treated in previous legislation. As an inevitable consequence the
Court of Appeal approached the issue which arose on the construction of the 1948 Act and the British Protectorates, Protected
States and Protected Persons Order in Council 1949, SI 1949/140, made under the 1948 Act, without reference to their proper
context. As will appear, when construed in the context of the pre-existing law, the 1948 and 1949 legislation wears a very
different aspect.
Mr Mervyn Joness book is a most useful starting point. It appears to have been the first comprehensive textbook on the
subject matter of its title. It carries a foreword by Mr W E Beckett, who was then the legal adviser to the Foreign Office. Apart
from giving the work his laudatory imprimatur, Mr Beckett points out that
685
 in the field of British Nationality law very few cases have ever gone to the courts at all, whereas a very large number
of problems have confronted the two Departments of State, the Home Office and the Foreign Office, and have been dealt
with administratively. Mr. Mervyn Jones has been able to see the papers of these two departments where cases of
interpretation have arisen. Not being an official, he has been entirely free to form his own judgment upon them, and, in
fully exercising this freedom, he has shown his own qualities as a scholar and as a lawyer.

This inspires confidence that the ensuing text accurately reflects both contemporary practice and accepted contemporary opinion
in matters of nationality and status.
The most significant passage from the text, for present purposes, appears where the author states (p 297):

It may often happen that a person may be, at one and the same time, both a British subject and a British protected
person. For instance, a number of British subjects also possess Palestinian citizenship. There are a large number of people
from India who are, at one and the same time, British subjects by virtue of their connection with British India, and British
protected persons by virtue of their connexion with some Indian state. It is a sort of domestic double nationality.

In many territories under British protection, eg the Indian native states, the several states in what is now Malaysia and the
protected states on the shores of the Persian Gulf, the question who was entitled to be regarded as a British protected person was
determined by the local law in the sense that whoever was recognised as a subject of a protected state was also recognised as a
British protected person. But, as Mr Mervyn Jones points out (at p 294), in the British protectorates, being

territories mainly in Africa where there is no native ruler the rules defining who can claim the status of a British
protected person, by virtue of their connection with protectorates, have to be laid down by the British Crown.

It was for this reason that the British Protected Persons Order 1934 was enacted. The territories to which the order applies are the
British protectorates, including Northern Rhodesia, and mandated areas set out in the schedule. The order recites:

And whereas certain persons who are regarded as belonging to those territories are afforded His Majestys
protection, and are known as British protected persons: And whereas it is expedient to define in relation to those territories
the persons who are so regarded as belonging thereto

The operative provisions of the order include the following:

2. The following persons shall be regarded as belonging to the territory:(a) any person born (whether before or after
the entry into force of this Order) within the territory who is not, at the time of his birth, a British subject, and who does
not, at the time of his birth, possess under the law of some other State the nationality of such State
4. A person who under this Order is regarded as belonging to the territory and who (a) becomes a British subject; or (b)
not being a married woman, minor, lunatic, or idiot, by some voluntary and formal act, acquires the nationality of a state in
which he is resident shall thereupon cease to be regarded as belonging to the territory.
686

These two articles are drafted in a way which confirms the proposition set out in the text of Mr Mervyn Joness book, that a
person might enjoy a form of dual nationality not only as a British protected person and a national of some foreign state, but also
as a British protected person and a British subject. Thus, by art 2(a), a person born in a British protectorate before the order came
into force who at birth was neither a British subject nor a foreign national belonged to the protectorate and acquired the status of
British protected person. But there is nothing in the order to indicate that if such a person had, again before the order came into
force, either become a British subject or acquired foreign nationality, he thereby lost his status as a British protected person.
Article 4 operates only in futuro, so that, after the order came into force, any person who belonged to the protectorate and who
voluntarily acquired the status of foreign national or British subject thereby relinquished his status as belonging to the
protectorate. Mr Collins contests this construction and submits that art 4(a) must be read as operating both prospectively and
retrospectively, so that a person born in the protectorate who became a British subject before the order came into force also
ceased to be a British protected person. But the language will not bear this construction. If the draftsman had intended the
meaning contended for, he need only have used the simple formula a person born within the territory who is not a British
subject to define one category of persons belonging to the territory. The policy underlying the more elaborate provisions of arts
2 and 4 is not, I think, difficult to understand. A person born in the protectorate who has acquired the additional status of British
subject or foreign national before the 1934 order is not to be deprived of his local nationality restrospectively. But after the
order is in force he will know that if he is to acquire a new status he must relinquish the old.
Turning to the 1948 Act one finds the following definitions in s 32(1):

Alien means a person who is not a British subject, a British protected person or a citizen of Eire British
protected person means a person who is a member of a class of persons declared by Order in Council made in relation to
any protectorate, protected state, mandated territory or trust territory to be for the purposes of this Act British protected
persons by virtue of their connection with that protectorate, state or territory

The British Protectorates, Protected States and Protected Persons Order in Council 1949 lists the territories, including Northern
Rhodesia, which are protectorates for the purposes of the Act, and provides by s 9(1):

Subject to the provisions of Section 13 of this Order, a person shall be a British protected person by virtue of his
connection with a protectorate (a) if he was born (whether before or after the date of this Order) in a protectorate

Section 13 makes provision enabling a person who is both a British protected person and a foreign national to renounce, if he
wishes, his status as a British protected person. If one reads the terms of s 9(1) of the 1949 Order in Council as incorporated in
the definition of a British protected person in the 1948 Act, as one must, it translates simply as British protected person means,
inter alia, a person born in a protectorate. This language is not qualified by any express provision to be found elsewhere in the
Act or in the Order in Council and unless there is ground for implying the qualifying words unless he is a citizen of the United
Kingdom and Colonies this must resolve the issue.
The Court of Appeal held that there must be such an implication. Beldam LJ, delivering the first judgment, said ([1991] 2
All ER 312 at 315):
687

The clear implication from the form of the Act is that the status of a British protected person is different from and
inconsistent with status as a citizen of the United Kingdom and Colonies, to which it adds nothing.
It is correct, of course, that the status of a British protected person is different from that of a citizen of the United Kingdom and
Colonies and it may be true that, in United Kingdom law, the one status adds nothing to the other, in the sense that a British
protected person enjoys no advantages denied to a citizen of the United Kingdom and Colonies. But I do not think it follows that
the one status is inconsistent with the other. Beldam LJ continued:

The Act was drafted against the background of the common law which traditionally regarded protected persons as
aliens who were in practice exempted from some of an aliens attendant disabilities. When for example the Aliens Order
1920, SI & O 1920/448, was amended in 1943, British protected persons were deemed not to be aliens for the purposes
of that order: see art 22(1A). Against the background of the common law it must have appeared to the draftsman of the
British Nationality Act 1948 unnecessary to state that a citizen of the United Kingdom and Colonies was not and could not
at the same time be a British protected person.

Here again it is correct that before the 1948 Act British protected persons were classified as aliens, albeit enjoying many of
the advantages of British subjects. When a British protected person became a British subject it followed, of course, that he
ceased to be an alien. But it did not follow that he also ceased to be a British protected person. The Court of Appeal could not
thus have misapprehended the common law position which preceded the 1948 Act if its attention had been directed to the
material to which I have referred which illustrates the true position.
The 1948 Act came into force on 1 January 1949. The British Protectorates, Protected States and Protected Persons Order in
Council 1949 and the Order in Council revoking the British Protected Persons Order 1934 were made on the same day, 28
January 1949. The draftsmen of the new legislation must have been perfectly familiar with the pre-existing law and, if it had
been intended that henceforth British protected persons could not at the same time be citizens of the United Kingdom and
Colonies and vice versa, it is inconceivable that this would not have been made clear in express terms, in the same way as it was
made clear in express terms that henceforth British protected persons would no longer be aliens.
Even if there was an ambiguity in the 1948 Act, there is available one further aid to its construction which was not brought
to the attention of the Court of Appeal. Your Lordships are indebted to Mr Collins, whose industrious research unearthed a
relevant provision in the Solomon Islands Act 1978, which he very properly brought to the attention of Mr Holman QC, who
naturally relies on it. It is s 4(1), which provides:

A person who immediately before Independence Day is a British protected person by virtue of his connection with the
Solomon Islands protectorate(a) shall cease to be a British protected person on that day if he then becomes a citizen of
Solomon Islands or is then a citizen of the United Kingdom and Colonies

This provision clearly assumes that prior to Independence Day there may be some Solomon Islanders who are both British
protected persons and citizens of the United Kingdom and Colonies. In the words of Lord Sterndale MR in Cape Brandy 688
Syndicate v IRC [1921] 2 KB 403 at 414, approved by your Lordships House in Ormond Investment Co Ltd v Betts [1928] AC
143 at 156, [1928] All ER Rep 709 at 715716:

I think it is clearly established in Attorney-General v. Clarkson ([1900] 1 QB 156) that subsequent legislation on the
same subject may be looked to in order to see what is the proper construction to be put upon an earlier Act where that
earlier Act is ambiguous. I quite agree that subsequent legislation, if it proceed upon an erroneous construction of previous
legislation, cannot alter that previous legislation; but if there be any ambiguity in the earlier legislation then the subsequent
legislation may fix the proper interpretation which is to be put upon the earlier.

Hence, if the 1948 Act were ambiguous on the point in question, s 4(1) of the Solomon Islands Act 1978 would resolve the
ambiguity.
Another factor which played an important part in the decision of the Court of Appeal was that, in the case of certain other
protectorates which obtained their independence both before and after Zambia, one finds in the Constitution that, in providing
what persons born in the protectorate are automatically to acquire citizenship of the new independent state, there is express
reference both to citizens of the United Kingdom and Colonies and to British protected persons. This is true of both the Malawi
Independence Order 1964, SI 1964/916, which preceded the Zambia Independence Order 1964, and the Botswana Independence
Order 1966, SI 1966/1171, which followed it. It is said with force that in these and other similar cases the draftsman of the Order
in Council must have assumed that it was necessary to make express reference to citizens of the United Kingdom and Colonies if
they were to be included, but if all persons born in the protectorate were and remained British protected persons, whether or not
they were also citizens of the United Kingdom and Colonies, the reference to citizens of the United Kingdom and Colonies was
surplusage. Hence, it is submitted, the omission of any express reference to citizens of the United Kingdom and Colonies in s
3(1) of the Zambia Constitution must have been intended to exclude them. I must confess that I find this difference in the
drafting of the different Constitutions very puzzling and I am not in the least surprised that the Court of Appeal gave to it the
weight which it did. But, having reached the conclusion that the plain words of the definition of British protected person in s
32(1) of the 1948 Act read with s 9(1) of the 1949 Order in Council mean just what they say and are not subject to any implied
limitation, I do not see how it is possible to give a more restricted meaning to the term British protected person in s 3(1) of the
Zambia Constitution simply on the ground that in some other Constitutions of protectorates granted independence the draftsman
has referred expressly to citizens of the United Kingdom and Colonies where it may have been unnecessary to do so.
For these reasons I conclude that Safiya and Faruq from their birth in Northern Rhodesia until Zambia became independent
were both citizens of the United Kingdom and Colonies by descent and British protected persons by birth and therefore became
citizens of Zambia on 24 October 1964. Did this deprive them of their citizenship of the United Kingdom and Colonies by the
operation of s 3(3) of the Zambia Independence Act 1964? Mr Collins submits that on the true construction of s 3 as a whole it
did not. Section 3 provides, so far as material:

(1) Subject to subsections (2) and (5) of this section, the British Nationality Acts 1948 to 1964 shall have effect on and
after the appointed day as if in section 1(3) of the British Nationality Act 1948 (Commonwealth countries having separate
citizenship) there were added at the end the words and 689 Zambia, and as if(a) in Schedule 1 to the British
Protectorates, Protected States and Protected Persons Order in Council 1949 the words Northern Rhodesia were omitted

(2) A person who, immediately before the appointed day, is for the purposes of those Acts and of the said Order in
Council of 1949 a British protected person by virtue of his connection with Northern Rhodesia shall not cease to be such a
British protected person for any of those purposes by reason of anything contained in the preceding provisions of this Act,
but shall so cease upon his becoming a citizen of Zambia.
(3) Except as provided by section 4 of this Act, any person who immediately before the appointed day is a citizen of the
United Kingdom and Colonies shall on that day cease to be such a citizen if he becomes on that day a citizen of Zambia

What I have earlier referred to as Mr Collinss subsidiary argument and what he himself described as his last ditch
argument, perhaps because it was not advanced in either court below, runs as follows. Section 3(2) operates to deprive a person
of his status as a British protected person however and whenever he becomes a citizen of Zambia. Thus Safiya and Faruq lost
their status as British protected persons when they became citizens of Zambia on the appointed day. But s 3(3) only operates to
deprive a person of his separate status as a citizen of the United Kingdom and Colonies if the Constitution contains a provision
whereby he becomes a citizen of Zambia on the appointed day by virtue of that separate status. I cannot accept this construction.
It requires that one should read into sub-s (3) some such words as by virtue of his citizenship of the United Kingdom and
Colonies and I can see no reason for making such an implication. The Zambia Independence Act 1964 preceded the Zambia
Independence Order 1964 and made provision, which was common to such statutes, that, however the new citizenship law was
drafted, which would depend on what classes of person the new state wished to admit immediately to its citizenship, those who
automatically became citizens of the new Commonwealth country, henceforth to be included in the list of countries in s 1(3) of
the British Nationality Act 1948 with their own separate citizenship laws, should automatically cease to be citizens of the United
Kingdom and Colonies. If there is no escape from the conclusion that Safiya and Faruq became citizens of Zambia on the
appointed day under s 3(1) of the Constitution, there is equally no escape from the conclusion that they thereby ceased to be
citizens of the United Kingdom and Colonies under s 3(3) of the 1964 Act.
I should perhaps add that it was made clear on behalf of the Attorney General that what he wished to establish was the point
of principle. So far as the respondents were concerned no difficulty was anticipated in their acquiring British citizenship.
I would allow the appeal and set aside the order of the Court of Appeal and the declarations made by Sir Stephen Brown P
relating to Safiya and Faruq.

LORD ACKNER. My Lords, I have had the advantage of reading in draft the speech of my noble and learned friend Lord
Bridge of Harwich. I agree with it and, for the reasons which he gives, I, too, would allow the appeal and make the order which
my noble and learned friend proposes.

LORD OLIVER OF AYLMERTON. My Lords, I have had the advantage of reading the speech prepared by my noble and
learned friend Lord Bridge of Harwich. I agree with it and for the reasons which he gives I, too, would allow the appeal.
690

LORD JAUNCEY OF TULLICHETTLE. My Lords, I have had the advantage of reading in draft the speech of my noble and
learned friend Lord Bridge of Harwich. I agree with it and for the reasons which he gives, I, too, would allow the appeal.

LORD LOWRY. My Lords, I have had the advantage of reading in draft the speech of my noble and learned friend Lord Bridge
of Harwich. I agree with it and, for the reasons which he gives, I, too, would allow the appeal and make the order which my
noble and learned friend proposes.

Appeal allowed.

Solicitors: Treasury Solicitor; Jakobi & Co agents for Livesey Scott, Preston.

Mary Rose Plummer Barrister.

[1991] 4 All ER 691

Westminster City Council v Wingrove and another

CRIMINAL; Criminal Procedure

QUEENS BENCH DIVISION

WATKINS LJ AND HUTCHISON J
23, 24 JULY 1990

Criminal law Costs Award out of central funds Interest Whether court having power to award interest on costs awarded
out of central funds in criminal cases Judgments Act 1838, ss 17, 18 Prosecution of Offences Act 1985, s 16.

The court has no jurisdiction to award interest when directing that the costs of an acquitted defendant or successful appellant in a
criminal case be paid out of central funds pursuant to s 16 a of the Prosecution of Offences Act 1985, since ss 17 b and 18c of the
Judgments Act 1838, which are the only statutory provisions under which the court may award interest on costs, apply only to
civil proceedings (see p 696 b d e g h and p 697 b c j to p 698 a, post).
________________________________________
a Section 16, so far as material, is set out at p 693 g to p 694 a, post
b Section 17 is set out at p 695 g, post
c Section 18, so far as material, is set out at p 695 h, post

Hunt v R M Douglas (Roofing) Ltd [1988] 3 All ER 823 considered.

Notes
For the award of defendants costs out of central funds in a criminal matter, see 11(2) Halsburys Laws (4th edn reissue) para
1527, and for cases on the subject, see 14(2) Digest (Reissue) 860861, 74507451.
For interest on costs, see 37 Halsburys Laws (4th edn) para 753, and for cases on the subject, see 37(3) Digest (Reissue)
326327, 49244927.
For interest on judgment debts, see 26 Halsburys Laws (4th edn) para 553, and for cases on the subject, see 30 Digest
(Reissue) 244247, 503539.
For the Judgments Act 1838, ss 17, 18, see 22 Halsburys Statutes (4th edn) 263, 264.
For the Prosecution of Offences Act 1985, s 16, see 12 Halsburys Statutes (4th edn) (1989 reissue) 948.
691

Cases referred to in judgments

A-G v Nethercote (1841) 11 Sim 529, 59 ER 958.
Hunt v R M Douglas (Roofing) Ltd [1988] 3 All ER 823, [1990] 1 AC 398, [1988] 3 WLR 975, HL.
K v K (divorce costs: interest) [1977] 1 All ER 576, [1977] Fam 39, [1977] 2 WLR 55, CA.
Legal Aid Board v Russell [1990] 3 All ER 18, [1990] 2 QB 607, [1990] 3 WLR 526, CA.

Application
Following the dismissal on 24 April 1989 of an appeal by way of a case stated by Mrs N F Negus, a metropolitan stipendiary
magistrate sitting at Bow Street Magistrates Court on 5 April 1988 in respect of her decision whereby, on a submission that there
was no case to answer, she dismissed informations preferred by Westminster City Council charging the respondents, Paul
Anthony Wingrove and Mark North, with certain offences under the Local Government Act 1963, the Divisional Court of the
Queens Bench Division (Stocker LJ and Saville J) ordered that the respondents costs be paid out of central funds. The costs
were taxed on 8 January 1990 in the sum of 2,61925, and on 27 February 1990 the respondents applied for an order that interest
be paid from 24 April 1989 on that sum. The application was referred to the Divisional Court by the Master of the Crown Office.
The court granted leave to the Lord Chancellors Department to intervene. The facts are set out in the judgment of Watkins LJ.

Charles Salter for the respondents.

Alison Foster for the Lord Chancellors Department.
The council were not represented.

24 July 1990. The following judgments were delivered.

WATKINS LJ. This is an application for payment of interest upon an award of costs out of central funds. It is made by the
respondents to an appeal in these circumstances. On 24 April 1989 before Stocker LJ and Saville J in this court the Westminster
City Council appealed against a decision of Mrs Negus, a metropolitan stipendiary magistrate. On 5 April 1988 she had before
her an information preferred by the city council against the respondents, Paul Anthony Wingrove and Mark North, which alleged
infringements by them of the London Government Act 1963 concerning the premises known as 24 Brewer Street, London W1.
Upon submissions of no case to answer, the learned magistrate dismissed the informations. The city council appealed to this
court against her decision and by case stated invited the court to answer certain questions.
During the hearing of that appeal it became apparent that the parties had no longer any desire for those questions to be
answered. Accordingly, the court had no alternative but to dismiss the appeal. That it did and affirmed the adjudication of the
magistrate. The court further ordered that the costs of the respondents be ascertained by the Master of the Crown Office and paid
to the respondents solicitors out of central funds pursuant to s 16 of the Prosecution of Offences Act 1985.
The master requested a taxing officer to tax the costs so ordered. That was done. The taxation was in the sum of 2,61925,
which included a sum of value added tax. A certificate to that effect was issued. A copy of the certificate was handed to the
solicitor for the respondents. His reaction to that taxation was to request that interest should be paid upon the sum so taxed. The
solicitors were informed that, if they were to pursue that request, they should do so formally and produce an affidavit to
accompany the application for an award of interest. 692An application was forthcoming. It was backed by an affidavit from Mr
Richard Barca, the solicitor for the respondents. In that affidavit he contended that the application was made on the authority of
the recent decision of the House of Lords in Hunt v R M Douglas (Roofing) Ltd [1988] 3 All ER 823, [1990] 1 AC 398. That case
decided, so Mr Barca stated, that costs should run at the judgment debt rate of 15% from the date of the order pursuant to which
the costs were taxed and not from the date of the taxation certificate. He stated that he could see no difference between an order
such was contemplated in Hunts case and the order which he was seeking in what are undoubtedly criminal proceedings in the
present case.
He further stated that not only was Hunts case an authority which assisted him, but in addition the city council, responding
to a request on their behalf, had paid interest upon that part of the costs ordered by this court which related to the interlocutory
proceedings, those costs being ordered to be paid inter partes and not out of central funds. The interest he calculated up to the
time of the making of the affidavit was an amount of approximately 325.
The master has referred the request that there be an order for the payment of interest upon the costs ordered to be paid out of
central funds to this court. It is right and proper that he should do so. A novel point has arisen. It is wholly appropriate and
proper that this court, and none other, should determine whether an order for costs should be accompanied by a further order for
the payment of interest.
Because of the wide implications of the possible decision of this court to accede to the application, the Lord Chancellors
Department applied to intervene in these proceedings. We granted the department permission to intervene and it has accordingly
been represented before us by Miss Foster. Mr Salter has appeared for the respondents. We have listened with very much interest
and gratitude to their respective submissions. We are of course not concerned in this application with the interest paid already by
the city council in respect of those costs relating to interlocutory matters paid by the city council directly to the solicitors, to the
respondents. I shall say nothing further for the moment of that payment save that I am surprised by it and that some further
reference will have to be made to it, having regard to the reliance placed upon it by Mr Salter in the course of his submissions.
The legislation concerning the power of this court to order costs in criminal proceedings is governed at the present time by s
16 of the Prosecution of Offences Act 1985 which, so far as relevant, states:

(5) Where(a) any proceedings in a criminal cause or matter are determined before a Divisional Court of the
Queens Bench Division the court may make a defendants costs order in favour of the accused. [I interpolate here that
a defendants costs order is an order for payment out of central funds.]
(6) A defendants costs order shall, subject to the following provisions of this section, be for the payment out of central
funds, to the person in whose favour the order is made, of such amount as the court considers reasonably sufficient to
compensate him for any expenses properly incurred by him in the proceedings.
(7) Where a court makes a defendants costs order but is of the opinion that there are circumstances which make it
inappropriate that the person in whose favour the order is made should recover the full amount mentioned in subsection (6)
above, the court shall(a) assess what amount would, in its opinion, be just and reasonable; and (b) specify that amount in
the order
(9) Subject to subsection (7) above, the amount to be paid out of central 693 funds in pursuance of a defendants costs
order shall (b) in any other case, be determined in accordance with regulations made by the Lord Chancellor for the
purposes of this section

The Lord Chancellor has made the regulations. They are the Costs in Criminal Cases (General) Regulations 1986, SI
1986/1335. Regulation 9(1) of those regulations states:

An applicant who is dissatisfied with the costs determined under these Regulations by an appropriate authority in
respect of proceedings other than proceedings before a magistrates court may apply to the appropriate authority to
redetermine them.

No application had been made by the solicitor to the respondents to redetermine the costs taxed although it was suggested at
one time apparently that such an application might be appropriate. I do not consider that an application to redetermine the costs,
as taxed, would have been appropriate seeing that what is in issue here is not a redetermination of the taxation process, but the
addition to the costs so taxed of a sum representing interest at what might properly be said to be nowadays an appropriate rate of
15% or 16%.
The 1985 Act replaced similar provisions in the Costs in Criminal Cases Act 1973, s 5. That stated:

(1) A Divisional Court of the Queens Bench Division may order the payment out of central funds of the costs of any
party to proceedings before the Divisional Court in a criminal cause or matter.
(2) The costs payable out of central funds under subsection (1) above shall be such sums as appear to the Divisional
Court reasonably sufficient to compensate the party concerned for any expenses properly incurred by him in the
proceedings or in any court below.
(3) The amount of costs ordered to be paid under this section shall be ascertained by the master of the Crown Office.

That provision stemmed from s 49 of the Courts Act 1971. It is unnecessary to refer specifically to the provisions of that
section seeing that they were mirrored in s 5 of the 1973 Act.
In Sch 6 to the Courts Act 1971 there is to be found a series of amendments relating to costs in criminal cases. A study of
the provisions in that schedule gives an indication of the basis of the awards of costs made prior to 1971 by courts of 694 assize
and quarter sessions and magistrates courts in this country. The position before 1971 was that orders for costs to be made out of
public moneys were payable out of local funds, that is to say the funds created out of the rates in county council and borough
council areas. The relevant legislation in that regard is to be found in the Costs and Criminal Cases Act 1952 and a similarly
worded 1908 Act. In order to see the origins of the powers of the court to award costs out of public moneys to successful
defendants and to prosecutors, the Criminal Law Act 1826 needs to be looked at. That made provision for the payment of certain
expenses to the parties in criminal proceedings.
That I think says for present purposes enough about the history of the powers which the courts nowadays possess to make
orders for costs in respect of both prosecution and defence in criminal proceedings. Suffice to say of the practice adopted by the
courts, an analysis of the powers and the practice can be found most usefully collected in 10 Halsburys Laws (3rd edn) 546553,
paras 10041019. From that analysis it will be gathered that the practice basically speaking was that when the order for costs had
been made by a court of assize, the clerk of assize was the taxation officer. He taxed the costs and the treasurer of the local
authority concerned was obliged to pay the amount so taxed. A similar procedure was also undertaken at courts of quarter session
where it was the clerk to the county council or the town clerk, as the case may be, who was the taxation officer and the borough
treasurer the paymaster.
The categories of costs in criminal cases are in the main these. Firstly, there are the prosecution costs payable under the
1985 Act. Secondly, costs ordered to be paid inter partes, that is to say by the prosecutor to a defendant or by a defendant to the
prosecutor under reg 3 of the 1986 regulations, to which I have already referred. Thirdly, there are the costs payable by a
convicted defendant or unsuccessful appellant under s 18 of the 1985 Act. Fourthly, there are costs payable out of central funds
to an acquitted defendant or successful appellant under s 16 of the 1985 Act. Fifthly, there are the costs payable under a legal aid
order.
In the first four categories the costs belong to the successful party, prosecutor or defendant. In the fifth category they belong
to the solicitor or counsel appearing under the legal aid order. These four categories are not exclusive and orders may be made
under reg 3 even when the accused is legally aided. Similarly, a defendants costs order may be made under s 16 even if the
accused is legally assisted. We are in this court vitally concerned with that category which is devoted to costs ordered to be paid
out of central funds.
What is contended for here is that there is solid ground for arguing that the powers which undoubtedly exist to award interest
on costs in civil proceedings apply equally nowadays to criminal proceedings. The basis of that argument is contended to be
found in ss 17 and 18 of the Judgments Act 1838. So far as material that Act provides in its title:

An Act for extending the Remedies of the Creditors against the Property of Debtors.

In the first 11 sections, which were later repealed, provision was made in respect of bankruptcies and insolvencies. In s 12
there is a provision enabling the sheriff to seize money and bank notes and so on. Section 17 states:

Judgment Debts to carry Interest: Every Judgment Debt shall carry Interest at the Rate of [nowadays, as I said, 15%
per annum] from the Time of entering up the Judgment until the same shall be satisfied, and such Interest may be levied
under a Writ of Execution on such Judgment.

Section 18 states:

Decrees and Orders of Courts of Equity, &c. to have Effect of Judgments. All Decrees and Orders of Courts of Equity,
and all Rules of Courts of Common Law whereby any Sum of Money, or any Costs, Charges, or Expences, shall be payable
to any Person, shall have the Effect of Judgments in the Superior Courts of Common Law, and the Persons to whom any
such Monies, or Costs, Charges or Expences, shall be payable, shall be deemed Judgment Creditors within the Meaning of
this Act

Section 20 was also referred to us but that was repealed a long time ago and is of no significance therefore to the issues
involved here.
The reason why the provisions of ss 17 and 18 are invoked is because an award of costs by this court is akin to a judgment
debt. This debt is in the hands of a creditor, the creditor being in the present case each respondent respectfully.
All inter parte orders for costs are judgment debts, so it is submitted, upon which interest runs nowadays. That contention,
as I have already indicated, 695appears in the affidavit of Mr Barca, where reliance is placed upon Hunts case, in which the sole
speech was that of Lord Ackner with whom all the other of their Lordships agreed. There it was made clear that interest on costs
ran from the day of judgment and not from the day of taxation as previously thought. That incidentally may make a considerable
difference to the quantum of interest for obvious reasons; hence, in part, the concern of the Lord Chancellors Department for the
outcome of this application.
Insofar as Mr Salter relied on Hunts case to support his contention as to the application of ss 17 and 18, I am bound to say
that he had failed to persuade me that it does so. In Hunts case, which was a running down case in which a claim for damages
was made, it was held that, in allowing the appeal, an order for payment of costs would be taxed as a judgment debt within s 17
of the Judgments Act 1838 as the principle established since the enactment of RSC1883. Following the common law rule interest
on costs ran from the date of judgment and had not been altered by the revision of the rules in 1965 notwithstanding that the
footnote to that effect had been omitted from the prescribed form of the writ of fieri facias. Accordingly, a litigant who had been
awarded costs in an action was entitled to interest on the amount of the costs from the date on which judgment was pronounced
and therefore the plaintiff was entitled to interest on his taxed costs from the date the action was stayed.
Clearly that decision affects merely the quantum of interest payable upon an order in a civil action. There is nothing in the
speech of Lord Ackner to indicate that ss 17 or 18 bear upon criminal proceedings. Mr Salter points out that the power of the
High Court to award costs inter partes is derived from s 6 of the Summary Jurisdiction Act 1857. As to that I should first of all
say that in the title it was stated that this was an Act to improve the administration of the law so far as concerned summary
proceedings before justices of the peace. Section 6 states:

Superior Court [that is this court] to determine the questions on the case. The Court to which a case is transmitted
under the Magistrates Courts Act 1980 shall hear and determine the question or questions of law arising thereon, and shall
thereupon reverse, affirm, or amend the determination in respect of which the case has been stated, or remit the matter to
the Justice or Justices, with the opinion of the Court thereon, or may make such other order in relation to the matter, and
may make such orders as to costs, as to the Court may seem fit

There is nothing in that section or in any other part of that Act which remains alive today to indicate that ss 17 and 18 apply
to the power of this court, as there stated, to award costs upon the determination of an appeal by way of case stated. That is so
whether what is contemplated is an order for costs inter partes or an order for costs for payment of costs out of central funds.
In the same context he invites us to say that s 51 of the Supreme Court Act 1981 is in point. That states:

Costs in civil division of Court of Appeal and High Court.(1) Subject to the provisions of this or any other Act and
to rules of court, the costs of and incidental to all proceedings in the civil division of the Court of Appeal and in the High
Court, including the administration of estates and trusts, shall be in the discretion of the court, and the court shall have full
power to determine by whom and to what extent the costs are to be paid.
(2) Nothing in subsection (1) shall alter the practice in any criminal cause or matter
696

That in my opinion cannot possibly assist Mr Salter. The very provisions themselves clearly exclude application to criminal
proceedings.
Finally, he urges us to find support for this contention in RSC Ord 62. Rule 2, so far as material, states:

(1) In addition to the civil proceedings to which this Order applies this Order applies to all criminal proceedings in
the High Court and in the civil division of the Court of Appeal

I can find no assistance to Mr Salter in this rule, which goes mainly to taxation. There is nothing there to show that there is
power in criminal proceedings to award interest on the payment of costs either inter partes or out of central funds. But, Mr Salter
submitted, we should adapt to modern conditions and the demands of high interest rates which bear heavily upon creditors. We
should look upon an award of costs as a judgment debt and act as courts are called upon to act in civil litigation.
Miss Foster argues that the contention made on behalf of the respondents is misconceived. Sections 17 and 18 remain
wedded, she said, only to civil proceedings. She asks us to have regard to the title in the 1838 Act and to what appears at the
commencement of Pt II of the 1985 Act. She refers us to A-G v Nethercote (1841) 11 Sim 529, 59 ER 958, Legal Aid Board v
Russell [1990] 3 All ER 18, [1990] 2 QB 607 and to the judgment of Lord Denning MR in K v K (divorce costs: interests) [1977]
1 All ER 576, [1977] Fam 39 and to the judgment of Stephenson LJ in that case, which traces very much the history of the award
of costs from the beginning of the last century. It was pointed out, incidentally, by Lord Denning MR in that case that before
1838 the courts of law and equity did not award interest at all either on the sum awarded or on the costs. It would appear that
1838 really did mark a significant change in the attitude of the courts to the award of interest upon judgment debts and possibly
other orders for the payment of costs.
In the course of his judgment Stephenson LJ stated ([1977] 1 All ER 576 at 587, [1977] Fam 39 at 57):

I hope also that Parliament may find time to consider (1) replacing ss 17 and 18 of the Judgments Act 1838 by
legislation which would make interest on judgment debts and costs beyond doubt a matter to be regulated by Rules of the
Supreme Court, and (2) providing for interest on judgment debts and costs in the county court.

What is of significance however in relation to this case is that there is nothing whatsoever in the judgment of Stephenson LJ
or in the judgments of Lord Denning MR and Orr LJ which gives the slightest indication that the powers which relate to the
award of interest on costs in civil proceedings have any bearing at all upon criminal proceedings.
The Acts and regulations to which I have referred are exhaustive, so it is submitted by Miss Foster, of the powers of the
court to award interest upon costs whether the order be for payment inter partes or out of central funds. That being so the court is
powerless to accede to this application. I am in no doubt at all that this application is without a legal foundation. The power to
award interest is wholly dependent upon provisions, if any, in statute, regulation or order. I am wholly satisfied that ss 17 and 18
apply only to civil proceedings. I can find nothing in any other statute, regulation or order which provides this court with 697
power to award interest on costs awarded inter partes and certainly none to do so upon an award of costs out of central funds.
For these reasons I would reject this application.

HUTCHISON LJ. I agree.

Application dismissed. The court refused to certify, under s 1(2) of the Administration of Justice Act 1960, that a point of law of
general public importance was involved in the decision.

Solicitors: Wilson Barca; Treasury Solicitor.

Kate OHanlon Barrister.

[1991] 4 All ER 698

R v Savage
R v Parmenter
CRIMINAL; Criminal Law

HOUSE OF LORDS
LORD KEITH OF KINKEL, LORD BRANDON OF OAKBROOK, LORD ACKNER, LORD JAUNCEY OF TULLICHETTLE AND LORD LOWRY
2, 3, 4 JULY, 7 NOVEMBER 1991
Criminal law Wounding Unlawful and malicious wounding Foresight of injury Foresight that some physical harm would
follow as result of defendants act Whether Crown must prove that defendant either intended or actually foresaw that his act
would cause harm Whether sufficient to show that he ought to have foreseen that his act would cause harm Whether physical
harm intended or forseen by defendant need only be of a minor character Whether necessary for Crown to show that defendant
intended or foresaw that his unlawful act might wound victim Offences against the Person Act 1861, s 20.Criminal law
Wounding Unlawful and malicious infliction of grievous bodily harm Foresight of injury Foresight that some physical harm
would follow as result of defendants act Whether Crown must prove that defendant either intended or actually foresaw that his
act would cause harm Whether sufficient to show that he ought to have foreseen that his act would cause harm Whether
physical harm intended or foreseen by defendant may be of minor character Whether necessary for Crown to show that
defendant intended or foresaw that his unlawful act might cause victim grievous bodily harm Offences against the Person Act
1861, s 20.Criminal law Assault occasioning actual bodily harm Mens rea Recklessness Whether sufficient to show that
defendant committed assault and that actual bodily harm was occasioned by that assault Whether Crown obliged to prove that
defendant intended to cause actual bodily harm or was reckless whether such harm would be caused Offences against the
Person Act 1861, s 47.Criminal law Wounding Unlawful and malicious wounding Assault Assault occasioning actual
bodily harm Alternative verdict Whether verdict of guilty of assault occasioning actual bodily harm permissible alternative
verdict on count alleging unlawful wounding Offences against the Person Act 1861, ss 20, 47
698

In order to establish the offence of unlawful and malicious wounding or inflicting grievous bodily harm contrary to s 20 a of the
Offences against the Person Act 1861 the Crown must prove that the defendant either intended or actually foresaw that his act
would cause harm; it is not sufficient to show merely that he ought to have foreseen that his act would cause harm. However, the
physical harm which the defendant intended or foresaw might result to some person need only be of a minor character for him to
be guilty and it is unnecessary for the Crown to show that he intended or foresaw that his unlawful act might cause physical harm
of the gravity described in s 20, ie either wounding or grievous bodily harm (see p 720 b to e j and p 721 e f, post); R v
Cunningham [1957] 2 All ER 412 and R v Mowatt [1967] 3 All ER 47 approved; R v Caldwell [1981] 1 All ER 961 considered.
________________________________________
a Section 20 provides: Whosoever shall unlawfully and maliciously wound or inflict any grievous bodily Harm upon any other Person,
either with or without any Weapon or Instrument, shall be guilty of [an offence], and being convicted thereof shall be liable to
[imprisonment].

In order to establish the offence of assault occasioning actual bodily harm contrary to s 47 b of the 1861 Act it is sufficient
for the Crown to show that the defendant committed an assault and that actual bodily harm was occasioned by the assault; the
Crown is not obliged to prove that the defendant intended to cause some actual bodily harm or was reckless as to whether such
harm would be caused (see p 711 g h and p 713 a b, post); R v Roberts (1972) 56 Cr App R 95 approved; R v Spratt [1991] 2 All
ER 210 disapproved.
________________________________________
b Section 47 provides: Whosoever shall be convicted upon an Indictment of any Assault occasioning actual bodily Harm shall be liable to
[imprisonment].

A verdict of guilty of assault occasioning actual bodily harm under s 47 is a permissible alternative verdict on a count
alleging unlawful wounding contrary to s 20 (see p 710 j to p 711 b, post); R v Wilson (Clarence) [1983] 3 All ER 448 applied.
Decision of the Court of Appeal, Criminal Division in R v Savage [1991] 2 All ER 220 affirmed; decision of the Court of
Appeal, Criminal Division in R v Parmenter [1991] 2 All ER 225 reversed.

Notes
For assault occasioning actual bodily harm, see 11(1) Halsburys Laws (4th edn reissue) paras 488, 490, and for cases on the
subject, see 15 Digest (Reissue) 11751184, 999210127.
For mens rea, intention and recklessness, see 11(1) Halsburys Laws (4th edn reissue) paras 1015, and for cases on the
subject, see 14(1) Digest (Reissue) 1720, 3652.
For the Offences against the Person Act 1861, ss 20, 47, see 12 Halsburys Statutes (4th edn) (1989 reissue) 94, 105.

Cases referred to in opinions

DPP v Majewski [1976] 2 All ER 142, [1977] AC 443, [1976] 2 WLR 623, HL.
R v Bradshaw (1878) 14 Cox CC 83, Assizes.
R v Briggs [1977] 1 All ER 475, [1977] 1 WLR 605, CA.
R v Caldwell [1981] 1 All ER 961, [1982] AC 341, [1981] 2 WLR 509, HL.
R v Cunningham [1957] 2 All ER 412, [1957] 2 QB 396, [1957] 3 WLR 76, CCA.
R v Grimshaw [1984] Crim LR 108, CA.
R v Lawrence [1981] 1 All ER 974, [1982] AC 510, [1981] 2 WLR 509, HL.
R v Lillis [1972] 2 All ER 1209, [1972] 2 QB 236, [1972] 2 WLR 1409, CA.
699
R v Mearns [1990] 3 All ER 989, [1991] 1 QB 82, [1990] 3 WLR 569, CA.
R v Mowatt [1967] 3 All ER 47, [1968] 1 QB 421, [1967] 3 WLR 1192, CA.
R v Roberts (1972) 56 Cr App R 95, CA.
R v Seymour [1983] 2 All ER 1058, [1983] 2 AC 493, [1983] 3 WLR 349, HL.
R v Spratt [1991] 2 All ER 210, [1990] 1 WLR 1073, CA.
R v Springfield (1969) 53 Cr App R 608, CA.
R v Stephenson [1979] 2 All ER 1198, [1979] QB 695, [1979] 3 WLR 193, CA.
R v Sullivan [1981] Crim LR 46, CA.
R v Venna [1975] 3 All ER 788, [1976] QB 421, [1975] 3 WLR 737, CA.
R v Ward (1871) LR 1 CCR 356.
R v Wilson (Clarence) [1983] 3 All ER 448, [1984] AC 242, [1983] 3 WLR 686, HL.

Appeals

R v Savage
Susan Savage appealed with the leave of the Court of Appeal, Criminal Division against the decision of that court (Glidewell LJ,
Ian Kennedy and Fennell JJ) ([1991] 2 All ER 220, [1991] 2 WLR 418) on 10 May 1990 allowing her appeal against her
conviction on 3 October 1989 in the Crown Court at Durham before Mr Recorder Williamson QC and a jury of unlawful
wounding contrary to s 20 of the Offences against the Person Act 1861 but substituted a verdict of guilty of assault occasioning
actual bodily harm contrary to s 47 of that Act. The Court of Appeal had certified, under s 33(2) of the Criminal Appeal Act
1968, that points of law of general public importance (set out at p 703 h to p 704 a, post) were involved in the decision. The facts
are set out in the opinion of Lord Ackner.

R v Parmenter
The Crown appealed with the leave of the Court of Appeal, Criminal Division (Mustill LJ, Waterhouse and Thorpe JJ) given on 6
November 1990 against the decision of that court (Mustill LJ, Waterhouse and Swinton JJ) ([1991] 2 All ER 225, [1991] 2 WLR
418) on 20 July 1990 allowing the appeal of the respondent, Philip Mark Parmenter, against his conviction on 24 February 1988
in the Crown Court at Chelmsford before Judge Taylor and a jury on four counts of inflicting grievous bodily harm, contrary to s
20 of the Offences against the Person Act 1861. On 6 November 1990 the Court of Appeal had certified, under s 33(2) of the
Criminal Appeal Act 1968, that points of law of general public importance (set out at p 707 j to 708 b, post) were involved in the
decision. The facts are set out in the opinion of Lord Ackner.
The appeals were heard together.

Alan Goldsack QC and Paul Fleming for the appellant Savage.

Anthony Scrivener QC and Simon E Wood for the Crown in Savages appeal.
Anthony Scrivener QC and Richard Daniel for the Crown in its appeal.
Stephen Sedley QC and Aftab Jafferjee for the respondent Parmenter.

Their Lordships took time for consideration

7 November 1991. The following opinions were delivered.

LORD KEITH OF KINKEL. My Lords, I have had the opportunity of considering in draft the speech to be delivered by my
noble and learned friend 700 Lord Ackner. I agree with it, and for the reasons he gives would dismiss the appeal in R v Savage
and allow that in R v Parmenter to the extent which he proposes.

LORD BRANDON OF OAKBROOK. My Lords, for the reasons given in the speech of my noble and learned friend Lord
Ackner, I would dismiss the appeal in R v Savage and allow the appeal in R v Parmenter but only to the extent indicated by him.

LORD ACKNER. My Lords, these two appeals have been heard together, because they each raise the issue of the mental
element which the prosecution have to establish in relation to offences under two sections of the Offences against the Person Act
1861, viz s 20, unlawfully and maliciously wounding or inflicting grievous bodily harm, and s 47, assault occasioning actual
bodily harm.

R V SAVAGE

The facts and the decision of the Court of Appeal

On 3 October 1989 in the Crown Court at Durham the appellant Mrs Savage was indicted and convicted on a single count of
unlawful wounding contrary to s 20 of the 1861 Act, the particulars of the offence being that on 31 March 1989 she unlawfully
and maliciously wounded Miss Beal. She was ordered to undertake 120 hours of community service. The victim, Miss Beal, was
a former girlfriend of Mrs Savages husband. There had been some bad feeling between these two young women, although they
had never previously met. On the evening of 31 March 1989 they were both in the same public house, but not together. Mrs
Savage pushed her way through to the table where Miss Beal was sitting with some friends. She had in her hand a pint glass
which was nearly full of beer. Having said, Nice to meet you, darling, she then threw the contents of the glass over Miss Beal.
Unfortunately, not only was Miss Beal soaked by the beer, but, contrary to Mrs Savages evidence, she must have let go of the
glass, since it broke and a piece of it cut Miss Beals wrist. The jury, by their verdict, concluded either that the appellant had
deliberately thrown not only the beer but also the glass at Miss Beal or, alternatively, that while deliberately throwing the beer
over Miss Beal the glass had accidentally slipped from her grasp and it, or a piece of it, had struck Miss Beals wrist, but with no
intention that the glass should hit or cut Miss Beal.
The material words of s 20 read: Whosoever shall unlawfully and maliciously wound or inflict any grievous bodily Harm
upon any other Person
In the course of his summing up the recorder said:

It is alleged that on 31 March Mrs Savage unlawfully and maliciously wounded Tracey Beal. What does this mean?
First of all it means that you must find Susan Savage did some unlawful action, unlawful in the sense that it was not in self-
defence and it was not a mere accident; malicious in the sense that it was deliberate and aimed against Tracey Beal and that
as a result of that unlawful, deliberate act aimed against Tracey Beal, Tracey Beal suffered a wound She went up to her
and threw deliberately the contents of a pint glass at her. That is an assault, that is an unlawful action aimed
deliberately against Tracey Beal. Mrs Savage admits it If you were sure that in throwing the liquid from the glass she
let go of the glass unintentionally, but in doing this unlawful act she let go of the glass and it struck Miss Beal, then that is a
consequence of her unlawful act. If a wound resulted from it then that is unlawful wounding.
701

In the Court of Appeal reference was made to R v Mowatt [1967] 3 All ER 47 at 50, [1968] 1 QB 421 at 426 and to the
following statement in the judgment of Diplock LJ, giving the judgment of the court:

In the offence under s. 20, and in the alternative verdict which may be given on a charge under s. 18for neither of
which is any specific intent requiredthe word maliciously does import on the part of the person who unlawfully inflicts
the wound or other grievous bodily harm an awareness that his act may have the consequence of causing some physical
harm to some other person. That is what is meant by the particular kind of harm in the citation from PROFESSOR
KENNYS OUTLINES OF CRIMINAL LAW (18th edn, 1962, para 158a, p 202). It is quite unnecessary that the accused
should have foreseen that his unlawful act might cause physical harm of the gravity described in the section, i.e., a wound
or serious physical injury. It is enough that he should have foreseen that some physical harm to some person, albeit of a
minor character, might result. In many cases in instructing a jury upon a charge under s. 20 of the Act of 1861, or on the
alternative verdict which may be given under that section when the accused is charged under s. 18, it may be unnecessary
to refer specifically to the word maliciously.

The Court of Appeal observed that, despite doubts which had been expressed about the above statement of the law, it was
binding on the court and that the test imported by the word maliciously is a subjective and not an objective one. In the opinion
of the Court of Appeal, it accordingly followed that the recorder was wrong to direct the jury that malicious meant deliberate
and aimed at Tracey Beal with the result that a wound occurred. The recorder omitted to direct the jury that they had to find that
Mrs Savage foresaw that some physical harm would follow as a result of what she did. The question as to whether she foresaw
that her act was likely to cause some harm, other than wetting Miss Beal with the beer, was question they should have been asked
to consider. In view of this misdirection, the Court of Appeal quashed the verdict and then went on to consider whether they
should substitute another verdict. The powers of the Court of Appeal so to do are contained in s 3 of the Criminal Appeal Act
1968, which reads as follows:

(1) This section applies on an appeal against conviction, where the appellant has been convicted of an offence and the
jury could on the indictment have found him guilty of some other offence, and on the finding of the jury it appears to the
Court of Appeal that the jury must have been satisfied of facts which proved him guilty of the other offence.
(2) The Court may, instead of allowing or dismissing the appeal, substitute for the verdict found by the jury a verdict of
guilty of the other offence, and pass such sentence in substitution for the sentence passed at the trial as may be authorised
by law for the other offence, not being a sentence of greater severity.

It was, of course, common ground that Mrs Savage was guilty of common assault. But in R v Mearns [1990] 3 All ER 989,
[1991] 1 QB 82 the Court of Appeal had concluded that, as a result of the coming into force of the Criminal Justice Act 1988, ss
39 and 40, common assault is no longer a possible alternative verdict on a trial on indictment for a more serious offence unless,
originally or by way of amendment, a specific count alleging common assault is added to the indictment. There was no such
count in the indictment.
The court then considered the offence under s 47, which is an indictable 702 offence. The material words of this section are:
Whosoever shall be convicted upon an Indictment of any Assault occasioning actual bodily Harm shall be liable
Could the jury have found Mrs Savage guilty of that offence?
Section 6(3) of the Criminal Law Act 1967 provides:

Where, on a persons trial on indictment for any offence except treason or murder, the jury find him not guilty of the
offence specifically charged in the indictment, but the allegations in the indictment amount to or include (expressly or by
implication) an allegation of another offence falling within the jurisdiction of the court of trial, the jury may find him guilty
of that other offence or of an offence of which he could be found guilty on an indictment specifically charging that other
offence.

This raised two questions for the court. (1) Did the allegation of wounding import or include an allegation of assault? In the
view of the Court of Appeal in the ordinary way, unless there are some quite extraordinary facts, it inevitably does (see [1991] 2
All ER 220 at 224, [1991] 2 WLR 418 at 421). (2) Did that assault, albeit unintentional, occasion actual bodily harm? The jury
might have concluded that Mrs Savage accidentally let go of her glass but the glass shattered on the table or that in the action of
throwing she, while still holding it, broke it on the table and then a piece of the broken glass cut Miss Beal. However, in neither
case had it been suggested that, as a matter of causation, the assault did not occasion the actual bodily harm, albeit
unintentionally. Nevertheless, counsel for Mrs Savage invited the court to decide that some element of recklessness had to be
established for the offence of assault occasioning actual bodily harm to be proved. The Court of Appeal rejected this invitation in
the following terms ([1991] 2 All ER 220 at 224, [1991] 2 WLR 418 at 421422):

That submission, in our view, seeks to relate the concept of recklessness to the wrong element of the offence. The
mens rea required is that which is a necessary element in the assault. In this case, as we have said, the assault was the
intentional throwing of the beer over Tracey. Thus, there was no need to consider recklessness. The remaining question is,
did the assault occasion the actual bodily harm which Tracey undoubtedly suffered? This is a question of causation, in
relation to which recklessness is relevant. The test is objectivewas the cut on Tracey Beals wrist a natural consequence
of the appellants deliberate action in throwing the beer? In our view the answer to this question could only be Yes.

The certified questions

The Court of Appeal, accordingly, substituted a verdict of guilty of assault occasioning actual bodily harm, contrary to s 47
of the 1861 Act. On 10 October 1990, by order dated 28 November 1990, the Court of Appeal gave leave to appeal, certifying
the following points of law to be of general public importance:

1. Whether a verdict of guilty of assault occasioning actual bodily harm is a permissible alternative verdict on a Count
alleging unlawful wounding contrary to section 20 of the Offences against the Person Act, 1861?
2. Whether a verdict of guilty of assault occasioning actual bodily harm can be returned upon proof of an assault and of
the fact that actual bodily harm was occasioned by the assault?
3. If it is proved that an assault has been committed and that actual bodily harm has resulted from that assault, whether
a verdict of assault occasioning 703 actual bodily harm may be returned in the absence of proof that the Defendant
intended to cause some actual bodily harm or was reckless as to whether such harm would be caused.

It is perhaps convenient at this stage to observe that in order for Mrs Savage to succeed in relation to the first certified
question your Lordships must conclude that the decision of this House in R v Wilson (Clarence) [1983] 3 All ER 448, [1984] AC
242 was wrong. As regards the second certified question, that the intent required in s 47 relates not only to the assault, but also to
the consequences of the assault, this clearly overlaps with the third certified question.

R V PARMENTER

The facts and the decision of the Court of Appeal

Paul Parmenter was born on 8 February 1988. Between that date and 11 May 1988 his father, the appellant Philip Mark
Parmenter caused his baby son to suffer injuries to the boney structures of the legs and right forearm. He was indicted on eight
counts: six represented three-paired alternatives, laid under ss 18 and 20 of the 1861 Act, the seventh count alleged a separate
offence under s 20, and the eighth count, to which he pleaded guilty from the outset, alleged cruelty to a person under the age of
16. The only issue before the jury was whether Mr Parmenter had acted with the relevant intent, his case being that he did not
realise that the way he handled the child would cause injury. At the conclusion of the trial in February 1989 at the Crown Court
at Chelmsford, Mr Parmenter was acquitted of the three s 18 offences and convicted of all four s 20 offences.
On the crucial issue of intent, the trial judge directed the jury as follows:

Let me tell you what maliciously means. First of all, let me tell you what it does not mean. If you and I meet in the
corridor outside and we were discussing the word maliciously, one I rather expect would say, and I expect you would
too, it means something like spiteful, something like that. That does not apply in the framework of this section of the Act
of Parliament. Let me tell you what maliciously means, because in the circumstances of this case it is very important
indeed. It is quite unnecessary that the accused should have foreseen that his unlawful act might cause physical harm of
the type described in the sectionand here comes the important partIt is enough that he should have foreseen that some
 physical harm to some person, albeit of a minor character, might result. Two of you are writing it down, I see. I say it
again, like a shipping forecast, It is enough that he should have foreseen that some physical harm to some person, albeit of
a minor character, might result. That is what you have to consider. So, members of the jury, the questions that you have
to ask yourselves on counts four, five and six only arise if he is not guilty on counts one, two and three, and they are these.
Are we sure that he inflicted grievous bodily harm of the nature described in the indictment? If the answer to the question
is Yes then: are we sure that he should have foreseen that some physical harm, albeit of a minor character, might result? If
the answer to that question is Yes, he is guilty. If the answer to that question is No, he is not guilty.

This direction was founded on R v Mowatt [1967] 3 All ER 47 esp at 4950, [1968] 1 QB 421 esp at 425426):

No doubt on these facts [ie the facts of R v Cunningham [1957] 2 All ER 412, [1957] 2 QB 396] the jury should be
instructed that they must be satisfied before convicting the accused that he was aware that physical harm 704 to some
human being was a possible consequence of his unlawful act in wrenching off the gas meter. In the words of the court
([1957] 2 All ER 412 at 414, [1957] 2 QB 396 at 399), maliciously in a statutory crime postulates foresight of
consequence, and on this proposition we do not wish to cast any doubt. But the court in that case also expressed approval
obiter of a more general statement by PROFESSOR C. KENNY [Outlines of Criminal Law (18th edn, 1962) p 202, para
158a], which runs as follows: In any statutory definition of a crime, malice must be taken not in the old vague sense
of wickedness in general, but as requiring either (i) an actual intention to do the particular kind of harm that in fact was
done, or (ii) recklessness as to whether such harm should occur or not (i.e., the accused has foreseen that the particular kind
of harm might be done, and yet has gone on to take the risk of it). It is neither limited to, nor does it indeed require, any ill-
will towards the person injured.
This generalisation is not, in our view, appropriate to the specific alternative statutory offences described in s. 18 and s.
20 of the Offences against the Person Act, 1861, and s 5 of the Prevention of Offences Act 1851, and if used in that form in
the summing-up is liable to bemuse the jury. In s. 18 the word maliciously adds nothing. The intent expressly required
by that section is more specific than such element of foresight of consequences as is implicit in the word maliciously and
in directing a jury about an offence under this section the word maliciously is best ignored
In the offence under s. 20, and in the alternative verdict which may be given on a charge under s. 18for neither of
which is any specific intent requiredthe word maliciously does import upon the part of the person who unlawfully
inflicts the wound or other grievous bodily harm an awareness that his act may have the consequence of causing some
physical harm to some other person. That is what is meant by the particular kind of harm in the citation from
PROFESSOR KENNYS OUTLINES OF CRIMINAL LAW. It is quite unnecessary that the accused should have foreseen
that his unlawful act might cause physical harm of the gravity described in the section, i.e., a wound or serious physical
injury. It is enough that he should have foreseen that some physical harm to some person, albeit of a minor character,
might result.

It will be recalled that the final paragraph of the above quotation is that to which the Court of Appeal made specific
reference in the Savage case.
The Court of Appeal then observed that at first sight it appeared that the direction given by the trial judge was quite
unexceptionable, containing as it did a verbatim quotation from R v Mowatt. However, on closer inspection it was apparent that
he had inadvertently imparted a fundamental change to the principle laid down in R v Mowatt. The Court of Appeal said ([1991]
2 All ER 225 at 229, [1991] 2 WLR 408 at 411412):

It seems to us clear, when the judgment in R v Mowatt is read as a whole, that the court was stating two propositions,
one positive and one negative. The positive proposition was that to found a conviction under s 20 it must be proved that
the defendant actually foresaw that physical harm to some other person would be the consequence of his act. This is
subject to a negative qualification, that the defendant need not actually have foreseen that the harm would be as grave as
that which in the event occurred. If one now returns to the summing up in the present case we find the judge posing the
crucial question as follows: Are we sure that he inflicted grievous bodily harm of the nature described in the indictment?
If the answer to the question 705 is Yes, then: Are we sure that he should have foreseen that some physical harm, albeit of a
minor character, might result? If the answer to that question is Yes, he is guilty. If the answer to that question is No, he is
not guilty. In the judgment in R v Mowatt the words should have foreseen were, we believe, intended to bear the
same meaning as did foresee or simply foresaw. Read out of context, however, the ordinary meaning of the words
should have is ought to have. By reading the passage to the jurors in isolation from its context the judge thus
inadvertently created a real risk that the jurors would believe that they were being directed to ask themselves, not whether
the appellant actually foresaw that his acts would cause injury, but whether he ought to have foreseen it. Indeed we would
be prepared to go further and say that this is the natural understanding of the passage which we have just quoted. At any
rate, whether we are right in this or not there was an ambiguity which went to the heart of the case, for while there was a
possibility that the jury might feel doubt about whether the appellant actually intended to injure the child, there seems on
the evidence to have been little room for question that, judge objectively, he should have realised that what he did would
lead to injury. (The Court of Appeals emphasis.)

The Court of Appeal accordingly quashed the convictions on the four counts under s 20 (the trial judge had in fact fallen into
the same error as that made by the judge in R v Grimshaw [1984] Crim LR 108). The court then had to consider whether it could
and should substitute for the convictions which it had quashed alternative verdicts of guilty under s 47 of the 1861 Act.
It then discovered that a curious situation had emerged, namely that two different divisions of the Court of Appeal, Criminal
Division had, contemporaneously but unwittingly, delivered judgments on the necessary intent in s 47, but had unfortunately
reached opposite conclusions. R v Savage was one of those cases and the other is R v Spratt [1991] 2 All ER 210, [1990] 1 WLR
1073.

R V SPRATT

The facts and the decision of the Court of Appeal

A young girl was struck twice whilst playing in the forecourt of a block of flats by two airgun pellets, which had been fired
from a window by the appellant. He admitted to the police that he had fired a few shots out of the window, not in order to hit
anyone, but to see how far the pellets would go. He was duly charged with an offence under s 47 of the 1861 Act, to which he
pleaded guilty. The basis of that plea, as was explained to the trial judge, was that the appellant accepted that he had been
reckless, and that his recklessness took the shape of a failure to give any thought to the possibility of a risk. However, it was
contended on his behalf that if he had known there were children in the area he would not have fired the shots. The judge
imposed a sentence of 30 months imprisonment, against which the appellant appealed. When the matter came before the full
court, the court itself raised the question whether, if the facts asserted on the appellants behalf were true, he had in law
committed the offence to which he had pleaded guilty. Subsequently leave was given to pursue an appeal against conviction. On
the appeal it was argued for the Crown that the appellant ought objectively to have appreciated that there was a risk, and that this
was enough to establish an offence under s 47, albeit that in the light of the decision of the Court of Appeal in R v Cunningham
[1957] 2 All ER 412, [1957] 2 QB 396, to which further reference will be made hereafter, this would not be sufficient for the
purpose of s 20. The court, having considered a number of subsequent cases, 706including in particular three decisions of your
Lordships House, namely R v Caldwell [1981] 1 All ER 961, [1982] AC 341, R v Lawrence [1981] 1 All ER 974, [1982] AC 510
and R v Seymour [1983] 2 All ER 1058, [1983] 2 AC 493, concluded that the subjective type of recklessness furnished the test
for ss 20 and 47 alike and that this had been decided by the Court of Appeal in R v Venna [1975] 3 All ER 788, [1976] QB 421,
also a case to which further reference will be made hereafter.
In R v Spratt [1991] 2 All ER 210 at 219, [1990] 1 WLR 1073 at 10821083 McCowan LJ, giving the judgment of the court,
said:

Finally, counsel for the Crown argues that while R v Venna says that Cunningham recklessness will amount to guilt
under s 47, it does not say that nothing else will do. In other words, it is now possible to add on failure to give thought to
the possibility of risk as also qualifying for guilt. We do not accept that interpretation of the decision in R v Venna.
Moreover, we are not attracted by what would be the consequence of accepting the argument of counsel for the Crown,
namely that responsibility for the offence of assault occasioning actual bodily harm (in respect of which Parliament used
neither the word maliciously nor recklessly) would be wider than for the offence of unlawful wounding (in respect of
which Parliament used the word maliciously).

In relation to these two decisions, R v Savage and R v Spratt, the Court of Appeal in R v Parmenter [1991] 2 All ER 225,
[1991] 2 WLR 408 concluded that in one respect they were in harmony. Where the defendant neither intends nor adverts to the
possibility that there will be any physical contact at all, then the offence under s 47 would not be made out. That is because there
would have been no assault, let alone an assault occasioning actual bodily harm. Further, there was no conflict where the
defendant does advert to the possibility of harm, albeit not necessarily of the kind which actually happened. In such a case there
clearly would be an assault. However, the two decisions were in conflict as to whether an intent is required in relation to the
consequences of the assault. The Court of Appeal having decided to prefer the decision in R v Spratt, asked itself whether there
was implicit in the s 20 verdicts (given in the light of a direction in terms of objective intent) a finding that the appellant
subjectively intended or recognised the risk of physical harm. Understandably it concluded that the answer must be in the
negative. Accordingly, the court allowed the appeal, declining to substitute any other verdict on those counts where the
convictions were quashed. The court concluded by observing that the authorities on the intent required in ss 20 and 47

can no longer live together, and that the reason lies in a collision between two ideas, logically and morally sustainable
in themselves, but mutually inconsistent, about whether the unforeseen consequences of a wrongful act should be punished
according to the intent (R v Cunningham) or the consequences (R v Mowatt).

(See [1991] 2 All ER 225 at 233, [1991] 2 WLR 408 at 417.)

On 6 November 1990 the Court of Appeal granted leave to appeal to your Lordships House and certified the following
points of law to be of general public importance:

1(a) Whether in order to establish an offence under Section 20 of the Offences against the Person Act 1861 (the Act)
the prosecution must prove that the defendant actually foresaw that his act would cause the particular 707 kind of harm
which was in fact caused, or whether it is sufficient to prove that (objectively) he ought so to have foreseen. (b) The like
question in relation to section 47 of the Act.
2(a) For the purposes of the answer to Question 1(a), whether the particular kind of harm to be foreseen may be any
physical harm, or harm of (i) the nature, or (ii) the degree, or (iii) the nature and the degree of the harm which actually
occurred. (b) The like question in relation to section 47 of the Act.

It will be observed that some of the certified questions in R v Parmenter overlap with those in R v Savage.
My Lords, I will now seek to deal with the issues raised by these appeals seriatim.
I Is a verdict of guilty of assault occasioning actual bodily harm a permissible alternative verdict on a count alleging unlawful
wounding contrary to s 20 of the 1861 Act?
The single count in R v Savage was in common form. It read as follows:

STATEMENT OF OFFENCE
UNLAWFUL WOUNDING, contrary to Section 20 of The Offences Against the Person Act 1861.

PARTICULARS OF OFFENCE
SUSAN SAVAGE on the 31st day of March 1989 unlawfully and maliciously wounded Tracey Beal.

The Indictment Rules 1971, SI 1971/1253, r 5 provides:

(1) Subject only to the provisions of rule 6 of these Rules, every indictment shall contain, and shall be sufficient if it
contains, a statement of the specific offence with which the accused person is charged describing the offence shortly,
together with such particulars as may be necessary for giving reasonable information as to the nature of the charge

Brief though the particulars of the offence were, the indictment can in no way be said to be defective. Clearly, if an accused
considers that he is entitled to further particulars of the offence with which he is charged, he can seek those from the prosecution
and, if unreasonably refused, he can obtain an order from the court.
In R v Wilson (Clarence) [1983] 3 All ER 448, [1948] AC 242 the defendant was tried on an indictment containing a single
count alleging an offence of contravening s 20 of the 1861 Act, the particulars being that he maliciously inflicted grievous bodily
harm on [L] (the second limb of s 20). The jury were directed that, if they were not satisfied that the harm inflicted was grievous
bodily harm but were satisfied that it was actual bodily harm, they could convict of the alternative offence of assault occasioning
actual bodily harm contrary to s 47 of the Act. The jury having convicted the defendant on this lesser offence, he appealed
against the conviction to the Court of Appeal, Criminal Division. Being bound by its decision in R v Springfield (1969) 53 Cr
App R 608, it held that the alternative verdict was not open to the jury, allowed the appeal and quashed the conviction. The
appeal by the Crown to your Lordships House was allowed and the conviction restored, your Lordships holding that the
allegations in the charge under s 20 of the Act, at least, impliedly included allegations of assault occasioning actual bodily harm
which constituted another offence within the ambit of s 6(3) of the Criminal Law Act 1967, the terms of which I have set out
earlier in this speech.
Since Mr Goldsack QC on behalf of Mrs Savage sought to persuade your 708 Lordships that the decision in R v Springfield
was correct and should never have been overruled by your Lordships, it is necessary to set out at some length the reasoning of
Lord Roskill, with whose speech Lord Fraser of Tullybelton, Lord Elwyn-Jones, Lord Edmund-Davies and Lord Brightman all
agreed.
What had to be determined was the true construction of the following words in s 6(3) set out above: the allegations in
the indictment amount to or include (expressly or by implication) an allegation of another offence The starting point was
accepted to be the historical background to the legislation. This had been correctly stated in R v Lillis [1972] 2 All ER 1209 at
1212, [1972] 2 QB 236 at 240, a five-judge Court of Appeal, Criminal Division, in a judgment delivered by Lawton LJ, who
described the purposes and effect of s 6(3) as follows:

Before the passing of the Criminal Law Act 1967 the law applicable to the kind of problem which presented itself to
the trial judge in this case was partly to be found in the common law and partly in a number of statutes. At common law on
an indictment charging felony the accused could be convicted of a less aggravated felony of which the ingredients were
included in the felony charged and similarly as regards misdemeanours; but except under statute a conviction for a
misdemeanour was not allowed on a charge of felony. The object of s 6(3) of the Criminal Law Act 1967 was to provide a
general rule continuing and combining the rules of common law and the provisions of most of the statutes which enabled
alternative verdicts to be returned in specific cases or types of cases.

In dealing with the position to the 1967 Act Lord Roskill observed ([1983] 3 All ER 448 at 452, [1984] AC 242 at 256):

My Lords, there can be no doubt that before 1967 the view was widely held that at common law on a charge under s
20 a defendant might be convicted of at least common assault

Lord Roskill then set out the statement in Archbolds Pleading, Evidence and Practice in Criminal Cases (36th edn, 1966) para
575 as authority for that observation and continued ([1983] 3 All ER 448 at 452, [1984] AC 242 at 256257):

It will be within the recollection of those of your Lordships who have in the past sat, either as recorders or chairman of
quarter sessions, that this statement in Archbold accurately stated the practice, at least before 1967. If this be right, it is not
easy to see why in principle such a defendant should not equally, at common law, be liable to conviction under s 47. The
current edition of Archbold (41st edn, 1982) para 20.145 states that on an indictment under s 20 either for unlawful
wounding or for inflicting grievous bodily harm the defendant may be convicted of common assault. Thus, long after
1967, the same view was expressed as I have already quoted from the 36th edition, published in 1966. These two passages
justify the statement by counsel for the Crown, in opening these appeals, that both before and after 1967 the view was
widely held that assault, whether common assault or assault occasioning actual bodily harm, was available at common law
as an alternative charge to inflicting grievous bodily harm contrary to s 20 in the event of an acquittal on that latter charge.

Lord Roskill then considered the crucial passage in the judgment of Sachs LJ in R v Springfield (1969) 53 Cr App R 608 at
610611, which reads as follows:

The question accordingly arises as follows. Where an indictment thus charges a major offence without setting out any
particulars of the matters relied upon, what is the correct test for ascertaining whether it contains 709 allegations which
expressly or impliedly include an allegation of a lesser offence? The test is to see whether it is a necessary step towards
establishing the major offence to prove the commission of the lesser offence: in other words, is the lesser offence an
essential ingredient of the major one?

In commenting on this passage, Lord Roskill observed ([1983] 3 All ER 448 at 453, [1984] AC 242 at 258):

First, the words major offences and lesser offences nowhere appear in the subsection. Second, the subsection says
nothing about it being a necessary step towards establishing the major offence to prove the commission of the lesser
offence, so that the so-called lesser offence has to be an essential ingredient of the major offence. Neither the adjective
necessary nor the adverb necessarily appear anywhere in the subsection.

It had been submitted by Mr Hill QC that what the Court of Appeal had done in R v Springfield was to hold that the
expressions amount to and include in s 6(3) were synonymous whereas they are alternatives and must in fact be meant to apply
to different concepts; the necessary step test can apply to the expression amount to but it did not fit with the word include (see
[1984] AC 242 at 247). As to this, Lord Roskill said ([1983] 3 All ER 448 at 453454, [1984] AC 242 at 258259):

There is, in my view, a clear antithesis in the subsection between amount to and include; the word or which
joins those two words is clearly disjunctive and must not be ignored. If either limb of the phrase is satisfied then the stated
consequences can follow In the present case, the issue to my mind is not whether the allegations in the s 20 charge,
expressly or impliedly, amount to an allegation of a s 47 charge, for they plainly do not. The issue is whether they either
expressly or impliedly include such an allegation. The answer to that question must depend on what is expressly or
impliedly included in a charge of inflicting any grievous bodily harm What, then, are the allegations expressly or
impliedly included in a charge of inflicting grievous bodily harm. Plainly that allegation must so far as physical injuries
are concerned, at least impliedly if not indeed expressly, include the infliction of actual bodily harm because infliction of
the more serious injuries must include the infliction of the less serious injuries. But does the allegation of inflicting
include an allegation of assault? (Lord Roskills emphasis.)

Having reviewed the relevant authorities Lord Roskill was content to accept that there can be an infliction of grievous bodily
harm contrary to s 20 without an assault being committed. For example, grievous bodily harm could be inflicted by creating
panic. Another example provided to your Lordships in the course of the argument in the current appeals was interfering with the
braking mechanism of a car, so as to cause the driver to be involved in an accident and thus suffer injuries. These are somewhat
far-fetched examples. The allegation of inflicting grievous bodily harm or for that matter wounding, as was observed by
Glidewell LJ, giving the judgment of the court in R v Savage [1991] 2 All ER 220 at 224, [1991] 2 WLR 418 at 421, inevitably
imports or includes an allegation of assault, unless there are some quite extraordinary facts.
The critical question remained: do the allegations in a s 20 charge include either expressly or by implication allegations of
assault occasioning actual bodily harm? As to this, Lord Roskill concluded ([1983] 3 All ER 448 at 455, [1984] AC 242 at 261):
710

If, inflicting can, as the cases show, include inflicting by assault, then, even though such a charge may not
necessarily do so, I do not for myself see why on a fair reading of s 6(3) these allegations do not at least impliedly include
inflicting by assault. That is sufficient for present purposes, though I also regard it as also a possible view that those
former allegations expressly include the other allegations. (Lord Roskills emphasis).
 I respectfully agree with this reasoning and accordingly reject the submission that R v Wilson (Clarence) was wrongly
decided. I would therefore answer the first of the certified questions in R v Savage in the affirmative. A verdict of guilty of
assault occasioning actual bodily harm is a permissible alternative verdict on a count alleging unlawful wounding contrary to s 20
of the 1861 Act.
II Can a verdict of assault occasioning actual bodily harm be returned upon proof of an assault together with proof of the fact
that actual bodily harm was occasioned by the assault, or must the prosecution also prove that the defendant intended to cause
some actual bodily harm or was reckless as to whether such harm would be caused?
Your Lordships are concerned with the mental element of a particular kind of assault, an assault occasioning actual bodily
harm. It is common ground that the mental element of assault is an intention to cause the victim to apprehend immediate and
unlawful violence or recklessness whether such apprehension be caused (see R v Venna [1975] 3 All ER 788, [1976] QB 421). It
is of course common ground that Mrs Savage committed an assault upon Miss Beal when she threw the contents of her glass of
beer over her. It is also common ground that however the glass came to be broken and Miss Beals wrist thereby cut, it was, on
the finding of the jury, Mrs Savages handling of the glass which caused Miss Beal actual bodily harm. Was the offence thus
established or is there a further mental state that has to be established in relation to the bodily harm element of the offence?
Clearly the section, by its terms, expressly imposes no such a requirement. Does it do so by necessary implication? It uses
neither the word intentionally nor the word maliciously. The words occasioning actual bodily harm are descriptive of the
word assault, by reference to a particular kind of consequence.
In neither R v Savage nor R v Spratt nor in R v Parmenter was the courts attention invited to the decision of the Court of
Appeal in R v Roberts (1972) 56 Cr App R 95. This is perhaps explicable on the basis that this case is not referred to in the index
to Archbolds Criminal Pleading, Evidence and Practice (43rd edn, 1988). The relevant text, states (para 20117): The mens rea
required [for actual bodily harm] is that required for common assault, without any authority being provided for this proposition.
It is in fact R v Roberts which provides authority for this proposition. Roberts was tried on an indictment which alleged that
he indecently assaulted a young woman. He was acquitted on that charge, but convicted of assault occasioning actual bodily
harm to her. The girls complaint was that while travelling in the defendants car he sought to make advances towards her and
then tried to take her coat off. This was the last straw and, although the car was travelling at some speed, she jumped out and
sustained injuries. The defendant denied he had touched the girl. He had had an argument with her and in the course of that
argument she suddenly opened the door and jumped out. In his direction to the jury the chairman of quarter sessions stated: If
you are satisfied that he tried to pull off her coat and as a result she jumped out of the moving car then your verdict is guilty.
It was contended on behalf of the appellant that this direction was wrong since 711 the chairman had failed to tell the jury
that they must be satisfied that the appellant foresaw that she might jump out of the car as a result of his touching her before they
could convict. The court rejected that submission. The test was, said the court (at 102):

Was it [the action of the victim which resulted in actual bodily harm] the natural result of what the alleged assailant
said and did, in the sense that it was something that could reasonably have been foreseen as the consequence of what he
was saying or doing? As it was put in one of the old cases, it had got to be shown to be his act, and if of course the victim
does something so daft, in the words of the appellant in this case, or so unexpected, not that this particular assailant did
not actually foresee it but that no reasonable man could be expected to foresee it, then it is only in a very remote and unreal
sense a consequence of his assault, it is really occasioned by a voluntary act on the part of the victim which could not
reasonably be foreseen and which breaks the chain of causation between the assault and the harm or injury.

Accordingly, no fault was found in the following direction of the chairman to the jury (at 103):

If you accept the evidence of the girl in preference to that of the man, that means that there was an assault occasioning
actual bodily harm, that means that she did jump out as a direct result of what he was threatening her with, and what he was
doing to her, holding her coat, telling her that he had beaten up girls who had refused his advances, and that means that
through his acts he was in law and in fact responsible for the injuries which were caused to her by her decision, if it can be
called that, to get away from his violence, his threats, by jumping out of the car.

Thus, once the assault was established, the only remaining question was whether the victims conduct was the natural
consequence of that assault. The words occasioning raised solely a question of causation, an objective question which does not
involve inquiring into the accuseds state of mind.
In R v Spratt [1991] 2 All ER 210 at 219, [1990] 1 WLR 1073 at 1082 McCowan LJ said:

However, the history of the interpretation of the 1861 Act shows that, whether or not the word maliciously appears
in the section in question, the courts have consistently held that the mens rea of every type of offence against the person
covers both actual intent and recklessness, in the sense of taking the risk of harm ensuing with foresight that it might
happen.

McCowan LJ then quoted a number of authorities for that proposition. The first is R v Ward (1871) LR 1 CCR 356, but that
was a case where the prisoner was charged with wounding with intent (s 18) and convicted of malicious wounding (s 20); next, R
v Bradshaw (1878) 14 Cox CC 83, but that was a case where the accused was charged with manslaughter, which has nothing to
do with a s 47 case. Then R v Cunningham [1957] 2 All ER 412, [1957] 2 QB 396 is quoted, a case under s 23 of the Act
concerned with unlawfully and maliciously administering etc a noxious thing which endangers life. And, finally, R v Venna
[1975] 3 All ER 788, [1976] QB 421, in which there was no issue as to whether in a s 47 case, recklessness had to extend to
actual bodily harm. Thus, none of the cases cited was concerned with the mental element required in s 47 cases. Nevertheless,
the Court of Appeal in R v Parmenter [1991] 2 All ER 225 at 232, [1991] 2 WLR 408 at 415 preferred the decision in R v Spratt
[1991] 2 All ER 210, [1990] 1 WLR 1073 to that of R v Savage [1991] 2 All ER 220, [1991] 2 WLR 418 because the 712 former
was founded on a line of authority leading directly to the conclusion there expressed.
My Lords, in my respectful view, the Court of Appeal in R v Parmenter was wrong in preferring the decision in R v Spratt.
The decision in R v Roberts (1972) 56 Cr App R 95 was correct. The verdict of assault occasioning actual bodily harm may be
returned upon proof of an assault together with proof of the fact that actual bodily harm was occasioned by the assault. The
prosecution are not obliged to prove that the defendant intended to cause some actual bodily harm or was reckless as to whether
such harm would be caused.
III In order to establish an offence under s 2 of the 1861 Act, must the prosecution prove that the defendant actually foresaw that
his act would cause harm, or is it sufficient to prove that he ought so to have foreseen?
Although your Lordships attention has been invited to a plethora of decided cases, the issue is a narrow one. Is the decision
of the Court of Criminal Appeal in R v Cunningham [1957] 2 All ER 412, [1957] 2 QB 396 still good law, subject only to a gloss
placed upon it by the Court of Appeal, Criminal Division in R v Mowatt [1967] 3 All ER 47, [1968] 1 QB 421, or does the later
decision of your Lordships House in R v Caldwell [1981] 1 All ER 961, [1982] AC 341 provide the answer to this question?
These three decisions require detailed consideration.

R v Cunningham
 As previously stated this case concerned a charge brought under s 23 of the 1861 Act, which makes it an offence unlawfully
and maliciously to administer etc to any person any poison or other noxious things so as to endanger life or inflict grievous
bodily harm. Cunningham, in stealing a gas meter and its contents from the cellar of a house, fractured a gas pipe, causing coal
gas to escape. This percolated through the cellar wall to the adjoining house and entered a bedroom, with the result that Mrs
Wade, who was asleep, inhaled a considerable quantity of the gas, with the result that her life was endangered. Cunninghams
conviction was quashed because of the misdirection by the trial judge as to the meaning of maliciously in s 23 of the Act.
Byrne J in a reserved judgment given on behalf of the court, accepted as accurate the following statement of the law
propounded by Professor CS Kenny in the first edition of his Outlines of Criminal Law published in 1902 and set out in the 16th
edition (1952) p 186:

in any statutory definition of a crime, malice must be taken not in the old vague sense of wickedness in general,
but as requiring either (1) an actual intention to do the particular kind of harm that in fact was done, or (2) recklessness as
to whether such harm should occur or not (i.e. the accused has foreseen that the particular kind of harm might be done, and
yet has gone on to take the risk of it). It is neither limited to, nor does it indeed require any ill-will towards the person
injured.

The court held that the jury should have been left to decide whether, even if the appellant did not intend the injury to Mrs Wade,
he foresaw that the removal of the gas meter might cause injury to someone but nevertheless removed it.

R v Caldwell
Mr Sedley QC has not invited your Lordships to reconsider the majority decision of your Lordships House. He chose a
much less ambitious task. He submits that R v Cunningham cannot be bad law, since it is inconceivable that your 713 Lordships
House, in its majority judgment, would have steered such a careful path around it. Your Lordships, having power to overrule it,
would, so he submits, have felt obliged to do so in order to avoid creating a false double standard of recklessness. He further
submits that it is significant that Lord Diplock, whose speech represented the views of the majority of your Lordships, nowhere
suggests that his own judgment in R v Mowatt [1967] 3 All ER 47, [1968] 1 QB 421, which clarified or modified R v
Cunningham, was of doubtful validity.
In the light of these submissions it is necessary to deal in some detail with R v Caldwell [1981] 1 All ER 961, [1982] AC
341.
The case was principally concerned with the meaning of the word reckless in a statute enacted less than ten years before
the decision of your Lordships House. Caldwell was indicted upon two counts of arson under s 1(1) and (2) respectively of the
Criminal Damage Act 1971. The section reads as follows:

(1) A person who without lawful excuse destroys or damages any property belonging to another intending to destroy or
damage any such property or being reckless as to whether any such property would be destroyed or damaged shall be guilty
of an offence.
(2) A person who without lawful excuse destroys or damages any property, whether belonging to himself or another
(a) intending to destroy or damage any property or being reckless as to whether any property would be destroyed or
damaged; and (b) intending by the destruction or damage to endanger the life of another or being reckless as to whether the
life of another would be thereby endangered; shall be guilty of an offence.
(3) An offence committed under this section by destroying or damaging property by fire shall be charged as arson.

Count 1 contained the charge of the more serious offence under s 1(2), which required intent to endanger the life of another
or recklessness as to whether the life of another would be endangered. To this count Cunningham pleaded not guilty. He relied
upon his self-induced drunkenness as a defence, on the ground that the offence under sub-s (2) was one of specific intent in the
sense in which that expression was used in speeches in your Lordships House in DPP v Majewski [1976] 2 All ER 142, [1977]
AC 443. Count 2 contained the lesser offence under s 1(1) to which he pleaded guilty.
The recorder directed the jury that self-induced drunkenness was not a defence to count 1, and the jury convicted him on this
count. The recorder sentenced him to three years imprisonment on count 1 but passed no sentence on count 2, the lesser offence,
to which he had pleaded guilty. On appeal, the Court of Appeal held that her direction to the jury as to the effect of self-induced
drunkenness on the charge in count 1 was wrong. It set aside the conviction on that count, but left the sentence of three years
imprisonment unchanged as it considered it to be an appropriate sentence on count 2.
The question of law certified for the opinion of Your Lordships House was:

Whether evidence of self-induced intoxication can be relevant to the following questions(a) Whether the defendant
intended to endanger the life of another; and (b) Whether the defendant was reckless as to whether the life of another would
be endangered, within the meaning of Section 1(2)(b) of the Criminal Damage Act 1971.

Your Lordships (Lord Diplock, Lord Keith of Kinkel and Lord Roskill) dismissed the appeal, holding that, if a charge under
s 1(2) of the Act was so framed as to charge the defendant only with the intent to endanger life, evidence of self-induced
drunkenness could be relevant as a defence, but (Lord Wilberforce 714 and Lord Edmund-Davies dissenting) not when the charge
included a reference to being reckless as to whether life would be endangered.
At the outset of his speech Lord Diplock drew attention to the fact that the certified question recognised that under s 1(2)( b)
there are two alternative states of mind as respects endangering the life of another, and that the existence of either of them on the
part of the accused is sufficient to constitute the mens rea needed to convert the lesser offence under s 1(1) into the graver offence
under s 1(2). One intention is that a particular thing should happen in consequence of the actus reus, viz that the life of another
person should be endangered and the other intention is recklessness as to whether that particular thing should happen or not.
Lord Diplock then continued ([1981] 1 All ER 961 at 964965, [1982] AC 341 at 350351):

My Lords, the Criminal Damage Act 1971 replaced almost in their entirety the many and detailed provisions of the
Malicious Damage Act 1861. Its purpose, as stated in its long title was to revise the law of England and Wales as to
offences of damage to property [Lord Diplocks emphasis]. As the brevity of the Act suggests, it must have been hoped
that it would also simplify the law. In the 1861 Act, the word consistently used to describe the mens rea that was a
necessary element in the multifarious offences that the Act created was maliciously, a technical expression, not readily
intelligible to juries, which became the subject of considerable judicial exegesis. This culminated in a judgment of the
Court of Criminal Appeal in R v Cunningham [1957] 2 All ER 412 at 414, [1957] 2 QB 396 at 399 which approved, as an
accurate statement of the law, what had been said by Professor Kenny in his Outlines of Criminal Law (1st Edn, 1902):
in any statutory definition of a crime malice must be taken as requiring either (i) an actual intention to do the
particular kind of harm that in fact was done, or (ii) recklessness as to whether such harm should occur or not (i.e. the
accused has foreseen that the particular kind of harm might be done, and yet has gone on to take the risk of it) My
Lords, in this passage Professor Kenny was engaged in defining for the benefit of students the meaning of malice as a
term of art in criminal law. To do so he used ordinary English words in their popular meaning. Among the words he used
was recklessness, the noun derived from the adjective reckless, of which the popular or dictionary meaning is
 careless, regardless, or heedless of the possible harmful consequences of ones acts. It presupposes that, if thought were
given to the matter by the doer before the act was done, it would have been apparent to him that there was a real risk of its
having the relevant harmful consequences; but, granted this, recklessness covers a whole range of states of mind from
failing to give any thought at all to whether or not there is any risk of those harmful consequences, to recognising the
existence of the risk and nevertheless deciding to ignore it. Conscious of this imprecision in the popular meaning of
recklessness as descriptive of a state of mind, Professor Kenny, in the passage quoted, was, as it seems to me, at pains to
indicate by the words in brackets the particular species within the genus, reckless states of mind, that constituted malice
in criminal law. This parenthetical restriction on the natural meaning of recklessness was necessary to an explanation of
the meaning of the adverb maliciously when used as a term of art in the description of an offence under the Malicious
Damage Act 1861 (which was the matter in point in R v Cunningham); but it was not directed to and consequently has no
bearing on the meaning of the adjective reckless in s 1 of the Criminal Damage Act 1971. To use it for that purpose can,
in my view, only be misleading.
715

The distinction which Lord Diplock was drawing between the meaning of the adverb maliciously when used as a term of
art in the description of an offence under the 1861 Act and that of the adjective reckless in s 1 of the 1971 Act was re-
emphasised by him in the following passage ([1981] 1 All ER 961 at 965, [1982] AC 341 at 351352):

My Lords, the restricted meaning that the Court of Appeal in R v Cunningham had placed on the adverb maliciously
in the Malicious Damage Act 1861 in cases where the prosecution did not rely on an actual intention of the accused to
cause the damage that was in fact done called for a meticulous analysis by the jury of the thoughts that passed through the
mind of the accused at or before the time he did the act that caused the damage, in order to see on which side of a narrow
dividing line they fell. If it had crossed his mind that there was a risk that someones property might be damaged but,
because his mind was affected by rage or excitement or confused by drink, he did not appreciate the seriousness of the risk
or trusted that good luck would prevent its happening, this state of mind would amount to malice in the restricted meaning
placed on that term by the Court of Appeal; whereas if, for any of these reasons, he did not even trouble to give his mind to
the question whether there was any risk of damaging the property, this state of mind would not suffice to make him guilty
of an offence under the Malicious Damage Act 1861. Neither state of mind seems to me to be less blameworthy than the
other; but, if the difference between the two constituted the distinction between what does and what does not in legal theory
amount to a guilty state of mind for the purposes of a statutory offence of damage to property, it would not be a practical
distinction for use in a trial by jury. The only person who knows what the accuseds mental processes were is the accused
himself, and probably not even he can recall them accurately when the rage or excitement under which he acted has passed,
or he has sobered up if he were under the influence of drink at the relevant time. If the accused gives evidence that because
of his rage, excitement or drunkenness the risk of particular harmful consequences of his acts simply did not occur to him,
a jury would find it hard to be satisfied beyond reasonable doubt that his true mental process was not that, but was the
slightly different mental process required if one applies the restricted meaning of being reckless as to whether something
would happen, adopted by the Court of Appeal in R v Cunningham. Mr Lords, I can see no reason why Parliament when it
decided to revise the law as to offences of damage to property should go out of its way to perpetuate fine and impracticable
distinctions such as these, between one mental state and another. One would think that the sooner they were got rid of the
better.

Lord Diplock then reviewed decisions which had been made under s 1(1) of the new Act in which the prosecutions case was
based upon the accuseds having been reckless as to whether property would be destroyed or damaged. R v Stephenson
[1979] 2 All ER 1198, [1979] QB 695 was the last of such cases in which the Court of Appeal, Criminal Division itself reviewed
a number of cases, mainly in the field of civil law, which cases did not disclose a uniform judicial use of the terms. Lord Diplock
concluded that the court had made the assumption that although Parliament in replacing the 1861 Act by the 1971 Act had
discarded the word maliciously as descriptive of the mens rea of the offences of which the actus reus is damaging property, in
favour of the more explicit phrase intending to destroy or damage any such property or being reckless as to whether any such
property would be destroyed, it nevertheless intended the words to be interpreted in precisely the same sense as that in which the
single adverb maliciously had 716 been construed by Professor Kenny in the passage that received the subsequent approval of
the Court of Appeal in R v Cunningham. Lord Diplock then continued ([1981] 1 All ER 961 at 966, [1982] AC 341 at 353):

My Lords, I see no warrant for making any such assumption in an Act whose declared purpose is to revise the then
existing law as to offences of damage to property, not to perpetuate it. Reckless as used in the new statutory definition of
the mens rea of these offences is an ordinary English word. It had not by 1971 become a term of legal art with some more
limited esoteric meaning than that which it bore in ordinary speech, a meaning which surely includes not only deciding to
ignore a risk of harmful consequences resulting from ones acts that one has recognised as existing, but also failing to give
any thought to whether or not there is any such risk in circumstances where, if any thought were given to the matter, it
would be obvious that there was. If one is attaching labels, the latter state of mind is neither more nor less subjective
than the first. But the label solves nothing. It is a statement of the obvious; mens rea is, by definition, a state of mind of
the accused himself at the time he did the physical act that constitutes the actus reus of the offence; it cannot be the mental
state of some non-existent, hypothetical person. Nevertheless, to decide whether someone has been reckless whether
harmful consequences of a particular kind will result from his act, as distinguished from his actually intending such
harmful consequences to follow, does call for some consideration of how the mind of the ordinary prudent individual
would have reacted to a similar situation. If there were nothing in the circumstances that ought to have drawn the attention
of an ordinary prudent individual to the possibility of that kind of harmful consequence, the accused would not be
described as reckless in the natural meaning of that word for failing to address his mind to the possibility; nor, if the risk
of the harmful consequences was so slight that the ordinary prudent individual on due consideration of the risk would not
be deterred from treating it as negligible, could the accused be described as reckless in its ordinary sense if, having
considered the risk, he decided to ignore it. (In this connection the gravity of the possible harmful consequences would be
an important factor. To endanger life must be one of the most grave.) So to this extent, even if one ascribes to reckless
only the restricted meaning, adopted by the Court of Appeal in Stephenson [1979] 2 All ER 1198, [1979] QB 695 and
Briggs [1977] 1 All ER 475, [1977] 1 WLR 605, of foreseeing that a particular kind of harm might happen and yet going
on to take the risk of it, it involves a test that would be described in part as objective in current legal jargon. Questions of
criminal liability are seldom solved by simply asking whether the test is subjective or objective.

Lord Diplock then considered what should be the proper direction to the jury where a person charged with an offence under
s 1(1) of the Criminal Damage Act 1971 is alleged to have been reckless as to whether any such property would be destroyed or
damaged. He concluded that the jury should be directed that such a person is reckless within the meaning of s 1(1) if (1) he does
an act which in fact creates an obvious risk that property will be destroyed or damaged and (2) when he does this act he either has
not given any thought to the possibility of there being any such risk or has recognised that there was some risk involved and has
nonetheless gone on to do it.
 In his dissenting speech, with which Lord Wilberforce concurred, Lord Edmund-Davies said ([1981] 1 All ER 961 at 969,
[1982] AC 341 at 357): In time, what was originally the common coinage of speech acquires a different value in the pocket of
the lawyer than when in the laymans purse. He concluded that the 717 draftsman of the 1971 Act had in mind the Law
Commissions definition of recklessness to be found in Codification of the Criminal Law: General Principles: The Mental
Element in Crime (Working Paper no 31 (1970)) and in the much respected decision of R v Cunningham. Thus, in his view,
unlike negligence, which has to be judged objectively, recklessness involves foresight of consequences, combined with an
objective judgment of the reasonableness of the risk taken. Accordingly, if a defendant says of a particular risk it never crossed
my mind a jury could not on those words alone properly convict him of recklessness simply because they considered that the risk
ought to have crossed his mind, though his words might well lead to a finding of negligence.
A few weeks after hearing the argument in R v Caldwell, your Lordships in R v Lawrence [1981] 1 All ER 974, [1982] AC
510 had to consider the word recklessly in ss 1 and 2 of the Road Traffic Act 1972 as amended. Judgment in that appeal was in
fact given on the same day as judgment in R v Caldwell. It was a unanimous decision of the House, the leading speech again
being given by Lord Diplock. I need not trouble your Lordships with the facts of that case. Lord Diplock in referring to R v
Caldwell said that the conclusion reached by the majority of your Lordships was that the adjective reckless when used in a
criminal statute, ie the Criminal Damage Act 1971, had not acquired a special meaning as a term of legal art, but bore its popular
or dictionary meaning of careless, regardless or heedless of the possible harmful consequences of ones acts. The same must be
true of the adverbial derivative recklessly when used in relation to driving a motor vehicle. As to the mens rea of the offence, he
said ([1981] 1 All ER 974 at 982, [1982] AC 510 at 526):

I turn now to the mens rea. My task is greatly simplified by what has already been said about the concept of
recklessness in criminal law in R v Caldwell. Warning was there given against adopting the simplistic approach of treating
all problems of criminal liability as soluble by classifying the test of liability as being either subjective or objective.
Recklessness on the part of the doer of an act does presuppose that there is something in the circumstances that would have
drawn the attention of an ordinary prudent individual to the possibility that his act was capable of causing the kind of
serious harmful consequences that the section which creates the offence was intended to prevent, and that the risk of those
harmful consequences occurring was not so slight that an ordinary prudent individual would feel justified in treating them
as negligible. It is only when this is so that the doer of the act is acting recklessly if, before doing the act, he either fails
to give any thought to the possibility of there being any such risk or, having recognised that there was such risk, he
nevertheless goes on to do it. In my view, an appropriate instruction to the jury on what is meant by driving recklessly
would be that they must be satisfied of two things: first, that the defendant was in fact driving the vehicle in such a manner
as to create an obvious and serious risk of causing physical injury to some other person who might happen to be using the
road or of doing substantial damage to property; and, second, that in driving in that manner the defendant did so without
having given any thought to the possibility of their being any such risk or, having recognised that there was some risk
involved, had none the less gone on to take it.

Some two years later in R v Seymour [1983] 2 All ER 1058, [1983] 2 AC 493 your Lordships House again considered R v
Caldwell, as followed in R v Lawrence, in a case in which a defendant was convicted of manslaughter when driving a lorry. An
appeal was made to the Court of Appeal upon the ground that the trial 718 judge had misdirected the jury in that where
manslaughter was charged, and the charge arose out of the reckless driving on the highway, the direction propounded in R v
Lawrence which he applied was inadequate, and that in such circumstances the jury should be directed that the prosecution must
prove that the defendant recognised that some risk was involved and had nevertheless proceeded to take the risk. The appeal was
dismissed by the Court of Appeal and by your Lordships.
Before returning to the submission made by Mr Sedley, to which I have referred above, I think it is now convenient to go
back in time to the decisions of the Court of Appeal in R v Mowatt [1967] 3 All ER 47, [1968] 1 QB 421, to which reference has
already been made. The facts of that case were simple. On 30 September 1966 in the early hours of the morning the defendant
and a companion stopped a third man in the street and asked him whether there was a pub anywhere nearby. The defendants
companion then snatched a ___5 note from the third mans breast-pocket and ran off. The third man chased him without success
and returned to the defendant, grasping him by the lapels and demanding to know where his companion had gone. The defendant
then struck the third man, knocking him down. Two police officers saw the defendant sit astride the third man and strike him
repeated blows in the face, pull him to his feet and strike him again, knocking him down and rendering him almost unconscious.
The defendant admitted inflicting the first blow but claimed it was self-defence. He was tried on an indictment which included a
count for wounding with intent to do grievous bodily harm contrary to s 18 of the Offences against the Person Act 1861. In
summing up on this count the trial judge told the jury they were entitled to return a verdict of unlawful wounding under s 20 of
the Act. However in his summing up, while explaining the meaning of the word unlawfully so far as it was relevant to the
defence of self-defence, he gave no direction as to the meaning of maliciously.
The importance of this case is that the Court of Appeal considered R v Cunningham and, although modifying or explaining
an important feature of that decision, in no way queried its validity. The judgment of the Court of Appeal, to which I have
already made references, was, as previously stated, given by Diplock LJ, as he then was. It is of course one of Mr Sedleys points
that, although R v Mowatt was not referred to in R v Caldwell, it was most unlikely that its existence was overlooked, particularly
by Lord Diplock. Diplock LJ observed that unlawfully and maliciously was a fashionable phrase of parliamentary draftsmen in
1861 (see [1967] 3 All ER 47 at 49, [1968] 1 QB 421 at 425). It ran as a theme, with minor variations, through the Malicious
Damage Act 1861, and the Offences against the Person Act 1861. He then referred to the very special facts in R v Cunningham
and observed:

No doubt on these facts the jury should have been instructed that they must be satisfied before convicting the accused
that he was aware that physical harm to some human being was a possible consequence of his unlawful act in wrenching
off the gas meter. In the words of the court maliciously in a statutory crime postulates foresight of consequence (see
[1957] 2 All ER 412 at 414, [1957] 2 QB 396 at 399), and on this proposition we do not wish to cast any doubt. (My
emphasis.)

Subsequently, he added ([1967] 3 All ER 47 at 50, [1968] 1 QB 421 at 426):

In the offence under s. 20, and in the alternative verdict which may be given on a charge under s. 18for neither of
which is any specific intent requiredthe word maliciously does import on the part of the person who unlawfully inflicts
the wound or other grievous bodily harm an awareness 719that his act may have the consequence of causing some
physical harm to some other person. That is what is meant by the particular kind of harm in the citation from
PROFESSOR KENNYS OUTLINES OF CRIMINAL LAW (18th edn, 1962, para 158a, p 202). It is quite unnecessary
that the accused should have foreseen that his unlawful act might cause physical harm of the gravity described in the
section, i.e., a wound or serious physical injury. It is enough that he should have foreseen that some physical harm to some
person, albeit of a minor character, might result. (My emphasis).

Mr Sedley submitted that in R v Caldwell your Lordships House could have followed either of two possible paths to its
conclusion as to the meaning of recklessly in the 1971 Act. These were: (a) to hold that R v Cunningham (and R v Mowatt)
were wrongly decided and to introduce a single test, wherever recklessness was an issue; or (b) to accept that R v Cunningham
(subject to the R v Mowatt gloss to which no reference was made) correctly states the law in relation to the Offences against the
Persons Act 1861, because the word maliciously in that statute was a term of legal art which imported into the concept of
recklessness a special restricted meaning, thus distinguishing it from reckless or recklessly in modern revising statutes then
before the House, where those words bore their then popular or dictionary meaning.
I agree with Mr Sedley that manifestly it was the latter course which the House followed. Therefore in order to establish an
offence under s 20 the prosecution must prove either that the defendant intended or that he actually foresaw that his act would
cause harm.
IV In order to establish an offence under s 20 is it sufficient to prove that the defendant intended or foresaw the risk of some
physical harm or must he intend or foresee either wounding or grievous bodily harm?
It is convenient to set out once again the relevant part of the judgment of Diplock LJ in R v Mowatt [1967] 3 All ER 47 at
50, [1968] 1 QB 421 at 426. Having considered Professor Kennys statement, which I have quoted above, he then said:

In the offence under s. 20 for which [no] specific intent is requiredthe word maliciously does import an
awareness that his act may have the consequence of causing some physical harm to some other person. That is what is
meant by the particular kind of harm in the citation from PROFESSOR KENNYS OUTLINES OF CRIMINAL LAW
(18th edn, 1962, para 158a, p 202). It is quite unnecessary that the accused should have foreseen that his unlawful act
might cause physical harm of the gravity described in the section, i.e. a wound or serious physical injury. It is enough that
he should have foreseen that some physical harm to some person, albeit of a minor character, might result. (My
emphasis.)

Mr Sedley submits that this statement of the law is wrong. He contends that, properly construed, the section requires
foresight of a wounding or grievous bodily harm. He drew your Lordships attention to criticisms of R v Mowatt made by
Professor Glanville-Williams and by Professor J C Smith in their textbooks and in articles or commentaries. They argue that a
person should not be criminally liable for consequences of his conduct unless he foresaw a consequence falling into the same
legal category as that set out in the indictment.
Such a general principle runs contrary to the decision in R v Roberts (1972) 56 Cr App R 95, which I have already stated to
be, in my opinion, correct. The 720 contention is apparently based on the proposition that, as the actus reus of a s 20 offence is
the wounding or the infliction of grievous bodily harm, the mens rea must consist of foreseeing such wounding or grievous
bodily harm. But there is no such hard and fast principle. To take but two examples, the actus reus of murder is the killing of the
victim, but foresight of grievous bodily harm is sufficient and, indeed, such bodily harm need not be such as to be dangerous to
life. Again, in the case of manslaughter death is frequently the unforeseen consequence of the violence used.
The argument that, as ss 20 and 47 have both the same penalty, this somehow supports the proposition that the foreseen
consequences must coincide with the harm actually done, overlooks the oft-repeated statement that this is the irrational result of
this piecemeal legislation. The Act is a rag-bag of offences brought together from a wide variety of sources with no attempt, as
the draftsman frankly acknowledged, to introduce consistency as to substance or as to form (see Professor J C Smith in his
commentary on R v Parmenter ([1991] Crim LR 43)).
If s 20 was to be limited to cases where the accused does not desire but does foresee wounding or grievous bodily harm, it
would have a very limited scope. The mens rea in a s 20 crime is comprised in the word maliciously. As was pointed out by
Lord Lane CJ, giving the judgment of the Court of Appeal in R v Sullivan [1981] Crim LR 46, the particular kind of harm in the
citation from Professor Kenny was directed to harm to the person as opposed to harm to property. Thus it was not concerned
with the degree of the harm foreseen. It is accordingly in my judgment wrong to look upon the decision in R v Mowatt [1967] 3
All ER 47, [1968] 1 QB 421 as being in any way inconsistent with the decision in R v Cunningham [1957] 2 All ER 412, [1957] 2
QB 396.
My Lords, I am satisfied that the decision in R v Mowatt was correct and that it is quite unnecessary that the accused should
either have intended or have foreseen that his unlawful act might cause physical harm of the gravity described in s 20, ie a wound
or serious physical injury. It is enough that he should have foreseen that some physical harm to some person, albeit of a minor
character, might result.
In the result I would dismiss the appeal in Savages case but allow the appeal in Parmenters case, but only to the extent of
substituting, in accordance with the provisions of s 3(2) of the Criminal Appeal Act 1968, verdicts of guilty of assault occasioning
actual bodily harm contrary to s 47 of the 1861 Act for the four s 20 offences of which he was convicted.

LORD JAUNCEY OF TULLICHETTLE. My Lords, I have had the opportunity of considering in draft the speech to be
delivered by my noble and learned friend Lord Ackner. I agree with it, and for the reasons which he gives I, too, would dismiss
the appeal in R v Savage and allow that in R v Parmenter to the extent which he proposes.

LORD LOWRY. My Lords, I have had the opportunity of considering in draft the speech to be delivered by my noble and
learned friend Lord Ackner. I agree with it, and for the reasons which he gives I, too, would dismiss the appeal in R v Savage and
allow that in R v Parmenter to the extent which he proposes.

Appeal in R v Savage dismissed; appeal in R v Parmenter allowed in part and conviction of assault occasioning actual bodily
harm substituted.

Solicitors: Judge Sykes & Harrison agents for J P Hall & Co, Spennymoor; Crown Prosecution Service; Crown Prosectuion
Service; E Edwards Son & Noice, Billericay.

Mary Rose Plummer Barrister.

721
[1991] 4 All ER 722

Black v Yates
CONFLICT OF LAWS

QUEENS BENCH DIVISION

POTTER J
21, 22 FEBRUARY, 10, 13 MARCH, 5 MAY 1989
Conflict of laws Foreign judgment Recognition by English courts Conclusiveness in English proceedings Recognition of
foreign judgment on same cause of action between same parties Plaintiffs husband killed in Spain in motor cycle accident
caused by defendants admitted negligence Plaintiff and her husband and defendant resident in England Criminal court in
Spain awarding compensation to dependants Dependants participating in Spanish proceedings Whether plaintiff entitled to
bring action in England against defendant on same cause of action for dependants and estate of deceased Whether action in
England barred by Spanish judgment Civil Jurisdiction and Judgments Act 1982, s 34.

The plaintiffs husband died in a motor cycle accident in Spain when he was riding as a pillion passenger with the defendant, who
admitted that the accident had been caused by his negligent driving of the motor cycle. The plaintiff, her husband and the
defendant were all resident in England at the time and the defendant was insured in England. The judicial investigating officer of
the district in Spain where the deceased was killed issued a writ of investigation to determine the criminal responsibility for the
accident and the civil liability to the dependants of the deceased. Under Spanish law the criminal court dealing with the
culpability of a defendant normally dealt with civil claims against him at the same time unless a party having a civil tort claim
reserved the right to seek damages in a separate civil claim. The plaintiff appointed lawyers in England and Spain to represent
the interests of herself and her infant children as the dependants of the deceased and executed a power of attorney in favour of a
Spanish lawyer to act on behalf of herself and the children in regard to both civil and criminal matters before the Spanish court
although she and her English lawyer intended that the claim for damages would be brought in England, where the amount of
damages recoverable was likely to be substantially higher than in Spain. The English lawyer was unaware that an award in the
Spanish proceedings might preclude recovery in England and the Spanish lawyer was given no information to put before the
court for the assessment of damages based on the dependency while the plaintiff, unaware that the right to seek damages in a
separate civil claim had to be expressly reserved, did not do so. The proceedings in the Spanish court were conducted by the
public prosecutor in relation to both the criminal and the civil liability of the defendant. The plaintiff had the right to be heard in
relation to both issues and the plaintiffs Spanish lawyer was present at the hearing but left the conduct of proceedings to the
prosecutor. The Spanish court found the defendant guilty of a minor offence equivalent to driving without due care and attention
and, having fined him, the court then awarded compensation of approximately 18,000 to the dependants. Subsequently the
plaintiff issued a writ in England claiming damages against the defendant under the Fatal Accidents Act 1976 on behalf of the
dependants and under the Law Reform (Miscellaneous Provisions) Act 1934 on behalf of the estate of the deceased. The
defendant contended that payment of the sums due under the Spanish judgment meant that the plaintiffs claim was barred by
both s 34a of the Civil Jurisdiction and Judgments Act 1982, which provided that proceedings could not be brought in England on
a cause of action in respect of which an enforceable or recognisable 722 judgment had been given in the plaintiffs favour in
proceedings between the same parties or their privies in an overseas court, and the common law principle that a plaintiff could
not bring proceedings in England when he had already been paid under a judgment in a foreign court in respect of the same debt
or damages based on the same cause of action against the same defendant. The plaintiff contended that she was not barred under
s 34 of the 1982 Act from bringing an action in England since the judgment of the Spanish court was not in respect of the same
cause of action between parties in the same capacity because (i) the Spanish proceedings were initiated by the Spanish judicial
investigating officer for the purpose of establishing the criminal liability of the defendant and culminated in compensation for the
injured heirs whereas the cause of action in the English action was based on the establishment and assessment of dependency and
(ii) in the Spanish proceedings the plaintiff and the children were represented in their own names as natural legal persons whereas
in the English action the plaintiff was suing as the administratrix of the deceaseds estate.
________________________________________
a Section 34, so far as material, is set out at p 734 e, post

Held (1) Since the plaintiffs cause of action in Spain comprised the same elements of a fatal accident case in England and
Spanish law recognised the right of injured heirs to recover damages under precisely the heads of damage which were
recoverable by dependants under English law, the plaintiffs claim under the 1976 Act in respect of her own dependency had been
brought on a cause of action in respect of which judgment had already been given by the Spanish court, albeit her cause of action
had been decided in the Spanish criminal proceedings and she had not exercised her right to be heard on the issue of negligence
in those proceedings. Furthermore, since the Spanish court could have quantified and apportioned damages under the same heads
of damage as an English court had the plaintiffs lawyer been able to put the appropriate evidence before the court and since the
plaintiff, through her Spanish lawyer, had participated in the Spanish proceedings and as a prerequisite to recovery in those
proceedings had been obliged to prove the dependency of herself and her children, the Spanish proceedings were proceedings
between the same parties in which she had been in the same position as in proceedings under the 1976 Act notwithstanding that
she had not initiated those proceedings, they were not exclusively civil proceedings and she had appeared in the Spanish
proceedings on behalf of herself and her children as natural legal persons whereas she was suing in the English proceedings as
administratrix of her husbands estate. Moreover, the judgment of the Spanish court, being a final and conclusive judgment of a
foreign court of competent jurisdiction for a definite sum of money, was enforceable and/or entitled to recognition in England. It
followed that, all the conditions of s 34 of the 1982 Act for the barring of a claim under s 34 being satisfied, the plaintiffs claim
under the 1976 Act in respect of her own dependency was barred by s 34 of the 1982 Act. Those conditions also applied to bar
the plaintiffs claim under the common law principle of former recovery under a foreign judgment. The plaintiffs claim in
respect of her own dependency and/or personal interest would therefore be dismissed (see p 735 a to p 736 a f j, p 737 e to g, p
739 j to p 740 a c to f h j and p 741 c to e, post); Letang v Cooper [1964] 2 All ER 929 applied; Leggott v Great Northern Rly Co
[187480] All ER Rep 625, Marginson v Blackburn BC [1939] 1 All ER 273, Kohnke v Karger [1951] 2 All ER 179 and Chaplin
v Boys [1969] 2 All ER 1085 distinguished.
(2) However, since the plaintiffs claim under the 1934 Act had been brought on behalf of the estate for the deceaseds loss
of expectation of life and special damages and she had not pursued any claim of the deceased in the Spanish proceedings, that
claim was not barred by s 34 of the 1982 Act (see p 742 d e, post).
723
(3) Moreover, the childrens claim under the 1976 Act was not barred by s 34 of the 1982 Act since the court would not hold
the children bound by the power of attorney in favour of the Spanish lawyer because they were not aware of the steps being taken
on their behalf in the Spanish proceedings and had not signed or acknowledged the power of attorney and had not been in a
position to give independent consideration or informed consent to it or the authority of their mother to sign it on their behalf.
Furthermore, despite the mothers ostensible authority to bring proceedings in the Spanish court on behalf of the children and that
courts acceptance of that authority the English court retained jurisdiction to protect the children from the effects of the Spanish
judgment if that judgment was not in their interests. Given that the Spanish proceedings had been conducted on the basis of a
misunderstanding as to their effect, that the Spanish court had not been fully apprised of the dependency of the children and that
much higher damages would probably be recovered in England, the childrens claim would be allowed to proceed (see p 742 j to
p 743 d, p 744 f to j and p 745 c to f, post); Stephens v Dudbridge Ironworks Co Ltd [1904] 2 KB 225, Arabian v Tuffnall &
Taylor Ltd [1944] 2 All ER 317 and Jeffrey v Kent CC [1958] 3 All ER 155 applied.

Notes
For the conclusiveness of foreign judgments in personam, see 8 Halsburys Laws (4th edn) para 725, and for cases on the subject,
see 11 Digest (Reissue) 606607, 15051532.
For pleading a foreign judgment as a defence to an action brought in England, see 8 Halsburys Laws (4th edn) para 736, and
for cases on the subject, see 11 Digest (Reissue) 615617, 15861599.
For the Law Reform (Miscellaneous Provisions) Act 1934, see 17 Halsburys Statutes (4th edn) 312.
For the Fatal Accidents Act 1976, see 31 Halsburys Statutes (4th edn) 202.
For the Civil Jurisdiction and Judgments Act 1982, s 34, see 22 Halsburys Statutes (4th edn) 362.

Cases referred to in judgment

Arabian v Tuffnall & Taylor Ltd [1944] 2 All ER 317, [1944] KB 685.
Avery v London and North Eastern Rly Co [1938] 2 All ER 592, [1938] AC 606, HL.
Barber v Lamb (1860) 8 CBNS 95, 141 ER 110.
Carl-Zeiss-Stiftung v Rayner & Keeler Ltd (No 2) [1966] 2 All ER 536, [1967] 1 AC 853, [1966] 3 WLR 125, HL.
Chaplin v Boys [1969] 2 All ER 1085, [1971] AC 356, [1969] 3 WLR 322, HL.
Jeffrey v Kent CC [1958] 3 All ER 155, [1958] 1 WLR 927.
Kingstons (Duchess) Case (1776) 1 East PC 468, 2 Smith LC (7th edn, 1876) 792, [17751802] All ER Rep 623, 168 ER 175.
Kohnke v Karger [1951] 2 All ER 179, [1951] 2 KB 670.
Leggott v Great Northern Rly Co (1876) 1 QBD 599, [187480] All ER Rep 625, DC.
Letang v Cooper [1964] 2 All ER 929, [1965] 1 QB 232, [1964] 2 WLR 573, CA.
Marginson v Blackburn BC [1939] 1 All ER 273, [1939] 2 KB 426, CA.
Read v Brown (1888) 22 QBD 128, CA.
Stephens v Dudbridge Ironworks Co Ltd [1904] 2 KB 225, CA.
Taylor v Hollard [1902] 1 KB 676.

Cases also cited

Hoghton, Re, Hoghton v Fiddey (1874) LR 18 Eq 573.
McIlkenny v Chief Constable of West Midlands Police Force [1980] 2 All ER 227, [1980] QB 283, CA; affd sub nom Hunter v
Chief Constable of West Midlands [1981] 3 All ER 727, [1982] AC 529, HL.
Miller v British Road Services Ltd [1967] 1 All ER 1027, [1967] 1 WLR 443.
724
Nouvion v Freeman (1889) 15 App Cas 1, HL; affg (1887) 37 Ch D 244, CA.
Oliver v Woodroffe (1839) 4 M & W 650, 150 ER 1581.

Preliminary issue
By a writ indorsed with a statement of claim issued on 15 November 1984 the plaintiff, Antonia Ninette Hudson Black, as the
widow and co-administratrix of the estate of Roger Clement Black deceased, commenced an action under the Fatal Accidents Act
1976 on behalf of herself and the two children of the deceased and on behalf of the estate of the deceased under the Law Reform
(Miscellaneous Provisions) Act 1934 against the defendant, Philip Anthony Yates, claiming damages and consequential loss
arising from the death of the deceased in an accident in Spain on 8 July 1983 alleged to have been caused by the negligence of the
defendant. The plaintiff relied on the judgment of the district court at Puebla de Trives, Spain, on 24 May 1984 that the defendant
had been guilty of ordinary negligence. The defendant by his defence pleaded that the claim was barred by a payment made by
him pursuant to the Spanish judgment awarding compensation to the plaintiff and the children as the injured heirs of the
deceased, and/or the doctrine of res judicata, and/or estoppel, and/or pursuant to s 34 of the Civil Jurisdiction and Judgments Act
1982. On 26 February 1986 Master Warren ordered that the question of the defendants liability in the English action be tried as a
preliminary issue. The facts are set out in the judgment.

Alan Tyrrell QC and Anthony Snelson for the plaintiff.

Mark Strachan QC and Terence Walker for the defendant.

Cur adv vult

5 May 1989. The following judgment was delivered.

POTTER J.

INTRODUCTION
In these proceedings, which were commenced by specially indorsed writ on 15 November 1984, an unusual point arises
upon the liability of the defendant, Philip Anthony Yates, to pay damages to the plaintiff, Antonia Ninette Hudson Black, the
widow and co-administratrix of the estate of Roger Clement Black deceased, resulting from the death of the plaintiffs husband
(whom I shall call the deceased) in a motor cycle accident which occurred in Spain on 8 July 1983.
The plaintiffs causes of action, as set out in the writ and the statement of claim, are in respect of her bereavement and for
the benefit of herself and her two adopted children (Roman Jason Clement, born on 16 February 1972, and Thanh Cerian
Antonia, born on 18 June 1973), whom I shall call the children, as dependants of the deceased under the provisions of the Fatal
Accidents Act 1976, and for the benefit of the estate of the deceased under the provisions of the Law Reform (Miscellaneous
Provisions) Act 1934.
It is not disputed by the defendant that his negligent driving of a motor cycle on which the deceased was his pillion
passenger caused the death of the deceased. The issue as to liability arises in this way.
On 24 May 1984 in proceedings brought by the public prosecutor (which I shall call the Spanish proceedings) arising out
of the accident and tried before the judge of the district court at Puebla de Trives in Spain (which I shall call the district court)
the judge, having found the defendant guilty of a minor offence of simple imprudencia or ordinary negligence as defined by
the law of Spain, and having fined him 2,000 pesetas and formally rebuked him and suspended his driving licence for one month,
further ordered that he pay compensation to the 725 beneficiaries of the deceased in the sum of 4m pesetas (or approximately
18,000 at current exchange rates). In the Spanish proceedings the interests of the plaintiff and the children were represented by
a Spanish lawyer (instructed by the plaintiffs solicitor in London), who made submissions on her behalf in relation to the
question of compensation in circumstances to which I shall turn in detail shortly. In the result there is a plea by way of defence
that the plaintiff, by her intervention in those proceedings on her own behalf and on behalf of her children in order to obtain the
compensation payment that I have mentioned, thereby elected to claim damages in respect of the deceaseds death in the Spanish
proceedings, that the judgment for compensation given in favour of the plaintiff and the two infant dependants was final and
conclusive on the merits, that such judgment has been satisfied by payment by or on behalf of the defendant, and that thereby the
plaintiff is precluded from bringing the claim in this case.
The manner in which the defence is put in para 5 of the reamended defence is as follows:
 the claim herein is barred by the said payment pursuant to the Spanish judgment and/or by former recovery and/or
the doctrine of the Res Judicata and/or by estoppel and/or pursuant to the provisions of Section 34 of the Civil
Jurisdiction and Judgments Act 1982.

There is an alternative plea, as indeed is not disputed by the plaintiff, that:

in any judgment given herein credit must be given for payment made pursuant to the Spanish judgment aforesaid.

Finally, it is pleaded that:

In relation to the plaintiffs claim under the Law Reform (Miscellaneous Provisions) Act, 1934 under Spanish law no
action can be sustained for the benefit of the deceaseds estate as such and accordingly no such action can be sustained
in this Court.

By order of Master Warren dated 26 February 1986 it was ordered that the question or issue of liability of the defendant to
the plaintiff in this action be tried as a preliminary issue before the question or issue of damages. Since negligence is no longer
disputed, the question of liability therefore turns solely upon the effect of the decision of the Spanish court.

THE SPANISH PROCEEDINGS

The history of the plaintiffs involvement in the Spanish proceedings is as follows. The plaintiff, like the deceased, was
Australian by birth and nationality. However, at the time of the accident they had both been resident for some years in England,
where the two children have been brought up. Roman is British by nationality and Thanh is Australian. The plaintiff is quite
unversed in legal matters and shortly after the accident, on the recommendation of a friend, she retained the services of an
English solicitor (whom I shall call the solicitor) to look after her interests and take all appropriate steps on her behalf in
relation to the death of the deceased. The solicitor in turn was quite unversed in either the Spanish language or Spanish legal
procedures and so needed to retain the services of a Spanish lawyer. To this end, the solicitor selected a name from a short list of
recommended names sent to him at his request by the British consul in Vigo, with whom he had established contact soon after the
accident and who had also forwarded to him the Spanish police report on the accident.
On 15 August 1983 the solicitor wrote to the defendant and his insurers, holding the defendant liable and stating that, in the
absence of proposals for settlement, proceedings would be issued without further notice. On 30 August 7261983 the insurers
replied confirming their interest and asking for details of the plaintiffs claims, but it does not appear that those were forthcoming
at the time, as the solicitors attention was directed to Spain.
A week or so earlier, on 2 August 1983, unknown to the solicitor or the plaintiff at the time, the judge of instruction (ie the
judicial investigating officer) for the district of Trives issued a writ (a full translation of which is before me) to determine the
circumstances of, nature of, and person criminally responsible for, the accident, making provision for the defendants provisional
liberty subject to bonds being given in respect of his leaving Spain and to cover his civil liability in Spain. It provided for
notification of the various parties and in particular directed that the writ be notified to the injured party, Antonia Black, with the
offer of the actions of arts 109 and 110 of the Criminal Procedure Law through the British consul in Vigo. Those articles (to the
detailed content of which I shall turn later) make provision whereby, in Spain, the victim of a tort which amounts also to a
criminal offence may participate in the criminal proceedings thereafter arising for the purposes of determining civil
compensation.
It is not clear from the evidence before me when the terms of the writ, from which I have quoted, reached the solicitor.
However, it is plain that he had notice of the criminal proceedings at around that time and, on 23 November 1983, he wrote to the
Spanish lawyer enclosing the police report already mentioned. He, inter alia, asked for the Spanish lawyers advice as to whether
he would undertake the matter for the plaintiff (through the solicitor) and what further information was required. The solicitor
wrote:

Apart from any proceedings in Spain, our client will be taking proceedings in England against the driver of the motor
cycle but it would seem at present that it is the Spanish Court which has jurisdiction to decide liability for the accident.

On 14 November 1983 the plaintiff and the solicitor were granted letters of administration in respect of the deceaseds estate.
After some delay the solicitor, in January 1984, received a letter from the Spanish lawyer in the form of a report dated 20
December 1983. That report stated that proceedings were shortly to be passed to the Spanish court where a misdemeanour
action would be instituted on the grounds that the defendant was deemed solely to blame. The report also stated that as the guilt
of the defendant appeared to have been proved or accepted in principle (presumably by the judge of instruction) the judicial
proceedings are virtually limited to fixing the compensation payable to the widow and her children. It further stated that
compensation had been raised and discussed by the Spanish lawyer with representatives of the defendants insurers, but that an
unrealistically low figure had been mentioned and the Spanish lawyer suggested that the solicitor should approach insurers in
London with a view to trying to establish fair compensation for the widow and children. The Spanish lawyer advised that, if no
agreement was reached in London, he would be pleased to act in Spain on behalf of the interests of the widow and children and
offered the comment that:

In Spain, and for the present case, the compensation which could be sought in court would be the sum of SIX
MILLION PESETAS (6,000,000 ptas) in favour of the widow and children, although there is no record at the Pueblade
Trives Court of having exceeded that figure by judicial award in situations identical to this case.

The Spanish lawyer requested urgently that proof of the status and relationship to the deceased of the widow and children be
sent to Spain, together with a power of attorney for legal proceedings in favour of the Spanish lawyer.
727
In a reply sent on 3 February 1984 the solicitor wrote inter alia:

We had anticipated that damages awarded in Spain would be rather lower than might be obtained in UK and our main
concern, in so far as the Spanish proceedings are concerned, is to obtain either agreement by [the defendants]
representative or a Court Order to the effect that [the defendant] was solely liable for the accident whereupon, as you have
said, the question of damages can be settled in England. We have had a brief conversation with [the defendants] insurers
in England, but believe that, until the question of liability is unequivocally established, no realistic offer will be made
We note the amount offered in settlement and will be considering carefully what claim might be sustained in this country
on the basis of there being no doubt as to [the defendants] liability We will write again shortly with regard to what an
anticipated recovery would be by way of damages, in this country, but in the meantime would be grateful if you would
proceed with your efforts to establish that liability for the accident was [the defendants] alone.

The Spanish lawyer thereafter sent to England a form of power of attorney, which he asked to be executed by the plaintiff in
London. This she did.
 The relevant document, headed deed of power of attorney and stated to be executed by the plaintiff in London on 2
February 1984, at the notarial office of notaries experienced in Spanish transactions, provided in its preamble that the plaintiff

acts for and on her own behalf, as the widow of [the deceased] also for and on behalf of the minors Roman
Jason Clement Black and Thanh Cerian Antonia Black, as adoptive mother The [plaintiff] has the necessary legal
capacity for the execution of this Deed of Power of Attorney, in her capacity, which I testify

The operative parts of the power, executed in favour of the Spanish lawyer, declared that:

for and on behalf of the grantor and of her minor children HE MAY: Address, receive and answer demands and
notices appear before any Court and file, prosecute and complete, as plaintiff, defendant or in any other way, all
kinds of processes, trials and procedures, civil and criminal and of any other kind

It further provided that the plaintiff

grants full facilities to hear summonses and notices, as the grantor herself could do. To make statements, submit
documents of all kinds, which may be ratified, abandoned and, in general, to file all kinds of processes which may also be
ratified, abandoned or suspension be requested, as the grantor herself could do She likewise grants powers to sign
receipts and collect all kinds of sums which for any reason may be in the name of the grantor. To waive whatever actions
and rights she may be entitled to, to reserve the civil action derived from the criminal matter, in order to be able to exercise
it before the competent jurisdiction and, if necessary, to agree with the opinion which the State Attorney may formulate.
She particularly empowers the attorney to act in the proceedings relating to the accident which occurred on 8th.July
1983 in which the husband of the grantor died.

It appears that thereafter there was no communication between the solicitor and the Spanish lawyer before the hearing in the
district court took place on 7287 May 1984, save for an unacknowledged chasing letter from the solicitor on the 8 March and a
telephone call which he made to the British consul on 3 May in which he gave to the consul, to be relayed to the Spanish lawyer,
a figure which English counsel had advised was likely to be recoverable in proceedings in England on the basis of the limited
information available to him at the time. That figure was 70,000. According to the solicitor, no details were passed in that
conversation or otherwise as to the income or capital of the deceased or any information of the kind required by English courts to
establish with proper particularity the quantum of any dependency in Fatal Accident Act proceedings in this jurisdiction. The
only details which had been supplied by the solicitor at that stage related to the ages of the plaintiff and her children and details of
their relationship to the deceased. The solicitor had not supplied, nor had he been asked to supply, other details or documentation
because he did not intend that the question of damages should be dealt with in Spain on the basis of any detailed assessment. He
was aware from the report he had received from the Spanish lawyer that compensation of some kind might be awarded and was
content that it should be. He assumed that the Spanish award would be lower than that available in England but it did not occur
to him that under English law such an award might preclude subsequent civil proceedings in England for compensatory damages
in excess of such award. Nor, apparently, was he informed by the Spanish lawyer that, so far as Spanish law was concerned, it
was necessary to reserve the right of civil action if it was intended to seek damages elsewhere than in the district court. Certainly
no such reservation was ever made.
The trial of the Spanish proceedings took place on 7 May 1984, as I have already indicated. A translation of the official
record states that the Spanish lawyer appeared for and on behalf of the injured party ANTONIA NINETTE HUDSON BLACK,
as recorded on the file, and of her minor children ROMAN and THANH, as well as recording the representation on
behalf of the prosecution, the defendant, and the defendants insurers agents in Spain.
The record also shows that, following a preliminary objection by the insurers lawyer to the form of the power of attorney,
which objection was summarily overruled by the judge, the Spanish lawyer

in the capacity evidenced in the record, then submitted documents from the British Consulate in Vigo, in relation with
the age of the widow of the deceased, and regarding indemnities being granted in England, as well as a document issued by
the Department of Pensions in INS pensions, regarding the granting of pensions on becoming a widow, which the Judge
agrees should be added to the file.

It is understood by the parties that the reference to indemnities was a reference to the level of damages obtainable in an
English court (presumably based on English counsels figure) and that the reference to the pensions document was to a document
supplied to the Spanish lawyer by the consul.
The record then goes on to deal with the advice and submission of the state attorney prosecuting as to the question of the
guilt of the defendant and the appropriate penalty to be imposed on him in relation to the criminal charge and records the
prosecutors opinion that the defendant: should indemnify the successors of the deceased in the sum of four million pesetas
(4,000,000 Pts), as a consequence of the death The following passage then appears in the record:

The representative of the widow and children of the deceased agrees with the Attorneys demand as regards the
penalty, and as regards to indemnity he 729 asks for the indemnity payable by the motorcycles driver to be increased to
eight million pesetas (8,000,000 pts.) in favour of the said widow and of her children, as the injured heirs

No record appears of the detailed submissions or arguments of the prosecutor or the Spanish lawyer beyond what I have read.
The summary of the submissions of the defendants representative shows that, following his submissions in relation to the
criminal charge and when dealing with the claim for compensation, he made the observation that:

as a precautionary measure, we have to point out, in the first instance, that if our principal should be condemned,
for the purposes of indemnity, it would be necessary to bear in mind that since there is no special factor regarding his
activities and quality in the records, that compensation for damages should be fixed in a maximum amount of 1,500,000
Pts.

This appears to have been a reference to the absence of information as to the activities and qualities of the deceased and (by
implication) to the absence of any details as to his income or the dependency of the plaintiff and the children. It appears that
judgment was then reserved. The record of sentence pronounced on 24 May 1984 shows that, following the statement of the
judge to the effect that he found the defendant to have been in violation of the criminal code by reason of simple imprudencia,
he went on to state:

WHEREAS: Any one liable for an offence under criminal law is also liable under civil law, arts. 19 and 101 of the
Code I RULE That I should condemn, and I hereby condemn [the defendant] as the perpetrator of the crime of simple
imprudence, to indemnify the successors of the deceased in the sum of four million pesetas and to pay the costs of
the trial.
 Following that decision of the district court, appeals were contemplated by the Spanish advisers on both sides, but they were
not pursued.
On 18 July 1984 the solicitor wrote from London to the Spanish lawyer:

under no circumstances should damages be accepted if they are stated to be in any way in final settlement of our
clients claim as damages awardable by an English Court would be considerably higher than those envisaged by the
Spanish Court. As we have mentioned before, our only real concern is that a conviction should be recorded against [the
defendant] damages in Spain being of little importance.

This elicited no comment from the Spanish lawyer. However, on 27 August 1984, in accordance with Spanish procedures, a
formal judicial acknowledgment of payment was issued in respect of a cheque from the defendants lawyer stated to be:

with a value of 4,007,030 pts. in payment of the civil indemnities and legal costs derived from the police court trial
which are allocated as follows: for the payment of civil indemnity 4,000,000.and for the payment of legal costs,
7,030 pts

On 10 August 1984 the solicitor wrote to the defendants insurers informing them of the Spanish judgment and damages (of
which indeed they were aware) asking whether it was possible for the damages to be paid directly to the plaintiff in the United
Kingdom and informing them:

our Client will of course be seeking further damages under the jurisdiction of the United Kingdom Courts and if
you have any proposals to make in that regard at this stage please let us know.
730

It was not long before the insurers replied to the effect that they had been advised by their Spanish representative that the
claim made on behalf of the estate and those dependent on it had been satisfied under Spanish law and, that being the case, it
appeared that there was no further claim to be pursued in the United Kingdom. That is, of course, the point elaborated in the
reamended defence, which I have already quoted.

SPANISH LAW AND PROCEDURE

I shall now turn to the nature and effect of the Spanish proceedings so far as Spanish law is concerned, on which topic I have
heard evidence from two experts in Spanish law, namely Sr Juan Elas de Abando for the plaintiff and Sr Jose Maria de Lorenzo
for the defendant, both of whom gave oral evidence before me in support of their written reports. In the event there were few
differences between them as to the relevant provisions of Spanish law and procedure or as to their effect, save on one matter
relating to the finality of the proceedings, to which I shall refer further below.
In Spain, following a serious road accident, the question of criminal culpability is dealt with in the following stages. The
police prepare a report which they send to the local court, which decides whether to send it to the judge of instruction for formal
investigation. If it so decides, then a formal file is opened for investigation by that judge, who pursues such investigation and
decides whether or not the driver has prima facie committed an offence for which he should be prosecuted. If the judge so
decides the case is referred to the appropriate court. In this case the investigating judge appears to have decided that the case
should proceed as a prosecution for the minor criminal offence of simple imprudencia (ie negligence or the equivalent of
driving without due care and attention in English law) and to have referred the case to the district court, as the court with
jurisdiction over such cases.
The Spanish court has jurisdiction not only to decide the question of criminal liability but, in the course of the proceedings
before it, to make an award of civil damages to any person who has been injured in or suffered damage as a result of the accident.
All interested parties with a potential civil claim who are known to the court are notified of the proceedings. Indeed, the criminal
process before the competent court of criminal jurisdiction is the primary arena in Spain in which such civil claims are decided.
The criminal court proceedings deal with civil claims arising unless a notified party expressly reserves his or her right to claim
damages by civil proceedings rather than in the criminal process.
The Spanish Civil Code provides by art 109: Civil obligations which arise from crimes or petty offences will be regulated
by the disposition of the Penal Code. The Penal Code provides by art 19: All persons criminally responsible for a crime or for a
petty offence are also civilly responsible. Article 101 provides: The responsibility comprises: (1) Restitution. (2) Making
good the damages caused. (3) Payment of prejudices caused.
The proceedings before the Spanish court, both in relation to the criminal offence and the claim(s) for civil compensation are
prosecuted by the public prosecutor, but any notified party who makes a claim and/or appears at the hearing of the proceedings
has a right to be heard both in the issue as to criminal liability and in respect of the civil claim, and to submit material
independently in support of the civil claim.
The relevant provisions of the Spanish Law of Criminal Procedure are as follows:

Article 108. A civil action has to be lodged jointly with the Penal action by the Public Prosecutor whether there is a
Private Prosecutor or not, but if 731 the offended party expressly renounces his right to restitution, the making good of
damages caused or the payment of prejudices caused, the Public Prosecutor will limit his petition to the punishment of the
guilty party.
Article 109. Where the victim of the tort has the necessary legal capacity, he shall be informed of his right to be a
party to the proceedings and of his right to renounce or not to renounce the indemnification of the loss caused by the
offence. Where the victim does not have legal capacity, his guardian shall be so informed.
Article 110. Those injured in a crime or violation who have not waived their rights may become a party in the case if
they do so before the stage of qualification of the offence, and exercise the Civil and Criminal actions which may be
applicable, or only one or the other, as may be convenient, without any retrocession in the course of the proceedings. Even
when the injured parties do not appear as a party in the case, this does not imply that they waive their right of restitution,
redress or indemnity in their favour which may be decided in a judgment which cannot be appealed against, since the
waiver of this right must be made in an express and categorical manner.
Article 111. Actions which derive from a crime or violation may be exercised jointly or separately, but while the
Criminal action is pending, the Civil one will not be exercised separately, until the former has been resolved in a final
sentence
Article 112. If only the Criminal action has been exercised, it will be understood that the Civil one has also been
exercised, unless the injured or damaged party should expressly waive or reserve it to be exercised after the end of the
Criminal case.

Head 3 of art 101 of the Penal Code quoted above covers compensation for material and non-material damages caused by
reason of the criminal offence to an aggrieved party and/or his family and/or any third party.
 By Spanish law compensation, in this context, implies being held harmless and this is achieved only if the injured parties
obtain full reparation of damage and compensation for losses, both as regards damnum emergens and lucrum cessans and as
regards both material and non-material damage, so that they are in the same financial position as they were before the offence
was committed, without being enriched, except in respect of non-material damage, and without their being impoverished or
prevented from obtaining that which would have accrued to them if the criminal offence had not been committed. Spanish law
also provides for awards of interest on the amount of compensation assessed at legally prescribed rates. Further the right to
reparation for damage caused or compensation for losses deriving from the offence is not undermined by the fact that the victim
may be entitled to the proceeds of private insurance policies as a result of the accident.
Within these principles the trial court has wide and indeed unfettered discretion in determining the amount of compensation
due, subject to no limitation other than the obligation not to exceed the amount requested by the public prosecutor or claimed by
the civil claimant. It may declare whether or not compensation for material and non-material damages and losses is appropriate,
and may fix the quantum of such compensation subject only to the limitations that there must be some evidence before it on
which to base an award (in fact, loss may be inferred for bereavement and dependency, where the court is satisfied the deceased
was in employment at the time of death) and, as already mentioned, the amount of the award must not exceed the amount
claimed.
732
In an award made following a fatal accident, the court will make a global award in respect of all the claims of the
dependants placed before it, unless otherwise requested, in which case it will make an apportionment between the dependants.
There is a right of appeal from an award of the district court in its criminal jurisdiction to an appellate court one level higher
than the district court, but an award of compensation is not subject to cassation, that is to say there is no further right of appeal,
whether on a matter of fact or law to the Court of Cassation or Supreme Tribunal. In practice, civil awards made by district
courts or other courts with criminal jurisdiction tend to vary substantially depending upon the district in which, or judge before
whom, such cases are heard. However, the principles upon which such awards are to be made are clearly established as a matter
of law on the basis that I have described above and it is in fact the position that an increasing measure of standardisation is
appearing in the awards of Spanish courts.
Turning specifically to claims in cases where a person has died as a result of a criminal offence, the compensation for losses,
which, as a general rule, is payable in respect of any such offence covers three principal items, namely: (1) funeral expenses, that
is to say those expenses normally incurred as a result of the death, violent or otherwise, of any person, such as burial, interment,
funeral, prayers, estate proceedings and similar matters; (2) any resulting lack of provision for the relatives of the deceased
generally spouses and children and, more rarely, parentswho were financially dependent upon the deceased, the deceased
having provided for their needs by the proceeds of his work; and (3) mental suffering or pecunia deloris, which is said to be the
burden or sorrow caused by the death of a loved one, the cessation of intimate life together and rupture of the bonds of affection,
and the painful void created by the death of the deceased. This head of damage is not limited to the widow of the deceased.
Head 3 of art 101 of the Penal Code, as already indicated, covers compensation for material and non-material damage caused by
reason of the offence to an aggrieved party and/or his family and/or any third party. So far as proceedings arising out of a fatal
accident are concerned, there is no right in the estate of the deceased or in his heirs as such to bring a claim as a result of the
death; the right to compensation depends upon demonstration by the claimant (heir or other) that he or she is an injured party in
the sense of having suffered some actual loss or damage including loss of support or dependency as described above.
So far as procedure and representation are concerned, parties may appear either in person or by legal representative to
present their claims. In relation to infant dependants, their interests may be represented by their parent or guardian unless the
court perceives a conflict of interest. If, and in so far as damages have been suffered by the deceased or what in England would
be termed his estate, then the heirs of his estate, which in Spain is the sum of the beneficiaries under his will and/or the Spanish
law of succession, may confer authority on one of their number to claim as a representative on their behalf (though if there is a
will under which the deceased has appointed an aldaceaa special type of executorhe will represent the community of heirs).
Against that general background of Spanish law and procedure it is now appropriate to consider the matters raised by way of
defence in the instant case.

THE PLEADED DEFENCES

The defences raised may best be categorised and considered under the four heads pleaded: (1) s 34 of the Civil Jurisdiction
and Judgments Act 1982, (2) payment pursuant to a foreign judgment, (3) res judicata and (4) issue estoppel. I shall deal with
these in turn in relation to the principal claim in these proceedings, 733which is that under the Fatal Accidents Act 1976, before
turning to (5) the claim under the Law Reform (Miscellaneous Provisions) Act 1934.
So far as the defences raised relate to the cause of action of the plaintiff on her own behalf and in respect of her own
dependency, no complication arises as to her own capacity to sue. However, there is a matter of importance to be considered in
respect of the claims of the plaintiff in so far as they are made on behalf of the children. This arises because it is asserted on
behalf of the plaintiff in these proceedings that whatever her personal position in the Spanish proceedings, neither the power of
attorney purportedly given by her on behalf of the children, nor the judgment in the Spanish proceedings, are binding on the
children because of their lack of capacity and for the reason that the Spanish proceedings were not in the childrens interests. I
shall turn to that aspect and certain associated points raised by the plaintiff after considering heads (1) to (5) above on the
assumption that no point on lack of capacity arises.
Heads (1) to (4) are, as I have indicated, closely related and involve consideration of a number of common features.
However, strictly speaking, the defence under s 34 of the 1982 Act is a clearly defined exercise in statutory construction while
heads (2) to (4) involve considering doctrines which depend upon principles of common law and/or private international law.
(I) SECTION 34 OF THE 1982 ACT
Section 34 provides:

No proceedings may be brought by a person in England and Wales or Northern Ireland on a cause of action in respect
of which a judgment has been given in his favour in proceedings between the same parties, or their privies, in a court of
an overseas country, unless that judgment is not enforceable or entitled to recognition in England and Wales or, as the case
may be, in Northern Ireland.

Prior to 1982 a foreign judgment had been regarded at common law as only constituting a simple contract debt, no merger
of the original cause of action in the judgment resulting. This meant that it remained open to a plaintiff to sue either on the
Foreign Judgments (Reciprocal Enforcement) Act 1933 or on the original cause of action. Section 34 abrogated that rule. From
the time the section came into force proceedings between the same parties on the original cause of action have no longer been
available unless the judgment in question is not enforceable or entitled to recognition. If the foreign judgment remains
unsatisfied, the proper course of action is to enforce it, either under statute or at common law, by suing on the judgment. The
abrogation of the non-merger rule is achieved by making the foreign judgment a bar to further proceedings. The defendants
principal contention in this case is that the plaintiff and her two children have already received judgment in Spain in respect of
the cause of action sued on in these proceedings and that the plaintiff is, therefore, debarred from pursuing proceedings by
original action in the High Court in England.
In order to make good that submission the defendant must show that three requirements have been satisfied: (i) the
proceedings must be brought on the same cause of action as the proceedings in Spain; (ii) the proceedings must be between the
same parties or their privies as the proceedings in Spain; and (iii) the judgment in the Spanish court must be enforceable or
entitled to recognition in England and Wales.
(i) Are the causes of action the same?
Having set out the relevant provisions of Spanish law as I find them, I have come to the conclusion that the causes of action
are the same. The words cause of 734 action comprise every fact (though not every piece of evidence) which it would be
necessary for the plaintiff to prove, if traversed, to support his right to judgment of the court: see Read v Brown (1888) 22 QBD
128 at 131 per Lord Esher MR and authorities cited in The Supreme Court Practice 1988 vol 1, para 15/1/3. It has been
elsewhere defined as simply a factual situation the existence of which entitles one person to obtain from the court a remedy
against another person: see the judgment of Diplock LJ in Letang v Cooper [1964] 2 All ER 929 at 934, [1965] 1 QB 232 at
242243. The factual situation underlying the cause of action in a fatal accident case in England appears to me to consist of: (i)
the death of the deceased; (ii) the negligence of the defendant as a cause of that death; (iii) proof of dependency on the part of the
plaintiff and/or those on behalf of whom the proceedings are brought; (iv) loss resulting to the dependants by reason of that death;
and (v) in the case of a claim for bereavement, proof of the appropriate relationship.
Viewed in that way, it appears to me that the plaintiffs cause of action in Spain essentially comprised the same elements.
The sole or principal ground on which Mr Tyrrell QC, for the plaintiff, argued that that was not so, was his contention that, so far
as the plaintiffs action and interest were concerned, all that she had to prove and/or all that the Spanish court investigated was
the question of causation, once the criminal offence had been established by the public prosecutor. That seems to me to ignore
the fact that the plaintiff became a party to the Spanish proceedings before the criminal trial was heard and had throughout the
right and opportunity to be heard on the issue of negligence, proof of which was necessary before the criminal liability, and any
consequent civil right to compensation, was established. Whereas the criminal aspect of the trial was no doubt principally, and it
may be (since the record is not clear) wholly conducted by the prosecutor, the plaintiff was party to the lis and present at the trial
through her Spanish lawyer, whom she had empowered to act for her in both the criminal and civil aspects of the proceedings.
She therefore had the opportunity to be heard on the question of negligence, even if her lawyer did not exercise it.
It is of course the case that by reason of the special requirements of the Fatal Accidents Act 1976 the plaintiff would, in
order to succeed in an English action, have to establish the additional fact of a grant of administration in her favour, but that does
not seem to me a distinction of substance. In Letang v Cooper [1964] 2 All ER 929 at 934935, [1965] 1 QB 232 at 243244
Diplock LJ drew attention to the distinction between a cause of action, defined as I have quoted it above, from a form of
action, ie the procedure by which such action may be pursued. Bearing in mind the context in which s 34 of the 1982 Act is
required and intended to operate, namely between parallel jurisdictions in different countries, in which forms and procedures are
bound to differ, it seems to me that the approach of Diplock LJ, albeit in the context of the different and domestic problem of
limitation, is one that is readily and properly adaptable to the problem of construing s 34. It seems to me clear that the facts
which give rise to a remedy in England gave rise to a comparable civil remedy in Spain, albeit such remedy falls to be pursued in
essentially criminal proceedings by intervention of the aggrieved party: see art 109 of the Civil Code and arts 19 and 101 of the
Penal Code. So far as damages are concerned, arts 101 to 104 of the Penal Code and the evidence which I have heard satisfy me
that the heads of damage in civil proceedings dealt with under those articles correspond with the heads of damage recoverable
under English law. The principal heads of damage in a fatal accident case in Spain are: (i) funeral expenses; (ii) damages for loss
of dependency; and (iii) damages for mental suffering or bereavement. Damages are also recoverable for damage to the property
of the deceased, eg his clothing or personal effects and interest may be awarded. In summary, there is no head of damage or item
or claim in respect of 735 which the plaintiff can (or does in these proceedings) seek recovery in England which was not
recoverable in Spain had appropriate material been put before the court in that respect.
Mr Tyrrell, relying on the observations of Lord Pearson in Chaplin v Boys [1969] 2 All ER 1085 at 11061107, [1971] AC
356 at 394395 to the effect that a difference or differences in the recoverable heads of damage will distinguish one cause of
action from another, asserted that recovery in respect of loss of dependency, as provided for in the Fatal Accidents Act 1976,
was a specific head of loss not covered or catered for by what he called the amorphous heads of damage which the Criminal Code
of Spain provides. In this respect, Mr Tyrrell also relied on the judgment of Lynskey J in Kohnke v Karger [1951] 2 All ER 179,
[1951] 2 KB 670 in which that learned judge, in holding that a plaintiff is not debarred from proceeding against a defendant in
England in respect of an accident for which he has already sued another party liable abroad, appears to have placed some reliance
on the fact that, apart from the difference in the parties which formed the ratio of his decision, it had not been possible for the
plaintiff to recover in the foreign court a certain head or heads of damage which were recoverable in English proceedings. Mr
Tyrrell submitted that, although the court record in this case suggested that the award of the Spanish court was made as
compensation in favour of the widow and her children as the injured heirs, there appeared to have been no real attempt to assess
the dependency of the widow, let alone of her children as separately entitled, and that accordingly the position was, in effect, that
no judgment had been given in their favour by the Spanish court on any cause of action in respect of their dependency.
With respect to Mr Tyrrell, I do not find the observations of Lord Pearson relied on of great assistance, because it seems to
me clear that Chaplin v Boys was a case where the foreign law did not recognise any right of recovery in respect of a particular
and substantial head of damage recognised in English law, whereas, as I have already indicated, Spanish law does recognise the
right to recover precisely those heads of damage which are recoverable in English Fatal Accident Act proceedings. The same
observation applies to the remarks of Lynskey J in Kohnke v Karger.
As to the question of the Spanish courts approach to quantification, it seems clear that the assessment was indeed done on a
rough and ready basis, if the record is anything to go by. Certainly the reasoning behind the quantification at 4m pesetas is not
clear. However, it is clear from the evidence that I have heard from Sr de Lorenzo, which I accept, that the court would have
been open to, and obliged to deal with, any advance by the plaintiff of a detailed claim in writing on behalf of herself and her
children and to submissions made in support of such claim, had the Spanish lawyer been in a position and seen fit to make them.
I know nothing to suggest to me that the Spanish court would not faithfully have applied the principles of recovery and
assessment which have been placed in evidence before me as applicable in such proceedings, had that court been provided with
material on which to do so. Equally, it is plain that the court could and would have made an apportionment of the award to the
plaintiff on the one hand and the children on the other, had it been requested to do so. However, it was not.
Accordingly, I take the view that these English proceedings are indeed brought on a cause of action in respect of which the
Spanish judgment was given.
(ii) Are the proceedings between the same parties or their privies?
It is, of course, the case that Mr Yates is the defendant in these proceedings, just as he was in the Spanish proceedings. It
seems equally clear that, in name at least, 736Mrs Black, who is the plaintiff in these proceedings became a party to the Spanish
proceedings under the provisions of arts 109 and 110 of the law of criminal procedure in order to pursue her civil remedy.
Finally, it is clear that in the Spanish proceedings she purported to act also on behalf of her children, just as she acts for them (as
dependants) in this action.
It is not clear precisely how the plaintiff became party to the Spanish proceedings in the sense of any formal documentation
or correspondence which may have passed between the Spanish court and the Spanish lawyer relative to the provisions of art 110
of the Code of Criminal Procedure. However, it is apparent, and Mr Tyrrell has not sought to argue to the contrary, that, through
her Spanish lawyer, she was heard at the trial after which an award was made in her favour to indemnify the successors of the
deceased, which in this context was herself and her two children as the injured heirs.
Faced with this position, Mr Tyrrell takes a series of points on behalf of the plaintiff. First, he submits that the plaintiff was
not a party to the Spanish proceedings in any real sense of the word, as he put it. He said it is clear that a Spanish court will, in
hearing criminal proceedings, automatically proceed to deal also with questions of civil indemnity which the prosecutor has a
duty to place before the court in so far as he has details, unless or until a party notified of the proceedings expressly waives his or
her right to civil indemnity. Thus, Mr Tyrrell says the plaintiff did not initiate the Spanish proceedings and he submits that
simply to participate in them as she did was not to render the proceedings between the same parties.
I do not consider that argument to be correct. It does not seem to me that s 34 contemplates only proceedings in which the
English plaintiff was a party ab initio, or indeed proceedings which were exclusively civil in character. Leaving aside any
question of who may or may not be a privy of one or other of the parties, it appears to me that s 34 contemplates proceedings of
whatever character in the court of an overseas country in which the plaintiff and defendant in English proceedings have
previously participated as opposing parties for the purposes of adjudicating a cause of action between them, in respect of which
the English plaintiff has obtained a judgment in his favour enforceable or entitled to recognition in England and Wales or
Northern Ireland. It seems to me unnecessary and inappropriate to read into the section any requirement that the English plaintiff
should have been the original party in the overseas proceedings or that such proceedings be exclusively civil in character. What
is aimed at by the section, in my view, is an extension of the English doctrine of merger to the judgments of all overseas courts of
competent jurisdiction which are enforceable and entitled to recognition in this country.
Mr Tyrrells second, and main, submission is to the following effect. He says that in the Spanish proceedings the plaintiff
was suing on her own behalf and, in so far as she sued on behalf of the children, on their behalf as natural legal persons. By way
of contrast he says that in these proceedings the plaintiff sues in a representative capacity as administratrix of her deceased
husbands estate. That being so, he relies upon the authority of the Court of Appeal in Marginson v Blackburn BC [1939] 1 All
ER 273, [1939] 2 KB 426 applying Leggott v Great Northern Rly Co (1876) 1 QBD 599, [187480] All ER Rep 625, both cases
involving pleas of estoppel by res judicata at common law.
In Leggotts case the plaintiff, a widow, acting in her capacity of administratrix of the estate of her deceased husband,
brought an action against the defendants for loss and injury to the husbands estate to the extent that his business had suffered loss
and he had incurred medical and business expenses following an accident for which the plaintiff alleged that the defendants were
responsible, such 737 loss extending over a period between the time of the accident and his death some months later. That action
was in the form of the ordinary executor/administrators action. When the defendants sought to put the circumstances of the
accident in issue, the plaintiff asserted that they were estopped from doing so by the reason of a finding of the court in her favour
in a previous action brought by her under Lord Campbells Act, the Fatal Accidents Act 1846 (the precursor of the Fatal
Accidents Act 1976), in which, again suing as an administratrix, she had recovered damages on her own behalf and on behalf of
the children. The court held that no estoppel arose because, although the plaintiff acted as administratrix in both cases, the earlier
action under Lord Campbells Act had been brought in an entirely different right in order to recover damages which were in no
way part of the estate but were due by way of compensation for the death of the deceased for the benefit of his dependants,
whereas the later action was brought by the plaintiff on behalf of the deceaseds estate only. In a well-known passage Quain J
said (1 QBD 599 at 606);

The rule about the estoppel is very correctly, I think, laid down in the note to the Duchess of Kingstons Case ((1776) 2
Smith LC (7th edn, 1876) 792). It is this: It must be observed that a verdict against a man suing in one capacity will not
estop him when he sues in another distinct capacity, and, in fact, is a different person in law. In other words, it is generally
put in the books that the plaintiff must not be only the same person, but he must be suing in the same right.

In Marginsons case the Court of Appeal applied these dicta in a case where the plaintiff brought an action in the High Court
against the defendants, arising out of an accident in which the defendants bus had collided with the plaintiffs car in which he
was being driven by his wife, as a result of which she was killed and he was injured. He sued (i) for damages for his own
injuries, (ii) under the 1934 Act for the benefit of his wifes estate for loss of expectation of life and (iii) under the Fatal Accidents
Act 1846 for damages for his wifes death. He had been party to an earlier county court action in which the owners of property
damaged in the accident had sued the defendants and the plaintiff (as vicariously liable for his wife) and each had blamed the
other in third party proceedings in that action. On a preliminary point the Court of Appeal held that inasmuch as the county court
decision had held each party to blame, that estopped the plaintiff from maintaining his personal claim for damages against the
defendants, but it did not estop him in respect of his second and third claims in which he sued in representative capacities as
administrator of his deceased wifes estate.
In a passage on which Mr Tyrrell relies, Slesser LJ (giving the judgment of the court), having stated in respect of the 1934
Act claim that a decision against the plaintiff in his personal capacity was not conclusive against him in his representative
capacity, said in respect of the Fatal Accidents Act claim ([1939] 1 All ER 273 at 278, [1939] 2 KB 426 at 438):

The same observations apply Nor do I think that the fact that such action is brought, not only for the benefit of his
daughter, alleged to be a partial dependant of the deceased, but also for the benefit of himself, said to be another, affects the
principle. As is very clearly shown in Leggotts case, the capacity in which a person may sue under the Fatal Accidents Act
is different from his capacity to sue personally, and in this connection it is enough to quote from the note to Kingstons
(Duchess) Case

Mr Tyrrell submitted that that passage clearly demonstrates that in relation to any issue of estoppel simpliciter, the plaintiff,
suing as administratrix in these 738 proceedings, could not be regarded as precluded from reopening her and her childrens claims
for compensation by reason of any matter decided in the Spanish proceedings in which she appeared in a personal capacity only.
He said that parity of reasoning should apply in relation to s 34 of the 1982 Act, so as to negate the defendants contention that
the Spanish proceedings were between the same parties.
Mr Strachan QC for the defendants distinguished Marginsons case, or rather denied its applicability to the proper
construction of s 34, by submitting as follows. He pointed out that Marginsons case was a case of res judicata/issue estoppel and
not a case of merger in judgment, the doctrine with which s 34 is concerned. He says that the considerations applying to the two
concepts are not precisely the same. Estoppel, however arising, operates to prevent a person from seeking to establish some
matter which has previously been decided against him (see the words used in the Duchess of Kingstons Case 2 Smith LC (7th
edn, 1876) 792). He says that the justification for this is clear, namely that it would be wrong for a person who first sues in a
personal capacity and then sues in a representative capacity to be estopped in the latter proceedings because the persons whom
the plaintiff represents in those proceedings may thereby be caused hardship and injustice.
Thus, the rule concerning capacity, enunciated in an unqualified form as it appears to have been in Marginsons case, may be
a good working rule for the purposes of the law of estoppel, but should not be applied willy-nilly in the construction of s 34. I
think that Mr Strachan is right in this respect. Again in the context in which s 34 operates, it does not seem to me to be
appropriate to jump from one jurisdiction to another, hidebound by concepts of capacity which may not be susceptible of
accurate translation when analysing whether, in reality, the same party is suing in respect of the same cause of action. It is
inevitable that as between different jurisdictions there will be different forms of action and procedure in fatal accident cases. I do
not think it can have been the intention of Parliament that the English form of action in such cases, ie a claim brought by the
executor or administrator of the deceased, although in fact brought for the benefit of the dependants, should limit the application
of s 34 to previous proceedings in those countries which have an identical form of action.
The capacities with which Mr Tyrrell sought to label, and within which he sought to constrain, the plaintiff for the purpose
of comparison were those of administratrix of the deceaseds estate in the English proceedings, and her personal capacity in the
Spanish proceedings. Thus, he said, Marginsons case should apply. I do not think that such an approach is appropriate. It is
well settled law that the English courts, in a claim under the Fatal Accidents Acts, treat the dependants in the action before the
court, and not the administratrix, as the parties in whom right against the defendant lies, and that they approach the matter on the
basis that the claim [is] the claim of the dependants and not of the administrator: see Jeffrey v Kent CC [1958] 3 All ER 155 at
159, [1958] 1 WLR 927 at 931 and Avery v London and North Eastern Rly Co [1938] 2 All ER 592 at 595, 598599, [1938] AC
606 at 612613, 617619 per Lord Atkin and Lord Macmillan.
It seems to me that in the Spanish proceedings, as a party obliged, as a pre-requisite of recovery, to prove the dependency of
herself and any others on whose behalf she claimed, the plaintiff was in the same position as in Fatal Accident Act proceedings.
Indeed the parallel between the two types of proceedings is close, also, in that English law requires the action of an administrator
to be brought once and for all on behalf of the dependants (see s 2(3) of the Fatal Accidents Act 1976), while Spanish law takes a
similar attitude in relation to the civil award following criminal proceedings. In Spain, the recourse of any dependant who did
739 not constitute himself a party lies against the fund recovered by the dependants who were so constituted. Mr Tyrrells
submissions under this head therefore fail.
(iii) Is the judgment in the Spanish proceedings enforceable and/or entitled to recognition in England and Wales?
Broadly speaking, this question depends on whether the Spanish judgment was the judgment of a foreign court of competent
jurisdiction, being for a definite sum of money and final and conclusive in character. In this respect, Mr Tyrrell takes two points.
First, he submits that the Spanish court was not a court of competent jurisdiction in respect of the claims of the children. Second,
based on the evidence of his expert, Sr de Abando, he contends that the decision was not final and conclusive.
In relation to the second point, it was agreed between the parties that whether the judgment was final and conclusive was a
matter to be decided according to Spanish law. I do not propose to recount the somewhat exiguous grounds on which Sr de
Abando sought to persuade me that the judgment was not a final and conclusive one. Suffice it to say, I preferred the evidence of
the defendants expert, and I am quite satisfied that this requirement was made out.
As to the first matter, that was also the subject of conflict between the experts in relation to the significance of the power of
attorney produced to the Spanish court, and whether or not the judge was justified in treating it as he did as sufficient authority
for the claims of the children to be represented before him. Again, I preferred the evidence of the defendants expert and I am
satisfied that the Spanish court was competent to exercise the jurisdiction which it did. I refer to this question further below
when considering the overall question of the plaintiffs powers under English law to act for the children in the Spanish
proceedings and in particular to purport to empower the Spanish lawyer on their behalf to bind them in those proceedings.
Thus so far as the plaintiffs claims under the Fatal Accidents Act 1976 on her own behalf and in respect of her own
dependency is concerned, I consider the defence under the 1982 Act is made out.
(2) PAYMENT PURSUANT TO A FOREIGN JUDGMENT
The defendants in this case rely also on the general principle stated by Lynskey J in Kohnke v Karger [1951] 2 All ER 179 at
181, [1951] 2 KB 670 at 675:

If a plaintiff has brought proceedings in a foreign court against a defendant for damages in respect of a cause of action
and obtains a judgment and that judgment is satisfied, it appears on the authorities that he cannot proceed in respect of the
same debt or damages based on the same cause of action against the same defendant in the courts of this country: see
Barber v. Lamb ((1860) 8 CBNS 95, 141 ER 110) and Taylor v. Hollard ([1902] 1 KB 676).

So far as this defence is concerned, it is necessary for the defendant to show both elements (i) and (ii) of the defence under s
34 of the 1982 Act, with which I have already dealt. It is also necessary to demonstrate a valid final judgment by the foreign
court. I have covered that aspect also. Finally, it is also necessary to show that payment has been made under the judgment of
the foreign court. So far as that is concerned, it is clear that such payment was indeed made in the sum of 4,007,030 pesetas in
respect of damages and costs as acknowledged in the judicial document dated 27 August 1984.
In addition to the arguments mounted in respect of s 34 and repeated under this head, Mr Tyrrell raised a further argument as
follows. He says that the 740 authorities demonstrate that the doctrine of former recovery is based on the concept of election.
Therefore, he says, a defendant, to succeed under this head, must demonstrate an election by the party by whom and/or on whose
behalf the subsequent action is brought to initiate proceedings in the first tribunal and to accept payment pursuant to the judgment
of that tribunal in satisfaction of the sum due to the plaintiff. He sought to say that there was no evidence before the court of any
election by the plaintiff to initiate proceedings in Spain, that election having been made by prosecuting authority. Nor, he said,
was there any evidence of election by the plaintiff to accept the payment made under the judgment in satisfaction of it, the money
having been paid into court and the receipt of the Spanish court operating as a full discharge of the defendants liability under the
judgment.
So far as any question of election by the infant dependants is concerned, I deal with that aspect later in the judgment.
However, so far as the plaintiff is concerned, it seems to me that Mr Tyrrells points are really unarguable. Albeit the plaintiff did
not initiate the criminal proceedings in Spain, she having been offered the opportunity to participate in them, and in particular to
pursue her civil claims in the Spanish court, intervened through her Spanish lawyer, without reserving her civil claims. In respect
of such election the expertise of her Spanish lawyer, acting under the power of attorney, was attributable to her as an informed
exercise of her rights in relation to the Spanish proceedings. The acceptance by her lawyer of moneys on her behalf, under the
judicial acknowledgment to which I have referred, was equally an informed act sufficient for the purposes of an inferred election
pursuant to the doctrine of former recovery.
Once again, so far as the plaintiffs own claim under the Fatal Accidents Act 1976 is concerned, I consider the defence of
former recovery has also been established.
(3) RES JUDICATA
The general principle relied on by the defendant in relation to res judicata is stated in Spencer-Bower and Turner Res
Judicata (2nd edn, 1969) para 9 as follows:

where a final judicial decision has been pronounced by either an English, or (with certain exceptions) a foreign
judicial tribunal of competent jurisdiction over the parties to, and the subject-matter of, the litigation, any party or privy to
such litigation, as against any other party or privy thereto is estopped in any subsequent litigation from disputing or
questioning such decision on the merits

Essentially this raises the same arguments as those which arise under s 34, although the wording of the judgment of Slesser LJ in
Marginson v Blackburn BC [1939] 1 All ER 273 at 278, [1939] 2 KB 426 at 438, to which I have already referred, presents
greater difficulties in relation to a successful argument of res judicata. However, in the light of my decision in relation to s 34 of
the 1982 Act and the plea of former recovery, it is not necessary for me to consider the question of res judicata at any further
length.
(4) ISSUE ESTOPPEL
Nor need I dwell upon the greater difficulties which face the defendants in relation to a plea of issue estoppel. In Carl-
Zeiss-Stiftung v Rayner & Keeler Ltd (No 2) [1966] 2 All ER 536, [1967] 1 AC 853 it was made clear that a foreign judgment can
give rise to a plea of issue estoppel. However, Mr Strachan acknowledged that his task in this respect was more difficult than
under his other heads of defence, 741because of the paucity of the material apparently made available to the Spanish court with
which to quantify the dependencies of the plaintiff and the children.
(5) THE CLAIM UNDER THE 1934 ACT
 So far as the 1934 Act is concerned, apart from any claim for the deceaseds loss of expectation of life, there are two heads
of claim put forward in these proceedings on behalf of the estate, namely a claim for funeral expenses amounting to 205odd
and a claim in respect of damage to the deceaseds watch to an unparticularised amount. Mr Tyrrell says that, even if his
submissions in respect of the Fatal Accidents Act claim fail on the grounds that the Spanish proceedings were, in reality, made on
behalf of the plaintiff herself and the children as dependants and in respect of the plaintiffs bereavement, the same could not be
said of the plaintiffs claim under the 1934 Act. This, he says, is, in form and reality, under English law a claim on behalf of the
estate. He says that: (i) Spanish law recognises no claim by a representative on behalf of an estate; (ii) the plaintiff appeared in
no such guise in the Spanish proceedings; and (iii) in any event, no claim was in fact made in respect of the two matters
mentioned in the Spanish proceedings.
While it is true that the estate, as such, is not recognised as an entity in Spanish law, it seems to me that it has a ready
equivalent in the community of heirs, who may authorise or nominate one of their number to act in their name to pursue a claim
on the deceaseds behalf. However that may be, the plaintiff does not appear to have purported to be acting on behalf of the
community of heirs for the purpose of pursuing any claim of the deceaseds (as opposed to a claim by herself and the children as
dependants) which might be said to be equivalent to the capacity and respects in which she now sues under the 1934 Act.
I therefore consider that there is no defence to the plaintiffs claims under the 1934 Act, save on the issue of quantum.

THE POSITION OF THE CHILDREN

Lastly, it is necessary to give separate consideration to the position of the children as the infant dependants in this case.
In relation to their claims, Mr Tyrrell relies on two separate but connected propositions, arising by reason of their infancy,
each of which, he says, is fatal to any contention that they are bound by the Spanish proceedings and/or are prohibited by reason
of s 34 of the 1982 Act from further suit in these proceedings. First, he observes that the power of attorney, pursuant to which the
plaintiff authorised the Spanish lawyer to participate in and conduct the Spanish proceedings was not under seal as required by s
2 of the Powers of Attorney Act 1971, the seal being that of the notary and not the plaintiff. He further relies on the fact that it
was not signed or acknowledged by either of the infants on whose behalf it was purportedly given. Second, Mr Tyrrell relies on
the cases such as Stephens v Dudbridge Ironworks Co Ltd [1904] 2 KB 225 and Arabian v Tuffnall & Taylor Ltd [1944] 2 All ER
317, [1944] KB 685 (concerning previous awards to infants under the Workmens Compensation Acts), which he says show that
the courts will not hold an infant to any judgment entered in his favour as a result of any decision or agreement on the part of the
infant which is said to amount to an election on his part, unless it can be shown that the decision or agreement was one in which
it was in his interests to make.
Before dealing in turn with Mr Tyrrells submissions, I can say, by way of preliminary, that I am quite satisfied that the
actions taken on behalf of the children in purportedly making them party to the Spanish proceedings and conducting such
proceedings on their behalf, while taken with the best of 742 intentions, were contrary to their interests in the sense that that
matter falls to be considered for the purposes of the law of infancy. At the time that the power of attorney was given, the solicitor
was of the opinion that a Spanish award would be lower than one obtained in these courts and was concerned only to obtain
moneys on account; yet he proceeded without having taken the advice of counsel on the question of a possible election or on the
applicability of the 1982 Act. Only four days before the Spanish trial, at which the Spanish lawyer could yet have reserved the
civil action from the jurisdiction of the Spanish court, English counsel advised that the sum of 75,000 was an appropriate global
figure in any English proceedings. It is plain that the Spanish proceedings were conducted on the basis of a misunderstanding as
to their likely effect, concerning which it appears that the solicitor had never taken the advice of English counsel. This was
plainly contrary to the interests of the plaintiff and her children.
Leaving aside the question of whether the absence of a seal was fatal to the power of attorney (which plainly it was not so
far as the Spanish court was concerned), there was no evidence before me that the children, at the time that the power of attorney
was given, were aware of any of the steps being taken on their behalf, let alone able to give them independent consideration or to
give any informed consent as to the power of attorney or the authority of their mother to give it on their behalf. In these
circumstances, and given the lack of benefit to the infants, it is not necessary for me to consider the nice questions set out at
Bowstead on Agency (15th edn, 1985) pp 3032, as to the ability of an infant to appoint agents and the basis upon which authority
apparently granted by an infant will be set aside as against third parties, though it does appear to me, as there stated, that as
regards actual authority the normal rules of capacity are not applied as between principal and third party and the transaction is
void on the ground that the authority was never granted.
I pause here to observe that, as mentioned earlier in my judgment, Mr Tyrrell took a point which he contended went to the
jurisdiction of the Spanish court. Both expert witnesses were agreed in evidence before me that in Spanish proceedings the
capacity of the infant dependants, and in particular their capacity to authorise the plaintiff to act on their behalf, were a matter for
the law of the mothers domicile and that if the Spanish court had any reason to suspect the authority of the plaintiff in this
connection, or whether her representation of the children in the Spanish proceedings would be regarded by an English court as
being in their interests, the Spanish court would have directed the Spanish lawyer to reserve the rights of the plaintiff and the
children in the civil action and would itself have declined jurisdiction over the civil claim. That being so, Mr Tyrrell contended
that the Spanish court should not be regarded as a court of competent jurisdiction for the purpose of considering whether or not
its award was final and conclusive. On this aspect, I do not think that Mr Tyrrell was correct, in that, while it may well be that the
Spanish court would have voluntarily declined jurisdiction in such a case, that does not mean that in proceeding to act, in a
position where, according to Spanish law and all outward appearances, the plaintiff had authority to act, it acted in excess of
jurisdiction. I find against Mr Tyrrell in this respect.
I turn now to Mr Tyrrells second point. In Stephens v Dudbridge Ironworks Co Ltd [1904] 2 KB 225 an infant brought a
claim against his employers under the Workmens Compensation Act 1897, which was compromised by an agreement to accept
the maximum amount payable to him under that Act during his incapacity to work. In a subsequent action for negligence to
recover a greater sum, the Court of Appeal held that he was entitled to proceed on the grounds that 743 the election provided for
in s 1(2) of the 1897 Act, between a claim under that Acts provisions or at common law, would not be applied in his case to
prevent his repudiation of the contract of compromise on the grounds that it was not in his interests. It is clear from his judgment
that Collins MR considered that the principle that the ordinary law governing the contracts of infants survived the 1897 Act and
went not merely to enable the infant to avoid the contract of compromise, but to invalidate the infants original decision to
exercise his option (ie to elect) provided for under s 1(2). Indeed, that was plainly the basis of the decision of Bruce J in the court
below, whose judgment was upheld without qualification. In Arabian v Tuffnall & Taylor Ltd [1944] 2 All ER 317, [1944] KB
685 an agreement of compromise in similar circumstances, which had been signed by the infant and his next friend and had been
registered as a judgment enforceable in the county court, was similarly treated. In that case Wrottesley J applied Stephens v
Dudbridge Ironworks Co Ltd and additionally made clear that it was no part of the duty of the registrar of the county court, before
recording the agreement, to consider whether the decision of the plaintiff to elect was for his benefit or not.
In Jeffrey v Kent CC [1958] 3 All ER 155, [1958] 1 WLR 927 Paull J held, in a case brought before the provisions of Ord
80, r 11 were introduced into the Rules of the Supreme Court, that where an administrator entered into an agreement or
compromise with defendants to a Fatal Accidents Act claim, whereby the administrator agreed to take a lump sum to cover all the
dependants, the agreement was not a valid agreement unless (a) each of the dependants who was sui juris and desired to claim
had approved the agreement and (b) the court had sanctioned the agreement as being one for the benefit of each of the dependants
who were infants. He held that the court had no power to sanction an agreement unless (a) was fulfilled as well as (b). The
modern position is, of course, that such a compromise, whether brought before or after the institution of proceedings in England,
is governed by the provisions of Ord 80, rr 10 and 11 (see The Supreme Court Practice 1988 vol 1, pp 12021206).
 Mr Tyrrell relied on the cases I have mentioned, and says that by parity of reasoning I should not regard the provisions of s
34 of the 1982 Act as designed or intended to affect the ordinary law of infancy, so that, even if the plaintiff enjoyed the authority
or ostensible authority of the infant dependants in this case to bring proceedings on their behalf in Spain, the court should retain
its power to set aside such authority and avoid the effects of the 1982 Act so far as they operate to their prejudice. Mr Tyrrell
says that the public policy which underlies the provisions of the Rules of the Supreme Court is a policy to protect minors from
any lack of skill or experience of their legal advisers which might lead to settlement of a money claim for less than it is worth,
and to provide means by which a defendant may obtain a valid discharge from a minors claim would be defeated, or at least
prejudiced, if I were to accept any contrary submission (see The Supreme Court Practice as above quoted).
While I do not consider that the matter is quite so straightforward as Mr Tyrrells submission would suggest, particularly in
relation to a claim where the natural forum for proceedings in tort may well be thought to be the foreign country in which such
tort occurred, and the foreign law may itself (as in this case) provide no impediment to parents giving a power of attorney on
behalf of their children, I accept the thrust of his submissions. In this respect, Mr Strachan for the defendant has submitted that
there are competing grounds of public policy in relation to the construction and application of s 34 of the 1982 Act. He says: (a)
that the structure and intention of the 1982 Act is to recognise foreign 744 judgments as binding in cases where a foreign court
has been properly seised of the cause of action in respect of which the plaintiff subsequently sues in this country; (b) that in this
case there was no reason for the Spanish court to do other than suppose that the plaintiff properly represented (and was authorised
to represent) the interests of her children (as she could at Spanish law); and (c) that in a case of this kind the English court is not
merely setting aside an agreement made or election exercised on behalf of the infants, but is withholding effect of a judgment
regularly obtained in a foreign court (cf Stephens v Dudbridge Ironworks Co Ltd and Arabian v Tuffnall & Taylor Ltd).
All these submissions seem to me correct so far as they go, but do they go so far as to indicate that the provisions of s 34 of
the 1982 Act were designed or intended to set aside the ordinary provisions of English law in relation to infancy? I do not think
so.
As to (a), it seems to me that the immediate purpose of s 34, as I have stated, was to extend the doctrine of merger
previously applicable only to English decisions to decisions of foreign courts. I have had no wider argument addressed to me by
either side based on any other provisions of the 1982 Act or wider considerations of comity or European law. As to (b), I have
already indicated that the expert witnesses were agreed that, had the Spanish court in fact been apprised of the difficulties as to
the authority of the mother or the interests of the children, it would have declined jurisdiction over the civil claims. As to (c), it is
true that in considering the interests of the children, the court is going behind the foreign judgment to look at the position at the
time of the grant of the original power of attorney; however, that is what the court should do, if necessary in order to protect the
interests of an infant. If the power of attorney was no power, then there can be no injustice in permitting the children to repudiate
it. Even if it was a power, the English law of infancy recognises that its benefits vis--vis the children should be considered, and
if, as I consider, the narrower purpose under (a) is all that should be read into s 34, then the defendants are in no better position
than were the defendants in Arabian v Tuffnall & Taylor Ltd.
Accordingly, I hold that the matters pleaded in the defence do not amount to a defence against the plaintiffs claims in so far
as they relate to the dependencies of the children, although, as I have held, the plaintiff is debarred from proceeding further in
respect of her own dependency and/or her personal interest.
I should add that Mr Tyrrell did urge upon me that if, as I here hold, the children should not be bound by the judgment in the
Spanish proceedings, then neither should the plaintiff, the judgment being an indivisible one in respect of the claims of all the
dependants. He founded this proposition upon the view taken by Paull J in Jeffrey v Kent CC that where a lump sum, ie an
unapportioned settlement agreement, had been reached without court approval, then the whole agreement failed and would not be
held valid to the extent it related to the dependency of the plaintiff/administratrix. It does not seem to me that the reasoning
behind that decision is applicable in this case. I am concerned with the binding effect of a foreign judgment given between
opposing parties, and not with a compromise agreement based on a common assumption as between the parties. Since that is so,
there seems to me no good reason why, in respect of her own claim in the Spanish proceedings, the plaintiff being sui juris and
requiring no approval from this court for her actions taken on her behalf, should not be bound by s 34 of the 1982 Act. As I have
already indicated, I can see no reason of policy or construction why she should be able to avoid its terms, albeit that is not so in
respect of the children. I would only add that it also appears to me that if this court is hereafter of the view, as would certainly
appear to be the case if 745 English counsels advice was anywhere near correct, that the sum awarded in respect of the plaintiffs
dependency was too small, and if as a result her ability to support the children is diminished, then this court may award to the
children for loss of dependency sums larger than would have been thought appropriate if the plaintiff had received a proper sum
(see Jeffrey v Kent CC [1958] 3 All ER 155 at 157, [1958] 1 WLR 927 at 930).

Action by plaintiff under 1976 Act dismissed in respect of her own dependency but allowed to proceed in respect of claim under
1976 Act on behalf of estate and in respect of claim under 1934 Act on behalf of dependent children.

Solicitors: Richard Steer & Co, Teddington; Dawson, Lloyd & Co, Reading.

K Mydeen Esq Barrister.

[1991] 4 All ER 746

Practice Direction
(House of Lords: costs: time limits)
PRACTICE DIRECTIONS
HOUSE OF LORDS
1 November 1991.

House of Lords Costs Taxation Bill of costs Time for lodging bill of costs Time limits Necessity to adhere strictly to
time limits Bills presented outside time limits where no application for extension of time received only to be accepted in
exceptional circumstances Taxing Officer having no discretion to waive compliance with directions Directions for the
Taxation of Bills of Costs in the House of Lords, direction 1(1)(2).

The Taxing Officer is concerned to note that the time limits for lodging bills of costs in the House of Lords continue to be
disregarded in a number of cases.
Direction 1(1) of the Directions for the Taxation of Bills of Costs in the House of Lords (the Green Book, 1988) provides that
bills for taxation should be lodged within three months from the date of judgment or from the date on which a petition was before
an Appeal Committee; and direction 1(2) provides that if further time is required an application for such an extension must be
made to the Taxing Officer of the House of Lords in writing before the expiry of the three-month period.
 In his notice of 11 June 1990 (Practice Direction [1990] 2 All ER 576, [1990] 1 WLR 1083) the Clerk of the Parliaments
drew the attention of those concerned to these directions and gave notice that, where no application to extend time had been
made, bills would not be accepted unless there were exceptional circumstances. It was further stated that the directions of the
House would be strictly adhered to.
Requests to lodge late bills in respect of which no application for an extension of time has been made are still being received
by this office. The Taxing Officer wishes to inform practitioners that unless the circumstances can be shown to be exceptional he
has no discretion to waive the Practice Directions which have been and will continue to be rigidly enforced.
1 November 1991.

J A Vallance White, Judicial Taxing Officer

746
[1991] 4 All ER 747

R v Hull University Visitor, ex parte Page

EDUCATION

COURT OF APPEAL, (CIVIL DIVISION)

LORD DONALDSON OF LYMINGTON MR, STAUGHTON AND FARQUHARSON LJJ
22, 23, 31 JULY 1991

University Academic staff Dismissal Jurisdiction Jurisdiction of court to grant judicial review of decision to dismiss
member of academic staff Lecturer appointed on terms that employment could be terminated by either party on three months
notice Appointment subject to university statutes Statutes providing that academic staff could be removed for good cause
Lecturer dismissed on grounds of redundancy by three months notice Visitor deciding that dismissal within powers of
university and refusing to intervene Lecturer challenging visitors decision by application for judicial review Whether court
having power to review visitors decision as to construction of universitys statutes Whether lecturers employment properly
terminated.

In 1966 the applicant was appointed to a university lectureship on terms that his appointment was subject to the statutes of the
university, that he was obliged to vacate his post as lecturer on reaching the retirement age of 67 and that his appointment could
be terminated by either party by three months written notice. In 1988 the applicant was given three months written notice
terminating his employment on the ground of redundancy. No criticism was made about him personally or professionally. The
applicant petitioned the visitor of the university, contending that the university was not entitled to dismiss him on the ground of
redundancy because under the universitys statutes it could not dismiss him before retirement except for good cause, which
related to immoral conduct of a disgraceful nature or to incapacity, and by giving him three months written notice. The visitor
rejected the petition, holding that the university was entitled to dismiss the applicant either without notice for good cause as
defined in the statutes or by three months notice. The applicant applied for judicial review of the visitors decision. The
question arose whether the High Court had jurisdiction to grant judicial review of the visitors decision as to the construction of
the universitys statutes and if so, whether the visitors decision should be quashed. The Divisional Court held that judicial
review could be granted to challenge the decision of the visitor as to the construction of the statutes of the university, granted a
declaration that on the true construction of the statutes the university did not have power to dismiss the applicant on the ground of
redundancy and quashed the visitors decision. The university and the visitor appealed.

Held (1) Although the concurrent, including appellate, jurisdiction of the courts was effectively excluded where the statutes of a
university invested a visitor or someone in his position with the right and duty of ensuring that the intentions of the founder, as
demonstrated by the universitys statutes, were given effect to and of resolving disputes based upon rights and duties said to arise
under the statutes, if the decision of the visitor amounted to an abuse of his powers in that it was affected by illegality,
irrationality or impropriety it was amenable to the High Courts supervisory jurisdiction by way of judicial review. Accordingly,
since to misconstrue the universitys statutes and to act upon that misconstruction would be an abuse of the visitors powers, the
court had jurisdiction to review his decision (see p 751 e, p 752 c to h, p 753 b to p 754 a, p 757 b and p 762 d, post); dicta of
Scrutton LJ in Czarnikow v Roth Schmidt & Co [1922] All ER Rep 45 at 50 747and of Lord Griffiths and Lord Ackner in
Thomas v University of Bradford [1987] 1 All ER 834 at 849850, 852 applied.
(2) However, on the true construction of the universitys statutes and the applicants letter of appointment, the university was
entitled to terminate the applicants appointment either by proof of good cause with or without notice or by giving him three
months notice in writing without specifying the reason for dismissal. Accordingly, the applicants appointment could properly be
terminated by the university on the ground of redundancy by giving him three months notice without having to show good cause.
The appeal would therefore be allowed (see p 756 to p 757 b, p 758 f g, p 759 f, p 761 f and p 762 b c, post).

Notes
For the courts control over visitors, see 5 Halsburys Law (4th edn) paras 885889, and for cases on the subject, see 8(1) Digest
(2nd reissue) 649650, 52215235.

Cases referred to in judgments

Anisminic Ltd v Foreign Compensation Commission [1969] 1 All ER 208, [1969] 2 AC 147, [1969] 2 WLR 163, HL.
Bently v Bishop of Ely (1729) 1 Barn KB 192, 94 ER 132.
Chichester (Bishop) v Harward and Webber (1787) 1 Term Rep 650, 99 ER 1300.
Council of Civil Service Unions v Minister for the Civil Service [1984] 3 All ER 935, [1985] AC 374, [1984] 3 WLR 1174, HL.
Czarnikow v Roth Schmidt & Co [1922] 2 KB 478, [1922] All ER Rep 45, CA.
Dawkins v Lord Paulet (1869) LR 5 QB 94.
McClelland v Northern Ireland General Health Services Board [1957] 2 All ER 129, [1957] 1 WLR 594, HL.
Marks v Frogley [1898] 1 QB 888, CA.
R v Army Council, ex p Ravenscroft [1917] 2 KB 504, [191617] All ER Rep 492, DC.
R v Bishop of Chester (1747) 1 Wm Bl 22, 96 ER 12.
R v Bishop of Ely (1794) 5 Term Rep 475, 101 ER 267.
R v Dunesheath, ex p Meredith [1950] 2 All ER 741, [1951] 1 KB 127, DC.
R v North, ex p Oakey [1927] 1 KB 491, CA.
R v Panel on Take-overs and Mergers, ex p Datafin plc (Norton Opax plc intervening) [1987] 1 All ER 564, [1987] QB 815,
[1987] 2 WLR 699, CA.
R v RASC, Colchester (O/C Depot Battalion), ex p Elliott [1949] 1 All ER 373, DC.
R v St Edmundsbury and Ipswich Diocese (Chancellor), ex p White [1947] 2 All ER 170, [1948] 1 KB 195, CA.
R v Secretary of State for War, ex p Martyn [1949] 1 All ER 242, DC.
Thomas v University of Bradford [1987] 1 All ER 834, [1987] AC 795, [1987] 2 WLR 677, HL.

Cases also cited or referred to in skeleton arguments

Ali v Secretary of State for the Home Dept [1984] 1 All ER 1009, [1984] 1 WLR 663, CA.
American Association of University Professors v Bloomfield College (1974) 129 NJ Super 249, NJ Super Ct.
Bayley-Jones v University of Newcastle (1990) 65 ALJ 299, NSW SC.
Buller, ex p (1855) 25 LTOS 102, 1 Jur NS 709, Bail Ct.
Cowley v Heatley (1986) Times, 24 July.
Dietmann v Brent London BC [1988] ICR 842, CA; affg [1987] ICR 737.
748
Oakes v Sidney Sussex College, Cambridge [1988] 1 All ER 1004, [1988] 1 WLR 431.
Patel v University of Bradford Senate [1978] 3 All ER 841, [1978] 1 WLR 1488; affd [1979] 2 All ER 582, [1979] 1 WLR 1066,
CA.
Pearce v University of Aston in Birmingham (No 1) (1989) [1991] 2 All ER 461, CA.
Philips v Bury (1694) 2 Term Rep 346, Holt KB 715, [15581774] All ER Rep 53, 100 ER 186.
R v Alsop (1681) 2 Show KB 170, 89 ER 868.
R v Bishop of Chester (1728) 2 Stra 797, 93 ER 855.
R v Bishop of Ely (1788) 2 Term Rep 290, [17741802] All ER Rep 70, 100 ER 157.
R v Chester Dean and Chapter (1850) 15 QB 513, 117 ER 553.
R v Chichester Consistory Court (Chancellor), ex p News Group Newspapers Ltd (1991) Times, 15 July, DC.
R v Preston Supplementary Benefits Appeal Tribunal, ex p Moore [1975] 2 All ER 807, [1975] 1 WLR 624, CA.
R v St Catherines Hall, Cambridge (1791) 4 Term Rep 233, 100 ER 991.
R v St Johns College, Cambridge (1673) 4 Mod Rep 233, 87 ER 366.
R v St Johns College, Oxford (1694) 4 Mod Rep 368, 87 ER 448.
R v University of London, ex p Vijayatunga [1987] 3 All ER 204, [1988] QB 322, DC; affd [1989] 2 All ER 843, [1990] 2 QB
444, CA.
Read v Bishop of Lincoln [1892] AC 644, [18914] All ER Rep 227, PC.
Roberts Case (1666) 2 Keb 102, 84 ER 65.

Appeal
The Lord President of the Privy Council, acting on behalf of Her Majesty the Queen as visitor of the University of Hull, and the
university appealed from the decision of the Divisional Court of the Queens Bench Division (Taylor LJ and Rougier J) on 27
March 1991 granting the application of the respondent, Edgar Page, for judicial review by way of an order of certiorari to quash
the decision of the Lord President on 28 September 1989 whereby, on the advice of Lord Jauncey of Tullichettle, he rejected a
petition by Mr Page to set aside his dismissal by the university from his post as lecturer by reason of redundancy, and declaring
that on the true construction of the statutes of the university, the university had no power to dismiss Mr Page by reason of
redundancy and that his purported dismissal was without effect. The facts are set out in the judgment of Lord Donaldson MR.

Michael Beloff QC and Hubert Picarda for the university.

Philip Havers for the visitor.
Jeffrey Burke QC and Brian Langstaff for Mr Page.

Cur adv vult

31 July 1991. The following judgments were delivered.

LORD DONALDSON OF LYMINGTON MR. In June 1966 Mr Page was appointed a lecturer in the Department of
Philosophy of the University of Hull. Twenty-two years later on 30 June 1988 he was given notice that his employment would be
terminated on 2 October 1988. There was no complaint about the way in which Mr Page did his work. The termination was on
grounds of redundancy consequent upon the need of the university to make economies. Whether 749 Mr Page, rather than some
other lecturer, should have been made redundant is not in issue in the present proceedings, but in fairness to Mr Page it should be
recorded that the axe fell upon him because he was the oldest of a particular group.
Mr Page took the view that important issues of academic tenure were at stake and petitioned Her Majesty the Queen, who is
the visitor of the university. The Lord President, on behalf of Her Majesty, considered the petition, sought advice from Lord
Jauncey of Tullichettle and, on the basis of that advice, rejected the petition, thereby deciding that Mr Pages dismissal was
within the powers of the university as determined by the universitys statutes.
Mr Page then sought and was granted leave to seek judicial review of the visitors decision. That gave rise to two quite
separate issues, both of considerable public importance, namely (a) the jurisdictional issue: is there jurisdiction to quash the
visitors decision? and, if so, (b) the construction issue: should it be quashed?
A Divisional Court of the Queens Bench Division consisting of Taylor LJ and Rougier J answered both questions in the
affirmative. The university and the visitor (who for this purpose was assumed in the interests of constitutional propriety to be the
Lord President of the Council rather than Her Majesty) appealed. For my part, in agreement with the Divisional Court, I would
answer the first question in the affirmative but, differing from it, would answer the second in the negative.

The jurisdictional issue

Mr Michael Beloff QC appeared for the university and Mr Havers for the visitor. Subject to one point, they were in
agreement in their submissions. I can therefore refer in the main to those of Mr Beloff, who advanced the principal arguments,
and in so doing I gladly acknowledge that I rely greatly upon his quite admirable skeleton argument.
Mr Beloff submitted:

(i) The Visitor is intended to have exclusive jurisdiction over the internal laws of the foundation including the
interpretation of the charter and statutes of the University. This exclusive jurisdiction requires such disputes to be dealt
with by the Visitor, not the courts. This necessarily excludes actions in the Court in advance of the Visitors decision (see
[Thomas v University of Bradford [1987] 1 All ER 834, [1987] AC 795]) and, by parity of reasoning, review by the Courts
of any decision on interpretation by the Visitor after it. If the Courts were to have jurisdiction to review such decisions,
that would run counter to the whole concept of the internal domestic law and the exclusive jurisdiction of the Visitor. The
internal domestic law is to be treated as distinct from the law of the landa species of foreign law (ii) there is historical
support in other areas for limited review of decisions of specialised bodies applying a distinct corpus of law. Accordingly:
(a) The Court of Appeal has refused to grant certiorari to quash decisions of ecclesiastical courts, essentially on the basis
 that such courts administer a system of law different from the ordinary law (R v Chancellor of St Edmundsbury and
Ipswich Diocese ex p White ([1947] 2 All ER 170, [1948] 1 KB 195)). By contrast, the courts will grant prohibition to
prevent the ecclesiastical court exceeding its jurisdiction or acting in breach of natural justice (see, eg. R v North ex p
Oakey [1927] 1 KB 491). (b) The courts have similarly held that questions of purely military law falling within the
jurisdiction of the military authorities cannot be called into question in the ordinary civil courts. The courts can only 750
intervene in so far as the actions of military authorities affect the ordinary civil rights of soldiers (see R v Secretary of State
for War ex p. Martyn [1949] 1 All ER 242; R v O/C Depot Battalion, RASC Colchester ex p. Elliott [1949] 1 All ER 373; R
v Army Council ex p. Ravenscroft ([1917] 2 KB 504, [191617] All ER ER Rep 492); Marks v Frogley [1898] 1 QB 888;
Dawkins v Lord Paulet (1869) LR 5 QB 94). (iii) in relation to Visitors, there is authority that prohibition will lie if the
Visitor exceeds his jurisdiction as a result of an error in construing the statutes (Bently v Bishop of Ely ((1729) 1 Barn KB
192, 94 ER 132) or if the Visitor acts in breach of natural justice (R v Bishop of Ely ((1794) 5 Term Rep 475, 101 ER 267)
but not, prior to this case, for a mere error of construction not going to jurisdiction (vi) The jurisdiction judicially to
review for errors of law is relatively recent and was prior to the seminal decision in Anisminic v Foreign Compensation
Commission ([1969] 1 All ER 208, [1969] 2 AC 147) confined to errors on the face of the record so that the concept of
judicial review on all grounds save errors of law has firm roots in history a fortiori where the errors of law are of a special
kind i.e. of interpretation of the Universitys internal law. (Mr Beloffs emphasis).

The difference between the submissions of Mr Havers and of Mr Beloff lay, I think, in Mr Beloff being prepared tentatively
to accept that the courts had jurisdiction to review a visitatorial decision upon grounds of irrationality, whereas Mr Havers
declined to make any such concession.
There is no serious dispute, but that the universities of this country have a sufficiently public character to bring decisions by
them within the scope of the supervisory jurisdiction of the courts, if that jurisdiction is not excluded upon the other grounds
relied upon in this appeal.
Subject to a somewhat optimistic submission by Mr Jeffrey Burke QC, appearing for Mr Page, that the House of Lords
decision in Thomas v University of Bradford [1987] 1 All ER 834, [1987] AC 795 obliged us to hold that the courts have
jurisdiction to review a decision of the visitor as to the construction of the universitys statutes, it was common ground that there
was no binding authority to guide us. For my part I do not regard the fact that there is no trace of the exercise of any such
jurisdiction in the older authorities as being either helpful or surprising in the light of modern expansionist developments in this
field of the law which have had House of Lords approval or have originated there. I do, however, think that the speeches in
Thomas point the way, a way which, in any event, seems to me to be based on long-established principle. That principle was
enunciated in colourful terms and in a slightly different context by Scrutton LJ in Czarnikow v Roth Schmidt Co [1922] 2 KB 478
at 488, [1922] All ER Rep 45 at 50: There must be no Alsatia in England where the Kings writ does not run. (See also R v
Panel on Take-overs and Mergers, ex p Datafin plc (Norton Opax plc intervening) [1987] 1 All ER 564 at 568569, [1987] QB
815 at 827828).
I do not regard the attitude of the courts towards the Church and the military as constituting any derogation from this
principle. Jurisdictionally the Kings writ should, and in my judgment does, run in respect of any matter which would be
justiciable in the courts of law (and equity) if there were no ecclesiastical and military courts. But those courts are not solely
concerned with such matters and, in so far as their jurisdiction extends to spiritual matters in the case of the ecclesiastical courts
or to purely disciplinary matters in the case of the military courts, I do not consider that the principle requires or enables the
courts of law to take jurisdiction. Furthermore, in considering how the courts of law have acted in particular situations as
recorded in the reports, it is important not to overlook the discretionary element in their exercise of their supervisory jurisdiction.
In 751 particular, the courts will normally, in the exercise of that discretion, decline to intervene if there is a satisfactory
alternative avenue of redress by means of an internal or domestic appellate system, as is the case with both the ecclesiastical and
the military courts. In many, and perhaps most, of the reported cases the courts will not have been concerned to differentiate
between a case in which they considered that they had no jurisdiction and one in which, whilst they may well have had
jurisdiction, as a matter of discretion that jurisdiction would never be exercised.
Both Mr Beloff and Mr Havers, the latter perhaps even more strongly than the former, have submitted that the founder of an
eleemosynary corporation was entitled to create his own private laws which would govern relations between it and its members
and its members inter se and was further entitled to provide for private disputes resolution machinery. I can go this far with them
indeed the decision in Thomas would oblige me to do so in any eventthat it is certainly open to the founder by suitably
drafting the statutes of the corporation to create a special regime of rules and regulations which will govern these relationships
and to do so without resort to a contractual nexus between those concerned. I can also go with them in agreeing (and this again is
confirmed by Thomas) that, where these statutes invest a visitor or someone in his position with the right and duty of ensuring
that the intentions of the founder, as demonstrated by the statutes, are given effect to and of resolving disputes based upon right
and duties said to arise under the statutes, this is effective to exclude any concurrent, including an appellate, jurisdiction in the
courts.
But what the Divisional Court has asserted in this case is not a concurrent, but a supervisory, jurisdiction. No doubt it is a
jurisdiction which has to be exercised with sensitivity, as indeed it is or should be in its other manifestations in relation, for
example, to decisions of the executive or of specialist tribunals with an exclusive jurisdiction which does not include a right of
appeal to the courts. Procedural improprietary apart, if what had here been in issue had been a question of what was appropriate
conduct upon the part of a member of the university or any other matter which called for a knowledge of the arcane mysteries of
academia, the visitor would clearly have had the widest discretion in reaching a decision and it would only have been in the event
of his decision being clearly irrational within Lord Diplocks famous classification of grounds for judicial review that the courts
would have considered intervening (see Council of Civil Service Unions v Minister for the Civil Service [1984] 3 All ER 935 at
951, [1985] AC 374 at 410411). That is not this case. The founder has framed his statutes not in a domestic language with
which the judiciary is unfamiliar, but in the same language as that which is employed in the framing of private and public Acts of
Parliament and must be taken to have intended that they should be so construed and given effect to. In such an exercise the
expertise of the judiciary is in principle no less than that of the visitor.
It was suggested by Mr Havers that, if the courts were to assert a supervisory jurisdiction which enabled them to review the
construction put upon the statutes by the visitor, they would in effect be creating a limited area of appeal. I do not agree. A
review jurisdiction is fundamentally different from an appellate jurisdiction, not least in its discretionary element, and indeed the
only point at which the two jurisdictions converge is when the sole or decisive issue is one of construction of laws, rules or
regulations intended to be binding in their terms.
He also suggested that, if this jurisdiction were to be asserted, the Lord President, or visitors generally, might no longer be
prepared to seek advice from the most eminent of lawyers, such as Lords of Appeal in Ordinary. Such a reaction 752 would be
deplorable and could only, I think, be based upon some such wholly mistaken notion as that it is somehow demeaning for the
most senior judges to have their decisions examined and passed upon by those who are judicially their juniors. This is to ignore
the fact that in the administration of justice in this country, the authority of any judicial pronouncement depends not upon the
personal authority of the judge concerned, but upon the capacity in which he gives a decision or expresses an opinion.
For my part, I am more than content to adopt the words of Lord Griffith and Lord Ackner (with which Lord Bridge of
Harwich, Lord Brandon of Oakbrook and Lord Mackay of Clashfern agreed) in Thomass case. There, as here, a lecturer was
claiming that a decision to dismiss her was ultra vires the universitys domestic laws. The difference lay in the fact that Miss
Thomas was seeking to invoke the ordinary jurisdiction of the courts, as distinct from their supervisory jurisdiction, but in each
case the dispute turned in part at least upon the construction of those laws. It was against that background, and not in some
different context, that the speeches were delivered. After considering all or most of the authorities to which we have been
referred, Lord Griffiths said ([1987] 1 All ER 834 at 849850, [1987] AC 795 at 824825):

It is true that the decision of the visitor is final and the parties are thus deprived of challenging a decision in that Court
of Appeal and perhaps the House of Lords. But is this a disadvantage or an advantage? I rather think it is an advantage.
Today the visitors of universities either are or include independent persons of the highest judicial eminence. Would not
most people consider it better to accept the decision of such a person rather than face the risk of the matter dragging on
through the years until the appellate process has finally ground to a halt. There is also the advantage of cheapness, lack of
formality and flexibility in the visatatorial appeal procedure which is not bound by the intimidating and formalised
procedures of the courts of law. Finally, there is the protection afforded by the supervisory, as opposed to appellate,
jurisdiction of the High Court over the visitor. It has long been held that the writs of mandamus and prohibition will go
either to compel the visitor to act if he refused to deal with a matter within his jurisdiction or to prohibit him from dealing
with a matter that lies without his jurisdiction. On mandamus see R v Bishop of Ely (1794) 5 Term Rep 475, 101 ER 267
and R v Dunsheath, ex p Meredith [1950] 2 All ER 741, [1951] 1 KB 127 and on prohibition see R v Bishop of Chester
(1747) 1 Wm Bl 22, 96 ER 12 and Bishop of Chichester v Harward and Webber (1787) 1 Term Rep 650, 99 ER 1300.
Although doubts have been expressed in the past as to the availability of certiorari, I have myself no doubt that in the light
of the modern development of administrative law, the High Court would have power, on an application for judicial review,
to quash a decision of the visitor which amounted to an abuse of his powers.

To misconstrue the universitys statutes and act upon that misconstruction would indeed be an abuse of the visitors powers.
And Lord Ackner said ([1987] 1 All ER 834 at 852, [1987] AC 795 at 828):

The source of the obligation on which Miss Thomas relies for her claim is the domestic laws of the university, its
statutes and its ordinances. It is her case that the university has failed either in the proper interpretation of its statutes or in
their proper application. Miss Thomas is not relying upon a contractual obligation other than an obligation by the
university to comply with its own domestic laws. Accordingly, in my judgment, her claim falls 753 within the exclusive
jurisdiction of the visitor, subject always to judicial review. (Lord Ackners emphasis.)

The construction issue

Although there was at one time some slight controversy as to the terms and circumstances of Mr Pages appointment, it is
now accepted that, so far as material, he was appointed and accepted the appointment as a lecturer subject to (a) the universitys
statutes, (b) an obligation to vacate his office as lecturer on 30 September following the date upon which he attained the age of 67
(ie the age of retirement) and (c) a term that The appointment may be terminated on either side by three months notice in
writing expiring at the end of a term or the long vacation.
Mr Page has contended, and the Divisional Court has held, that on the true construction of the statutes read in conjunction
with the obligation to vacate office upon reaching the age of retirement, and the notice clause, Mr Page is free to vacate his office
upon giving three months notice, but the university can only terminate his tenure of that office for good cause and subject to
giving him three months notice. Lord Jauncey of Tullichettle on the other hand advised, and the Lord President accepted, that
the conjoint effect of these provisions was that either the university or Mr Page could terminate Mr Pages tenure of office on
giving three months notice and that in addition the university could terminate it for good cause with or without such notice.
In the ordinary course of events the legal relationship of employer and employee, which is the relationship with which we
are concerned, can be determined by either party with or without notice and with or without good or any cause. It is a personal
relationship and cannot survive its repudiation by either party, whether or not the repudiation is accepted by the other. The
relationship having ended, all that remains is to determine whether it was wrongful dismissal, which turns on the terms of the
contract, or was an unfair dismissal, which turns on the provisions of the Employment Protection (Consolidation) Act 1978. That
would be a matter for the courts or, as the case might be, an industrial tribunal. By contrast this is a case in which, if Mr Page and
the Divisional Court are right, the university as employer had no power to terminate Mr Pages employment and accordingly Mr
Page has never been dismissed at all and the employment relationship remains intact. If on the other hand the visitor and Lord
Jauncey of Tullichettle are right, the employment relationship was terminated on 2 October 1988 and it will be for an industrial
tribunal to decide whether his dismissal was unfair, it being conceded that, if he could be dismissed at all, his dismissal by the
notice given on 30 June 1988 was not wrongful. What are the powers of the university is within the exclusive jurisdiction of the
visitor, subject to judicial review (see Thomass case).
The relevant terms of the universitys states are ss 33, 34 and 35. They provide that:

SECTION 33
REMOVAL OF CERTAIN OFFICERS AND MEMBERS AND VACATION OF OFFICE AND MEMBERSHIP
1. The Chancellor, Pro-Chancellors, the Treasurer and any Member of the Court or of the Council (other than ex officio
Members) may be removed for good cause by the Court.
2. Good Cause in this Statute means: (a) Conviction of any felony or misdemeanour which shall be judged by the
Court to be of an immoral, scandalous or disgraceful nature; (b) Actual physical or mental incapacity 754 which shall be
judged by the Court to prevent the proper execution of the duties of the office or membership; or ( c) Any conduct which
shall be judged by the Court to be of an immoral, scandalous or disgraceful nature.

SECTION 34
REMOVAL OF MEMBERS OF THE TEACHING RESEARCH AND ADMINISTRATIVE STAFF AND VACATION
OF OFFICES
1. The Vice-Chancellor and all Officers of the University including Professors and members of the Staff holding their
appointments until the age of retirement may be removed by the Council for good cause. The Council may and shall if
requested by the person concerned or by any three members of the Council before such removal appoint a Joint Committee
of the council and the Senate as defined by Ordinance to examine the complaint and to report to the Council therein.
2. Good Cause in this Statute means: (a) Conviction of any felony or misdemeanour which the Council after
consideration if necessary of a Report of the Joint Committee referred to in Clause 1 of this Section shall deem to be of an
immoral, scandalous or disgraceful nature. (b) Actual physical or mental incapacity which the Council after consideration
if necessary of a Report of the Joint Committee referred to in Clause 1 of this section shall deem to be such as to render the
member of Staff unfit for the execution of the duties of his office. (c) Conduct of an immoral, scandalous or disgraceful
nature which the Council after consideration if necessary of a Report of the Joint Committee referred to in Clause 1 of this
Section shall deem to be such as to render the member of the Staff unfit to continue to hold his office. ( d) Conduct which
the Council after consideration if necessary of a Report of the Joint Committee referred to in Clause 1 of this Section shall
 consider to be such as to constitute failure or inability to perform the duties of his office or to comply with the conditions of
the tenure of his office.
3. Subject to the terms of his appointment no member of the teaching research or administrative staff of the University
(including the Vice-Chancellor) shall be removed from office save upon the grounds specified in paragraph 2 of this
Section and in pursuance of the procedure specified in Clause 1 of this Section.

SECTION 35
RETIREMENT OF MEMBERS OF THE ACADEMIC AND ACADEMICRELATED STAFF OF THE
UNIVERSITY
The Vice-Chancellor and all Professors, Readers, Lecturers and other salaried Officers of the University shall vacate
their office on the 30th day of September following the date on which they attain the age of 65 years unless the Council by
a vote of at least two-thirds of the number of members present shall request any such Officer to continue in office for such
period as it shall from time to time determine provided that in the case of such persons holding office on 30th September,
1977, the date shall be that on which they attained the age of 67 years.

Notwithstanding Mr Pages strongly held views, which are no doubt supported by many of his academic colleagues both at
Hull and at other universities, I do not consider that any principle of academic tenure is involved. Either the university statutes
give Mr Page tenure or they do not. It is a pure question of construction with no presumption one way or the other.
755
It is common ground that Mr Page does not fall within section 33, but does fall within section 34(1) as being an [officer] of
the University including Professors and members of the Staff holding their appointments until the age of retirement. It is also
common ground that he could properly be described as a member of the teaching research or administrative staff of the
University but not that he is within section 34(3). He is also a lecturer within section 35.
The Divisional Court accepted Mr Burkes submission that the statutes contemplate a hierarchial structure. Level 1
comprised the top brass refered to in section 33. Level 2 comprised Mr Page and others to whom section 34(1) applies,
including the vice-chancellor if, but only if, he holds that appointment up to the age of retirement. Those at this level can only be
dismissed for good cause. Level 3 comprised those who fall within section 34(3), but not within section 34(1) because, whilst
they are members of the teaching research or administrative staff or are a vice-chancellor, they hold temporary or fixed-term
appointments or indeed any form of appointment not being expressed to be up to the age of retirement. Staff in this group enjoy
good cause protection, save in so far as their contracts otherwise provide.
Applying this construction to the case of Mr Page, as a level 2 member of staff he enjoys good cause protection until the
age of retirement and, in addition, by the terms of his appointment as contrasted with the statute has the additional protection of
being proof against dismissal however good the cause, unless and until he has been given three months notice and that notice
has expired.
It appears that this construction was not put to Lord Jauncey of Tullichettle, but I am confident that he would have rejected
it, as I do. Unless the words compel such a construction, it is absurd that level 1 office holders should be dismissable summarily
for good cause, whereas level 2 office holders can only be dismissed for good cause on notice, however grave the cause. It also
involves an artificial removal from level 3 of staff who in terms fall within both levels 2 and 4.
Both parties are able to submit that the drafting of the statutes could have been simplified and thus probably clarified, but I
think that the framework and construction are sufficiently clear. Section 33 officers stand on their own. They can be dismissed
for good cause whatever the terms of their appointment. There is then a further group which falls within section 34 and includes
Mr Page. Clause 1 empowers the university to dismiss staff falling within it for good cause, whatever the terms of their
appointment, subject only to compliance with the procedure specified in that clause. This may constitute a breach of contract, but
the section is concerned with vires which is different. The clause is positive and permissive in form. Paragraph 3 applies to the
same group and, in addition, to administrative staff who are not within cl 1 because they do not hold their appointments until
retirement age. Again it is concerned with vires. It is mandatory and negative in form and deprives the university of the power to
dismiss them otherwise than for good cause or in accordance with the terms of their employment. This protection is not enjoyed
by other employees of the university, because a purported dismissal in breach of this paragraph would not be just a wrongful
dismissal, it would be ultra vires the university and a nullity.
This view is consistent with that of Lord Jauncey of Tullichettle who advised that the opening words of section 34(3)

show clearly that section 34 contemplated that individual contracts of employment would contain provisions for
termination in circumstances other than those set out in section 34(2). When the notice section is read together with these
opening words I consider that the conclusion is 756 inescapable that Mr Pages contract of employment provided for two
situations, namely (1) removal from office without a specified period of notice under section 34, (2) termination of
employment by three months notice expiring at the end of a term or the long vacation. It follows that the University were,
by letter of 30th June 1988, entitled to terminate his contract of employment with effect from 2nd October 1988.

I would allow the appeal.

STAUGHTON LJ. For the reasons given by Lord Donaldson MR, I agree that the remedies of judicial review are available
when a decision of the visitor of a university or college is affected by illegality, irrationality or impropriety.
As to the construction of the statutes of the University of Hull and Mr Pages letter of appointment, the courts first task is to
discover what classes or categories of person are referred to in sections 33 and 34. It is clear that section 33 is intended to contain
one class which is largely separate. That comprises:

The Chancellor, Pro-Chancellors, the Treasurer and any Member of the Court or of the Council (other than ex officio
Members)

In section 13, class 6, there is a list of ex officio members, which shows that the term has a narrow meaning and by no
means comprises all those members of the court or council or the university who have membership because they hold an office.
For example, the vice-chancellor is not in class 6, but is a member of both the court and council. There is thus an overlap
between the class of persons in section 33 and the class or classes in section 34. Since the two sections have a somewhat
different regime for removal, this presents a problem. The solution is, in my judgment, that section 33 is dealing with removal
from certain offices (chancellor, pro-chancellor, treasurer), or from membership of the court or council; hence the reference in
para 2(b) of the section to unfitness for the execution of the duties of the office or membership. Section 34, on the other hand,
deals with the removal from any other office of the person appointed to it. Theoretically the vice-chancellor, and perhaps other
persons, would have to be removed from office under section 34, and removed from membership of the court or council under
section 33. Although cumbersome, this is not an impossible result.
Section 34 is headed: Removal of members of the teaching research and administrative staff and vacation of office. In cl 1
it described a class as follows:
 The Vice-Chancellor and all Officers of the University including Professors and members of the Staff

In para 3 the reference is to:

no member of the teaching research or administrative staff of the University (including the Vice-Chancellor)

In either case two of the grounds for removal are those specified in para 2(b) and (c), whereby the member of Staff is deemed to
be unfit for the execution of the duties of his office, or to continue to hold his office.
In my opinion the two classes described in section 34(1) and (3) are precisely the same; hence they are both contained in a
section which has only one heading. A skilled draftsman would have used the same words to describe them in both paragraphs.
But I am not much impressed by the skill with which these statutes were drafted.
757
I therefore reject the Divisional Courts conclusion that there is a hierarchy of three grades of staff in sections 33 and 34.
There are in my opinion only two grades, so far as concerns removal from office: (a) the chancellor, pro-chancellor and treasurer,
and (b) all other members of the teaching, research or administrative staff. Removal from membership of the court or council is
included in section 33, as I have pointed out, together with removal from office of those in class (a). Removal from office of
those in class (b) is dealt with in section 34.
Once it is appreciated that there is only one class in section 34, the meaning becomes clear. Section 34(1) provides that
anyone in class (b) who holds an appointment until the age of retirement may be removed for good cause. Paragraph 3 provides
that, subject to the terms of his appointment, no member of class (b) may be removed except for good cause. It may well be that
the same result could have been achieved with greater economy of language; that does not persuade me that my interpretation is
wrong.
I then turn to Mr Pages letter of appointment. This provided:

The appointment may be terminated by either party on giving three months notice in writing expiring at the end of a
term or of the long vacation.

There is nothing there about appointment until retirement age. But it was common ground in the Divisional Court that Mr Page
was appointed until the age of retirement. That conclusion was presumably derived from the terms of the advertisement (which I
wrongly thought to be irrelevant during the argument). This stated that a lecturer would vacate office on 30 September following
his 67th birthday, in contrast to an assistant lecturer who would have a probationary period. But the advertisement also provided
for three months notice by either side.
No doubt one should read the advertisement with the letter of appointment. But for my part I do not consider that Mr Page
was appointed until the age of retirement, in terms of section 34(1), despite the common view of the parties. He was appointed
until that age unless either party gave three months notice earlier. This is the short and simple answer to this case. Section 34(1)
does not apply, and Mr Page was properly dismissed by notice.
If I am nevertheless obliged to accept what was common ground between the parties, it means that Mr Page by the terms of
his appointment was both appointed until the age of retirement and subject to dismissal on three months notice. In those
circumstances section 34(1) provides that he may be removed for good cause; and by para 3 he may be dismissed on three
months notice (because his appointment says so), but otherwise only for good cause. On that view also, Mr Page was validly
dismissed by notice.
It is said that the effect of this construction is to render the somewhat elaborate provisions as to good cause unnecessary, as
the university would be unlikely ever to seek to operate them; it would be simpler merely to give three months notice, as
operation of the good cause provisions would take longer and might involve dispute. That may well be true today. But I doubt if
it was true in 1955 when the statutes were made, or in 1966 when Mr Page was appointed. Employment law and procedure have
developed greatly since then, and much more care is now taken before a person is dismissed for cause. But in any event, if the
good cause provisions are of no practical effect in Mr Pages case, that is because a period as short as three months was inserted
in his terms of appointment. Instead it might have been 12 months. In that case the university might well have wished to operate
the good cause provisions if there had been serious misconduct or 758 incapacity. The length of the period inserted in the letter
of appointment cannot affect the meaning of the statutes.
Thus far I have said nothing about academic tenure. I fully appreciate that importance is attached to job security by those
who teach at universities; and I see nothing improbable in the University of Hull in 1966 appointing someone as a lecturer until
the age of 67, subject only to good cause. The statute itself contemplated that this might happen. But equally I see nothing
improbable in the university appointing someone on terms that he should remain until that age, unless three months notice was
given sooner. Accordingly, it is in my judgment right to approach the problem from a neutral position, without any predisposition
to favour one solution or the other. That I have sought to do.
Likewise, I would see nothing improbable in the university binding itself to Mr Page for a longer period than Mr Page was
bound to the university, if it chose to do so. But in my opinion it did not.
Finally, I should mention the argument that the three months notice provision, when operated by the university, was to be
notice of dismissal for good causeand what is more, that it could only be given after good cause was either admitted or
established by the joint committee of the council and the senate; the three months notice provision did not authorise dismissal by
reason of redundancy, or for that matter caprice. The argument proceeded from the assumption that some period of notice had to
be provided even if dismissal was for good cause; McClelland v Northern Ireland General Health Services Board [1957] 2 All
ER 129, [1957] 1 WLR 594 was said to show that no other period of notice could be implied, since one was already expressly
agreed; hence the three months notice provision must have been directed at dismissal for good cause.
I am afraid that I cannot accept the premise that any period of notice was required in the case of dismissal for good cause. It
used to be common for employment contracts to provide for instant dismissal in the case of serious misconduct. The university
would require that right in some of the events covered by section 34. It would not wish to have the burden of paying a person
who was suspended from duty. I do not consider that the good cause provisions contemplated any period of notice or delay, other
than that necessarily inherent in securing either an admission that good cause existed or a report of the joint committee. I would
allow this appeal.

FARQUHARSON LJ. On 13 June 1966 by letter from the registrar of the University of Hull, the applicant was offered an
appointment as lecturer in philosophy. Among a number of other terms and conditions it was provided that:

The appointment may be terminated by either party on giving three months notice in writing expiring at the end of a
term or of the long vacation.

In the advertisement for the post which the university had published in the national press, under the heading Tenure it was
stated that:

The appointments will date from 1st October, 1966 and will be subject to the Statutes of the University for the time
being in force
The applicant accepted the appointment by letter dated 14 June 1966.
On 30 June 1988 the applicant was given written notice to terminate his employment on the grounds of redundancy, the
notice to take effect on 2 October 1988. The applicant subsequently petitioned the visitor of the university that his 759 purported
dismissal was ultra vires and void but his petition was rejected. In proceedings for judicial review of the visitors decision the
Divisional Court held that the visitor had misconstrued the statutes of the university and granted the applicant the relief he
sought. The present appeal is from the Divisional Courts decision.
There is no dispute that the terms governing the applicants appointment are to be found in the letter already cited and in
section 34 of the statutes of the university. In developing his argument for the applicant Mr Burke QC also relied on section 33
which he submitted placed section 34 in its proper context.
Section 33(1) provides:

The Chancellor, Pro-Chancellors, the Treasurer and any Member of the Court or of the Council (other than ex officio
Members) may be removed for good cause by the Court.

Paragraph 2 defines the meaning of good cause.

Section 34 bears the heading:

Removal of members of the teaching research and administrative staff and vacation of office.

Clause 1, in so far as it is relevant, provides:

The Vice-Chancellor and all Officers of the University including Professors and members of the Staff holding their
appointments until the age of retirement may be removed by the Council for good cause.

Paragraph 2 defines good cause within the meaning of cl 1 and it is agreed by both sides that there was no good cause in this
sense for dismissing the applicant.
It was also common ground that the applicant was within the category of those holding their appointments until the age of
retirement.
Section 34(3) is in these terms:

Subject to the terms of his appointment no member of the teaching research or administrative staff of the University
(including the Vice-Chancellor) shall be removed from office save upon the grounds specified in paragraph 2 of this
Section and in pursuance of the procedure specified in Clause 1 of this Section.

The construction of section 34 advanced by counsel for the university, Mr Beloff QC, and for the visitor, Mr Havers, is
simplicity itself. While the applicant comes within section 34(1) as one holding his appointment until retirement and for that
reason can only be removed under the statutes for good cause as specified in para 2, the parties made the applicants appointment
subject to the correspondence exchanged between them in June 1966, so that the appointment was terminable by three months
notice, which had been duly given. Section 34(3) expressly provides that the protection against removal contained in the statutes
is subject to the terms of his appointment. Counsel contend that the university has acted correctly within the terms of section 34
and that the dismissal of the applicant is therefore effective.
Mr Burke approaches the task of construction on what might be described as policy grounds. He submits that the purpose of
those sections in the statutes is to preserve and guarantee academic freedom. No teacher should be at risk of dismissal because he
expresses radical or unpopular opinions. He is given protection against such a risk by the provision that he can only be dismissed
for good cause as expressed in the statute, which, broadly speaking, relates to immoral conduct of a disgraceful nature or
incapacity. Recognition of the 760 importance of this safeguard is to be found in the Education Reform Act 1988 in ss 202(2)(a)
and 203(1)(b). The introductory words of section 34(3) of the statutes could not therefore have been intended to remove the
protection given to university teachers. Mr Burke argues that, if the universitys construction is correct, the whole edifice set up
by the section is destroyed. There would be no point in going through the painful and difficult task of proving disgraceful
conduct by or incapacity of a member of the university staff if the problem could be resolved more simply by giving three
months notice.
These are cogent arguments but for my part I find it difficult to spell out the policy suggested from these two sections. The
provisions are equally consistent with a view which might be taken by the university that with falling rolls and increasing
expenditure it could not afford a guarantee of employment for a professional lifetime. I agree with Mr Burke that the two
provisions (ie in the statutes and in the letter of appointment) sit uneasily together but I do not accept his approach of attributing a
policy to the statutes and then seeking to construe them in a way which achieves that policy. If the policy was clearly expressed
in the statutes, it might be different but in the present case the task of the court is to derive the true meaning, if it can, from the
words of the sections themselves.
Rejecting the policy argument, as I do, one asks what is the purpose of those introductory words of section 34(3) subject
to the terms of his appointment? Mr Burke contends that they are in a sense an auxiliary to the process contemplated by section
34(1). He submits that the only way of removing a teacher holding his appointment until retirement is by proving good cause
against him and then applying the notice provisions in the letter of appointment. Thus the council, having found disgraceful
conduct, for example, established against the teacher, would then give him three months notice of the termination of his
appointment.
For my part, I cannot accept that as an arguable construction. The provisions for removal in section 34 involve an entirely
different process from the giving of three months notice of termination. Section 34(1) gives the council the power of removal
once good cause is proved. It is a power of summary removal. The injection of a subsequent period of notice is artificial. The
two procedures are inconsistent and not complementary.
The next submission of Mr Burke is that there should be a hierarchical construction of the statutes. This construction was
approved by the Divisional Court. Counsel argues that sections 33 and 34 contemplate three distinct categories of appointment in
the university. Thus section 33 relates to the most senior appointments, those who might colloquially be described as the top
brass. Section 34(1) deals with the officers of the university, ie those including the vice-chancellor who hold their appointments
until retirement. They might, I suppose, be categorised as the senior establishment. Lastly, the lowest element in the hierarchy
are the non-permanent or fixed-term staff. Mr Burke by way of illustration points to the use of a capital s in the word staff in
section 34(1) but a small s in 34(3). In fairness he (quite rightly) did not rely on that point very much. If this categorisation is
correct, then the words subject to the terms of his appointment would not apply to those in the position of the applicant, but only
to the non-permanent staff. Thus the applicant could not have his appointment terminated by notice but only by proof of good
cause for his dismissal within the section.
While I readily accept that those described in section 33 constitute a separate category, I can find no justification for drawing
a distinction between those described in section 34(3) and those in section 34(1). It is to be noted that section 34 has an
introductory heading describing the members of staff to which it relates where no such distinction appears. Furthermore, there is
no express description of 761 different categories in the words of the section itself. The distinction sought to be drawn is an
important one with significant consequences, and one would suppose in those circumstances that it would be clearly stated. Mr
Burke argues with his usual cogency that, if his analysis is not correct, there would be no sense in having the two clauses in the
same section. If only one category of persons is contemplated, both clauses would give those persons the protection of the
statutes against dismissal.
While acknowledging the weight of that argument, I take the view that section 34(1) is an enabling clause giving the
university the power of dismissal in the specified circumstances; while section 34(3) describes those entitled to benefit from the
protection against dismissal given by the statutes. To that extent only I agree that section 34(3) is repetitive. In my judgment,
whilst section 34(1) describes a narrower category, ie those holding their appointments until the age of retirement, all those
included in that category are also included in section 34(3) together with the non-established staff.
For those reasons the applicants appointment is qualified by the terms of the letter of 13 June 1966 and it could properly be
terminated by the giving of three months notice by the university.
So far as the issue of jurisdiction is concerned, I agree with the observations of Lord Donaldson MR.
I would allow the appeal.

Appeal allowed. No order for costs in Court of Appeal or below. Leave to appeal and cross-appeal to the House of Lords
granted.

Solicitors: Priestman Green & Co, Hull; Treasury Solicitor; Robin Thompson & Partners.

Mary Rose Plummer Barrister.

[1991] 4 All ER 762

Practice Direction
(judgment: enforcement: costs)
PRACTICE DIRECTIONS
QUEENS BENCH DIVISION
1 November 1991.

Judgment Enforcement Costs Costs of previous attempts to enforce judgment Procedure Ex parte application Affidavit
in support Exhibits Indorsement of recoverable costs on affidavit by master or district judge Directions as to taxation where
amount indorsed is less than amount claimed Enforcement of any further costs to which judgment creditor entitled Interest
Courts and Legal Services Act 1990, s 15(3)(4).

Section 15(3) and (4) of the Courts and Legal Services Act 1990
1. Subsection (3) of s 15 enables a person taking steps to enforce a money judgment in the High Court to recover the costs
of any previous attempt to enforce that judgment. Subsection (4) excludes costs the court considers to have been unreasonably
incurred.
1.2 This practice direction concerns the procedure by which a judgment creditor should obtain an order for the addition of
such costs in the Queens Bench Division of the High Court.
2. The procedure
2.1 The same procedure should be adopted as which other ex parte applications made on affidavit, ie an affidavit in support
of the application should be lodged either with the Masters Secretarys Department of the Central Office in cases where
judgment was entered, transferred or registered in the Central Office or in the district registry where judgment was entered,
transferred or registered.
762
2.2 The affidavit should be in substantially the form annexed hereto.
2.3 The deponent should exhibit to the affidavit sufficient vouchers, receipts or other documents as are reasonably necessary
to verify the amount of the costs of previous attempts to enforce the judgment.
3. Consideration by the court
3.1 A master or district judge shall on consideration of the affidavit lodged pursuant to this procedure indorse upon the
affidavit the amount of such costs as he considers may be recoverable under sub-s (3) of s 15, which shall be drawn up as an
order for costs.
3.2 If the sum indorsed is less than that claimed by the judgment creditor then the master or district judge may give
directions whether as to taxation or otherwise for determination of any such balance or he may disallow the balance.
3.3 If after taxation or such other steps as the master or district judge may order it appears the judgment creditor is entitled
to further costs beyond those originally allowed then a further writ of fieri facias or other lawful steps may be taken to enforce
such further costs.
3.4 Interest or costs allowed under 3.1 shall run from the date of the indorsement and under 3.3 from the date or taxation.

Keith Topley, Senior Master of the Queens Bench Division

8 November 1991.

Affidavit in support of application for leave to execute

for earlier costs of enforcement pursuant to s 15(3) and (4)

of the Courts and Legal Services Act 1990

[Title as in action]
I, of in the County of MAKE OATH AND
SAY AS FOLLOWS:
1. I am (state depondents occupation and connection with the matter). I am duly authorised by the above named plaintiff
[or defendant] to make this affidavit on his behalf.
2. Except where the context otherwise indicates my source of knowledge of the facts herein deposed to is ( state deponents
source of knowledge). Such facts are true to the best of my knowledge, information and belief.
 3. The plaintiff is a judgment creditor of the defendant to the extent of inclusive of all interest which has accrued to date
on the judgment debt.
4. The plaintiff is presently taking steps to enforce the said judgment (or being the balance thereof]. There follows a list
of the previous attempts and the methods which the plaintiff has employed in seeking to enforce the said judgment. The costs to
the plaintiff of each such attempt are included in the said list and I verily believe all such costs were reasonable incurred.

[List]
5. There is now produced and shown to me marked a numbered bundle of documents containing the vouchers, receipts
and other documents which the plaintiff relies upon in support of his application. The said bundle is divided into sections which
correspond with the costs claimed in respect of each previous attempt listed under paragraph 4 above.
SWORN etc.
763
[1991] 4 All ER 764

Practice Direction
(family proceedings: allocation to judiciary)
PRACTICE DIRECTIONS
FAMILY DIVISION
20 September 1991.

Practice Family proceedings Proceedings within jurisdiction of county courts Allocation to specified judges or specified
descriptions of judge Pending proceedings Judges of Family Division included in all descriptions of judge Proceedings
including more than one specified class of proceedings Adjournment where unopposed proceedings becoming opposed during
trial and no longer of description allocated to trial judge Interim orders Allocation of appeals Adoption Act 1976, ss 14, 15,
18, 20, 21, 27, 28, 29, 55 Domestic Violence and Matrimonial Proceedings Act 1976, s 1 Supreme Court Act 1981, s 128
Matrimonial Homes Act 1983, ss 1, 9 Matrimonial Proceedings Act 1984, s 42 Children Act 1989, ss 4 (1)(a)(3), 5(1), 6(7), 8,
10, 13(1), 16(6), 25, 31, 33(7), 34, 36(1), 38(1), 39(1)(2)(3)(4), 43, 44, 45(4)(8), 46(7), 48(9), 50, 91 (14)(15)(17), Sch 2, para
19(1), Sch 3, paras 6, 15(2), 17(1), Sch 14, para 11(3) Courts and Legal Services Act 1990, s 9 CCR Ord 37, r 6 Family
Proceedings Rules 1991, r 8.1 Children (Allocation of Proceedings) Order 1991 Children (Allocation of Proceedings)
(Appeals) Order 1991.

The Lord Chancellor, in exercise of the powers conferred on him by s 9 of the Courts and Legal Services Act 1990 and with the
concurrence of the President of the Family Division, hereby gives the following directions.
1. These directions shall come into force on 14 October 1991. In relation to proceedings which were pending immediately
before that day, these directions shall have effect as if a person capable of sitting as a judge for a county court district were
included in every entry in column (i) of schedule 1 to these directions.
2. In these directions, in the absence of a contrary implication, family proceedings and judge bear the meanings assigned
to them in s 9 of the Courts and Legal Services Act 1990.
3. Where proceedings of a class specified in column (ii) of schedule 1 to these directions are pending in a county court or, by
virtue of s 42 of the Matrimonial Proceedings Act 1984 or by virtue of a provision of the Children (Allocation of Proceedings)
Order 1991, SI 1991/1677, in the principal registry of the Family Division of the High Court, the proceedings shall, subject to the
following paragraphs of these directions, be allocated to a judge of the description specified in column (i) against the entry in
column (ii) for those proceedings.
4. Every entry in column (i) of schedule 1 to these directions shall be deemed to include a reference to a judge of the Family
Division of the High Court.
5. Paragraph 3 shall have effect in relation to an entry in column (ii) of schedule 1 to these directions only in the
circumstances specified in column (iii) against that entry.
6. Where any proceedings include proceedings of more than one class specified in column (ii) of schedule 1, that schedule
shall apply to those classes as if they did not form part of the same proceedings.
7. For the purposes of paras (e), (h) and (i) of schedule 1 to these directions, where(1) unopposed proceedings become
opposed during the course of the trial and (2) the judge hearing the trial does not fall within a description of judge to whom the
proceedings would have been allocated if column (iii) had applied at the commencement of the trial, he shall adjourn the trial for
hearing by a judge to whom such a trial would be allocated by these directions but may, where s 38(1) of the Children Act 1989
applies, make an interim order under that section.
764
8. The hearing of an appeal under r 8.1 of the Family Proceedings Rules 1991, SI 1991/1247, under CCR Ord 37, r 6 as
applied by the said r 8.1 or under the Children (Allocation of Proceedings) (Appeals) Order 1991, SI 1991/1801, shall be
allocated to a person capable of sitting as a judge for a county court district who would have been able to hear the matter at first
instance in accordance with these directions.
9. Schedules 2, 3 and 4 to these directions specify individual judges for the purposes of those entries in column (i) of
schedule 1 to these directions which refer to judges listed in one or more of those schedules, and where that column refers to
judges of a particular description who are listed in schedule 2 the reference shall extend to all persons whose names appear in that
schedule who fall within the description at the time when the allocation falls to take effect regardless of whether the persons
name appears in the schedule in connection with his tenure of one of the other descriptions of judge covered by the schedule.

Schedule 1allocation of proceedings

(i)
(ii)
(iii)
description of judge
description of proceedings
circumstances in which allocation applies
(a)
A circuit judge listed in schedule 2 or 3 to these directions; a deputy circuit judge, recorder or assistant recorder
listed in schedule 2 to these directions; or a district judge, assistant district judge or deputy district judge
Family proceedings for which no express provision is made in this schedule, except any such proceedings
pending in the principal registry of the Family Division
All circumstances
(b)
A judge
Proceedings of any of the following kinds, except any such proceedings pending in the principal registry of the
Family Division
All circumstances

Application for an injunction under s 1 of the Domestic Violence and Matrimonial Proceedings Act 1976

Application for an order under s 1 or 9 of the Matrimonial Homes Act 1983

Non-contentious or common form probate business, within the meaning of s 128 of the Supreme Court Act 1981

765

(c)
A person capable of sitting as a judge for a county court district
Application to commit for breach of an injunction under s 1 of the Domestic Violence and Matrimonial
Proceedings Act 1976 or s 1 or 9 of the Matrimonial Homes Act 1983
All circumstances
(d)
A circuit judge listed in schedule 2 or 3 to these directions; or a deputy circuit judge, recorder or assistant
recorder listed in schedule 2 to these directions
Trial of contested petition for a decree of divorce, nullity or judicial separation
All circumstances

(e)
A circuit judge listed in schedule 2 or 3 to these directions; a deputy circuit judge, recorder or an assistant recorder
listed in schedule 2 to these directions; or a district judge of the principal registry of the Family division of the
High Court
Proceedings under any of the following sections of the Adoption Act 1976: s 14 (adoption by married couple); s
15 (adoption by one person); s 18 (freeing child for adoption); s 20 (revocation of order under s 18); s 27, 28
or 29 (restrictions on removal of child); s 55 (adoption of children abroad)
Where the proceedings are opposed and ready for trial

Proceedings under any of the following provisions of the Children Act 1989: s 4(1)(a) (application for parental
responsibility by father); s 4 (3) (termination of parental responsibility); s 5(1) (appointment of guardian); s
6(7) (termination of guardianship); s 13(1) (change of child's name or removal from jurisdiction); s 16 (6)
(reference of question of variation or discharge of s 8 order); para 11(3) of Sch 14 (discharge of existing
custody etc orders)

766

(f)
A circuit judge listed in schedule 2 or 3 to these directions; a deputy circuit judge, recorder or assistant recorder
listed in schedule 2 to these directions; or a district judge , assistant district judge or deputy district judge
Any of the proceedings listed in column (ii) of para (e) above, except any such proceedings pending in the
principal registry of the Family Division
Where column (iii) of para (e) does not apply
(g)
A circuit judge listed in schedule 2 or 3 to these directions; a deputy circuit judge, recorder or assistant recorder
listed in schedule 2 to these directions; or a district judge, assistant district judge or deputy district judge
Applications under s 10 of the Children Act 1989 for an order under s 8, except any such proceedings pending in
the principal registry of the Family Division
Where column (iii) of para (h) does not apply
(h)

A circuit judge listed in schedule 2 or 3 to these directions; or a deputy circuit judge, recorder or assistant recorder
listed in schedule 2 to these directions; or a district judge of the principal registry of the Family Division of the
High Court
Application under s 10 of the Children's Act 1989 for an order under s 8
Where the proceedings are opposed and ready for trial, unless the application is for a contact order and the
frequency or nature of the contact sought , but not the principle of contact with the applicant, is opposed
(i)
A circuit judge listed in schedule 3 to these directions; or a district judge of the principal registry of the Family
Division of the High Court
Proceedings under any of the following provisions of the Children's Act 1989: s 25 (secure accommodation); s 31
(care and supervision orders s 33(7) (change of child's name or removal from jurisdiction); s 38 (interim order);
s 39(1), (2) or (4) (discharge and variation of care and supervision orders); Para 6 of Sch 3 (supervision orders);
s 34 (parental contact etc with child in care); para 19(1) of Sch 2 (arrangements to assist children to live
abroad)
Where the proceedings are opposed and ready for trial
767

(j)
A circuit judge listed in schedule 3 to these directions; a district judge of the principal registry of the Family
Division of the High Court; or a district judge listed in schedule 4 to these directions
Any of the proceedings listed in column (ii) of para (i) above
Where column (iii) of para (i) does not apply
(k)
A circuit judge listed in schedule 3 to these directions; a district judge of the principal registry of the Family
Division of the High Court; or a district judge listed in schedule 4 to these directions
Proceedings under any of the following provisions of the Children Act 1989: s 39(3) (variation of supervision
order); s 36(1) (education supervision order); s 43 (child assessment order); s 44, 45(4), 45(8), 46(7) or
48(9) (order for emergency protection of child); s 50 (recovery order); applications for leave under s 91(14),
(15) or (17) of the Children Act 1989 (further applications); or applications under s 21 of the Adoption Act 1976
(substitution of adoption agencies)

[Schedule 2 (which lists circuit judges, deputy circuit judges, recorders and assistant recorders nominated for private family
proceedings), schedule 3 (which lists circuit judges nominated for private and public law family proceedings) and schedule 4
(which lists district judges nominated for private and public law family proceedings), being lists subject to frequent up-dating as
new appointments and retirement occur, are not printed herein.]

Mackay of Clashfern C
20 September 1991.
I concur.

Stephen Brown P
20 September 1991.
768
[1991] 4 All ER 769

Atlas Maritime Co SA v Avalon Maritime Ltd

The Coral Rose (No 1)
CIVIL PROCEDURE

COURT OF APPEAL, CIVIL DIVISION

NEILL, STOCKER AND STAUGHTON LJJ
9, 10 OCTOBER, 21 NOVEMBER 1990

Practice Pre-trial or post-judgment relief Mareva injunction Variation Application for release of Mareva funds
Defendant company having no assets apart from Mareva funds Defendants operations entirely financed and managed by
parent company Defendant applying for release of Mareva funds to enable it to transfer those funds to parent company as
business debt owing to creditor Evidence of parent company exercising complete financial and management control over
defendant Whether variation should be granted Whether relationship between companies one of debtor and creditor
Whether proposed transfer of funds amounting to repayment in ordinary course of business.

In 1987 the defendant, a wholly-owned subsidiary of a Swiss company involved in commodity trading, purchased a damaged
vessel and proceeded to make the necessary repairs with funds advanced by its parent company. In 1988 the defendant entered
into negotiations to sell the vessel, which was its only asset, to the plaintiff company for $US155m and was regarded by the
latter as having in fact agreed to sell the vessel. In February 1990 the defendant denied that any such contract of sale had been
concluded. The plaintiff commenced proceedings against the defendant, seeking a declaration that a valid oral contract had been
concluded for the sale of the vessel and damages for wrongful repudiation of contract and pending trial of the action obtained a
Mareva injunction over the defendants assets in the sum of $US3m. In May 1989 the defendant sold the vessel to a third party
and transferred the proceeds of the sale, less the amount subject to the injunction, to the parent company. At the trial of the action
the judge granted the declaration sought and stayed the proceedings pending reference of the plaintiffs claim for damages to
arbitration pursuant to the terms of the contract. The defendant later applied for the discharge of the injunction to enable it to
transfer the frozen funds to its parent company as a business debt owing to its creditors. The judge refused to discharge the
injunction on the grounds (i) that the relationship between the two companies was not one of debtor and creditor given the scant
documentary evidence of the loan but rather one of agent and principal in view of the evidence indicating that the defendants
operations were entirely financed and managed by its parent company and that the defendant was in reality a mere nominee of the
parent company with no more than the barest legal existence independent of the latter and (ii) that the principle requiring the
variation of Mareva injunctions to permit the making of payments in good faith and in the ordinary course of business did not
require the court to permit an agent to transfer to his principal assets without which the agent would be unable to meet a liability
incurred to a third party in the course of that agency. The defendant appealed.

Held (1) The relationship between the two companies was more readily inferred as being that of debtor and creditor than that of
agent and principal, since the available evidence, far from indicating an agreement that the parent company 769 should be the
beneficial owner of the vessel and that the defendant company should act as agent, suggested not only that the parties had taken
deliberate steps to arrange matters so that the vessel would trade for and on behalf of the defendant alone, though no doubt it
would remunerate the parent company by means of dividends and other payments if the trading proved successful, but also that
the defendant was to be both the legal and beneficial owner of the vessel and that therefore, despite scant documentary evidence
of a loan, it owed in excess of $US3m to its parent company for the purchase of the vessel and its subsequent repair and
operation. Accordingly, the only question for determination was whether the existence of the debt entitled the defendant to the
discharge or variation of the Mareva injunction (see p 774 h, p 775 a b, p 777 a and p 778 b j to p 779 a to e, post); dictum of
Lord Pearson in Garnac Grain Co Inc v H M F Faure & Fairclough Ltd [1967] 2 All ER 353 at 358 applied.
(2) The court would not exercise its discretion to vary or discharge a Mareva injunction to enable the party enjoined to repay
a loan to a creditor out of frozen assets where, having regard to the nature of the relationship between the two parties and the
nature of the debt itself, it was clear that the party subject to the injunction was a wholly-owned subsidiary of the creditor and that
repayment of the loan was not repayment in the ordinary course of business or a payment to trade creditors in the ordinary way
but repayment of loan or trading capital which would effect an evasion of the purpose underlying Mareva relief by placing assets
which would otherwise be available to satisfy a judgment in favour of the plaintiff out of the plaintiffs reach. On the facts it was
clear that, looking behind the corporate veil, the creditor was the ultimate parent of the defendant company as to 100% of the
ownership, that the sum owed to the parent company was not a debt incurred in the course of ordinary routine trading but
represented funds advanced to the defendant as trading capital and that the defendant was seeking by the proposed repayment to
take action designed to ensure that subsequent orders of the court were rendered less effective than would otherwise be the case
or desired to use assets frozen by the injunction merely to evade its underlying purpose. It followed that the variation sought by
the defendant company would be refused and that its appeal would therefore be dismissed (see p 775 e, p 776 c d h j, p 777 a e to
p 778 a, p 779 j, p 780 c to j and p 781 b c, post); dicta of Danckwerts LJ in Merchandise Transport Ltd v British Transport
Commission [1961] 3 All ER 495 at 518 and of Robert Goff J in Iraqi Ministry of Defence v Arcepey Shipping Co SA (Gillespie
Bros & Co Ltd intervening), The Angel Bell [1980] 1 All ER 480 at 487 applied.

Notes
For Mareva injunctions, see 37 Halsburys Laws (4th edn) para 362, and for cases on the subject, see 37(2) Digest (Reissue) 474
476, 29472962.

Cases referred to in judgments

A v B (X intervening) [1983] 2 Lloyds Rep 532.
Adams v Cape Industries plc [1991] 1 All ER 929, [1990] Ch 433, [1990] 2 WLR 657, Ch D and CA.
Avant Petroleum Inc v Gatoil Overseas Inc [1986] 2 Lloyds Rep 236, CA.
Burnet v Francis Industries plc [1987] 2 All ER 323, [1987] 1 WLR 802, CA.
Canada Enterprises Corp Ltd v MacNab Distilleries Ltd (1976) [1987] 1 WLR 813, CA.
Company, Re a [1985] BCLC 333, CA.
Delhasse, Ex p, re Megevand (1878) 7 Ch D 511, V-C and CA.
Derby & Co Ltd v Weldon (No 2) [1989] 1 All ER 1002, sub nom Derby & Co Ltd v Weldon (Nos 3 and 4) [1990] Ch 65, [1989]
2 WLR 412, CA.
770
Garnac Grain Co Inc v H M F Faure & Fairclough Ltd [1967] 2 All ER 353, [1968] AC 1130, [1967] 3 WLR 143, HL; affg
[1965] 3 All ER 273, [1966] 1 QB 650, [1965] 3 WLR 934, CA.
Iraqi Ministry of Defence v Arcepey Shipping Co SA (Gillespie Bros & Co Ltd intervening), The Angel Bell [1980] 1 All ER 480,
[1981] QB 65, [1980] 2 WLR 488.
Jones v Lipman [1962] 1 All ER 442, [1962] 1 WLR 832.
K/S A/S Admiral Shipping v Portlink Ferries Ltd [1984] 2 Lloyds Rep 166, CA.
Merchandise Transport Ltd v British Transport Commission, Arnold Transport (Rochester) Ltd v British Transport Commission
[1961] 3 All ER 495, [1962] 2 QB 173, [1961] 3 WLR 1358, CA.
Orri v Moundreas [1981] Com LR 168.
Salomon v Salomon & Co Ltd [1897] AC 22, [18959] All ER Rep 33, HL.
SCF Finance Co Ltd v Masri [1985] 2 All ER 747, CA.

Appeal
The defendants, Avalon Maritime Ltd (Avalon), a company incorporated in Gibraltar, appealed from the decision of Hobhouse J
([1990] 2 Lloyds Rep 258) dismissing their application to discharge or vary a Mareva injunction granted by Steyn J in favour of
the plaintiffs, Atlas Maritime Co SA (Atlas), a company incorporated in Liberia, to permit Avalon to pay their parent company,
Marc Rich & Co AG of Zug, Switzerland, the sum of $US3m, being the sum subject to the injunction and which was the balance
of the proceeds of the sale of the vessel Coral Rose to another purchaser contrary to an alleged agreement to sell the vessel to
Atlas. The facts are set out in the judgment of Neill LJ.

Kenneth Rokison QC and Alistair Schaff for Atlas.

Iain Milligan for Avalon.

Cur adv vult

21 November 1990. The following judgments were delivered.

NEILL LJ. This is an appeal by Avalon Maritime Ltd (Avalon) from the order dated 13 February 1990 of Hobhouse J in the
Commercial Court whereby he dismissed the application by Avalon to discharge an order of Steyn J dated 21 March 1989 (see
[1990] 2 Lloyds Rep 258). By the order of Steyn J Avalon were enjoined from paying to Marc Rich & Co AG (Marc Rich) the
sum of $US3m plus interest.
In the action Atlas Maritime Co SA (Atlas), a company incorporated in Liberia, claim that by a contract made orally over the
telephone on 6 June 1988 Avalon agreed to sell to Atlas the vessel Coral Rose at the price of $US155m cash. It is said that the
oral contract was made between Mr Alexatof of Inter Ocean Chartering Ltd on behalf of Atlas and Mr Vintiadis of Niva Shipping
Ltd on behalf of Avalon and that the contract was evidenced by a telex from Niva Shipping Ltd to Atlass agents, Brokerhouse
Inc, dated 6 June 1988.
In the action it is further alleged that in February 1989 Avalon wrongfully and in breach of contract repudiated their
obligation under this contract and purported to claim that no such contract had been concluded. Atlas accepted this repudiation
by a telex dated 20 February 1989. Atlas claim a declaration that a valid and binding contract was concluded on 6 June 1988 and
also claim damages based on the difference between the market value of the vessel at the date of the acceptance of the
repudiation and the contract price.
771

The facts
Mr Richard Morrison is a director of Stewart Marine (Sale and Purchase) Ltd (Stewart Marine), a firm of ship brokers.
Stewart Marine are, inter alia, the London agents for Drake Maritime SA, a technical management company.
 In 1987 Mr Morrison heard that a vessel, the Red Sea (subsequently renamed Coral Rose), was for sale. The vessel was then
in a damaged condition but Mr Morrison thought that after repair it might be a profitable proposition. Mr Melville Price, a
technical consultant of Drake Maritime in the Arabian Gulf, was asked to carry out a preliminary evaluation. Following this
evaluation, which was reasonably optimistic, Mr Morrison and Mr Price approached Mr Jeffrey Cooper of Marc Rich and asked
whether his company would be interested in buying the vessel. Marc Rich declined to buy the vessel in their own name, but
agreed that they would advance sufficient funds to a company called Avalon which had been purchased for this purpose by Nala
Transport Inc, a Liberian company which was a subsidiary of Marc Rich. Avalon had been incorporated in Gibraltar on 2
October 1986.
The agreement between Mr Cooper on the one hand and Mr Morrison and Mr Price on the other hand was that the project
involving the Coral Rose was to be administered by Mr Morrison and Mr Price.
On 28 September 1987 Avalon, acting by Mr Brown, a nominee director, appointed Mr Morrison as the attorney of the
company:

1. To open and operate a bank account in any currency in any part of the world as the attorney shall think fit.
2. To do all such acts and things, conduct and finalise any and all matters, and execute all such deeds, agreements and
instruments as may be necessary as the attorney shall think fit in relation to any and all matters as we ourselves could do.

On 2 October 1987 Avalon were granted an exemption certificate under the Companies (Taxation and Concessions)
Ordinance of Gibraltar whereby the company was registered as an exempt company for the purposes of taxation on the condition
that the company carried on the business of a shipping company.
In October 1987 Avalon bought the Coral Rose for $US7,925,000. The vessel, however, required substantial repairs, which
were then put in hand. In his affidavit sworn on 22 January 1990 Mr Morrison explained the position as follows:

The formation of Avalon, the purchase, repair and operation of the CORAL ROSE, were all funded by way of loan
to Avalon from Marc Rich. No formal loan agreement was ever drawn up, but throughout the repair period I reported
regularly to Mr. Cooper on the progress of repairs, accounts to be paid, and all other relevant matters.

Between the date of the purchase of the vessel in October 1987 and May 1988 extensive repairs to the Coral Rose were
carried out in the Arabian Gulf but they proved to be insufficient. In June or July 1988, following a major engine breakdown, the
vessel was towed to Singapore, where further repairs were undertaken.
It is not necessary for the purpose of this appeal to refer in detail to the documents relating to the sale of the vessel by
Avalon to Atlas or to its subsequent history. It is sufficient to record: (a) that in May 1989 the Coral Rose was sold to a third
party for a net sum of about $US107m; and (b) that, apart from the moneys restrained by injunction (as will shortly be
mentioned), the proceeds of sale have been paid over by Avalon to Marc Rich.
772
The writ in the action was issued on 16 March 1989. On that day Steyn J granted leave to issue and serve the writ outside
the jurisdiction and at the same time granted a Mareva injunction restraining Avalon from dealing with any of their assets save in
so far as they exceeded $US75m.
The injunction provided, however, that Avalon could sell the Coral Rose on condition that $US75m from the proceeds of
sale was paid into a bank account in London. On 21 March 1989 Steyn J varied his order by substituting the sum of $US3m for
the sum of $US75m. This reduction was based on fresh estimates of the damages which might be recovered by Atlas.
The case came before the court again on 30 January 1990. On that occasion there were three applications which were heard
by Hobhouse J: (a) an application by Atlas under RSC Ord 14 for a declaration that on or about 6 June 1988 a valid and binding
contract was concluded between Atlas and Avalon for the sale of the vessel; (b) an application by Atlas for a stay of the
proceedings pending arbitration; and (c) an application by Avalon to discharge or vary the Mareva injunction.
Hobhouse J granted the declaration sought and stayed the proceedings pending arbitration, holding that there was no triable
issue as to whether a contract had been made.
On 13 February 1990 Hobhouse J gave judgment in open court dismissing Avalons application to discharge or vary the
injunction.
The basis of Avalons application before the judge, as it has been before us, was that Avalon were indebted to Marc Rich in a
sum in excess of $US775m, which Avalon had received from Marc Rich and had used to pay the original purchase price of the
Coral Rose and subsequent expenses. Therefore they should be permitted to pay the sum of $US3m to Marc Rich in part
satisfaction of this debt.
On behalf of Atlas, on the other hand, it was contended (a) that in the circumstances of the case it was just and convenient
for the court to grant a Mareva injunction in the exercise of its general discretion and (b) that furthermore Avalon had acted as the
agent of Marc Rich in and about the purchase and operation of the Coral Rose and that any sum owed by Avalon to Marc Rich
was subject to and thus cancelled by a cross-claim by Avalon for an indemnity.
We were told in the course of the hearing that the issue of agency was a matter which was raised by the judge himself.
However that may be, it seems clear that the judge reached his conclusion to continue the Mareva injunction in the sum of
$US3m on the basis of a finding that arguably the relationship between Marc Rich and Avalon was one of principal and agent or
was a relationship very nearly equivalent thereto. Hobhouse J said ([1990] 2 Lloyds Rep 258 at 264):

the question is whether or not the relationship of the defendant company to Marc Rich was one of agent and
principal or simply one of debtor and creditor. All the evidence is in favour of the relationship being one of agent and
principal with one exception. The exception is that the defendant company was after about one year charged interest in the
account. If an agent is performing tasks for a principal, even if using the principals funds to do so, it is not appropriate,
other things being equal, that the agent should pay the principal interest. Indeed, the position should be the other way
round; the principal should be paying some form of remuneration to the agent. However the fact remains that the
defendant company was in reality a mere nominee of Marc Rich and had nothing more than the barest legal existence
independently of Marc Rich.

The judge then examined what he considered to be weaknesses in the argument put forward on behalf of Avalon that the
relationship was that of debtor and creditor. He continued (at 264):
773

If the relationship was as the defendant company before me has submitted, there are a number of surprising features.
First, Marc Rich itself has not intervened to ask for a payment to be made to it. Secondly, there has been a long delay
before this application was made. The fact that it has only come before the court this term has been purely of the
defendants own making. Thirdly, no contemporaneous documents at all evidencing the making of the loan or the
agreement to pay interest have been produced. In a sense it is not surprising that the defendants have not produced any
documents because they have no activities of their own and no business existence save in bare legal terms. On the
evidence of Mr Morrison, Marc Rich decided not to buy the vessel in their own name but that it should be purchased by the
defendant company using funds provided by Marc Rich. There must be internal documents in the possession of Marc Rich
 which record this decision and authorise the payments but they have not been produced. Marc Rich has not made itself a
party to this application but if it did so discovery could be obtained against it and it could be required to answer
interrogatories. Against that it can legitimately be commented that the plaintiffs could have applied for leave to cross-
examine the persons who had sworn the affidavits relied upon by the defendants but did not do so.

The judge therefore concluded that the plaintiffs had a good arguable case that the relationship was in truth one of agent and
principal. A little later the judge summed up the matter as follows (at 264):

It would not be right for the court to exclude a relationship of agent and principal or a relationship sufficiently close to
one of agency so as to give rise to an abuse falling within the exception to the Angel Bell principle which I consider exists
[see Iraqi Ministry of Defence v Arcepey Shipping Co SA (Gillespie Bros & Co Ltd intervening), The Angel Bell [1980] 1
All ER 480, [1981] QB 65].

In these circumstances the judge decided that the injunction should not be discharged or varied. He based this decision on
the conclusion that the principle requiring the variation of Mareva injunctions to permit the making of payments in good faith and
in the ordinary course of business did not extend so as to require the court to permit an agent to pass over to its principal assets
without which the agent would be unable to meet its liability to another incurred in the course of that agency (see [1990] 2
Lloyds Rep 258 at 264). The judge considered that the plaintiffs had a good arguable case that the relationship between Avalon
and Marc Rich was either one of agent and principal or very close to being one of agent and principal.
I regret to say that, on the facts disclosed in the documents before the court, I am unable to agree with the judge as to the
nature of this relationship. It is true that the evidence of the existence of the loan is scanty and is not supported by any
contemporary documents, but it seems to me that a relationship of debtor and creditor can be more readily inferred on these facts
than a relationship of agent and principal. As I understand the matter, the purposes of the scheme were to avoid the risk that Marc
Rich might be liable for debts incurred in the course of trading with the vessel and to reduce as far as possible the incidence of
taxation. It is possible to criticise the use of one-ship companies to achieve such results, but it is necessary to bear in mind the
fundamental principle that the relationship of principal and agent can only be established by the consent of the principal and the
agent: see Garnac Grain Co Inc v H M F Faure & Fairclough Ltd [1967] 2 All ER 353 at 358, [1968] AC 1130 at 1137 per
Lord Pearson. It is true that the question 774 of consent has to be determined objectively and that parties may be held to have
consented even if they profess to disclaim the relationship. In the present case, however, the evidence, such as it is, tends to
suggest that the parties took deliberate steps to arrange matters so that the vessel was to trade for and on behalf of Avalon alone,
though no doubt Marc Rich was to be remunerated by dividends and perhaps other payments if the trading proved successful. It
follows, therefore, that in my view there is some evidence that Avalon owes money to Marc Rich in excess of $US3m. The
question remains, however, whether the existence of this debt entitles Avalon to the discharge or a variation of the injunction.
It is always important to remember that a plaintiff who has obtained a Mareva injunction is not in the same position as a
secured creditor and that he has no proprietary claim to the assets which are subject to the injunction. It follows therefore that
there can be no objection in principle to a defendant being allowed by the court to employ such assets for the purpose of his
business or, where appropriate, to pay living expenses or legal fees. Accordingly, Mareva injunctions often include specific
provisions to enable expenses to continue to be paid, or, where the original order is insufficient, the court will make a variation to
permit expenses to be paid or debts to be discharged.
In the present case Avalon seek the discharge of the injunction granted in March 1990 to enable them to pay part of what is
said to be owed by them to Marc Rich. It is recognised that if the order is made Avalon will be left without assets, but it is
submitted that the court should treat the debt as an ordinary debt owing to a creditor and that the fact that Marc Rich is the
ultimate holding company is fortuitous. The payment would undoubtedly be permitted if the money had been lent by a bank and,
it is said, the same approach should be adopted on the present facts. In the circumstances of the present case I feel bound to reject
this submission and to uphold the judges decision, though on different grounds.
In Derby & Co Ltd v Weldon (No 2) [1989] 1 All ER 1002 at 10061007, [1990] Ch 65 at 76 Lord Donaldson MR stated the
principle underlying the Mareva jurisdiction as follows:

The fundamental principle underlying this jurisdiction is that, within the limits of its powers, no court should permit
the defendant to take action designed to ensure that subsequent orders of the court are rendered less effective than would
otherwise be the case.

But he went on to indicate two important qualifications:

On the other hand, it is not its purpose to prevent a defendant carrying on business in the ordinary way or, if an
individual, living his life normally pending the determination of the dispute, nor to impede him in any way in defending
himself against the claim. Nor is its purpose to place the plaintiff in the position of a secured creditor.

In the present case we are concerned with the qualification relating to the defendant carrying on business in the ordinary
way.
This qualification has been given effect to in many other cases. In Iraqi Ministry of Defence v Arcepey Shipping Co SA
(Gillespie Bros & Co Ltd intervening), The Angel Bell [1980] 1 All ER 480 at 487, [1981] QB 65 at 73 Robert Goff J varied a
Mareva injunction to allow the defendant to repay loans because he was seeking in good faith to make payments which he
considers he should make in the ordinary course of business. This Angel Bell variation, as it has come to be known, has been
treated as a proper and necessary modification to enable defendants to pay their 775 trade creditors in the ordinary course as
those creditors sought payment (see K/S A/S Admiral Shipping v Portlink Ferries Ltd [1984] 2 Lloyds Rep 166 at 167) and to
permit the payment of trade creditors in the ordinary course of business (see Avant Petroleum Inc v Gatoil Overseas Inc [1986]
2 Lloyds Rep 236 at 242). But it remains important to ensure that the right balance is preserved between the rights of the parties.
The injunction must not be used so as to amount to an instrument of oppression which would bring about the cessation of
ordinary trading. On the other hand, the court must have regard to the interests of the plaintiff and consider whether the variation
of the injunction would involve a real risk that a judgment or award in his favour would remain unsatisfied. The court must look
at all the circumstances of the case in order to try to do justice between the parties. There are two features about the present case
which, taken together, I regard as being of particular significance.
In the first place the sum owed to Marc Rich is not a debt incurred in the course of ordinary routine trading but represents
moneys advanced in effect as trading capital. In the second place the close link between Avalon and Marc Rich is a factor to be
taken into account when deciding how, as a matter of discretion, the interests of the ultimate holding company should be balanced
against those of Atlas.
There are cases where, notwithstanding the principle of Salomon v Salomon & Co Ltd [1897] AC 22, [18959] All ER Rep
33, the corporate veil between two companies can be pierced so that one company is to be regarded as the alter ego of the other.
But this is not such a case, as I have already demonstrated when dealing with the question of agency. Nevertheless in the exercise
of a discretion in relation to injunctive relief the eye of equity (see Jones v Lipman [1962] 1 All ER 442 at 445, [1962] 1 WLR
832 at 836 per Russell J) can, I think, look behind the corporate veil in order to do justice. This approach was recognised by
Danckwerts LJ in Merchandise Transport Ltd v British Transport Commission [1961] 3 All ER 495 at 518, [1962] 2 QB 173 at
206, where he said:

where the character of a company, or the nature of the persons who control it, is a relevant feature the court will go
behind the mere status of the company as a legal entity, and will consider who are the persons as shareholders or even as
agents who direct and control the activities of a company which is incapable of doing anything without human assistance.

It is to be noted that in Adams v Cape Industries plc [1991] 1 All ER 929 at 1024, [1990] Ch 433 at 542 Slade LJ accepted this
approach as being correct in an appropriate case.
In my view, as I have already indicated, the court must look at all the circumstances of the case. As Slade LJ explained in
Adams v Cape Industries plc [1991] 1 All ER 929 at 1020, [1990] Ch 433 at 537, a holding company is free to choose to arrange
the affairs of its group in such a way that the business of the group in a particular country or for a particular project is carried on
by a subsidiary. In such an event there is no presumption of agency and the company and the subsidiary can be regarded as two
separate entities. But when it comes to considering the exercise of a discretion and the scope of injunctive relief it is then
legitimate to look at all the circumstances and to examine the nature of the debt and the identity of the creditor. In the present
case I have no doubt that justice requires that the Mareva injunction should be maintained in respect of this sum of $US3m.
I would dismiss the appeal.
776

STOCKER LJ. I have read in draft the judgments of Neill and Staughton LJJ and agree with their conclusions, and I adopt with
gratitude the history of the facts set out in the judgment of Neill LJ. I add short observations of my own, since although we are
upholding the decision of the judge we are doing so by a somewhat different route.
I have nothing to add to the analysis of Neill and Staughton LJJ on the question of agency. In my view, the issues raised on
this appeal and its determination are not dependent upon whether or not agency existed between Avalon and its ultimate holding
company Marc Rich.
For the sake of completeness I refer to an argument put forward by Mr Rokison QC on behalf of Atlas concerning the delay
in seeking to vary the terms of the amended Mareva injunction. Hobhouse J referred to this aspect of the case in his judgment
(see [1990] 2 Lloyds Rep 258 at 260). Mr Rokison sought to argue that, since the question of the discharge or variation of the
Mareva in order to repay Marc Rich and that this was repayment of a debt could have been but were not raised in the inter partes
hearing before Steyn J, it is too late to raise it upon this application and that to do so would be to have two bites of the cherry. I
agree that the delay factor may be relevant in considering whether or not there was any loan in the ordinary sense between Marc
Rich and Avalon. I cannot agree that any form of estoppel (if that is what was intended) or other bar can operate to prevent an
application to vary, on the grounds now put forward. So long as the Mareva persists circumstances may permit an application to
discharge or vary, at any time based upon facts not previously argued, at the risk of having to pay costs thrown away by failure to
raise the issue at an earlier hearing.
The basis upon which I would dismiss this appeal is that, whatever be the true legal basis upon which Marc Rich financed
the purchase, restoration and perhaps, for a short time, the operation of the vessel, the fact is that if the Mareva is now discharged
the consequence will be that there will be no assets to meet any award made in favour of Atlas in the arbitration. The return of
the money due to Marc Rich by Avalon will in fact be a payment to the former by its wholly-owned subsidiary and will thus
protect the interests of the holding company, at the expense of an established right to damages (on the assumption that an award is
made in favour of Atlas in the arbitration). I confess to doubts whether there ever was a loan in the ordinary sense that a trade
debt was created, though no doubt at some stage Marc Rich could require the repayment of the loan capital by means of which
Avalons sole asset was purchased and refurbished. Although the financing arrangements between Marc Rich and Avalon have
not been put into effect for the purpose of defeating any successful claim by a third party against Avalon, that is the consequence
if Avalons argument is well founded. It is not the repayment of a trade debt which, even though it may not have been
enforceable, was the situation in Iraqi Ministry of Defence v Arcepey Shipping Co SA (Gillespie Bros & Co Ltd intervening), The
Angel Bell [1980] 1 All ER 480, [1981] QB 65.
Repayment by Avalon to its holding company would not, in my view, be carrying on business in the ordinary way (see
Derby & Co Ltd v Weldon (No 2) [1989] 1 All ER 1002 at 1007, [1990] Ch 65 at 76) or in the ordinary course of business (see
Avant Petroleum Inc v Gatoil Overseas Inc [1986] 2 Lloyds Rep 236 at 242). It would be, in effect, the evasion of the
underlying purpose of the Mareva injunction. If it be necessary to lift the corporate veil to ascertain the reality of the position, in
my view this is legitimate in the context of a Mareva injunction. In my view, though based in part upon a legal analysis which
may not be sustainable, the judge correctly exercised his discretion not to discharge or vary the Mareva 777 injunction on the
basis that it was just and convenient that it should be maintained in force pending the outcome of the arbitration.
For these reasons I agree that this appeal should be dismissed.

STAUGHTON LJ.

(1) Agency
In the view of Hobhouse J there was a good arguable case that, in buying and operating the Coral Rose, Avalon were acting
as agents for Marc Rich, their undisclosed principals (see [1990] 2 Lloyds Rep 258). I am afraid that at this interlocutory stage,
and as the evidence now stands, I am unable to share that view.
The law relating to the creation of an agency relationship is stated by Lord Pearson in Garnac Grain Co Inc v H M F Faure
& Fairclough Ltd [1967] 2 All ER 353 at 358, [1968] AC 1130 at 1137:

The relationship of principal and agent can only be established by the consent of the principal and the agent. They will
be held to have consented if they have agreed to what amounts in law to such a relationship, even if they do not recognise it
themselves and even if they have professed to disclaim it, as in Re Megevand, Ex p. Delhasse ((1878) 7 Ch D 511). The
consent must have been given by each of them, either expressly or by implication from their words and conduct.

The evidence here is to be found in the second affidavit of Richard Morrison, a shipbroker and director of Stewart Marine
(Sale and Purchase) Ltd, who held a general power of attorney from Avalon dated 28 September 1987. Also concerned was Mr
Price, who was a consultant with a technical management company. Mr Morrison says:

It was eventually agreed that although Marc Rich were not prepared to buy the vessel in their own name, they would
advance sufficient funds for the purchase to Avalon, a subsidiary of Nala Transport Incorporated, a Liberian company
which is a subsidiary of Marc Rich, on the basis that the project would be administered by me and Mr. Price. CORAL
ROSE was accordingly purchased by Avalon in October 1987 for US$7,925,000. Copies of Avalons corporate
documents are now produced and shown to me at pages 841 of KJDM2. It can be seen that the shares in Avalon are held
by nominees for Nala Transport Incorporated. The formation of Avalon, the purchase, repair and operation of the CORAL
ROSE, were all funded by way of loan to Avalon from Marc Rich. No formal loan agreement was ever drawn up, but
throughout the repair period I reported regularly to Mr. Cooper on the progress of repairs, accounts to be paid, and all other
 relevant matters. In effect, therefore, Mr. Price and I administered the CORAL ROSE project on behalf of Avalon from
its inception in 1987 until the vessel was sold in May 1989, since when I have been responsible for dealing with Avalons
remaining creditors.

I disregard for the present the evidence as to a loan, since the documentation said to support it is meagre and open to
comment. Without that, the evidence is merely that Avalon were to buy the vessel in their own name, and that the purchase and
operation of the vessel were to be funded, directly or indirectly, by payments made by Marc Rich. In fact it seems likely that they
were so funded, though we do not know how this was achieved in terms of the mechanics of payment.
Far from indicating consent by Avalon and Marc Rich to the relationship of 778 agent and principal, that evidence seems to
me to show that Avalon were to be both legal and beneficial owners of the vessel, although they were purchasing and operating
her with money obtained from Marc Rich. Of course it is possible that the superficial appearance of the transaction was a sham,
in the sense of that word used by Diplock LJ in the Garnac Grain case [1965] 3 All ER 273 at 285, [1966] 1 QB 650 at 683684,
where he said that to affect legal rights or obligations

it is necessary to show that the parties really made some other and different contract between them and agreed that
the ostensible contract should not give rise to legally enforceable rights or liabilities.

I cannot at present see any evidence of an agreement that the beneficial owner of the Coral Rose should in reality be Marc Rich,
and that Avalon should act as agents. Indeed, such an agreement would have defeated two objects which the parties most
probably had in mindthat Marc Rich should not be liable for the debts of Avalon, and that profits from the venture should be
taxable (if at all) as the income of Avalon and not of Marc Rich. Of course the profits might eventually reach Marc Rich in the
form of dividends if the venture was successful, or a distribution on the winding up of Avalon. But that might be postponed for
many a day.
Once agency is rejected, the notion of a loan by Marc Rich to Avalon assumes plausibility, despite the meagre evidence to
support it. Indeed I do not at present see how else the funds can have been provided if not by way of loan, for they are unlikely to
have been a gift.
The creation or purchase of a subsidiary company with minimal liability, which will operate with the parents funds and on
the parents directions but not expose the parent to liability, may not seem to some the most honest way of trading. But it is
extremely common in the international shipping industry, and perhaps elsewhere. To hold that it creates an agency relationship
between the subsidiary and the parent would be revolutionary doctrine.

(2) The corporate veil

Like all metaphors, this phrase can sometimes obscure reasoning rather than elucidate it. There are, I think, two senses in
which it is used, which need to be distinguished. To pierce the corporate veil is an expression that I would reserve for treating the
rights or liabilities or activities of a company as the rights or liabilities or activities of its shareholders. To lift the corporate veil
or look behind it, on the other hand, should mean to have regard to the shareholding in a company for some legal purpose. The
distinction can be seen in the illuminating judgment of Slade LJ in Adams v Cape Industries plc [1991] 1 All ER 929 at 1024
1025, [1990] Ch 433 at 542543.
In this case I can see no justification for piercing the corporate veil, so as to treat the liabilities of Avalon as liabilities of
Marc Rich, its ultimate parent. We were referred to Re a company [1985] BCLC 333 (also apparently known as X Bank Ltd v G
82 LS Gaz 2016 and SIB Ltd v G), as an authority for adopting that course. But, as Hobhouse J said, that was an exceptional case
involving allegations of fraud and the manipulation of corporate structures. I would not regard it as relevant to the determination
of the present appeal.
Nor, in my judgment, is it necessary to pierce the corporate veil in order to uphold the decision which the judge reached; it is
enough to lift it or look behind it, so as to ascertain that Marc Rich is as to 100% the ultimate parent of Avalon. Merchandise
Transport Ltd v British Transport Commission [1961] 3 All ER 495, [1962] 2 QB 173 was a case concerned with the issue of
licences for goods vehicles and the exercise of a discretion. The Court of Appeal held that for that purpose it 779 was proper to
consider the relationship between a parent company and its subsidiary. Danckwerts LJ said ([1961] 3 All ER 495 at 518, [1962] 2
QB 173 at 206):

where the character of a company, or the nature of the persons who control it, is a relevant feature the court will go
behind the mere status of the company as a legal entity, and will consider who are the persons as shareholders or even as
agents who direct and control the activities of a company which is incapable of doing anything without human assistance.

That passage was cited without dissent in Adams v Cape Industries [1991] 1 All ER 929 at 1024, [1990] Ch 433 at 542.
In my judgment, it is wholly proper, in deciding whether to permit payment by Avalon at this stage of the moneys claimed
by Marc Rich, to have regard to the fact that Marc Rich is the ultimate parent of Avalon as to 100%. It is also right to regard the
moneys sought to be repaid as in effect the loan capital of Avalon. This is not a case of repayment in the ordinary course of
business (see Iraqi Ministry of Defence v Arcepey Shipping Co SA (Gillespie Bros & Co Ltd intervening), The Angel Bell [1980]
1 All ER 480 at 487, [1981] QB 65 at 73), or of carrying on business in the ordinary way (see Derby & Co Ltd v Weldon (No 2)
[1989] 1 All ER 1002 at 1007, [1990] Ch 65 at 76), or of a payment to trade creditors in the ordinary course (see K/S A/S
Admiral Shipping v Portlink Ferries Ltd [1984] 2 Lloyds Rep 166 at 167, Avant Petroleum Inc v Gatoil Overseas Inc [1986] 2
Lloyds Rep 236 at 242, SCF Finance Co Ltd v Masri [1985] 2 All ER 747 at 750). On the contrary, it is a case of a defendant
who is seeking to avoid his responsibilities to the plaintiff if the latter should ultimately obtain a judgment (see The Angel Bell
[1980] 1 All ER 480 at 487, [1981] QB 65 at 73), or taking action designed to ensure that subsequent orders of the court are
rendered less effective than would otherwise be the case (see Derby v Weldon (No 2) [1989] 1 All ER 1002 at 10061007, [1990]
Ch 65 at 76), or of a desire to use assets caught by the injunction merely to evade its underlying purpose (see A v B (X
intervening) [1983] 2 Lloyds Rep 532 at 534).
In that last case Parker J said obiter (at 534):

Equally and for the same reason, the fact that a debt is not an ordinary business debt is of no importance.

Taken from its context this might be thought to suggest that any debt of any kind justifies the variation of a Mareva injunction,
provided that the intention is not merely to evade the underlying purpose of the injunction. But I do not think that Parker J
intended to say that the nature of the debt is wholly immaterial to the exercise of the courts discretion. In this case I do not
suppose that repayment would in the ordinary way have been demanded by Marc Rich until the prosperity of Avalon permitted it.
So I conclude that it is just and convenient to continue the injunction and not to permit the variation sought by Avalon. The
nature of the debt to Marc Rich is repayment of loan capital; and on lifting or looking behind the corporate veil one finds that
Marc Rich is the ultimate parent company as to 100%. It seems to me right that the court should take these factors into account
in the exercise of its discretion. Neither may be conclusive in itself; in The Angel Bell the debt which was allowed to be paid was
in respect of a loan. But both are important factors, and in this case determinative.
That the exercise of a courts discretion may be affected by the relationship between parent company and subsidiary is
supported by three cases under RSC Ord 47, r 1, which deals with a stay of execution: Canada Enterprises Corp Ltd v MacNab
Distilleries Ltd (1976) [1987] 1 WLR 813, Burnet v Francis Industries plc 780[1987] 3 All ER 323, [1987] 1 WLR 802 and Orri
v Moundreas [1981] Com LR 168. Those cases were of course concerned with a different discretion. But they seem to me to be
of some relevance as illustrating circumstances in which lifting the corporate veil is permissible in exercising a discretionary
jurisdiction.
But it is said that the function of a Mareva injunction is not to rewrite the law of insolvency: see The Angel Bell [1980] 1 All
ER 480 at 486, [1981] QB 65 at 71 and the Admiral Shipping case [1984] 2 Lloyds Rep 166 at 168. I do not think that we shall
be altering the law of insolvency if we uphold the order of Hobhouse J on the grounds that I have indicated. At most we shall be
preserving for the time being the status quo, the facts upon which the law of insolvency may one day take effect. In a sense all
Mareva injunctions are liable to do that. I do not see why we should not do it in the exercise of our discretion in this case.
Accordingly, I would dismiss this appeal and uphold the order of Hobhouse J, although on grounds which are different from
those which appealed to him. Curiously, the need for a Mareva injunction may be greater if there was no agency relationship
between Marc Rich and Avalon than if there was such a relationship. In the former case, if the debt due to Marc Rich were now
paid, a future liquidator of Avalon might well have a claim to recover from Marc Rich what Avalon owes to Atlas, by way of an
agents right to indemnity. If there is no agency, there would be no such right.

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

Solicitors: Stephenson Harwood; Clyde & Co.

Raina Levy Barrister.

[1991] 4 All ER 781

Atlas Maritime Co SA v Avalon Maritime Ltd

The Coral Rose (No 2)
CIVIL PROCEDURE

COURT OF APPEAL, CIVIL DIVISION

LORD DONALDSON OF LYMINGTON MR, NICHOLLS AND FARQUHARSON LJJ
1 MAY 1991

Injunction Interlocutory Variation Appeal Leave to appeal Mareva injunction Application to vary Mareva injunction
Order granting or refusing such variation Whether leave to appeal from order required Supreme Court Act 1981, s 18(1)(h).

Leave to appeal from an order granting or refusing an application for the variation of a Mareva injunction is not required under s
18(1)a of the Supreme Court Act 1981 since if the application is successful a new injunction in different terms will be granted
and if it is unsuccessful the new injunction will in effect be refused and therefore the application falls within the exception set out
in s 18(1)(h)(iii) which provides that leave is not required where an injunction is granted or refused (see p 782 h j and p 783
b c, post).
________________________________________
a Section 18(1), so far as material, is set out at p 782 g, post

Notes
For leave to appeal to the Court of Appeal, see 37 Halsburys Laws (4th edn) para 683, and for cases on the subject, see 37(3)
Digest (Reissue) 154155, 37563762.
781
For Mareva injunctions, see 37 Halsburys Laws (4th edn) para 362, and for cases on the subject, see 37(2) Digest (Reissue)
474476, 29472962.
For the Supreme Court Act 1981, s 18, see 11 Halsburys Statutes (4th edn) (1991 reissue) 983.
As from a day to be appointed s 18 of the 1981 Act is to be amended by the Courts and Legal Services Act 1990, s 7 so as to
remove the cases in which leave of the lower court or tribunal or of the Court of Appeal is required and to provide instead for the
making of rules of court specifying cases in which such leave is required.

Application
The plaintiffs, Atlas Maritime Co SA (Atlas), a company incorporated in Liberia, applied to the Court of Appeal for (i) directions
whether leave was necessary to appeal from the order of Phillips J dated 20 December 1990 whereby he varied a Mareva
injunction granted against the defendants, Avalon Maritime Ltd (Avalon), a company incorporated in Gibraltar, to enable them to
meet certain legal expenses, (ii) leave to appeal if required or (iii) an extension of time for appealing. The facts are set out in the
judgment of Lord Donaldson MR.

Jonathan Gaisman for Atlas.

Iain Milligan QC for Avalon.

1 May 1991. The following judgments were delivered.

LORD DONALDSON OF LYMINGTON MR. The purpose of this application is to determine whether leave to appeal is
required where a party to proceedings is dissatisfied with the decision to vary an injunction or to refuse to vary it. The
application arises in the context of an application to vary a Mareva injunction to which Phillips J acceded, the variation being
designed to enable the defendants, Avalon Maritime Ltd (Avalon), to meet certain legal expenses. The plaintiffs, Atlas Maritime
Co SA (Atlas), wish to appeal this order and, of course, I say nothing whatever about the merits of any appeal.
The issue itself turns on s 18(1)(h) of the Supreme Court Act 1981. Section 18(1) is in these terms:

No appeal shall lie to the Court of Appeal (h) without the leave of the court or tribunal in question or of the Court
of Appeal, from any interlocutory order or interlocutory judgment made or given by the High Court or any other court or
tribunal, except in the following cases, namely (iii) where an injunction or the appointment of a receiver is granted or
refused
 It is quite true that the paragraph does not mention variations, but it must include them because, if an application for a
variation of an injunction is successful, what happens is that a new injunction in different terms is put in place. If, on the other
hand, it is unsuccessful, what happens is that a new injunction in different terms is not put in place. In the first case it is granted
and in the second case it is refused, and that is within the terminology of the paragraph.
Accordingly, I would have no hesitation whatever in ruling that s 18(1)(h)(iii) is to be construed as including the grant or
refusal of applications for variations in injunctions.
That being so, the question arises of an extension of time for serving notice of the appeal and setting it down. It may be that
notice of the appeal has already been served, and I pause not to consider that technicality. The substance of the matter is that
virtually all the delay which has occurred since the judgment of Phillips J has been attributable to the need to clear up the doubts
which have 782 existed as to whether leave to appeal was required. It is perfectly true that the delay may have prejudiced
Avalon, but I really do not think that that delay can in any way be laid at the door of Atlas, certainly not to such extent as to
justify us in refusing all necessary extensions of time.
I would therefore extend the time by seven days from todays date, if that is sufficient, which I think it should be, for both
serving notice of the appeal and for setting it down.

NICHOLLS LJ. I agree. The grant or refusal of a variation in an injunction is the grant or refusal of an injunction in the varied
form. As such, such a grant or refusal is squarely within s 18(1)(h)(iii) of the Supreme Court Act 1981.

FARQUHARSON LJ. I agree with both judgments.

Application granted. Leave to appeal to the House of Lords refused.

Solicitors: Stephenson Harwood; Clyde & Co.

Frances Rustin Barrister.

[1991] 4 All ER 783

Atlas Maritime Co SA v Avalon Maritime Ltd

The Coral Rose (No 3)
CIVIL PROCEDURE

COURT OF APPEAL, CIVIL DIVISION

LORD DONALDSON OF LYMINGTON MR, NICHOLLS AND FARQUHARSON LJJ
4, 14 JUNE 1991

Practice Pre-trial or post-judgment relief Mareva injunction Variation Application for release of Mareva funds
Defendant company having no assets apart from Mareva funds Defendant applying for release of Mareva funds to enable it to
meet legal expenses Parent company exercising complete financial and management control over defendant Whether
variation should be granted Whether court entitled to look behind corporate veil and take account of relationship between
parent and subsidiary company Whether court entitled to take into account funds to which defendant had no legal right.

In 1987 the defendant, a wholly-owned subsidiary of a Swiss company involved in commodity trading, purchased a damaged
vessel and proceeded to make the necessary repairs with funds advanced by its parent company. In 1988 the defendant entered
into negotiations to sell the vessel, which was its only asset, to the plaintiff company for $US155m and was regarded by the
latter as having in fact agreed to sell the vessel. In February 1990 the defendant denied that any such contract of sale had been
concluded. The plaintiff commenced proceedings against the defendant, seeking a declaration that a valid oral contract had been
concluded for the sale of the vessel and damages for wrongful repudiation of contract and pending trial of the action obtained a
Mareva injunction over the defendants assets in the sum of, ultimately, $US4m. In May 1989 the defendant sold the vessel to a
third party and transferred the proceeds of the sale, less the amount subject to the injunction, to the parent company. At the trial
of the action the judge granted the declaration sought and stayed the proceedings pending reference of the plaintiffs claim for
damages to arbitration pursuant to the terms of the contract. The defendant later applied for the discharge of the injunction to
enable 783 it to transfer the frozen funds to its parent company as a business debt owing to its creditors. The judge refused to
discharge the injunction and his decision was upheld by the Court of Appeal on the ground that it would be inequitable to release
the frozen funds in view of the nature of the relationship between the two companies and the fact that the defendants business
and financial affairs were completely controlled by the parent company, which indicated that the money owed to the parent
company as sole beneficial owner of the defendant should be regarded as trading capital and not a routine trading debt owed to an
ordinary third party creditor. The defendant then applied for a variation of the injunction to enable it to draw an amount from the
frozen funds sufficient to pay legal fees and expenses incurred in resisting the claim against it, asserting that it was unable to pay
its solicitors otherwise than out of the frozen funds because it had no legal right to require its parent company to pay them. The
judge granted the variation, holding that there was no justification for piercing the corporate veil and challenging the existence of
the defendant company as a separate legal entity in order to treat its liabilities as liabilities of the parent company, that the proper
approach was to consider the position of the subsidiary as an independent company having no assets of its own other than the
funds subject to a Mareva injunction and that the funds should be released in accordance with the general Mareva principle
permitting the variation of injunctions to enable payments to be made in good faith to third party creditors. The plaintiffs
appealed.

Held In exercising its equitable jurisdiction to grant, discharge or vary a Mareva injunction, the court should not limit its
consideration to funds to which the party subject to the injunction had a legal right if there were reasonable grounds for believing
that he could obtain funds from other sources. It followed that where a subsidiary company sought the release of money from
funds frozen by a Mareva injunction and the circumstances suggested a close financial involvement with the parent company, the
court was entitled to look behind the corporate veil and to refuse to grant the variation sought if it was satisfied that the financial
relationship between the two companies was such that the parent company would make the necessary funds available to settle
third party creditors claims, including solicitors fees and expenses. On the facts, having regard to the complete financial and
management control exercised by the parent company over the defendant and the fact that the parent company had chosen to
operate the defendants affairs in such a way as to leave it with no resources apart from the frozen funds of $US4m, it was clear
that the financial relationship between the two companies was such that the parent company could be expected to continue to
make funds available to meet the defendants legal expenses and not to obstruct its efforts to resist the claim against it.
Accordingly, in the absence of any denial by the parent company that funds would continue to be made available to meet the
defendants outgoings, it would not be just or equitable to vary the injunction to release money from the frozen funds to meet the
defendants legal expenses. The appeal would therefore be allowed and the judges order set aside (see p 790 g h, p 791 j to p
792 a c d h j, p 794 d to j and p 795 a, post).
Browne v Browne [1989] 1 FLR 291 applied.
Atlas Maritime Co SA v Avalon Maritime Ltd, The Coral Rose (No 1) [1991] 4 All ER 769 considered.

Notes
For Mareva injunctions, see 37 Halsburys Laws (4th edn) para 362, and for cases on the subject, see 37(2) Digest (Reissue) 474
476, 29472962.
784

Cases referred to in judgments

Atlas Maritime Co SA v Avalon Maritime Ltd, The Coral Rose (No 1) [1991] 4 All ER 769, CA; affg [1990] 2 Lloyds Rep 258.
Atlas Maritime Co SA v Avalon Maritime Ltd, The Carol Rose (No 2) [1991] 4 All ER 781, [1991] 1 WLR 633, CA.
Babanaft International Co SA v Bassatne [1989] 1 All ER 433, [1990] Ch 13, [1989] 2 WLR 232, CA.
Beddow v Beddow (1878) 9 Ch D 89.
Browne v Browne [1989] 1 FLR 291, CA.
Derby & Co Ltd v Weldon (No 1) [1989] 1 All ER 469, [1990] Ch 48, [1989] 2 WLR 276, CA.
Derby & Co Ltd v Weldon (No 2) [1989] 1 All ER 1002, sub nom Derby & Co Ltd v Weldon (Nos 3 and 4) [1990] Ch 65, [1989]
2 WLR 412, CA.
Iraqi Ministry of Defence v Arcepey Shipping Co SA (Gillespie Bros & Co Ltd intervening), The Angel Bell [1980] 1 All ER 480,
[1981] QB 65, [1980] 2 WLR 488.

Cases also cited

A v C [1980] 2 All ER 347, [1981] QB 956.
A v C (No 2) [1981] 2 All ER 126, [1981] QB 961.
Aro Co Ltd, Re [1979] 1 All ER 32, [1979] Ch 613.
Avant Petroleum Inc v Gatoil Overseas Inc [1986] 2 Lloyds Rep 236, CA.
Campbell Mussells v Thompson (1984) 135 NLJ 1012, CA.
Cella, The (1888) 13 PD 82, CA.
Customs and Excise Comrs v Norris [1991] 2 All ER 395, [1991] 2 QB 293, CA.
K/S A/S Admiral Shipping v Portlink Ferries Ltd [1984] 2 Lloyds Rep 166, CA.
PCW (Underwriting Agency) Ltd v Dixon [1983] 2 All ER 158; on apeal [1983] 2 All ER 697, CA.
Peters, Re [1988] 3 All ER 46, [1988] QB 871, CA.

Interlocutory appeal
The plaintiffs, Atlas Maritime Co SA (Atlas), a company incorporated in Liberia, appealed from the judgment of Phillips J dated
20 December 1990 granting an application by the defendants, Avalon Maritime Ltd (Avalon), a company incorporated in
Gibraltar, that a Mareva injunction granted by Steyn J on 16 March 1989 and subsequently varied by him on 21 March and by
Gatehouse J on 4 December be further varied to allow Avalon to draw from the frozen funds of $US4m sufficient money to pay
legal expenses and fees incurred in defending themselves in proceedings, later referred to arbitration, for breach of contract in
respect of an agreement for the sale by Avalon to Atlas of a vessel, the Coral Rose. The facts are set out in the judgment of Lord
Donaldson MR.

Jonathan Gaisman for Atlas.

Iain Milligan QC for Avalon.

Cur adv vult

14 June 1991. The following judgments were delivered.

LORD DONALDSON OF LYMINGTON MR. This is an appeal by Atlas Maritime Co SA (Atlas), claimants in an arbitration,
who obtained a Mareva injunction against Avalon Maritime Ltd (Avalon), the respondents. The injunction was originally limited
to $US75m, but subsequently this was reduced to $US3m and then increased to $US4m. Nothing much turns of these changes.
The increase 785 from $US3m to $US4m stemmed from a realisation by Atlas that they had not taken full account of their
potential entitlement to interest on any award which they might obtain in the arbitration or the need to include their claim for
costs. There is always a delicate balance to be struck by applicants for Mareva injunctions. On the one hand they should ask for
a sufficiently extensive injunction to cover the amount of any judgment or award which they may reasonably expect to obtain in
respect of damages, interest and their own costs. On the other hand they must not forget that if they ask for and obtain an
injunction for an excessive amount, they may find themselves liable to the other party in damages under the counter-undertaking.
The appeal itself is against a variation of this injunction, Phillips J on 20 December 1990 having added a proviso

that [Avalon] shall be entitled to draw from the funds held by their solicitors [the funds to which the injunction
attached] sufficient to pay legal fees and expenses including those incurred in connection with these proceedings and the
current arbitration between [Atlas] and [Avalon].

The order further provided:

Leave to appeal refused. Defendants costs. Any application for leave to appeal by 15th January.

I would only add that on 1 May this court held that s 18(1)(h)(iii) of the Supreme Court Act 1981 applied to the grant or refusal of
an application to vary an injunction, since the effect was to grant or refuse an injunction in the varied form (see Atlas Maritime
Co SA v Avalon Maritime Ltd (No 2) [1991] 3 All ER 781, [1991] 1 WLR 633). It followed that no leave to appeal was required.
The principle underlying the grant of Mareva injunctions which falls to be applied in the context of this appeal is not in
dispute and was restated by this court in Derby & Co Ltd v Weldon (No 2) [1989] 1 All ER 1002 at 10061007, [1990] 1 Ch 65 at
7677:

THE MAREVA JURISDICTION GENERALLY The fundamental principle underlying this jurisdiction is that, within
the limits of its powers, no court should permit a defendant to take action designed to ensure that subsequent orders of the
court are rendered less effective than would otherwise be the case. On the other hand, it is not its purpose to prevent a
 defendant carrying on business in the ordinary way or, if an individual, living his life normally pending the determination
of the dispute, nor to impede him in any way in defending himself against the claim. Nor is it its purpose to place the
plaintiff in the position of a secured creditor. In a word, whilst one of the hazards facing a plaintiff in litigation is that,
come the day of judgment it may not be possible for him to obtain satisfaction of that judgment fully or at all, the court
should not permit the defendant artificially to create such a situation. The jurisdictional basis of the Mareva injunction is to
be found in s 37(1) to (3) of the Supreme Court Act 1981, which, in sub-s (1), is the lineal successor of s 45 of the Supreme
Court of Judicature (Consolidation) Act 1925 and s 25(8) of the Supreme Court of Judicature Act 1873. Those subsections
provide as follows: (1) The High Court may by order (whether interlocutory or final) grant an injunction or appoint a
receiver in all cases in which it appears to the court to be just and convenient to do so. (2) Any such order may be made
either unconditionally or on such terms and conditions as the court thinks just. (3) The power of the High Court under
subsection (1) to grant an interlocutory injunction restraining a party to any proceedings from 786 removing from the
jurisdiction of the High Court, or otherwise dealing with, assets located within the jurisdiction shall be exercisable in cases
where that party is, as well as in cases where he is not, domiciled, resident or present within that jurisdiction. In Beddow
v Beddow (1878) 9 Ch D 89 at 93 Jessel MR said: I have unlimited power to grant an injunction in any case where it
would be right or just to do so: and what is right or just must be decided, not by the caprice of the Judge, but according to
sufficient legal reasons or on settled legal principles. That remains the position to this day, the only issue being whether in
particular circumstances the grant is right or just. What changes is not the power or the principles but the circumstances,
both special and general, in which courts are asked to exercise this jurisdiction. This can and does call for changes in the
practice of the courts. We live in a time of rapidly growing commercial and financial sophistication and it behoves the
courts to adapt their practices to meet the current wiles of those defendants who are prepared to devote as much energy to
making themselves immune to the courts orders as to resisting the making of such orders on the merits of their case.
Hence it comes about that, as was pointed out by Neill LJ in Babanaft International Co SA v Bassatne [1989] 1 All ER 433
at 448, [1990] Ch 13 at 3738 and by May LJ in Derby & Co Ltd v Weldon (No 1) [1989] 1 All ER 469 at 472473, [1990]
Ch 48 at 54, this is a developing branch of the law. To that I would add that a failure or refusal to grant an injunction in any
particular case is an exercise of discretion which cannot, as such, provide a precedent binding on another court concerned
with another case, save in so far as that refusal is based on basic principle applicable in both such cases.

Whilst it may well be unfair to apply the description wiles to the situation which has been revealed in this case, the regime
under which Avalon lived, moved and had its being was and is undoubtedly one of very considerable commercial, financial and, I
would add, legal sophistication.
Avalon is a Gibraltarian private company which was incorporated in 1986. It had a share capital of 100 1 shares. The
original shareholders were Mr Brown, a British subject and businessman resident in Gibraltar, Miss Shaw, a secretary similarly
resident, and Mr Valbac, a Danish subject resident in Spain. The original directors were Messrs Brown and Valbac. Early in
1988 the original shareholders transferred their shares as to one share to Really Useful Nominees Ltd, a Gibraltarian company
which a year later changed its name to Sinac Nominees Ltd, and as to 99 shares to another Gibraltarian company, Canis
Nominees Ltd, it being a feature of Gibraltarian company law that it is lawful, and in some circumstances no doubt useful, to
have directors who are juridical rather than natural persons. They are less likely to think and may not need to be paid.
As their names imply, Sinac and Canis were nominees for others and declarations of trust executed in May 1988 revealed
that the beneficial owners of the shares held by these companies were Nala Transport Inc of Monrovia, Liberia. Nala is a wholly-
owned subsidiary of Marc Rich & Co AG, a Swiss company in a very substantial way of business primarily, as I understand, in
the commodity trades. Marc Rich also has a United Kingdom subsidiary, Marc Rich & Co Ltd, whose treasury manager, a
Jennifer Freeman, is responsible for supervising Marc Richs accounting system insofar as it has a United Kingdom connection.
In 1987 a Mr Morrison, a London shipbroker, learnt that a vessel, the Coral Rose, was for sale. She was in a damaged
condition, but Mr Morrison thought that she could be repaired. He approached a Mr Cooper of Marc Rich & Co AG and inquired
whether his company would be interested in acquiring this vessel. 787The answer was that, whilst Marc Rich were not prepared
themselves to buy the vessel, they were prepared to advance sufficient funds for the purchase to Avalon provided that the
project would be administered by Mr Morrison and a marine surveyor, a Mr Price. Whether the project involved trading the
vessel or merely repairing and reselling her does not appear, but in the light of subsequent events it may well have been the latter.
The Coral Rose was bought by Avalon in October 1987 for $US7,925,000. According to Mr Morrisons second affidavit:

The formation of Avalon, the purchase, repair and operation of the CORAL ROSE, were all funded by way of loan
to Avalon from Marc Rich. No formal loan agreement was ever drawn up, but throughout the repair period I reported
regularly to Mr. Cooper on the progress of repairs, accounts to be paid, and all other relevant matters. In effect, therefore,
Mr. Price and I administered the CORAL ROSE project on behalf of Avalon from its inception in 1987 until the vessel
was sold in May 1989, since when I have been responsible for dealing with Avalons remaining creditors. I hold a general
Power of Attorney for Avalon

It appears from Miss Freemans affidavit and the computerised accounts which she produced that the financial machinery for
this transaction and indeed for all expenditure in connection with the Coral Rose was for Marc Rich & Co AG or Marc Rich &
Co Ltd to make the payments and to debit them to an account kept by Miss Freeman in the name of Avalon. The account was
also periodically debited with interest on the outstanding balance of 1% above LIBOR (London Inter-Bank Offered Rate). On
no view was this a loan account. On one view it was an overdraft facility granted to Avalon, but there is no evidence it was ever
accepted by Avalon. Indeed it is not clear that Avalon had any effective alter ego which could have done so. Whilst it is true
that Mr Morrison held a power of attorney, it seems that all decisions were taken by Mr Cooper of Marc Rich & Co AG in
consultation with Mr Morrison and Mr Price. Accordingly on another view what was really happening was that Marc Rich was
keeping separate accounts of its own expenditure in relation to the Coral Rose under the heading Avalon. This might well be
characterised as a sham, but for present purposes it is unnecessary to do so. Suffice it to record how the project was managed
financially.
Atlas allege that in June 1988 Avalon agreed to sell Coral Rose to them at a price of $US155m. This was denied by Avalon
and in February 1989 Atlas treated Avalons conduct as a repudiation. The contract contained an arbitration clause, but its
effectiveness depended upon the existence of the contract. Accordingly it was necessary for the courts to determine whether
there was such a contract and Hobhouse J found in favour of Atlas in a judgment under RSC Ord 14 in January 1990. The
remaining issues of whether the contract was repudiated and, if so, what damage has been suffered by Atlas fall to be determined
by arbitration.
The original Mareva injunction for $US75m was granted on 16 March 1989 and the reduction to $US3m was ordered on 21
March. On 25 May 1989 the Coral Rose was sold for a sum variously stated to be $US107m and $US127m. Which is the
correct figure falls to be determined in the arbitration rather than in the action. For present purposes what matters is that the
Avalon account kept by Miss Freeman shows receipts of $US7,462,04821 and $US2,57918, described as SALE PROCEEDS
CORAL, immediately followed by an entry TRANSFER FUNDS TO MR, $US7,464,62739. Since there never was a
transfer from MR when the purchase price of the Coral Rose was paid and other expenses incurred, it is not clear to me why
there should be a transfer to MR when the sale proceeds were received. I would have expected that the proceeds would simply
reduce the debit 788 balance. The mystery deepens when a few entries later the same sum appears successively as a credit and a
debit entry, but the transfer may have something to do with interest or notional interest on the account and taxation. An
alternative explanation was that someone wanted to make it doubly clear that the $US7,464,62739 proceeds of sale were no
longer in the hands of Avalon.
The balance of the purchase price, namely $US3m to which the Mareva injunction applied, was placed on an interest
bearing deposit account in the name of Messrs Clyde & Co.
On the same day Marc Rich & Co AG demanded repayment by Avalon of a further $US75m said to be the balance due on
the loan facility extended to Avalon Maritime Ltd since October 1987.
Meanwhile an action was brought in the name of Avalon against Tradex Shipping for breach of contract or negligence in
relation to the Coral Rose. This was settled in November 1989 for $US100,000. As the injunction was at that time limited to
$US3m, Avalon and Marc Rich were free to deal with this sum as they wished. $US45,000 was retained by Clyde & Co in client
account on account of fees and disbursements. As to the balance of $US55,000, Mr Townson, a partner in Clyde & Co who had
received the whole $US100,000, says only that it was remitted to [Avalon] who in due course passed the funds to Marc Rich &
Co A G. How this was achieved is not revealed. It does not appear in Miss Freemans Avalon account, but it may be that a
cheque was given to Mr Morrison payable to Avalon which was indorsed over to Marc Rich. Certainly there is no evidence of
any account of Avalon, other than Miss Freemans account, into which any cheque could have been paid and out of which
payment could have been made to Marc Rich.
Thus far matters had proceeded reasonably smoothly, but in June 1989 Avalon applied to discharge the Mareva injunction on
the footing that their only assets were moneys held by Clyde & Co and that they owed more than this to Marc Rich, who were
business creditors, had demanded payment and were entitled to be paid. Hobhouse J refused this application in February 1990
(see Atlas Maritime Co SA v Avalon Maritime Ltd, The Coral Rose (No 1) [1990] 2 Lloyds Rep 258. Essentially his reasoning
was that the relationship between Marc Rich and Avalon was not that of creditor and debtor, but of principal and agent and that he
considered that

the principle in the Angel Bell ([1980] 1 All ER 480, [1981] QB 65) requiring the variation of Mareva injunctions to
permit the making of payments in good faith and in the ordinary course of business does not extend so as to require the
court to permit an agent to pass over to its principal assets without which the agent would be unable to meet its liability to
another incurred in the course of that agency.

(See [1990] 2 Lloyds Rep 258 at 264.)

Avalon appealed to this court, which dismissed the appeal, but on different grounds (see [1991] 3 All ER 769). The court,
consisting of Neill, Stocker and Staughton LJJ, accepted that the relationship was one of debtor and creditor. It also accepted that
Avalon was to be treated as a separate entity from Marc Rich and that it was not appropriate to seek to pierce the corporate veil in
the sense of treating the rights or liabilities or activities of Avalon as the rights or liabilities or activities of its shareholders and
therefore, albeit indirectly, of Marc Rich. On the other hand all three members of the court thought it appropriate to lift and look
behind the corporate veil in the sense of having regard to the shareholding for some legal purpose, in this case for the purpose of
deciding whether it would be equitable to discharge the injunction.
789
As a result of so doing, the court concluded that the moneys owed to Marc Rich were to be regarded as trading capital rather
than an ordinary routine trading debt and that, whilst it would no doubt have been appropriate to permit repayment to a third
party, it was not appropriate to do so on the facts of this case, where the creditor was the sole beneficial shareholder in the debtor
company.
This decision is only relevant for our purposes to the extent that it entitles us to peek behind the corporate veil, as indeed I
have done. It is distinguishable in that it is not Marc Rich which Avalon seek to pay out of the funds subject to the injunction, but
Clyde & Co, who are not only third parties but legal advisers for the payment of whose fees the fundamental principle to which I
have already referred makes provision.
This brings me to the judgment of Phillips J. I remind myself that this was a discretionary decision with which an appellate
court should not interfere unless convinced that the judge misdirected himself or that the decision was plainly wrong.
Phillips J summarised the issue and his approach to it in the following passage from his extempore judgment:

The issue is a short onedo the unusual facts referred to by the Court of Appeal in their judgments render it
appropriate for me to exercise my discretion to refuse to permit the payment of proper legal costs on the basis that this may
result in the parent company being constrained to take over the funding of these proceedings. If this had been a case where
it was right for me to regard the corporate relationship between the defendants and Marc Rich as a sham and pierce the veil
of incorporation, then the submissions of Mr Schaff [counsel for the plaintiffs] would be well founded, but it is not such a
case. The Court of Appeal made that plain. See the judgment of Staughton LJ where he stated ([1991] 4 All ER 769 at
779): In this case I can see no justification for piercing the corporate veil, so as to treat the liabilities of Avalon as
liabilities of Marc Rich, its ultimate parent. The position is, and this is not challenged, that the defendants have repaid to
Marc Rich all but the sum of approximately $US3m, which remains available. Mr Schaff has not suggested any
impropriety in making that payment. In these circumstances, in the exercise of my discretion, the proper approach is to
look at the position of a wholly-owned subsidiary with no assets of its own other than the money subject to a Mareva.

In the ordinary case of a wholly-owned subsidiary company having a commercial, as distinct from a legal, existence
involving some degree of independence of its parents, I would entirely agree with the judge. However, in citing the decision of
this court that there was no justification for piercing the corporate veil, ie challenging the existence of Avalon as a separate legal
entity, he failed to direct himself that he could and should lift up or look behind it as Staughton LJ explained in his judgment.
Let me go back to the fundamental principle. There is no doubt that the variation ordered by Phillips J is designed to
ensure (in the sense that it will produce the result whether or not that is the object of the exercise) that, in so far as the frozen
fund is used for the payment of Clyde & Cos fees and disbursements, any award in favour of Atlas is likely to be rendered less
effective assuming, as for this purpose I must, that the award may well equal or exceed the amount of this fund.
In a wholly novel submission Mr Iain Milligan QC, for Avalon, submitted that, whilst this might from some points of view
be regarded as regrettable, it was a consequence of the failure by Atlas to seek a Mareva injunction in a sufficient 790 sum to
cover not only any damages, interest and costs which they might be awarded in the arbitration, but the legal costs incurred or to
be incurred by Avalon. He submitted that, bearing in mind that a further $US75m had passed through Avalons hands at a time
when a Mareva injunction was in force, if Atlas had taken this elementary precaution there would now be no problem.
This submission is wholly misconceived. It was the responsibility of Avalon, if they were in a position to do so, to retain
sufficient funds to cover any legal or other expenses which they were likely to incur during the course of the arbitration.
According to Mr Townsons affidavit he was

advised by [Avalons] attorney, Mr. Richard Morrison, that he took the view that the demand [for payment over of the
$US75m to Marc Rich] was impossible to resist

and he did not at that time consider the need to make provision for legal costs, which at that stage were relatively insignificant.
It is unfortunate that Mr Morrison did not himself deal with this matter in either of his affidavits. Had he done so, it might
have occurred to someone that it would be enlightening to seek to cross-examine him not only on this statement, but upon why he
did not seek to retain any money to meet even relatively insignificant legal costs and whether he really believed that Marc
Richs demand was irresistible at least to this extent. The obvious answer is that the financial arrangements between Marc Rich
and Avalon had always contemplated that any moneys received by Avalon would at once be paid to the credit of Marc Richs
Avalon account and that the legal costs would at a later stage have been paid out of this account.
Leaving aside this unusual, and possibly unique, financial relationship, the fact that the variation of the injunction to enable
legal costs to be paid would be likely to render any award in favour of Atlas less effective is not of itself a fatal objection because
of the proviso built into what I have described as the fundamental principle. But this proviso only applies in cases in which the
operation of the injunction would impede the person enjoined from defending himself against the claim. Would it in this case?
Phillips J cited a passage from an affidavit by Mr Townson reading as follows:

I also confirm that my firm has received no payments or assurances whatsoever from Marc Rich regarding payment of
fees and expenses, with the result that if [Avalon] are not permitted to pay legal fees and expenses out of the enjoined
funds, my firm will become another creditor, and will not be able to represent [Avalon] in the forthcoming arbitration. To
the best of my belief there are no other funds available for the payment of legal fees and expenses.

Phillips J commented:

This plainly indicates that the stage has been reached where Clyde & Co are no longer prepared to go on acting unless
they are satisfied that their fees will be met from the funds held.

With all respect I cannot accept that Clyde & Co minded from what fund their fees were paid. Their client is and was
Avalon. As I understand Mr Townsons evidence, he was asserting, on instructions and probably correctly, that Avalon had no
other moneys. But Avalons lack of unfrozen funds would in no way impede their defence of the claim against them if,
nevertheless, they could obtain the necessary funds. Neither Mr Townson nor, more significantly, Marc Rich has ever said that
no such funds are obtainable in precisely the way in which Avalons 791 funds always were obtained, namely by drawing on the
Marc Rich Avalon account.
Essentially Avalon are asserting that they are unable to pay Clyde & Cos fees otherwise than out of the frozen funds,
because they have no legal right to require Marc Rich to pay them debiting the Avalon account. A similar argument was
advanced in a somewhat different context in Browne v Browne [1989] 1 FLR 291, where the wife was one of the beneficiaries of
a discretionary trust. The evidence showed that the trustees had always acted in accordance with the wifes wishes and that she
had immediate access to funds whenever she required them. Much the same could be said of Avalon. This court held that in
exercising the quasi-equitable statutory jurisdiction under the Matrimonial Causes Act 1973 full account should be taken of the
availability of the trust funds. In exercising the equitable Mareva jurisdiction, the court should adopt a similar approach and not
limit its consideration to funds to which the party concerned has a legal right, if there are reasonable grounds for believing that it
can obtain money otherwise. In the light of the history of financial dealings between Marc Rich and Avalon and the absence of
any denial by Marc Rich, I am satisfied that Marc Rich will make funds available to Avalon to enable them to meet the costs of
defending the claim unless Avalon or Marc Rich (if, as I assume for this purpose, they are different) decide that this would be
throwing good money after bad.
One further point remains. Phillips J in his judgment said:

Mr Milligan has pointed out that it would be open to Clyde & Co to obtain a judgment which could not be resisted in
respect of fees incurred to date and to enforce that against the Marevad funds. This would be a waste of costs. The proper
procedure is that which has been followed, namely to apply for the release of the funds for that purpose.

This is not wholly accurate. Clyde & Co could indeed obtain a judgment in so far as they have an immediate right to
payment, but execution against the frozen funds could only be effected with the leave of the court. This brings us back to the
present position, in which the stage of obtaining a judgment has rightly been bypassed and Avalon, at least in part, are seeking
leave to meet an admitted liability. The same point was considered by this court when hearing the appeal from the decision of
Hobhouse J, the argument being that there was no answer in law to Marc Richs claim to repayment by Avalon of a debt which
could only be discharged if the whole Mareva injunction was set aside. This court rejected it, saying that without rewriting the
laws of insolvency it was appropriate on the facts of this case to preserve the status quo upon the basis of which the law of
insolvency might one day take effect (see [1991] 4 All ER 769 at 781 per Staughton LJ).
As I am satisfied that Phillips J misdirected himself in failing to look behind the corporate veil at the financial relationship
between Marc Rich and Avalon, it becomes the right and duty of this court to exercise that discretion afresh.
Avalon have never had any funds which they controlled independently of Marc Rich. If they needed any money, however
small the sum, it was provided by Marc Rich and debited to the Marc Rich Avalon account. If they received any sum, however
small, it was at once credited to that account and so repaid to Marc Rich. There is an example in the account of the receipt of a
sum as small as $US1229. The only change has been the formal demand by Marc Rich in May 1989 that Avalon discharge their
remaining indebtedness. In the light of the relationship between Marc Rich and Avalon and in the absence of any denial by Marc
Rich that funds will continue to be made available to meet Avalons legal costs, I consider that it would not be right or just to
vary the injunction and accordingly would allow the appeal and set aside the order of Phillips J.
792

NICHOLLS LJ. Under English law the parent company of a wholly-owned subsidiary is not, without more, liable for the debts
of the subsidiary. In the case of a company limited by shares, the liability of members is limited to the amount, often nominal,
payable on the shares held by them. The subsidiary is a separate legal entity, having its own assets and its own debts. So if the
subsidiary possesses a fund of money, and is facing a claim by a third party, in the ordinary course the subsidiary should be able
to utilise its money in paying for legal advice and representation. Normally a Mareva injunction ought not to prevent the
subsidiary from using its own funds for this purpose, provided it is acting in good faith. Mareva injunctions are intended to
prevent a defendant from abusing the interval which must elapse after a claim has emerged and before judgment can be obtained
and executed. A defendant is not to be permitted to thwart in advance orders which the court may make. But Mareva injunctions
are not intended to impede a defendant from defending himself against adverse claims (see Lord Donaldson MR in Derby & Co
Ltd v Weldon (No 2) [1989] 1 All ER 1002 at 1006, [1990] Ch 65 at 76).
Of course, in the nature of things, the parent of a wholly-owned subsidiary will often have a very real commercial interest in
the outcome of a claim brought by a third party against the subsidiary company. The interest may stem from the legal interest the
parent has in the subsidiary, as a member; or it may stem from the parents interest as a creditor of the subsidiary; or it may stem
simply from a desire by the parent to maintain the reputation and goodwill of the group. Whatever be the precise nature of the
parent companys interest in a particular case, frequently in one or more of these ways the parent company will have a
commercial interest in providing funds to a subsidiary to enable it to resist a third party claim if the subsidiary is not in a position
to finance its own defence. Providing such funds to the subsidiary may be in the parents own best interests. In general,
however, the mere fact that a parent company has a financial interest in the outcome of a claim against a subsidiary company
cannot be a sufficient reason for the court preventing the subsidiary from using such funds as it may have in providing for its own
defence. The reason is not far to seek: use by a subsidiary of its own funds in these circumstances is not inherently an abuse by
the subsidiary as described above.
Against that background I turn to consider Avalons application in the present case. Avalon was incorporated under the law
of Gibraltar, but no one has suggested that the material provisions of Gibraltar company law differ from English law. Is there
here any factor which makes this a special case, so that here, contrary to the normal situation, it would be just to prevent Avalon
from using any of the $US4m subject to the Mareva injunction in financing its defence to Atlass claim? In my view there is.
The reason lies not in one factor, but in a combination of factors. First, and importantly, there is the unusual way in which Avalon
and Marc Rich have carried on their mutual financial dealings. Avalon was the owner of the vessel Coral Rose. But it seems,
from the limited evidence before us concerning Avalons financial affairs, that Avalon did not maintain and operate a bank
account of its own in the usual way. Avalon seems not to have had any funds of its own. When Avalon required money to pay for
a particular outgoing, whatever its nature and size, the money was provided by Marc Rich on an ad hoc basis in respect of the
particular outgoing. Conversely in respect of receipts by Avalon: all money received by Avalon seems to have been channelled
straight through to Marc Rich. Thus, so far as one can see, the financial affairs of Avalon have, in substance, been conducted by
Marc Rich and not Avalon. In relation to money matters Avalon seems not to have exercised any mind of its own, even in the
attenuated sense in which that frequently is the case with wholly-owned subsidiary companies. Marc Rich has controlled the
purse-strings, on an item-by-item basis.
793
The second matter to be noted is that, so it seems, the Coral Rose was Avalons only asset of any substance. The vessel was
not charged to Marc Rich. Nevertheless, Marc Rich has already received from Avalon the whole of the proceeds of the sale of the
Coral Rose, save for the sum frozen by the Mareva injunction. Marc Rich has done so by operation of the financial arrangement
I have mentioned. Despite some evidence which seeks to suggest otherwise, I think the proper inference to be drawn is that this
payment, or withdrawal, was not an arms length payment by a debtor to a creditor in the ordinary course of business. On the
contrary, payment was made to Marc Rich by Avalon in accordance with a direction to that effect from Marc Rich.
The matter goes further. Thirdly, when the payment of about $US746m was made to Marc Rich in May 1989, Marc Rich
was well aware of the pending proceedings. I have no doubt that Marc Rich was concerned not to leave Avalon, a subsidiary
facing a substantial claim, one penny more that it must. So be it. The withdrawal may have been wholly lawful, as a matter of
company law. The contrary has not been suggested. That is not a point I need pursue on this appeal. It is sufficient for present
purposes to note that the payment was made to Marc Rich, on the direction of Marc Rich, in full knowledge that this would leave
Avalon with no money with which to finance a defence to Atlass claim for damages for alleged breach of contract.
In these unusual circumstances, I consider justice requires that Avalon should not be free to have recourse to the sum of $4m
which is subject to the Mareva order. Marc Rich, the ultimate parent of Avalon, has chosen to operate the purse-strings in such a
way that, quite deliberately, it has left Avalon with no other money with which to defend itself against a pending claim. Indeed,
but for the Mareva injunction, Avalon would now have no money at all. All the proceeds of sale would have been paid to Marc
Rich. This court has already refused to permit any part of the $4m to be paid to Marc Rich in part discharge of Avalons
indebtedness to Marc Rich. Likewise, justice requires that Marc Rich should be left to finance Avalons defence if it considers
this a prudent commercial proposition.
There is nothing unfair to Avalon or Marc Rich in this course. We have not been told that Avalon has any other creditors of
substance. Having deliberately emptied Avalons coffers of the proceeds of sale of the vessel, Marc Rich ought fairly to be
expected to replenish them if it wishes Avalon to defend this claim. Otherwise, Avalons defence, which will enure solely for the
benefit of Marc Rich as Avalons creditor and ultimate parent, will in effect be conducted at the expense of Atlas even though it is
Marc Rich which had deliberately chosen to empty Avalons coffers.
I do not think that a refusal to vary the Mareva injunction as sought by Avalon is inconsistent with the basic purpose, and the
inherent limitations, of Mareva orders. The unusual feature here, in short, is that the only reason Avalon finds itself without funds
with which to finance its defence is that its ultimate parent company has exercised its control over Avalon in such a way as
knowingly to denude it of the funds needed for this purpose.
I add a final comment. No doubt Avalons solicitors could obtain a judgment against Avalon in respect of their bill for work
already done. But, if that event should occur, the court would still have a discretion on whether to permit immediate execution of
the judgment debt.
I too would allow this appeal. I think the judge fell into error, and misdirected himself, by failing to take into account the
circumstances in which Avalon finds itself without any money beyond the frozen fund.
794

FARQUHARSON LJ. I agree with both judgments.

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

Solicitors: Stephenson Harwood; Clyde & Co.

Frances Rustin Barrister.

[1991] 4 All ER 795

Derbyshire County Council v Times Newspapers Ltd and others

TORTS; Defamation

QUEENS BENCH DIVISION

MORLAND J
26, 27, 28 FEBRUARY, 15 MARCH 1991

Libel and slander Parties Right to sue Corporation Local government corporation Right of local authority to sue
Publication relating to administration by local authority of its superannuation fund Publication insinuating maladministration
of pension funds Whether non-trading corporation entitled to sue for libel if damage not pleaded Whether expediency of libel
proceedings instituted by authority a matter for authority Local Government Act 1972, s 222(1).

The plaintiff local authority brought an action against the publishers of a Sunday newspaper, its editor and two journalists
claiming damages for publishing articles defamatory of the local authority and its leader relating to the authoritys investment and
control of its superannuation fund. The local authority also sought an injunction to restrain the publication of any further articles
on the subject. The defendants applied to have the statement of claim struck out for failing to plead any loss and the action struck
out for disclosing no cause of action against the defendants, contending (i) that a local authority, being a non-trading statutory
corporation, could not maintain an action for a libel which reflected on its administrative reputation in carrying out its statutory
responsibility for the investment and control of its superannuation fund when no actual financial loss was pleaded, (ii) that since s
222(1)a of the Local Government Act 1972 conferred on a local authority power to institute proceedings which it considered to
be expedient for the promotion or protection of the interests of [its] inhabitants the action ought not to be allowed to proceed
unless the court was satisfied that the proceedings promoted or protected the interests of the authoritys inhabitants and that it had
to be shown that the action would be beneficial in economic terms to the inhabitants and (iii) that the libel, if any, was directed
solely towards the leader of the authority and the authority could not sue for a libel on him.
________________________________________
a Section 222(1), so far as material, is set out at p 808 f, post

Held (1) A local authority could sue for libel in respect of its governing or administrative reputation even though no actual
financial loss was pleaded or alleged since it was an ordinary incident of all corporations, whether trading or municipal
corporations, that they could sue for libel (see p 800 g and p 808 a, post); Bogner Regis UDC v Campion [1972] 2 All ER 61,
South Hetton Coal Co Ltd v North-Eastern News Association Ltd [18914] All ER Rep 548 and dictum of Aikins JA in City of
Prince George v British 795 Columbia Television System Ltd (1979) 95 DLR (3d) 577 at 584585 applied; Manchester Corp v
Williams [1891] 1 QB 94 doubted.
(2) Under s 222(1) of the 1972 Act it was for the local authority concerned to consider the expediency of litigation and any
challenge to authoritys decision to litigate could only be made by way of judicial review.
(3) On the facts and applying the principle that a corporation could not maintain an action for a libel which reflected only on
its officers and not on itself, it was nevertheless arguable that the words complained of reflected on the authority itself in the
management and rectitude of its financial affairs. Accordingly the statement of claim would not be struck out and the defendants
application would be dismissed (see p 809 e f, post); dictum of Browne J in Bognor Regis UDC v Campion [1972] 2 All ER 61 at
66 applied.

Notes
For corporations maintaining actions for libel and slander, see 9 Halsburys Laws (4th edn) para 1378 and 28 Halsburys Laws
(4th edn) para 25, and for cases on the subject, see 13 Digest (Reissue) 349350, 29722977.
For the Local Government Act 1972, s 222, see 25 Halsburys Statutes (4th edn) (1990 reissue) 340.

Cases referred to in judgment

A-G v Guardian Newspapers Ltd (No 2) [1988] 3 All ER 545, [1990] 1 AC 109, [1988] 2 WLR 805, HL.
A-G v Kerr (1840) 2 Beav 420, 48 ER 1244.
Australia (Commonwealth) v John Fairfax & Sons Ltd (1980) 147 CLR 39, Aust HC.
Bognor Regis UDC v Campion [1972] 2 All ER 61, [1972] 2 QB 169, [1972] 2 WLR 983.
Brind v Secretary of State for the Home Dept [1991] 1 All ER 720, [1991] 1 AC 696, [1991] 2 WLR 588, HL.
Broadway Approvals Ltd v Odhams Press Ltd [1965] 2 All ER 523, [1965] 1 WLR 805, CA.
Byrne v Chicago General Rly Co (1897) 169 Ill 75, SC.
Chicago (City) v Tribune Co (1923) 307 Ill 595, SC.
Church of Scientology Inc v Anderson [1980] WAR 71, WA SC.
Doe d Governors of Bristol Hospital v Norton (1843) 11 M & W 913, 152 ER 1076.
Femis-Bank (Anguilla) Ltd v Lazar [1991] 2 All ER 865, [1991] Ch 391, [1991] 3 WLR 80.
Finnish Temperance Society Sovittaja v Finnish Socialistic Publishing Co (1921) 238 Mass 345, Mass Sup Jud Ct.
Hector v A-G of Antigua and Barbuda [1990] 2 All ER 103, 2 AC 312, [1990] 2 WLR 606, PC.
Huddersfield Police Authority v Watson [1947] 2 All ER 193, [1947] KB 842, DC.
Lingens v Austria (1986) 8 EHRR 407, E Ct HR.
Ludlow Corp v Tyler (1836) 7 C & P 537, 173 ER 237.
Manchester Corp v Williams [1891] 1 QB 94, 63 LT 805, DC.
Metropolitan Saloon Omnibus Co Ltd v Hawkins (1859) 4 H & N 87, [184360] All ER Rep 430, 157 ER 769.
National Union of General and Municipal Workers v Gillian [1945] 2 All ER 602, [1946] KB 81, CA; affg [1945] 2 All ER 593.
New York Society for the Suppression of Vice v Macfadden Publications Inc (1932) 260 NY 167, NY Ct of Apps.
New York Tmes Co v Sullivan (1964) 376 US 254, US SC.
796
Prince George (City) v British Columbia Television System Ltd (1979) 95 DLR (3d) 577, BC CA; affg (1978) 85 DLR (3d) 755,
BC SC.
South Hetton Coal Co Ltd v North-Eastern News Association Ltd [1894] 1 QB 133, [18914] All ER Rep 548, CA.
Sunday Times v UK (1979] 2 EHRR 245, E Ct HR.
Willis v Brooks [1947] 1 All ER 191.

Application
By a writ issued on 11 October 1989 the plaintiffs, the Derbyshire County Council, brought an action against the defendants,
Times Newspapers Ltd, the publishers of the Sunday Times newspaper, Andrew Neil, the editor of that newspaper, and Peter
Hounam and Rosemary Collins, two journalists employed on the newspaper, claiming damages for libel published in articles
published in the Sunday Times newspaper on 17 and 24 September 1989 and an injunction restraining the defendants and each of
them from publishing articles relating to the investment of the councils superannuation fund. The defendants applied to strike
out the action on the ground, inter alia, that the statement of claim disclosed no cause of action against the defendants because the
plaintiffs did not allege that they had suffered damage by the publication. The facts are set out in the judgment.

Alan Newman QC and Antony White for the plaintiffs.

Anthony Lester QC, Desmond Browne QC and Presiley Baxendale for the defendants.

15 March 1991. The following judgment was delivered.

MORLAND J. The plaintiffs claim is for (1) damages for libel contained in articles appearing in the issue of the Sunday Times
dated 17 September 1989 entitled REVEALED: SOCIALIST TYCOONS DEALS WITH A LABOUR CHIEF and BIZARRE
DEALS OF A COUNCIL LEADER AND MEDIA TYCOON respectively, in the issue of the Sunday Times dated 24 September
1989 entitled COUNCIL SHARE DEALS UNDER SCRUTINY published by the defendants and (2) an injunction.
I have to determine the following preliminary point of law: whether the plaintiffs can maintain an action for libel for any
words which reflect upon the plaintiffs as the Derbyshire County Council in relation to their governmental and administrative
functions in Derbyshire, including their statutory responsibility for the investment and control of the superannuation fund, and
whether or not the statement of claim in the action discloses a cause of action.

The factual background to the action

By virtue of the Superannuation Act 1972 and the regulations thereunder the plaintiffs are the administering authority of
their superannuation fund. In particular the Local Government Superannuation Regulations 1986, SI 1986/24, prescribe the
parameters for the use and investment of superannuation funds moneys. For example only 10% of the fund may be in unlisted
securities.
The allegations in the Sunday Times articles centre on the share dealings involving moneys of the superannuation fund being
invested, sometimes by a complex series of deals, in companies connected with or controlled by a tycoon 797 named Mr Oyston.
It was alleged that Mr Bookbinder, the council leader, was a prime mover in these deals.
The following excerpts from the articles give a sufficient flavour of the allegations as they may affect the reputation of the
plaintiffs and may be defamatory:

The funds external investment advisers, Geoffrey Morley and partners, have confirmed that although they were told
of the scheme they were not asked to give advice, contrary to a written assurance to a councillor by Reg Beard, the council
treasurer that they had been consulted
The deals could be ultra vires
The outcome of this extraordinary deal was that Derbyshires pension fund had made Oyston richer on paper by as
much as 1m. Because the transaction was carried out in this way, the loser was Derbyshires pension fund. As with the
Telemags transaction, the only advice taken by Derbyshire before making the 2m investment was from its own financial
officers
QUESTIONABLE share deals involving the Miss World group and the pension funds of a county council are being
investigated by the Stock Exchange and the Citys Takeover Panel after their disclosure by The Sunday Times Insight
Team. The inquiries will focus on a suspicious series of share transactions by Derbyshire County Council prior to the
bitterly contested takeover by the Miss World group of Piccadilly Radio in Manchester earlier this year
Such inquiries would determine whether a false market in Miss World shares was created before and during a takeover.
In a shares-for-shares takeover, the likely result would be to strengthen the hand of the bidder at the expense of its victim

Insights new share revelations came after evidence of improper behaviour and legally doubtful financial transactions
between Oyston and Derbyshire. Last week Insight revealed that some of Derbyshires earlier associations with Oyston,
including a plan to build a holiday resort behind the Iron Curtain, could be ultra vires, or ouside the councils legal scope.
After a series of share transactions following a failed investment of 305,000 in the News on Sunday newspaper, Oyston
benefited on paper by as much as 1m from investments by Derbyshires pension fund.

This is only the third recorded case in England of a local authority bringing an action for libel. The first, which was
unsuccessful, was Manchester Corp v Williams [1891] 1 QB 94 (but more fully reported in 63 LT 805), a decision of the
Divisional Court. The second, which was successful, was Bognor Regis UDC v Campion [1972] 2 All ER 61, [1972] 2 QB 169,
a decision of Browne J.
In this, the third case, the defendants contend that the Bognor Regis case was wrongly decided and that Browne J erred in
distinguishing the Manchester Corp Case. The plaintiffs contend that the Bognor Regis case was rightly decided and that I
should follow it and that the Manchester Corp case was decided per incuriam and that I am not obliged to follow it.
It is important that I emphasise the position faced by a puisne judge where there is a conflict of authority. In Huddersfield
Police Authority v Watson [1947] KB 842 at 848, cf [1947] 2 All ER 193 at 196 Lord Goddard CJ said:

I can only say for myself that I think the modern practice, and the modern view of the subject, is that a judge of
first instance, though he would always follow the decision of another judge of first instance, unless he is convinced the
judgment is wrong, would follow it as a matter of judicial 798 comity. He certainly is not bound to follow the decision of a
judge of equal jurisdiction. He is only bound to follow the decisions which are binding on him, which in the case of a
judge of first instance, are the decisions of the Court of Appeal, the House of Lords and the Divisional Court.

The consequence of those words of Lord Goddard CJ are that I should follow the decision of the Bognor Regis case unless I
am firmly convinced that Browne J was wrong, and that the Manchester Corp case is binding upon me unless the Divisional
Court reached its decision per incuriam.
An alternative conclusion may be that both those cases were rightly decided but that some of the reasoning in the judgments
may be defective.
The ambit of the argument has centred on the question whether a local authority, a non-trading statutory corporation, can sue
for libel in respect of its governing or administrative reputation, especially when no actual financial loss is pleaded or
particularised.
I have been referred to a wealth of authorities, some of only very peripheral relevance, from jurisdictions, including non-
common law jurisdictions, right across the globe.
Mr Lester QC, for the defendants, was both enthusiastic and educative in his argument both in opening and in reply, but at
times, it seemed to me, was submitting what he considered the English law should be rather than what it is. He was contending
that newspapers commenting upon matters of public interest in relation to government, whether it be central government
departments or local authorities, should not be subject to the tort of libel, which he described as being uniquely onerous for
defendants. He advocated that wrongs committed by newspapers could be dealt with by the tort of malicious falsehood or, rather
inconsistently as it seemed to me, by the crime of criminal libel. He submitted that the case raised constitutional issues. He
urged me not to be blinkered by private law spectacles but to view the wide horizons through public law spectacles.
While indorsing the utmost importance of freedom of speech and expression, including vigorously expressed comment and
criticism on matters of public interest, not only by a newspaper but all the citizens in a democratic society and also fully
acknowledging the value of thorough and accurate investigative journalism, in my judgment it is neither appropriate nor
necessary for me to comment on many of the matters raised by Mr Lester.
I must keep to the forefront of my mind two questions. Can a local authority sue for libel in respect of its governing or
administrative reputation when no actual loss is pleaded? Has Derbyshire County Council in this action against the Sunday
Times, its editor and its two investigative journalists for such a libel a cause of action on the basis of the pleaded statement of
claim?
I must fully bear in mind that I must not determine this preliminary issue in the defendants favour unless it is entirely clear
and manifest that the statement of claim discloses no cause of action and is not capable of disclosing a viable cause of action if
either amended or supplemented by further and better particulars.

The first question

The raison detre of the tort of defamation is the protection of the reputation of a person whether a living human person or
an active persona ficta.
 As long ago as 1859 the Court of Exchequer decided in Metropolitan Saloon Omnibus Co Ltd v Hawkins (1859) 4 H & N
87, [184360] All ER Rep 430 that a joint stock company incorporated under the recently enacted Joint Stock Companies Act
1856 might maintain an action for libel against a shareholder 799 who published a letter imputing to the company insolvency,
mismanagement and an improper and dishonest carrying out of its affairs. Pollock CB said (4 H & N 87 at 9091, [184360] All
ER Rep 430 at 431):

We are all of opinion that the plea cannot be sustained. That a corporation at common law can sue in respect of a libel
there is no doubt. It would be monstrous if a corporation could maintain no action for slander of title through which they
lost a great deal of money. It could not sue in respect of an imputation of murder, incest, or adultery, because it could not
commit those crimes. Nor could it sue in respect of a charge of corruption, for a corporation cannot be guilty of corruption,
although the individuals composing it may. But it would be very odd if a corporation had no means of protecting itself
against wrong; and if its property is injured by slander it has no means of redress except by action. Therefore it appears to
me clear that a corporation at common law may maintain an action for a libel by which its property is injured. Then, has a
corporation created under the [Joint Stock Companies Act 1856] the same power? Though that Act makes a partnership a
corporation, Mr. Stammers says that this is merely for the purpose of carrying on the business mentioned in it, and that it
can only sue in respect of matters necessarily incident to that purpose. But in order to carry on business it is necessary that
the reputation of such a corporation should be protected, and therefore in the case of libel or slander it must have a remedy
by action.

Watson B said (4 H & N 87 at 9394, [184360] All ER Rep 430 at 432):

In this respect I cannot distinguish between corporations created for certain purposes and corporations at common law;
they all have a perpetual succession and a common seal. Why are we to make a distinction when the legislature says that
these joint stock companies shall be corporations? It is one of the incidents of a corporation that it may sue and be sued in
the corporate name, and for purposes of the suit a member of the corporation is a mere stranger. It would make strange
work in the law if we were to hold that the ordinary incidents of a corporation did not attach to companies incorporated by
act of parliament.

In my judgment it is implicit from these citations that it is an ordinary incident of all corporations that they may sue for libel,
and that includes municipal corporations.
Manchester Corp v Williams (1890) 63 LT 805 was decided by a Divisional Court consisting of Day J, who gave the short
judgment of the court, and Lawrence J, who agreed. The defendant had written a letter to a local newspaper, which published it,
saying, inter alia:

I will undertake to bring before it witnesses and documents who will (and I deeply deplore it) prove that in the case
of two if not three departments of our Manchester City Council bribery and corruption have existed and done their
nefarious work.

Manchester Corporation brought an action against the defendant for libel, alleging:

The defendant meant, and was understood to mean thereby, that bribery and corruption existed, or had existed, in three
departments of the Manchester City Council, and that the plaintiffs were either parties thereto or culpably 800 ignorant
thereof, and that the said bribery and corruption prevailed to such an extent as to render necessary an inquiry by a
parliamentary commission.

Before the Divisional Court it was argued that the action was not maintainable:

C A Russell for the defendant.This letter was not directed against the corporation, but against individual officers of
the corporation. Even if it had been directed against the corporation, it only charges them with corruption, in respect of
which charge no action is maintainable by a corporation, as it cannot be guilty of corruption. The case of The Metropolitan
Saloon Omnibus Company v Hawkins (4 H & N 87, [184360] All ER Rep 430) is conclusive in favour of the defendant.

Day J upheld this submission, saying:

A corporation may sue for a libel affecting property, not for one merely affecting personal reputation. This does not
fall within the class of cases in respect of which a corporation can maintain an action, but does fall within the second class
commented on by Pollock, C.B. in his judgment in the case of the Metropolitan Saloon Omnibus Company v Hawkins, with
which I fully agree.

Day J also said:

The charge in the present case is one of bribery and corruption, of which a corporation cannot possibly be guilty, and
therefore, in my opinion, this action will not lie.

(See 63 LT 805 at 806807.)

The decision of the Divisional Courts was subjected to withering criticism by Mr Spencer Bower in his Law of Actionable
Defamation (1st edn, 1908) p 280:

The case is about as unsatisfactory a one as can be imagined. No real thought seems to have been bestowed on the
important principle involved either by Day J., who, in a judgment of thirteen lines, appears to found his decision simply on
the above dictum of Pollock C.B., which happens to mention corruption, as one of the inapposite illustrations of an
unsound proposition, or by Lawrance J., who contents himself with a bare expression of concurrence. It is submitted that
the judgment cannot be supported on principle, though, as regards the particular application of the principle, but no further,
it must be taken to be law in any court of first instance. Certainly the proposition enunciated by Day J., that a corporations
right of action for libel is limited to a publication which affects its property derives no countenance from the decision of the
C.A. in the South Hetton Co.s Case, where the imputation held to be actionable was that the plaintiff company was guilty
of a want of proper consideration for its workmen.

It was further criticised in Fraser on Libel and Slander (7th edn, 1936) p 90, edited by Mr G O Slade and Mr N Faulks, as
they then were, by Oliver J in Willis v Brooks [1947] 1 All ER 191 at 192, where he held that a an allegation of ballot-rigging
libelled a union and not merely its officers, and in Carter-Ruck on Libel and Slander (3rd edn, 1985) p 68.
Mr Newman QC argues that the Manchester Corp case decision was made per incuriam in so far as it was founded on the
dicta of Pollock CB in the Metropolitan Saloon case that a corporation could not be guilty of corruption. By s 7 of the Public
Bodies Corrupt Practices Act 1889 a person who can be guilty of corruption 801 under s 1 includes a body corporate. Certainly a
trading corporation could be guilty of corruption, but in my view it would require a very far-fetched factual scenario to render a
local authority corporation itself, as opposed to its members, or officers or servants, guilty. However, I can conceive a
hypothetical situation where a local authority had a management policy to use corrupt practices in the supply of services by
another public body. I therefore have reached the conclusion that in so far as the Manchester Corp case is based on the dictum of
Pollock CB it was decided per incuriam (see also Smith and Hogan Criminal Law (6th edn, 1988) pp 170175).
Mr Newman also argued that if the ratio of the Manchester Corp case was that a corporation could only sue in defamation
affecting property or that actual damage had to be pleaded it is inconsistent with the decision of the Court of Appeal in South
Hetton Coal Co Ltd v North-Eastern News Association Ltd [1894] 1 QB 133, [18914] All ER 548. The libel was that the
pitmens cottages owned by the plaintiffs were insanitary. No actual damage was proved but the jury found a verdict for the
plaintiffs for 25 damages. The appeal was dismissed. In his argument counsel for the plaintiffs submitted ([1894] 1 QB 133 at
135):

This libel was calculated seriously to injure the plaintiffs in the way of their business by preventing men from entering
into their employment.

In my judgment this submission was clearly right and is consistent with the judgments of the Court of Appeal. Similarly I
consider that no valid distinction can be made between trading corporations and municipal corporations in respect of such libels.
If, for example, a local authority was itself libelled, in that its workmen were required to work in insanitary or dangerous
conditions or that it operated policies of religious, racial or sexual discrimination in the engagement of staff, it could in my
judgment sue in libel without pleading actual damage.
Lord Esher MR said ([1894] 1 QB 133 at 138139, [18914] All ER Rep 548 at 550551):

I have come to the conclusion that the law of libel is one and the same as to all plaintiffs; and that, in every action
of libel, whether the statement complained of is, or is not, a libel, depends on the same questionviz., whether the jury are
of opinion that what has been published with regard to the plaintiff would tend in the minds of people of ordinary sense to
bring the plaintiff into contempt, hatred, or ridicule, or to injure his character. The question is really the same by
whomsoever the action is broughtwhether by a person, a firm, or a company. But though the law is the same, the
application of it is, no doubt, different with regard to different kinds of plaintiffs. There are statements which, with regard
to some plaintiffs, would undoubtedly constitute a libel, but which, if published of another kind of plaintiffs, would not
have the same effect Statements may be made with regard to their mode of carrying on business, such as to lead people
of ordinary sense to the opinion that they conduct their business badly and inefficiently. If so, the law will be the same in
their case as in that of an individual, and the statement will be libellous. Then, if the case be one of libelwhether on a
person, a firm, or a companythe law is that the damages are at large. It is not necessary to prove any particular damage;
the jury may give such damages as they think fit, having regard to the conduct of the parties respectively, and all the
circumstances of the case.

Lopes LJ said ([1894] 1 QB 133 at 141, [18914] All ER Rep at 552):

802

I am of opinion that, although a corporation cannot maintain an action for libel in respect of anything reflecting
upon them personally, yet they can maintain an action for a libel reflecting on the management of their trade or business,
and this without alleging or proving special damage. The words complained of, in order to entitle a corporation or
company to sue for libel or slander, must injuriously affect the corporation or company as distinct from the individuals who
compose it.

The recognition that corporations other than trading corporations such as trade unions and charities can sue for libel follows
the South Hetton case. See, for example National Union of General and Municipal Workers v Gillian [1945] 2 All ER 602,
[1946] KB 81 and New York Society for the Suppression of Vice v Macfadden Publications Inc (1932) 260 NY 167 at 170, where
Hubbs J in the Court of Appeals of New York, delivering the judgment of a court of seven judges who concurred, said:

No such differentiation is made in the opinions in those cases between business corporations, so called, and
nonbusiness corporations. Corporations engaged in charitable, social welfare, benevolent and religious work, have the
right to acquire and hold property which may produce a profit or income. Indeed, the statute under which plaintiff was
organized expressly grants that power to it. Many such corporations own and control very valuable properties, and in their
management such corporations establish a reputation, rights and interests similar to the reputations, right and interests
acquired by individuals and corporations engaged in business for profit. To decide that such corporations have no
reputation acquired in the management of their affairs and property which can be injured or destroyed by a malicious libel,
unless special damage is proved, would constitute a reflection upon the administration of justice.

It should be noted that Hubbs J expressly followed Finnish Temperance Society Sovittaja v Finnish Socialistic Publishing
Co (1921) 238 Mass 345 at 353354, which expressly followed the South Hetton case.
Although in my judgment the reasoning in the Manchester Corp case is flawed, the actual decision may be justified on the
basis that the council itself was not libelled but merely its officers and staff at a subordinate level. This seems to have been the
understanding of the case by Mr Blake Odgers, counsel for the unsuccessful plaintiffs (see Odgers on Libel and Slander (5th edn,
1929) p 478).
Bognor Regis UDC v Campion [1972] 2 All ER 61, [1972] 2 QB 169 was the second defamation action brought in England
by a local authority. It was tried by Browne J without a jury. Delivering a reserved judgment he found for the plaintiff council.
The libel was contained in a leaflet distributed by the defendant at a ratepayers meeting. It contained a vitriolic attack,
particularly on the councillors, and described the council as toytown Hitlerism local government.
Brown J placed particular reliance (see [1972] 2 All ER 61 at 6465, [1972] 2 QB 169 at 173174) on the decision of Birkett
J in Gillians case [1945] 2 All ER 593. I respectfully agree with Browne J in his application of Gillians case, which sets out
recognised common law principles.
Browne J considered the Manchester Corp case in detail. He said ([1972] 2 all ER 61 and 68, [1972] 2 QB 169 at 177):

Day J seems to put his judgment on two grounds; first, that a corporation may sue for a libel affecting property and not
for one merely affecting 803 personal reputation. If this was ever right, it has in my view been overruled by the South
Hetton case (where substantially this argument was used by the defendants) and by National Union of General and
Municipal Workers v Gillian (where the Manchester case was cited). The other ground seems to have been that a
corporation cannot be guilty of corruption

I respectfully agree with Browne Js view of the effect of the South Hetton case. Browne J went on ([1972] 2 All ER 61 at
69, [1972] 2 QB 169 at 178):
 The actual decision in the Manchester case can perhaps be supported, as counsel for the council suggested, on the
argument that the libel there was not capable of referring to a corporation consisting (as the plaintiffs did) of the mayor,
alderman and citizens, and not, as here, of the chairman and councillors. I think that case is distinguishable from this on
that ground, and also on the ground that in my view none of the statements in the leaflet in this case actually imputes
corruption. But I hope that the Court of Appeal will soon have occasion to consider the Manchester case. (Browne Js
emphasis.)

With respect to Browne J I cannot accept the basis upon which he distinguished the Manchester Corp case.
Both Mr Lester and Mr Newman were agreed in their submissions that the title of the plaintiffs as the mayor, aldermen and
citizens was not material. It was procedural only: see s 8 of the Municipal Corporations Act 1882, which provided:

The municipal corporation of a borough shall bear the name of the mayor, aldermen, and burgesses of the borough, or,
in the case of a city, the mayor, aldermen, and citizens of the city.

This general provision, following as it did a similar general provision in the Municipal Corporations Act 1835, does not affect in
any way the identity or continuity of the corporation itself: cf Doe d Governors of Bristol Hospital v Norton, (1843) 11 M & W
913, 152 ER 1076; Ludlow Corp v Tyler, (1836) 7 C & P, 537 173 ER 237 and A-G v Kerr (1840) 2 Beav 420, 48 ER 1244.
So far as the second basis of distinction is concerned, Mr Lester argued that in the Manchester Corp case the basis of the
Divisional Courts decision was not because corruption was imputed but because the corporation was not suing for a libel
affecting property.
With respect to Browne J, I find the distinction between an allegation of corruption and other allegations of, for example,
fraud, financial impropriety or reckless maladministration and mismanagement as tenuous. All such allegations may affect a
corporations governing reputation and may be capable of being defamatory.
Mr Lester submitted that the decision of Browne J in the Bogner Regis case is unsound because he did not have his attention
drawn to the wider constitutional issues raised by the case, including the effect upon the public interest in freedom of expression
about the workings of government. If a local government corporation can sue for libel to protect its governing reputation it
must follow that any institution of government with the capacity to sue is entitled to bring such proceedings against an individual
who is alleged to have libelled the governing bodys reputation. For example s 17(2) of the Crown Proceedings Act 1947
provides that proceedings by the Crown may be instituted by an authorised government department in its own name or by the
Attorney General.
804
In my judgment s 17(2) is procedural and does not alter the substantive law. Mr Lester provided me with a list of
government departments and central government agencies which had been created by statute corporations at least for certain
purposes. If local authorities, statutory corporations and devolved organs of government can sue for libel to protect their
reputations why cannot, he submitted, central government? I resist the temptation of uttering obiter dicta.
Mr Lester further submitted that, in considering whether the common law of libel should be extended to protect the
governing reputation of institutes of government, Browne J failed to have regard to the public interest of freedom of expression,
and to consider whether such an extension of the law of libel was necessary in a democratic society to protect the competing
public interest in protecting someones personal reputation against unjustifiable attack.
In support of this submission Mr Lester cited numerous passages in the judgments and speeches in A-G v Guardian
Newspapers Ltd (No 2) [1988] 3 All ER 545, [1990] AC 1909 (the Spycatcher case), Commonwealth of Australia v John Fairfax
& Sons Ltd (1980) 147 CLR 39, Hector v A-G of Antigua and Barbuda [1990] 2 All ER 103, [1990] 2 AC 312 and Femis-Bank
(Anguilla) Ltd v Lazar [1991] 2 All ER 865, [1991] Ch 391. It should be noted that in the Spycatcher case Times Newspapers
Ltd was ordered to give an account; it was the discretionary remedy of a permanent injunction that was refused. Mr Lester also
cited New York Times Co v Sullivan (1964) 376 US 254 (but that case was decided under the First and Fourteenth Amendments of
the Constitution) and City of Chicago v Tribune Co (1923) 307 Ill 595 at 608, 610, where Thompson CJ said:

Municipal corporations, however, exist primarily for governmental purposes, and they are permitted to enter the
commercial field solely for the purpose of subserving the interests of the public which they represent. A city is no less a
government because it owns and operates its own water system, its own gas and electric system and its own transportation
system. In Byrne v Chicago General Railway Co ((1897) 169 Ill 75), this court said: The city is but an agency of the
State, and governs, within its sphere, for the State The government exercised by the city is exercised as an agency of the
whole public and for all the people of the State. A municipal corporation, like a State or country, is within its prescribed
sphere, a political power. We consider the question solely from the standpoint of public policy and fundamental
principles of government This action is out of tune with the American spirit and has no place in American
jurisprudence.

However, I must decide this case according to the English Law of tort and not American constitutional law, however
admirable those sentiments may be.
Mr Lester also laid much weight on art 10 of the Convention for the Protection of Human Rights and Fundamental
Freedoms (Rome, 4 November 1950; TS 71 (1953); Cmd 8969), which was ratified by the United Kingdom on 8 March 1951.
The relevant words of art 10 are:

(1) Everyone has the right to freedom of expression. This right shall include freedom to hold opinions and to receive
and impart information and ideas without interference by public authority and regardless of frontiers. This Article shall not
prevent States from requiring the licensing of broadcasting, television or cinema enterprises.
(2) The exercise of these freedoms, since it carries with it duties and responsibilities, may be subject to such
formalities, conditions, restrictions or penalties as are prescribed by law and are necessary in a democratic society for
the protection of the reputation or rights of others
805

In Sunday Times v UK (1979) 2 EHRR 245 (the Thalidomide case) the European Court of Human Rights decided that the
expression necessary in a democratic society implied the existence of a pressing social need. Mr Lester craved in aid Lingens v
Austria (1986) 8 EHRR 407, where the European Court of Human Rights held that Lingens conviction of criminal defamation
contravened art 10.
In so far as art 10 has any application to this case, I accept Mr Newmans submission that art 10 contains a derogation to the
right of freedom of expression and the English law as to the civil law of defamation is within the margin of appreciation allowed
to a member state. I also accept Mr Newmans submission that, if Dr Kreisky had brought a libel action in England, Lingens
defence of fair comment would have succeeded:
 In the Courts view, a careful distinction needs to be made between facts and value judgments. The existence of facts
can be demonstrated, whereas the truth of value judgments is not susceptible of proof. The Court notes in this connection
that the facts on which Mr Lingens founded his value judgments were undisputed, as was also his good faith.

(See 8 EHRR 407 at 420421.)

I further accept the basis upon which the court may have regard to the convention as set out in Brind v Secretary of State for
the Home Dept [1991] 1 All ER 20 esp at 733734, [1991] 1 AC 686 esp at 760761 per Lord Ackner and, as Mr Newman
submitted, those considerations do not apply in this case. I do not find any uncertainty or ambiguity in relation to the ambit of
English law in relation to the extent to which local authorities may sue for libel.
I reject Mr Lesters submission that Browne J was extending the common law of libel. He was applying existing legal
principles to the facts of the case before him. Although Toy J in City of Prince George v British Columbia Television System Ltd
(1978) 85 DLR (3d) 755 at 757, described Browne J as giving judicial birth to a new concept, in my judgment, with respect to
Toy J, Browne J was using fresh language appropriate to the facts within the parameters of established law. In my judgment there
is no ambiguity or doubt as to the extent of the tort of defamation in relation to corporations and no explicit regard to art 10 is
required.
I gratefully adopt the words of Aikins JA in the City of Prince George case (1979) 95 DLR (3d) 577 at 584585:

I now go on to consider the second branch of the argument for the appellant. The submission, it will be recalled,
invokes the concept of freedom of speech; it is contended that to hold that a municipal corporation may maintain an action
for libel would unduly encroach on the right of the public to speak freely concerning municipal affairs. Counsel suggests
that if municipal corporations have the right to sue for libel that this right would give municipalities the power to supress
legitimate and proper criticism by threats of legal proceedings. The short answer to counsels submission, founded on
freedom of speech, is simply that that right, under our law, must be exercised subject to the law of defamation which
affords everyone protection against injury to reputation by untrue imputation. Moreover, as counsel for the respondent
pointed out, in my view correctly, the law of defamation makes adequate provision by the principle adopted in respect of
fair comment to protect those who make legitimate critical comments on matters of public interest. In my view the
appellants argument founded on free speech is without merit.

The Bognor Regis case was criticised in uninhibited terms by Mr J A Weir in Local authority v Cortical ratepayera suit in
defamation [1972A] CLJ 238. He 806 said: In effect it is gross invasion of civil liberties and in method it is a serious reproach
to English law there is not often such a bad case. In language perhaps more appropriate to the journalist than the jurist he
said (at 240):

the decision in the South Hetton Coal Co. case should be reversed, although the libel bar will be displeased at
losing their lovable corporate clients like Broadway Approvals Ltd. [see Broadway Approvals Ltd v Odhams Press Ltd]
([1965] 2 All ER 523, [1965] 1 WLR 805), the more so since human plaintiffs cannot obtain legal aid for their expensive
services.

Browne Js decision was considered by the Report of the Committee on Defamation (chairman Faulks J) (Cmnd 5909
(1975)), a committee which included the future Lord Keith of Kinkel and Hirst J; they also dealt with Mr Weirs criticism (See
paras 332 and 333). They concluded (para 334):

We do not agree with Mr. Weirs criticisms. In particular we consider that Bognor Regis U.D.C. v Campion was
rightly decided in accordance with the present law. We have, however, found his article most stimulating, and we think it
points the way to useful reform, albeit more limited than that advocated by Mr Weir himself.

Browne Js decision has been accepted as correct in Australia (see Church of Scientology Inc v Anderson [1980] WAR 71
and 76) and it has been considered in depth and expressly approved in British Columbia both at first instance and on appeal in the
City of Prince George v British Columbia Television System Ltd (1978) 85 DLR (3d) 755; affd (1979) 95 DLR 755 (3d) 577. I
entirely agree with the conclusion reached by Aikins JA (95 DLR 577 at 583584):

In Bognor Regis Urban District Council v. Campion, Browne, J., held that the plaintiff corporation had a governing
reputation which it was entitled to protect by bringing an action for defamation. I cite a further passage from the judgment
([1972] 2 All ER 61 at 66, [1972] 2 QB 169 at 175): Just as a trading company has a trading reputation which it is entitled
to protect by bringing an action for defamation, so in my view the plaintiffs as a local government corporation have a
governing reputation which they are equally entitled to protect in the same wayof course, bearing in mind the vital
distinction between defamation of the corporation as such and defamation of its individual officers or members It is
plain enough that the reasoning of Day, J., in Manchester should not be adopted. I have one comment on the last passage I
have reproduced from the judgment of Brown, J., in Bognor Regis. I do not think it necessary to adjectively qualify a
municipal corporations reputation by the use of the word governing. It may be that the phrase governing reputation
does not encompass all facets of a municipal corporations reputation. I think, because there may be aspects of a municipal
corporations reputation which are important and do not conveniently fall within the meaning of governing, that it is
sufficient and preferable to say no more than that injury by libel to the reputation of a municipal corporation is actionable
by the corporation. This is the conclusion reached by the Chambers Judge, who put it in this way (85 DLR (3d) 755 at
758): Mr. Justice Browne, in the passage of his judgment I quoted, referred to a governing reputation. It seems to me to
be unnecessary to qualify the reputation by an adjectivebe it trading, governing, administering or otherwise. A
municipal corporation, although it lacks many indicia and attributes of a natural person, enjoys a reputation delineated by
those powers and obligations created by the Municipal Act, the functions that it actually engages in and the manner in
which it performs those functions.
807

My answer to the first question is unequivocal. A local authority can sue for libel in respect of its governing or
administrative reputation when no actual financial loss is pleaded or alleged.

The second question: s 222(1) of the Local Government Act 1972

It was argued on behalf of the defendants that this section went to the root of the plaintiffs legal right to sue for libel and
that this argument was not a Wednesbury unreasonable contention under another guise, although Mr Lester at one stage did
argue that the plaintiffs did act unreasonably in launching this action and that there was no evidence that they even considered the
implications of s 222. He even suggested that Browne J was not alert to the sections predecessor, s 276 of the Local Government
Act 1933 in the Bognor Regis case [1972] 2 All ER 61 and 64, [1972] 2 QB 169 at 173. This suggestion I reject (see ).
In his argument in reply Mr Desmond Browne QC went even further. He submitted that I should be satisfied that the
proceedings promoted or protected the interests of the inhabitants of the area for which the plaintiffs were responsible and that a
cost/benefit analysis should be carried out. He gave by way of example the case where Mr Andrew Neill had been awarded
1,000 and Times Newspapers only 60p for essentially the same libel.
Mr Browne submitted that when the cost/benefit analysis is carried out, an action by a council (such as the present) which
does not seek to allege actual or probable pecuniary loss cannot possibly be for the benefit of the inhabitants of the area. The
present action can only benefit the lawyers in the Temple. In my view all these arguments are fallacious.
Section 222(1) reads:

(1) Where a local authority consider it expedient for the promotion or protection of the interests of the inhabitants of
their area(a) they may prosecute or defend or appear in any legal proceedings and, in the case of civil proceedings, may
institute them in their own name

In my judgment the words of the section are clear. It is for the local authority to consider the expediency of the litigation. It
is not a judges function on an application to strike out. I consider that any challenge to a local authoritys decision to litigate can
only be made by way of judicial review.
In the South Hetton case [1894] 1 QB 133 at 141, [18914] All ER Rep 548 at 552 Lopes LJ said:

The words complained of, in order to entitle a corporation or company to sue for libel or slander, must injuriously
affect the corporation or company as distinct from the individuals who compose it.

Similar language is used in Gatley on Libel and Slander (8th edn, 1981) para 959 and Duncan and Neill on Defamation (2nd
edn, 1983) para 9.08, and in the Bognor Regis case [1972] 2 All ER 61 at 66, [1972] 2 QB 169 at 175 Browne J said:

I entirely accept the statement made in Gatley A corporation or company cannot maintain an action of libel or
slander for any words which reflect, not upon itself, but solely upon its individual officers or members. To merely
attack or challenge the rectitude of the officers or members of a corporation does not give the corporation a right of
action for libel. I stress the words solely and merely in those passages.
808

Mr Desmond Browne, who continued the defendants submissions after Mr Lesters departure, submitted that this case is
one where the defendants attack was merely on Mr Bookbinder and the alleged libel reflected solely upon him. He submits it is
plain and obvious on this basis that the statement of claim discloses no reasonable cause of action and that I should dismiss it on
this ground. The writ in this action was issued on 11 October 1989. Mr Bookbinders personal action against the same
defendants was issued on 9 October 1989. It is right to say that the two statements of claim reproduce the wording of each other
almost verbatim. For example para 7 of the statement of claim in the councils action pleads the alleged defamatory meaning of
the article of 17 September 1989. That is reproduced in para 8 of the statement of claim in Mr Bookbinders action, subject to the
necessary alteration because Mr Bookbinder is the plaintiff in his action. So para 7(ii) in the councils action, which reads the
Council had recklessly placed millions of pounds of public money at risk , becomes in para 8(ii) in Mr Bookbinders action
Bookbinder has caused the Council to recklessly place millions of pounds of public money at risk
The only other difference in the two paragraphs is that in the Councils action there is a reference to an alleged lie by the
county treasurer. This is omitted in Mr Bookbinders action because it does not reflect upon him.
Similar comments can be made about paras 9 and 10 respectively of the two statements of claim relating to the article of 24
September 1989.
At the invitation of counsel I read the whole of the alleged defamatory articles and the pleadings in both actions.
Dismissing an action because the statement of claim discloses no reasonable cause of action is a draconian act and such an
order should not be made unless it is clearly manifest that the plaintiffs will fail. Applying the test approved by Browne J in the
Bognor Regis case and accepting that the main thrust of the articles is against Mr Bookbinder and the particular aspect of the
plaintiffs responsibility, the superannuation fund, I consider that it is arguable that the words complained of reflect upon the
council itself in the management and rectitude of its financial affairs.
My answer to the second question is that the plaintiffs have a cause of action in libel against the defendants on the basis of
the pleaded statement of claim, and therefore in my judgment this application fails.

Application dismissed. Leave to appeal to the Court of Appeal granted.

Solicitors: David Tysoe, Matlock; Biddle & Co.

K Mydeen Esq Barrister.

809
[1991] 4 All ER 810

R v Attewell-Hughes
CRIMINAL; Criminal Procedure

COURT OF APPEAL, CRIMINAL DIVISION

BINGHAM LJ, HUTCHISON AND BUCKLEY JJ
14 JANUARY 1991

Criminal law Evasion of liability by deception Intent to make permanent default on liability to make payment or to let
another do so Intent to let another do so Defendant managing hotel Defendant passing worthless cheques to obtain goods
and services supplied for hotel Whether defendant intending to default on his own liability or on behalf of another Whether
irrelevant whether liabilities those of defendant or of hotel owner Whether two separate modes of committing offence Theft
Act 1978, s 2(1)(b).

The appellant was employed as manager of a hotel by the owner, who lived abroad and who gave him authority to act on his
behalf and to operate his bank account in relation to the running of the hotel. The appellant opened an account in the name of the
hotel at a bank, which made it clear that it would not grant an overdraft facility on the account. However, the appellant wrote a
number of cheques on that account for goods and services supplied to the hotel when the funds available in the account were not
sufficient to cover the cheques. He was charged with, inter alia, evading a liability by deception with intent to make permanent
default, contrary to s 2(1)(b)a of the Theft Act 1978, by dishonestly inducing the payees of the cheques to wait for payment by a
false representation that the cheques were valid. Under s 2(1)(b) it was an offence by deception with intent to make
permanent default on any existing liability to make a payment, or with intent to let another do so to dishonestly induce a
creditor to wait for or forgo payment. At his trial the appellant submitted that the Crowns case could not be sustained because he
was charged with intending to make default on his own liabilities when in fact the liabilities in the counts charged were those of
the hotel owner. The judge ruled that it was irrelevant whether the liabilities were those of the appellant or the hotel owner for
the purposes of a charge under s 2(1)(b) and directed the jury that the question for them to decide was whether the appellant was
dishonest irrespective of whether the liability he had evaded was his or anothers. The appellant was convicted. He appealed
against his conviction on the ground, inter alia, that the judge had wrongly directed the jury.
________________________________________
a Section 2(1), so far as material, is set out at p 814 b c, post.

Held Section 2(1)(b) of the 1978 Act envisaged two different modes of committing the offence of evading a liability by
deception, namely either (i) by the defendant intending to make default on his own liability or (ii) by his intending to make
permanent default on behalf of another or to let another make permanent default. Accordingly, the question whether the liabilities
were the appellants or the hotel owners was clearly material to the jurys consideration of the central issue of dishonesty, since
the question of dishonesty might appear in quite a different light depending on whether it was being alleged that he intended to
make permanent default on his own behalf or whether it was being alleged that he intended to make permanent default on behalf
of another or to let another make permanent default. It followed that the judges direction to the jury that the question was one of
dishonesty and it did not matter whether the liabilities were the appellants or the hotel owners was incorrect and on that ground
the 810 appeal would be allowed and the convictions on the counts of evading a liability by deception would be quashed (see p
814 d and p 815 g to p 816 d g, post).

Notes
For evasion of a liability by deception, see 11(1) Halsburys Laws (4th edn reissue) para 570.
For the Theft Act 1978, s 2, see 12 Halsburys Statutes (4th edn) (1989 reissue) 726.

Case referred to in judgment

R v Laverty [1970] 3 All ER 432, CA.

Appeal against conviction and sentence

Clifford Henry Ian Attewell-Hughes appealed with the leave of the single judge against his conviction on 8 May 1989 in the
Crown Court at Newport, Isle of Wight, before Judge McCreery QC and a jury on three counts of obtaining property by
deception and eight counts of evading liability by deception and against his sentence of 12 months imprisonment suspended for
two years on each count concurrent, a fine of 100 on each count (totalling 1,100), an order to pay a sum not exceeding 8,000
towards defence costs (the legal aid order having been revoked) and 2,050 towards the prosecution costs, and an order to pay
compensation of 3,439.17. The facts are set out in the judgment of the court.

Adam Pearson for the appellant.

William B Stephenson for the Crown.

14 January 1991. The following judgment was delivered.

BINGHAM LJ delivered the following judgment of the court. On 8 May 1989, in the Crown Court at Newport in the Isle of
Wight, the appellant was convicted on three counts of obtaining property by deception, those being counts 1, 6 and 13 of the
indictment, and eight counts of evading liability by deception, those being counts 2, 4, 5, 8, 9, 10, 11 and 12 of the indictment.
There were two additional counts (3 and 7), one of evading liability by deception and the other of obtaining property by
deception, of which the appellant was acquitted on the direction of the judge. The appellant now appeals against all his
convictions with the leave of the single judge.
The case against the appellant was that between about April and November 1986 he was running the Dean House Hotel on
the Isle of Wight and that, while doing so, in a number of ways he was systematically defrauding those who were supplying, or
had previously supplied, the hotel with various goods. It was alleged that the charges preferred against the appellant were a
selection of those which could have been brought.
The essence of the counts of obtaining property by deception was that he persuaded suppliers to provide goods or services
by telling lies, causing the suppliers to believe that they would be paid when he knew that they would not. The counts of evading
liability by deception depended on the appellant having fobbed off suppliers of goods or services, making them wait for payment
by the deception that cheques he was giving them were good and valid orders for payment and that he had authority to draw on
the bank account for those amounts.
It is an important feature of the background to the case that the hotel was 811 owned not by the appellant but by a Mr
Nicholson, who early in 1986 had himself been the manager of a hotel in Sussex where the appellant had worked as a part-time
chef. There were apparently some difficulties in the managership of the Dean House Hotel on the Isle of Wight and Mr
Nicholson and the appellant agreed that he would take over as manager there. There were documents exchanged between Mr
Nicholson and the appellant, one of those being a projection of the hotels business over the forthcoming period showing a
projected surplus. Agreements were drawn up, and it appears that two-thirds of the net profit were to be paid to Mr Nicholson,
who was going to live in Tenerife, and one-third of the profit was to be retained by the appellant as remuneration for his services
as manager. Part of the sum which was due to be paid to Mr Nicholson was to be deducted and paid into an account for the credit
of Mr Nicholson. Those sums were to be transferred by the bank to a loan account in the name of the hotel since the business
was in debt to the bank for a substantial sum of money.
It appears that the appellant had Mr Nicholsons authority to act on his behalf in relation to running the business of the hotel
and to operate an account with Barclays Bank plc in that capacity. It is important to note that the bank account was in Mr
Nicholsons name and not in the appellants, in any event so far as the Barclays Bank account was concerned.
The evidence was that the indebtedness of the hotel business was made plain to the appellant as also was the fact that the
bank were unwilling to grant any overdraft. It none the less seems clear that the appellant wrote a number of cheques on the
Barclays Bank account which were returned unpaid, and the bank wrote letters which were not answered or forwarded to Mr
Nicholson. It also appears that the appellant opened an account with Midland Bank plc, who had refused to give him a loan.
Midland Bank also made plain that it was not going to allow the appellant any overdraft facility. He none the less wrote a
number of cheques on that account, some of which were covered by money in the account but most of which were returned
unpaid. That bank, we are told, repeatedly warned him about the financial position and eventually the account was closed.
The appellant telephoned Mr Nicholson from time to time and gave him to believe that business was prospering but by
November Mr Nicholson, who had received no money and no information by post, became suspicious and informed the appellant
that he was coming to the Isle of Wight, which he did. By the time Mr Nicholson had arrived, however, the appellant had
disappeared. He was shortly afterwards arrested on the mainland. The hotels position turned out to be quite hopeless with a
substantial amount of cheques having been returned unpaid. From that brief summary it is plain that whatever the technicalities
of the matter the appellants case was not rich in merit.
It is, however, relevant to note, because it is relevant to one of the submissions that we shall shortly have to consider, that
certain of the debts relating to this hotel were debts contracted before the appellant came on the scene at all and for which on no
showing could he have been personally responsible. The clearest example is that which is covered by count 12 of the indictment,
which relates to a liability for value added tax, that being a liability of Mr Nicholsons, having mostly been in existence, as we
say, before the appellant appeared in the Isle of Wight. As to various other liabilities, which were contracted between April and
November, the position is to some extent unclear.
The first ground of appeal which is advanced on behalf of the appellant relates to count 1 of the indictment: that is a count
of obtaining property by deception laid under s 15(1) of the Theft Act 1968 and charges the appellant that between 1 April 1986
and 11 November 1986 in the Isle of Wight he dishonestly obtained 812 from John Keynes, a representative of Coopers of
Wessex Ltd, a quantity of supplies with the intention of permanently depriving the said John Keynes of the said supplies by
deception, namely by falsely representing that he was the proprietor of Dean House Hotel. That count rested very largely on an
account application form which was signed by the appellant and submitted to Coopers of Wessex with a view to obtaining
supplies of drink for the hotel on credit.
The alleged misrepresentation was as to the position of the appellant in relation to the hotel. In the bottom left-hand corner
of the application we find the appellants name and below that the printed word position, against which it appears that there was
written either by him or on his dictation the words sole owner, or it may be co-owner. The form does, however, make plain in
capital letters that the transactions will be on a cash with order basis until such time as satisfactory references are received. We
should add that on the second page of the application form, after the full name of the appellant as the applicant for credit, there is
a blank for the owners full name which is left blank and therefore suggests that Mr Attewell-Hughes, the appellant, was himself
the owner.
The ground of appeal relating to this count is very shortly, succinctly and effectively put in the perfected grounds of appeal
and is to the effect that although a representation was made to the effect that the appellant was the owner of this business and
although that was, as the appellants counsel acknowledged, false, none the less there was nothing to suggest that this
representation operated on the mind of the representee, as is necessary to satisfy the ingredient of this statutory offence.
Reference was made to R v Laverty [1970] 3 All ER 432 at 433, where Lord Parker CJ described it as axiomatic that a false
representation, to found an offence under the section, must operate on the mind of the representee.
In this case there was no evidence from Mr Keynes or Coopers of Wessex to show that the representation had any effect at
all. That might not have mattered had the facts been such that it could be left to the jury with a clear direction that they should
convict only if on all the facts they were properly satisfied that an inference of reliance could be drawn. Whether or not such an
inference could have been drawn in the circumstances we need not pause to inquire because it is quite clear, as counsel for the
Crown acknowledges, that the question of the effect, or operative nature of the representation, was never left to the jury at all.
The position, therefore, was that there was no evidence that this representation had any effect, nor was this issue, which was
a clear issue of fact, left to the jury for their consideration. That being so, we are persuaded that this conviction on count 1 cannot
be sustained, and it is only right to acknowledge that Mr Stephenson, who appears for the Crown, has very properly accepted in
the circumstances that he cannot seek to support it.
The second ground which is argued relates to counts 2, 4, 5, 8, 9, 10, 11 and 12, being the counts charging the appellant with
evading by deception. It is convenient to take count 12 as an example because it is the example which counsel took when making
submissions to the judge. Like the other counts, this is laid under s 2(1)(b) of the Theft Act 1978 and it charges the appellant that
he on a stated date in the

Isle of Wight with intent to make permanent default in whole or in part of an existing liability to pay 6,347 to
Geoffrey Arnold Malone on behalf of HM Customs and Excise dishonestly induced the said Geoffrey Arnold Malone on
behalf of HM Customs and Excise to wait for payment of the said sum by deception, namely by a false implied
representation that cheque number 224358 for 6,347 drawn on the account of Dean House Hotel was 813 a good and valid
order for the payment of 6,347 and that he had authority to draw upon the account with Midland Bank Limited for that
amount.

We pause to reiterate that, so far as this liability is concerned, it is plain, and indeed not in dispute, that the liability was not
that of the appellant but was that of Mr Nicholson.
The point which counsel raised before the judge, and raises again on appeal, depends on the language of s 2(1)( b) of the
Theft Act 1978, which reads:

Subject to subsection (2) below, where a person by any deception (b) with intent to make permanent default in
whole or in part on any existing liability to make a payment, or with intent to let another do so, dishonestly induces the
creditor or any person claiming payment on behalf of the creditor to wait for payment (whether or not the due date for
payment is deferred) or to forgo payment he shall be guilty of an offence.

The submission which counsel made was that that subsection envisages an offence which may be committed in two different
ways. First, it may be committed by a defendant who intends to make default in whole or in part of his own liability to make a
payment. Secondly, it may be committed by a defendant who intends to make permanent default in whole or in part on behalf of
another. Counsels submission was that the first limb was covered by the words with intent to make permanent default in whole
or in part on any existing liability to make a payment and that the second limb was covered by the language or with intent to let
another do so.
He submitted that the opening words of s 2(1)(b), in particular the reference to making permanent default, taken alone
suggested an intention to escape a personal liability of the defendant and that that inference was greatly strengthened by the
draftmans inclusion of the language or with intent to let another do so, which plainly envisaged another course of action or
another situation. This dichotomy, counsel submitted, was reflected not only in other sections of the Act but also in this section,
for example, in sub-s 2(1)(a) where the reference to an existing liability to make a payment is followed by the words, whether
his own or anothers, a qualification which does not appear in para (b), and a further reference in sub-s (4) where obtains is
stipulated to include obtaining for another or enabling another to obtain.
Basing himself on that analysis of the section, Mr Pearson at the end of the prosecution case submitted to the learned judge,
taking count 12 as an example, that the prosecution case could not be sustained because the value added tax liability was that of
Mr Nicholson but the language of the count was charging the appellant with intent to make permanent default in whole or in part
of an existing liability to make a payment, meaning an existing liability of his own. On that basis counsel submitted that the
count was wrongly charged against him, and we understand him to have generalised that submission to cover all the other counts
of evading a liability, which necessarily presupposes a submission on his part that the liabilities were not those of the appellant
but were those of Mr Nicholson on whose behalf the hotel business was being conducted. Mr Pearson urged that if his
construction of the subsection was not correct then it was difficult to see why the draftsman had included the words or with
intent to let another do so.
 In replying to this submission, Mr Stephenson for the Crown submitted that the construction which Mr Pearson advanced
amounted to reading language into the section which was not there, namely reading in after existing liability the words of the
defendant. The opening words of s 2(1)(b), said Mr Stephenson, were equally apt to cover a liability of the defendant or of
another and it made no 814 difference which it was. Accordingly, he submitted that the point that was raised was a bad one
because whether the liability was the defendants or not the language of the count was apt to cover it.
We think it is fair to observe that Mr Stephenson did not, and perhaps could not, meet the submission that on that
construction the words or with intent to let another do so were otiose, and certainly he did not suggest what the purpose of those
words was if not that for which Mr Pearson contended.
The learned judge accepted the submission of Mr Stephenson. He held that to construe the statute in the way that was
contended for by Mr Pearson was to read language into the statute which was not there. He said:

It is sufficient that it is an intention to make permanent default, which of course would be the intention on the part of
the accused because he was the person who made the payment, to evade at that time an existing liability. It does not say
that the existing liability has to be the liability of the accused. I have already said this liability had attached originally to
Mr Nicholson, but when he departed this country to Tenerife the hotel was there, and of course it was in respect of the
business conducted in that hotel that this liability for value added tax arose. So I reject this submission of Mr Pearson for
the simple reason that, as Mr Stephenson puts it, if that submission is right then one has to read into the section words that
simply do not exist. It is not an existing liability of the person whose conduct is being investigated, it is an existing
liability. There was an existing liability here, the value added tax people were induced to wait for payment, and the issue
for the jury it seems to me is whether or not there was dishonest conduct on the part of the accused in saying what he did to
the officer from the value added tax. So that it follows I reject this submission in relation not only to count 12 but the other
counts of evading liability under s 2(1)(b) of the 1978 Act.

It is, we think, fair to observe that in making his submission Mr Pearson drew no distinction between count 12 and the other
counts of evading, and that can only have been because he was treating those other counts as relating to liabilities of Mr
Nicholson and not of his client, as was the case with count 12.
The reply of the Crown was not to the effect that these were liabilities of the appellant but that it made no difference whether
they were or were not. That, as is evident, is the submission that the learned judge accepted. Again, as it seems to us, the learned
judge did not direct his mind to the purpose of the draftsman in including the words or with intent to let another do so, and we
must for our part say, with deference to this very experienced and highly respected judge, that we can put no construction on this
section other than that for which Mr Pearson contends. It seems to us that the opening words with intent to make permanent
default and the absence of any reference to procuring a default by another clearly suggest a default by the party whose liability it
is. We notice the absence of any qualification, whether his own or anothers, such as exists in s 2(1)(a) and we find the express
reference, which I have now quoted several times, or with intent to let another do so, which in our judgment clearly indicates an
intention on the part of the draftsman to differentiate between these two modes of committing the offence.
If, on that construction, one considers count 12, it appears quite clear that the question of dishonesty may appear in quite a
different light depending on whether the appellant was being said to have intended to make permanent default on behalf of
another or to let another make permanent default, or whether he was being said to have done so on his own behalf. It might be
thought that he would 815 be less likely to make permanent default or intend to let Mr Nicholson make permanent default in a
liability of Mr Nicholsons, and indeed the question as to how he would make permanent default on behalf of Mr Nicholson
might pose questions. But, as it appears to us, the question as to whether or not these were liabilities of the appellant or of Mr
Nicholson in relation to the other counts was a material one, and one which the jury would have to pay regard to in considering
what the learned judge rightly stressed was the central question in the case, which was that of dishonesty.
It was not, in our judgment, a correct direction to the jury simply to say that the question was one of dishonesty and it did
not matter whether these were the liabilities of the appellant or of Mr Nicholson, since whether he was acting dishonestly or not
could have been very much affected not only by whose liabilities they were but whose liabilities he believed them to be.
Accordingly, and without any enthusiasm because as we have indicated the appellants conduct appears to have been in no
way praiseworthy, we are satisfied that the learned judges ruling and direction to the jury on these counts of evading liability
were not satisfactory and that in the light of a proper direction the jury might not have convicted.
Accordingly we quash the convictions on counts 2, 4, 5, 8, 9, 10, 11 and 12.
The third ground of appeal related to count 12, evading liability. This raised the same question of materiality, to which we
have already referred, in relation to count 1. Counsel does not seek to support the conviction under this count. In any event, for
reasons that we have just given, we have quashed it and so need say nothing more.
That leaves two convictions of obtaining by deception, those being counts 6 and 13. The complaint that is made under this
head is of the generality of the learned judges direction to the jury. As an example, and no doubt the best example, of what he
complains of, Mr Pearson has referred us to a passage where the learned judge, having properly directed the jury to treat all the
counts separately, goes on to say that in respect of the question of honesty or dishonesty they may none the less feel that the
counts stand or fall together, the appellant either having been honest or dishonest.
We, having carefully considered both the transcript and the submission of counsel, find no ground to interfere with the
learned judges direction on this point, which seems not only unobjectionable but realistic and common sense in all the
circumstances.
The result, therefore, is that so far as the appeal against conviction is concerned the convictions on counts 6 and 13 are
sustained but those on the other counts are quashed.

Appeal allowed and convictions on counts 1, 2, 4, 5, 8, 9, 10, 11, and 12 quashed. Convictions on counts 6 and 13 sustained, but
conditional discharge for 12 months substituted for term of imprisonment. All financial orders quashed.

Solicitors: Registrar of Criminal Appeals; Crown Prosecution Service, Portsmouth.

Kate OHanlon Barrister.

816
[1991] 4 All ER 817

Telnikoff v Matusevitch
TORTS; Defamation

HOUSE OF LORDS
LORD KEITH OF KINKEL, LORD BRANDON OF OAKBROOK, LORD TEMPLEMAN, LORD ACKNER AND LORD OLIVER OF AYLMERTON
15, 16, 17 JULY, 14 NOVEMBER 1991

Libel and slander Fair comment Comment or fact Communication to press Letter in response to newspaper article
complaining of authors racialist and anti-semitic views Whether words complained of in letter capable of being understood as
comment or fact Whether words complained of to be read in isolation or in context of letter and/or article Whether defence of
fair comment capable of being based on extrinsic evidence.

Libel and slander Fair comment Honest expression of opinion Test of fair comment Burden of proof Criticism of
newspaper article Criticism contained in letter written by defendant to newspaper Whether test of fair comment subjective as
well as objective Whether defendant required to prove not only that comment was reasonable but also that it was honest
expression of his own opinion.

The plaintiff, a Russian emigr employed by the BBCs Russian service, wrote an article on the importance of distinguishing
between Russia and communism which was published in a national daily newspaper. In the course of the article he criticised the
BBCs Russian service for recruiting too many employees from the ethnic minorities of the Soviet Union and not enough from
among those people who associate themselves ethnically, spiritually or religiously with the Russian people. The defendant, also
a Russian emigr, who, like the plaintiff, had suffered persecution before coming to England, was incensed by the plaintiffs
article and wrote a letter, which was published in the same newspaper, in which he indicated that the article was racialist and anti-
semitic in content and complained that the plaintiff was advocating that in the interest of more effective broadcasts the
management of the BBCs Russian service should switch from professional testing to a blood test and that ethnically alien
employees should be dismissed from the Russian service, however high their professional standards and integrity might be. The
plaintiff considered the defendants letter to be defamatory and brought an action for libel against the defendant, claiming that the
natural and ordinary meaning of the defendants letter was that the plaintiff advocated the introduction of blood testing as part of
the recruitment process of the Russian service in order to maintain racial purity, ie recruitment on the basis of ethnic origin and
not professional merit, and the dismissal of all ethnically alien employees. The defendant pleaded fair comment on a matter of
public interest, but not justification. In reply the plaintiff alleged that the defendant had been actuated by express malice. At the
trial the judge held that the matters complained of in the letter, construed as a whole, were to be understood as comment on a
matter of public interest and not as statements of fact since it was clear that the defendant was doing no more than commenting
that if effect were given to the plaintiffs views the logical outcome would be that the BBCs Russian service would pursue a
strictly racialist staffing policy and, applying the objective test of fair comment, the judge further held that an honest-minded man
might honestly hold the views stated as comments on the facts on which those comments were made. The judge concluded that
there was no case to go to the jury since any reasonable jury, properly directed, would be bound to uphold the defence of fair
comment and there was no evidence of express malice. He therefore dismissed the plaintiffs 817 action. The plaintiff appealed,
contending (i) that in deciding the question whether the words complained of were statements of fact or comment the court was
confined to a consideration of the words themselves without reference to the letter or article as a whole and (ii) that the test of fair
comment required the defendant to satisfy not only the objective test that his letter expressed views which an honest man could
hold but also the subjective test of whether his comment represented an honest expression of his own view and that therefore the
judge should not have withdrawn the case before the defendant had discharged the subjective burden of proof. The Court of
Appeal dismissed the appeal, holding that the letter and article should be read together and, when so read, the defendants words
amounted only to comment and that, applying the normal objective test of what constituted fair comment on a matter of public
interest, a reasonable jury would be bound to find that the comment was fair. The plaintiff appealed to the House of Lords.

Held (1)(Lord Ackner dissenting) Where a letter published in a newspaper in response to an article was alleged to be libellous,
the court, in deciding whether the words complained of were capable of being understood as defamatory statements of fact rather
than comment on which a defence of fair comment could be sustained, had to consider the letter on its own and it was not
permissible to have regard to the whole terms of the article as well as those parts of the article quoted in the letter since it was
likely that the readers of the letter included a substantial number of persons who had not read the article or if they had done so did
not have its terms fully in mind. There was nothing undesirable in the fact that the jury would not be allowed to consider the
terms of the article in deciding whether or not the letter contained only comment but would be allowed to refer to the article in
deciding whether any comment was fair, since the jury would simply be directed in deciding the first question to consider the
effect of the letter on the mind of a person who had not read the article. Since a reasonable jury, looking at the defenants letter
alone, could properly find that the letter contained statements of fact, the question whether they constituted pure comment or
whether they contained defamatory statements of fact should have been left to the jury. To that extent, therefore, the appeal
would be allowed (see p 822 c g to p 823 a, p 824 e and p 825 d to f j, p 826 b to e and p 832 h, post).
(2) (Per Lord Keith, Lord Brandon, Lord Templeman and Lord Oliver) A defendant who relied on a plea of fair comment in
libel proceedings did not have to show that the comment was an honest expression of his own views but merely that the facts on
which his comment was based were true and that the comment was objectively fair in the sense that any man, however prejudiced
and obstinate, could honestly have held the views expressed, since in alleging unfairness the onus was on the plaintiff, as was the
case where he alleged malice, to prove that the criticism was unfair either from the language used or from some extraneous
circumstances. On the facts (Lord Ackner concurring), there was no evidence of express malice fit to go to the jury and the
plaintiff had failed to discharge the burden of proof which lay on him to prove that the defendant did not honestly hold the belief
which he had expressed in his letter. Accordingly, the judge had been right to withdraw that issue from the jury (see p 824 f g, p
825 a c e, p 826 d e, p 827 c d and p 832 h, post); Cherneskey v Armadale Publishers Ltd [1979] 1 SCR 1067 not followed.
Decision of the Court of Appeal [1990] 3 All ER 865 reversed in part.

Notes
For the defence of fair comment in libel proceedings, see 28 Halsburys Laws (4th edn) paras 131144, and for cases on the
subject, see 32 Digest (Reissue) 271286, 22382332.
818
For malice generally and in relation to fair comment in particular, see 28 Halsburys Laws (4th edn) paras 145148, 152, and
for cases on the subject, see 32 Digest (Reissue) 228298, 23472432.

Cases referred to in opinions

Broadway Approvals Ltd v Odhams Press Ltd [1965] 2 All ER 523, [1965] 1 WLR 805, CA.
Cherneskey v Armadale Publishers Ltd [1979] 1 SCR 1067, Can SC.
Kemsley v Foot [1952] 1 All ER 501, [1952] AC 345, HL.
Lyon v Daily Telegraph Ltd [1943] 2 All ER 316, [1943] 1 KB 746, CA.
Merivale v Carson (1887) 20 QBD 275, [188690] All ER Rep 261, CA.
Slim v Daily Telegraph Ltd [1968] 1 All ER 497, [1968] 2 QB 157, [1968] 2 WLR 599, CA.
Turner (orse Robertson) v Metro-Goldwyn-Mayer Pictures Ltd[1950] 1 All ER 449, HL.

Appeal
The plaintiff, Vladimir Telnikoff, appealed with leave of the Court of Appeal from the decision of that court (Lloyd, Glidewell
and Woolf LJJ) ([1990] 3 All ER 865, [1991] 1 QB 102) on 16 May 1990 dismissing his appeal from the judgment of Drake J
given on 14 May 1989 withdrawing the action for libel brought by the plaintiff against the defendant, Vladimir Matusevitch, from
the jury on the grounds that there was no case to go to the jury that a letter published in the Daily Telegraph on 18 February 1984,
in which the defendant complained that an article was written by the plaintiff and published in the Daily Telegraph on 13
February was racialist and anti-semitic, was unfair comment or that the defendant was actuated by malice. The facts are set out
in the opinion of Lord Keith.

Desmond Browne QC for the plaintiff.

Richard Rampton QC and Edward Garnier for the defendant.

Their Lordships took time for consideration.

14 November 1991. The following opinions were delivered.

LORD KEITH OF KINKEL. My Lords, this is an action for libel brought by one Russian emigr against another. On 13
February 1984 the plaintiff, Mr Telnikoff, was employed by the BBC Russian service as a probationer. On that date the Daily
Telegraph newspaper published an article written by him headed Selecting the right wavelength to tune in to Russia. Having set
out the history of broadcasting to Russia, the article continued:

But still, after three decades of gradually becoming aware of the significance of Russian language broadcasting, I
believe its general concept has never been set right. It continues to reflect the fatal confusion of the West, which has yet to
clarify to itself whether it is threatened by Russia or by Communism. We fail to understand that Communism is as alien to
the religious and national aspirations of the Russian people as those of any other nation.
This confusion further manifests itself in the policy of recruitment for the Russian Service. While other services are
staffed almost exclusively from 819 those who share the ethnic origin of the people to whom they broadcast, the Russian
Service is recruited almost entirely from Russian-speaking national minorities of the Soviet empire, and has something like
10 per cent. of those who associate themselves ethnically, spiritually or religiously with Russian people. However high the
standards and integrity of that majority there is no more logic in this than having a Greek Service which is 90 per cent.
recruited from the Greek-speaking Turkish community of Cyprus.
WHEN broadcasting to other east European countries, we recognise them to be enslaved from outside, and better able
to withstand alien, Russian, Communism through our assertion of their own national spirit and traditions. However, this
approach, leaves room for flirting with Euro-communism or socialism with a human (non-Russian) face as a desirable
future alternative, and well suits the Left in the West.
Resisting the ideological advance of Communism by encouraging anti-Russian feelings is of less obvious value with a
Russian audience. Making Russian synonymous with Communist alienates the sympathetic Russian listeners. It stirs
up social resentment in others against the Russians. Making those words synonymous also makes sympathy for Russia into
support for the Communist system.

The defendant, Mr Matusevitch, is a Russian Jew who suffered persecution there before emigrating. He was at the time of
publication of the article employed in London by Radio Liberty, a United States radio station. Having read the article he wrote a
letter to the Daily telegraph, which published it on 18 February 1984. The terms of the letter, the paragraphs of which I have
numbered for ease of reference, were these:

[1] SirHaving read Selecting the Right Wavelength to Tune in to Russia (Feb 13) I was shocked, particularly by
the part on alleged inadequacies of the BBCs Russian Service recruitment policies.
[2] Mr Vladimir Telnikoff says: While other services are staffed almost exclusively from those who share the ethnic
origin of the people to whom they broadcast, the Russian Service is recruited almost entirely from Russian-speaking
national minorities of the Soviet empire.
[3] Mr Telnikoff must certainly be aware that the majority of new emigr from Russia are people who grew up, studied
and worked in Russia, who have Russian as their mother tongue and have only one cultureRussian.
[4] People with Jewish blood in their veins were never allowed by the Soviet authorities to feel themselves equal with
people of the same language, culture and way of life. Insulted and humiliated by this paranoic situation, desperate victims
of these Soviet racialist (anti-Semitic) policies took the opportunity to emigrate.
[5] Now the BBCs Russian Service, as well as other similar services of other Western stations broadcasting to Russia,
who are interested in new staff members (natives) employ those people in accordance with common democratic
procedures, interested in their professional qualifications and not in the blood of the applicants.
[6] Mr Telnikoff demands that in the interest of more effective broadcasts the management of the BBCs Russian
Service should switch from professional testing to a blood test.
[7] Mr Telnikoff is stressing his racialist recipe by claiming that no matter how high the standards and integrity of
ethnically alien people Russian staff might be, they should be dismissed.
820
[8] I am certain the DAILY TELEGRAPH would reject any article with similar suggestions of lack of racial purity of
the writer in any normal section of the British media.
[9] One could expect that the spreading of racialist views would be unacceptable in a British newspaper. (The
defendants emphasis.)

The plaintiff took strong exception to this letter. Solicitors instructed by him wrote to the defendant demanding an apology,
which was not given, and on 18 April 1984 they issued a writ for libel against him, followed next day by a statement of claim,
which set out the terms of the defendants letter and pleaded in para 4:

In their natural and ordinary meaning the said words meant and were understood to mean that the Plaintiff (i)
Advocated the introduction of blood-testing as part of the recruitment process of the BBC Russian Services, in order to
maintain racial purity. (ii) Advocated the dismissal of employees of the BBC Russian Service, on racial grounds. (iii) Had
made statements inciting racial hatred and/or racial discrimination. (iv) Was a racialist and/or an anti-semite and/or a
supporter and/or proponent of doctrines of racial superiority or racial purity.

The defendant pleaded fair comment in a matter of public interest, but not justification. The plaintiff alleged in reply that the
defendant was actuated by express malice.
On 5 October 1988 the action came to trial, in the defendants absence, before Michael Davies J and a jury. The plaintiff
was awarded damages of 65,000 and costs. However, on 28 April 1989 Michael Davies J, on the defendants application, set
aside the judgment and ordered a retrial, which took place before Drake J and a jury, starting on 22 May 1989. The plaintiff
conducted his own case and the defendant was represented by counsel. At the close of the plaintiffs case on 24 May it was
submitted to the judge on behalf of the defendant that there was no case to go before the jury, in respect that (1) any reasonable
jury properly directed would be bound to sustain the defence of fair comment and (2) there was no evidence of express malice.
Drake J upheld this submission. The plaintiff appealed to the Court of Appeal (Lloyd, Glidewell and Woolf LJJ) ([1990] 3 All
ER 865, [1991] 1 QB 102), which dismissed the appeal but granted leave to appeal to your Lordships House, which the plaintiff
now does.
The first matter considered by Drake J and the Court of Appeal was whether those parts of the defendants letter which were
defamatory in character, in particular paras (6) and (7), were capable of being regarded as statements of fact or could only
properly be held to be comment. Since justification was not pleaded the plaintiff would necessarily succeed if the jury, the issue
being left to them, were to decide that these paragraphs contained statements of fact. Drake J said that on a consideration of the
letter as a whole he had no doubt that these paragraphs constituted comment. If he had felt any doubts about the matter he would
presumably have left it to the jury to decide, having regard to the law as stated in 28 Halsburys Laws (4th edn) para 228:

The question whether all or some of the words complained of are statements of fact or comments is a question of
construction for the judge. If, in his opinion, there is no reasonable doubt, he must direct the jury accordingly; but if, in his
view, there is reasonable doubt as to whether the words are statements of fact or expressions of opinion he must leave it to
the jury to decide.
821

In the Court of Appeal Lloyd LJ expressed the opinion that the paragraphs in question could clearly amount only to
comment, whether regard was had only to the terms of the letter as a whole or whether, as he thought to be correct, the contents
of the plaintiffs article were also taken into account (see [1990] 3 All ER 865 at 871872, [1991] 1 QB 102 at 110111).
Glidewell and Woolf LJJ, on the other hand, took the view that if the letter alone were looked at it would be arguable whether
what was contained in the offending paragraphs was statement of fact or comment; but they both considered that the letter should
be read along with the contents of the plaintiffs article, and that when that was done the only possible view was that the
paragraphs in question constituted comment (see [1990] 3 All ER 865 at 880881, [1991] 1 QB 102 at 121122, 123).
I am of the opinion, in common I understand with the majority of your Lordships, that if the letter alone is looked at it would
be open to a reasonable jury properly to find that the offending paragraphs contained statements of fact. Paragraph (2) of the
letter quotes one sentence from the plaintiffs article. Paragraph (6) states, in the form of a statement of fact, that the plaintiff
demands that the BBC Russian service should switch from professional testing to a blood test. It seems to me that this is capable
of being read as describing something else that the plaintiff has said in his article. As regards para (7), the words Mr Telnikoff is
stressing his racialist recipe are undoubtedly pure comment, but what follows, by claiming that no matter how high the
standards and integrity of ethnically alien people Russian staff may be, they should be dismissed, is in my view capable of
being read as a fact upon which the defendant is commenting, that fact being that the plaintiff has made such a claim in his
article. The reader might be the more likely to think that the plaintiff had made such a claim by reason that the words of
ethnically alien are placed in inverted commas, thus indicating that they are a quotation from the article (where in fact no such
words appear). Drake J took the view that paras (6) and (7) did no more than express what would be the logical outcome if the
views stated in the plaintiffs article were given effect to, while Lloyd LJ said that the sense of the words in para (6) was Mr
Telnikoff in effect demands (see [1990] 3 All ER 865 at 872, [1991] 1 QB 102 at 111; Lloyd LJs emphasis). But the fact
remains that the writer of the letter has used no such words nor any others apt to indicate that what he has written are inferences
drawn from the terms of the article.
The question then arises whether it is permissible to have regard to the whole terms of the plaintiffs article, not only the
sentence from it quoted in the letter, in determining whether paras (6) and (7) of the letter contain statements of fact or are pure
comment. In my opinion the letter must be considered on its own. The readers of the letter must have included a substantial
number of persons who had not read the article or who, if they had read it, did not have its terms fully in mind. If to such persons
the letter appeared in paras (6) and (7) to contain statements of fact about what the plaintiff had written in his article, which as I
have already indicated might well be the case, then in the eyes of those persons the plaintiff would clearly be defamed. The
matter cannot turn on the likelihood or otherwise of readers of the letter having read the article. In some cases many readers of a
criticism of some subject matter may be familiar with that subject matter but in other cases very few may be, for example where
that subject matter is a speech delivered to a limited audience. The principle must be the same in either case.
Lloyd LJ, in the course of his judgment in the Court of Appeal, was troubled by what he regarded as the anomaly that the
jury should not be allowed to consider the terms of the article in deciding whether or not the letter contained only comment, but
should be allowed to look at the article, if they decided that 822 question affirmatively, for the purpose of deciding whether or not
the comment was fair. For my part, I can see nothing undesirable about that situation. The jury would simply be directed, in
deciding the first question, to consider the effect of the letter on the mind of a person who had not read the article. Lloyd LJ also
considered that if juries were not allowed to consider the terms of articles upon which newspaper correspondents chose to
comment, the whole text of the article would have to be set out in the letter, a condition which would be unacceptable to
newspaper editors, so that free discussion of matters of public interest would be restricted. That apprehension is not, in my view,
well founded. The writer of a letter to a newspaper has a duty to take reasonable care to make clear that he is writing comment,
and not making misrepresentations about the subject matter upon which he is commenting. There is no difficulty about using
suitable words for that purpose, such as those which Lloyd LJ thought capable of being implied. Likewise any newspaper editor
should be under no difficulty in observing whether his correspondent has used language apt to make clear that what he writes is
pure comment and does not contain misrepresentations about what he is commenting on.
Lloyd LJ found support for his view in the speech of Lord Porter in Kemsley v Foot [1952] 1 All ER 501, [1952] AC 345,
the Lower than Kemsley case. That was not a case in which any issue arose as to whether the words complained of were a
statement of fact or were comment. Lord Porter said ([1952] 1 All ER 501 at 504, [1952] AC 345 at 354):

It is not, as I understand, contended that the words contained in that article are fact and not comment. Rather it is
alleged that they are comment with no facts to support it. The question for your Lordships decision is, therefore, whether a
plea of fair comment is only permissible where the comment is accompanied by a statement of facts on which the comment
is made, and to determine the particularity with which the facts must be stated.

It was held that the subject matter of the comment, namely the Kemsley Press, had been indicated with sufficient clarity to justify
comment being made, that subject matter being well known to the public generally. The defendant had pleaded particulars of
facts about the Kemsley Press which were founded on as indicating that the comment was fair. Lord Porter said ([1952] 1 All ER
501 at 504505, [1952] AC 345 at 355356):

If an author writes a play or a book or a composer composes a musical work, he is submitting that work to the public
and, thereby, inviting comment. Not all the public will see or read or hear it, but the work is public in the same sense as a
case in the law courts is said to be heard in public. Obviously not all those who wish to attend a trial do so, but in so far as
there is room for them in the court all are entitled to do so, and the subject-matter on which comment can be made is
indicated to the world at large. The same observation is true of a newspaper. Whether the criticism is confined to a
particular issue or deals with the way in which it is, in general, conducted, the subject-matter on which criticism is made
 has been submitted to the public, though by no means all those to whom the alleged libel has been published will have seen
or are likely to see the various issues. Accordingly, its contents and conduct are open to comment on the ground that the
public have at least the opportunity of ascertaining for themselves the subject-matter on which the comment is founded. I
am assuming that the reference is to a known journal. For the present purpose it is not necessary to consider 823 how far
criticism without facts on which to base it is subject to the same observation in the case of an obscure publication.

All that was said in a context in which the words complained of were admitted to be pure comment, and the passage therefore has
no application to the present case.
There can be no doubt that where the words complained of are clearly to be recognised as comment, and the subject matter
commented on is identified, then that subject matter must be looked at to determine whether the comment is fair. Kemsley v Foot
is no authority for the view that the subject matter may be looked at for the purpose of turning what on the face of it is a
statement of fact into a comment. The subject matter may, of course, be looked at for the purpose of ascertaining that the
statement of fact is untrue. In Merivale v Carson (1887) 20 QBD 275, [188690] All ER Rep 261 a published criticism of a play
made reference to one of the characters being a naughty wife, though in fact there was no adulterous wife in the play. Bowen
LJ said (20 QBD 275 at 284, [188690] All ER Rep 261 at 265):

Still there is another class of cases in which, as it seems to me, the writer would be travelling out of the region of fair
criticismI mean if he imputes to the author that he has written something which in fact he has not written. That would be
a misdescription of the work. There is all the difference in the world between saying that you disapprove of the character
of a work, and that you think it has an evil tendency, and saying that a work treats adultery cavalierly, when in fact there is
no adultery at all in the story. A jury would have a right to consider the latter beyond the limits of fair criticism.

I conclude that Drake J was wrong in failing to leave to the jury the question whether paras (6) and (7) of the defendants
letter contained statements of fact.
Drake J also refused to leave to the jury the question whether, assuming that paras (6) and (7) were pure comment, they
constituted fair comment on a matter of public interest, and the Court of Appeal upheld his decision on this matter also. Both
took the view that on an application of the normal objective test of fair comment any reasonable jury would be bound to hold that
it was satisfied. Lloyd LJ correctly stated the test as being whether any man, however prejudiced and obstinate, could honestly
hold the view expressed by the defendant in his letter (see [1990] 3 All ER 865 at 873, [1991] 1 QB 102 at 112113). I agree
with Drake J and the Court of Appeal as to the only reasonable outcome of a proper application of that test, and find it
unnecessary to elaborate the matter. It was, however, argued by counsel for the plaintiff before the Court of Appeal and in your
Lordships House that in addition to satisfying the objective test a defendant pleading fair comment must prove affirmatively that
the comment represented his own honest opinion, which the present defendant failed to do, since the case was withdrawn from
the jury before any evidence had been given by him. Lloyd LJ, after an extensive review of the authorities, concluded that this
argument was unsound (see [1990] 3 All ER 865 at 874879, [1991] 1 QB 102 at 114119). These authorities included
Cherneskey v Armadale Publishers Ltd [1979] 1 SCR 1067, in the Supreme Court of Canada. The defendants were the editor and
the owner and publisher of a newspaper which had published a letter to the editor in which the writers accused the plaintiff of
holding racist views. The writers of the letter did not give evidence, but the defendants in their evidence made it clear that the
letter complained of did not represent the honest expression of their own views. The trial judge refused to leave the defence of
fair comment to the jury, and the Supreme Court, by a majority of six to three, held that he had 824 acted rightly. Lloyd LJ
expressed himself as preferring the judgment of the minority to that of the majority, and as regarding the former as being fully
supported by the English authorities cited in his extensive review. I find myself in respectful agreement with him and feel that to
repeat his review would be a work of supererogation. The law is correctly stated in Gatley on Libel and Slander (8th edn, 1981)
p 348, para 792, as follows:

Onus of proof of malice: fair comment. In the same way, the defendant who relies on a plea of fair comment does not
have to show that the comment is an honest expression of his views. In alleging any unfairness the plaintiff takes on him
or herself the onus, also taken by an allegation of malice, to prove that the criticism is unfair either from the language used
or from some extraneous circumstance.

Finally, it was argued for the plaintiff that Drake J was wrong to decide that there was no evidence of express malice fit to
go before the jury, and that the Court of Appeal was wrong in upholding that decision. I am satisfied that the decision was
correct, and find it unnecessary to go into any detail upon this matter.
My Lords, for these reasons I would allow the appeal only on the issue as to whether it should have been left to the jury to
determine whether paras (6) and (7) of the defendants letter constituted pure comment or whether they contained defamatory
statements of fact. Since the argument dealt extensively with issues upon which the plaintiff has been unsuccessful, I would
award him only one-half of his costs before the Court of Appeal and your Lordships House, but the whole of his costs of the
proceedings before Drake J.

LORD BRANDON OF OAKBROOK. My Lords, for the reasons given in the speech delivered by my noble and learned friend
Lord Keith of Kinkel, I would allow the appeal to the extent proposed by him.

LORD TEMPLEMAN. My Lords, the plaintiff alleges that certain of the contents of the letter by the defendant set forth with
numbered paragraphs in the speech of my noble and learned friend Lord Keith of Kinkel were defamatory, ie reflected in the
reputation of the plaintiff and tended to lower him in the estimation of right-thinking members of society. If the contents of the
letter were fair comment, then the plaintiff cannot complain not withstanding that they were defamatory. If the contents of the
letter included defamatory statements of fact, however, then the plaintiff will succeed in his action for defamation unless the
statements of fact set out in the letter were true. If the contents

were a statement of fact, and the facts were untrue, a plea of fair comment would not avail and it is for the jury in a
proper case to determine what is comment and what is fact, but a pre-requisite to their right is that the words are capable of
being a statement of a fact or facts.

(See Turner (orse Robertson) v Metro-Goldwyn-Mayer Pictures Ltd [1950] 1 All ER 449 at 461 per Lord Porter.) In the present
case the question, whether to be answered by judge or jury, is whether the letter alleged facts or made comments. Drake J and
Lloyd LJ were of the opinion that all the contents of the letter were comments (see [1990] 3 All ER 865 at 872, [1991] 1 QB 102
at 111). Your Lordships (with the possible exception of my noble and learned friend Lord Ackner) share the opinion voiced by
Lord Keith of Kinkel that if the letter alone is looked at it would be open to a reasonable jury properly to find that the offending
passages contain statements of fact. Glidewell and Woolf LJJ were of 825 the same opinion but nevertheless concluded that all
the contents were unarguably comment and not fact in the light of the plaintiffs article which inspired the defendants letter (see
[1990] 3 All ER 865 at 881, [1991] 1 QB 102 at 122, 123). In my opinion, fact or comment depends on the true construction of
the letter and not on the true construction of the article. If in the letter the defendant made allegations of fact, those allegations
cannot be converted into comment by the article written by the plaintiff. This logical result is disputed on two grounds.
 First, it is said that the judge will have to direct the jury that they must refer to the article in deciding whether any comment
was fair but that they must not refer to the article in deciding whether it was comment at all. My Lords, the first task of the jury,
in any event, must be to decide on an examination of the letter whether the contents are fact or comment. If and only if the
contents are comment the jury must then consider whether those comments are fair.
Secondly, it is said that the defence of fair comment will be unduly restricted and freedom of the press inhibited if in
deciding whether the defendant has alleged fact or has made comments the jury can only look at the defendants statement which
is claimed to be defamatory. In my opinion this argument blurs the distinction between the defence of fair comment and the
defence of justification. It was argued that a newspaper could only protect itself against an action for defamation by confining
criticism to passages actually set out in the criticism. I do not agree. Any critic, whether private or public, whether individual or
press, must simply make clear that he is not quoting the plaintiff but is commenting on words which the plaintiff has uttered. In
the present case it will be for the jury to decide whether the parts of the letter put words into the mouth of the plaintiff.
For these reasons and in agreement with the views expressed by Lord Keith I agree with the orders which he has proposed.

LORD ACKNER. My Lords, your Lordships are once more concerned with one of the fundamental freedomsthe freedom of
speech. This appeal concerns the plea of fair commentthe right of the citizen honestly to express his genuine opinion on a
subject of public interest, however wrong or exaggerated or prejudiced that opinion may be. There have been many judicial
pronouncements on how vital to the functioning of a democratic society is the freedom to comment on matters of public interest.
I content myself with citations from two cases.
In Lyon v Daily Telegraph Ltd [1943] 2 All ER 316 at 319, [1943] KB 746 at 752, a decision of the Court of Appeal to which
I will have occasion again to refer, Scott LJ said:

The reason why, once a plea of fair comment is established, there is no libel, is that it is in the public interest to have
free discussion of matters of public interest.

Towards the end of his judgment Scott LJ added ([1943] 2 All ER 316 at 320, [1943] KB 746 at 753);

It [the right of fair comment] is one of the fundamental rights of free speech and writing which are so dear to the
British nation, and it is of vital importance to the rule of law upon which we depend for our personal freedom, that the
courts should preserve the right of fair comment undiminished and unimpaired.

In Slim v Daily Telegraph Ltd [1968] 1 All ER 497 at 503, [1968] 2 QB 157 at 170 Lord Denning MR said:
826

the right of fair comment is one of the essential elements which go to make up our freedom of speech. We must
ever maintain this right intact. It must not be whittled down by legal refinements.

In the Report of the Committee on Defamation (Cmnd 5909 (1975)) under the chairmanship of the late Faulks J it is stated (at
para 151):

The very wide breadth of the main criterion for the defence of fair comment (could an honest albeit prejudiced person
have expressed such an opinion?) has stood for over a century. It is generally regarded as a bulwark of free speech.

I entirely agree with the views expressed by my noble and learned friend Lord Keith of Kinkel supporting the decision of the
Court of Appeal ([1990] 3 All ER 865, [1991] 1 QB 102) and the trial judge, Drake J, that there was no evidence of malice fit to
go to the jury and that accordingly the plaintiff, the appellant before your Lordships, failed to discharge the burden of proof
which lay upon him that the defendant, the respondent to this appeal, did not honestly hold the belief which he expressed in his
letter to the Daily Telegraph and which was published on 18 February 1984. However, the fundamental question which remains
is whether the words complained of in that letter were capable of being understood as a statement or statements of fact, since if
they were, they were defamatory, there being no attempt to justify them. It is common ground that it is for the judge alone to
decide whether the words complained of are capable of being a statement of a fact or facts and whether his ruling is right or
wrong is matter of law for the decision of an appellate tribunal. Drake J decided that the words were not so capable and his
decision was upheld by the Court of Appeal.
It is not always easy to draw the distinction between an expression of an opinion and an assertion of fact. The very same
words may be one or the other according to their context. This point is cogently made in Winfield and Jolowicz on Tort (11th edn,
1979) p 304 where this example is provided:

To say that A is a disgrace to human nature is an allegation of fact, but if the words were A murdered his father and
is therefore a disgrace to human nature the latter words are plainly a comment on the former.

I do not take it to be disputed that whether the words complained of were reasonably capable of being understood as comment or
a statement of fact must depend on a consideration of the whole of the words used, their context and the circumstances of
publication. The vital issue in this case iswhat is their context?
The respondents letter which was published in the Daily Telegraph had been stimulated by and indeed brought into
existence as a result of the publication in that newspaper on 13 February 1984 (some five days earlier than the publication of the
respondents letter) of an article written by the appellant entitled Selecting the Right Wavelength to Tune into Russia. The
appellant was then employed by the BBC Russian service as a probationer. The respondent was also employed at the relevant
time by the same service in the BBC. He is a Russian Jew. He was much incensed by the appellants article, which he regarded
as racialist and anti-semitic. As Lloyd LJ pointed out in his judgment, the main thrust of the article was the importance of
distinguishing between Russia on the one hand and communism on the other (see [1990] 3 All ER 865 at 867868, [1991] 1 QB
102 at 105106). Having traced the history of Russian broadcasting since the early 1970s the article continued:

But still, after three decades of gradually becoming aware of the significance of Russian language broadcasting. I
believe its general concept 827 has never been set right. It continues to reflect the fatal confusion of the West, which has
yet to clarify to itself whether it is threatened by Russia or by Communism. We fail to understand that Communism is as
alien to the religious and national aspirations of the Russian people as those of any other nation.

In the remaining paragraphs of the article the appellant then made quite a different point. These need to be set out in full.

This confusion further manifests itself in the policy of recruitment for the Russian Service. While other services are
staffed almost exclusively from those who share the ethnic origin of the people to whom they broadcast, the Russian
Service is recruited almost entirely from Russian-speaking national minorities of the Soviet empire and has something like
10 per cent. of those who associate themselves ethnically, spiritually or religiously with Russian people. However high the
 standards and integrity of that majority there is no more logic in this than having a Greek Service which is 90 per cent.
recruited from the Greek-speaking Turkish community of Cyprus.
WHEN broadcasting to other East European countries, we recognise them to be enslaved from outside and better able
to withstand alien Russian Communism through our assertion of their own national spirit and traditions. However, this
approach leaves room for flirting with Euro-communism or socialism with a human (non-Russian) face as a desirable
future alternative, and well suits the Left in the West.
Resisting the ideological advance of Communism by encouraging anti-Russian feelings is of less obvious value with a
Russian audience. Making Russian synonymous with Communist alienates the sympathetic Russian listeners. It stirs
up social resentment in others against the Russians. Making those words synonymous also makes sympathy for Russia into
support for the Communist system.
In America the Reagan Administration recently appointed a new Director to Radio Liberty, George Bailey, who
introduced a concept in broadcasting which is to oppose Communism ideologically through Russian national spirit,
tradition and, most important, appreciation of religious feelings. In other words, through relying upon and appealing to
those basic values which constitute the health of any nation, indeed provide its only ideological immunity against the
spread of Communism.
Predictably, Mr Bailey very soon came under malicious attack from the Left and particularly those in the State
Department who promote their own unfortunate brand of detente of the airwaves: If we stop telling the truth, they might
stop telling lies. Mr Baileys approach must be studied and followed by other broadcasting corporations not least of all
our own external services of the BBC.

The appellant by submitting his article for, and thus achieving, its publication exposed himself to and certainly, by
implication, invited comment through the same medium. The invitation was accepted with indignation.
I set out the respondents letter of 18 February, for convenience sake, numbering each of the paragraphs.

[1] SirHaving read Selecting the right Wavelength to Tune in to Russia (Feb 13) I was shocked particularly by the
part on alleged inadequacies of the BBCs Russian Service recruitment policies.
[2] Mr Vladimir Telnikoff says: While other services are staffed almost exclusively from those who share the ethnic
origin of the people to whom 828 they broadcast, the Russian Service is recruited almost entirely from Russian-speaking
national minorities of the Soviet empire.
[3] Mr Telnikoff must certainly be aware that the majority of new emigr from Russia are people who grew up, studied
and worked in Russia, who have Russian as their mother tongue and have only one cultureRussian.
[4] People with Jewish blood in their veins were never allowed by the Soviet authorities to feel themselves equal with
people of the same language, culture and way of life. Insulted and humiliated by this paranoic situation, desperate victims
of these Soviet racialist (anti-Semitic) policies took the opportunity to emigrate.
[5] Now the BBCs Russian Service, as well as other similar services of other Western stations broadcasting to Russia,
who are interested in new staff members (natives) employ those people in accordance with common democratic procedures
interested in their professional qualifications and not in the blood of the applicants.
[6] MrTelnikoff demands that in the interest of more effective broadcasts the management of the BBCs Russian
Service should switch from professional testing to a blood test.
[7] Mr Telnikoff is stressing his racialist recipe by claiming that no matter how high the standards and integrity of
ethnically alien people Russian staff might be, they should be dismissed.
[8] I am certain the DAILY TELEGRAPH would reject any article with similar suggestions of lack of racial purity of
the writer in any normal section of the British media.
[9] One could expect that the spreading of racialist views would be unacceptable in a British newspaper. (The
respondents emphasis.)

One matter is crystal clear, that at the very outset of his letter the respondent identified, both by its title and by its date, the
appellants article. He stated in terms that he was shocked, particularly by that part of the appellants article which alleged
inadequacies in the BBCs Russian service recruitment policies and he quoted from the very first paragraph of the excerpt of the
article which I have set out above. He then, to put the matter neutrally, gave vent to his feelings. Your Lordships are concerned
with whether the words complained of were capable of being understood as statements of fact or facts rather than comment. If
they were so capable then it is common ground that it would have been the judges duty to leave the questionfact or comment
to the jury.
Let me first identify what are the words alleged to be statements of fact rather than statements of opinion or comment. Mr
Browne QC, for the appellant, relies upon paras (6) and (7) of the letter, coupled with the final paragraph. In relation to para (6),
while conceding that the reference to a blood test was plainly not meant to be taken literally, he contended that the paragraph
was capable of being construed as a factual statement that the appellant had demanded that the BBC should vet employees for
employment and reject those who were of Jewish blood, regardless of their abilities.
As regards para (7), he contended that the statement that the appellant claimed that no matter how high the standards and
integrity of ethnically alien people Russian staff might be they should be dismissed, was capable of being construed as a factual
statement.
As regards para (9), Mr Browne appeared to rely on the contents of this paragraph essentially as material for the jurys
consideration as to whether the respondent could honestly have believed in the comments which he had expressed in his letter.
To my mind this was the only possible use that could be made of 829 this paragraph and I agree with your Lordships that it failed.
This paragraph is giving the respondents interpretation of the appellants view, as expressed in his article, and is characterising
them as being racialist. That is a statement, be it right or wrong, of the respondents opinion.
I now turn to the issue of public importance, which appears to have motivated the Court of Appeal to grant leave to appeal to
your Lordships House. Is the court entitled, in deciding whether the words complained of are comment or statements of fact, not
only to look at the whole of the contents of the letter (this was not in dispute before your Lordships) but also the very article to
which the letter refers. In short, is the article part of the context in which the letter is to be construed?
It is accepted that in most cases it would be apparent from the publication itself whether the words complained of are
comment or not. It is however accepted by Mr Browne that in some cases it may be necessary to have regard to the wider
context, for example to documents which are, as it were, incorporated in the publication by reference. This is accepted to be
permissible when a question arises as to the meaning of the alleged libel (see Gatley on Libel and Slander (8th edn, 1981) p 55,
para 102). Is it also permissible where the question is whether words complained of are statements of fact or comment? On this
there is no authority direct in point.
Mr Browne repeated the submission which he had unsuccessfully made to the Court of Appeal. He contended that your
Lordships are confined to the four corners of the letter. He conceded that the subject matter on which the respondent was
commenting, namely the article, was sufficiently indicated in the letter. But the letter might, he said, have been read by someone
who had no ready access to the article. Accordingly, the question of construction, which he described as purely linguistic or
grammatical, must be answered by reference to the letter alone. The article, the subject matter of the letter, must not be referred
to.
 I share the view expressed in particular by Woolf LJ in his judgment that, if the court is not entitled to look at the material on
which it is alleged that the words complained of were commenting, it would unduly restrict the defence of fair comment (see
[1990] 3 All ER 865 at 881, [1991] 1 QB 102 at 123). Indeed, it would diminish and impair this vitally important right, by
whittling it down by a wholly unjustified legal refinement. If the criticism of an article published in a newspaper on a subject
matter of public importance is to be confined to passages actually set out in the criticism, then the freedom to comment on a
matter of public importance becomes, from a practical point of view, illusory or non-existent. The ability of a defendant to
comment should not depend on whether or not the reader is aware of the material which is the subject of the comment. As
pointed out in terms by Woolf LJ, the defence of fair comment is based on the principle that a citizen should be entitled to
comment on a matter of public interest and the fact that the publication is limited does not affect the public interest (see [1990] 3
All ER 865 at 881, [1991] 1 QB 102 at 123).
In my judgment the defence of fair comment is not based on the proposition that every person who reads a criticism should
be in a position to judge for himself. It would be absurd to suggest that a critic may not say what he thinks of a play performed
only once, because the public cannot go and see it to judge for themselves. The defence of fair comment is available to a
defendant who has done no more than express his honest opinion on publications put before the public. It is sufficient for him to
have identified the publication on which he is commenting, without having set out such extracts therefrom as would enable his
readers to judge for themselves whether they agreed with his opinion or not. Were the law otherwise it would be necessary or at
the very least forensically expedient to set out, ipsissima verba, the entire contents of the article upon which 830 as a matter of
public importance the citizen is entitled to comment honestly. In the result the important contribution to public discussion on
matters of public importance arising out of the publication in the press of correspondence would be seriously curtailed. Yet a free
and general discussion of matters of public interest is fundamental to a democratic society.
The views which I have stated above seem to me not only to be clearly right in principle, but appear also to reflect the views
of your Lordships House, as expressed in Kemsley v Foot [1952] 1 All ER 501, [1952] AC 345. In that case an article criticising
the conduct of the Beaverbrook press describe it as lower than Kemsley. No details were contained in the article to substantiate
the charge against Lord Kemsley. Nevertheless, it was held that there was a sufficient substratum of fact indicated in the libel to
justify the allegation being treated as comment. The subject matter which was implied was that the plaintiff was in control of
newspapers and that the conduct of the publishers was in question. The defendant was entitled to say, per Lord Porter ([1952]1
All ER 501 at 506, [1952] AC 345 at 357):

We have pointed to your Press. It is widely read. Your readers will, and the public generally can, know at what our
criticism is directed. It is not bare comment. It is comment on a well-known matter, much better known, indeed, than a
newly printed book or a once performed play.

In the course of his speech Lord Porter said ([1952] 1 All ER 501 at 504505, [1952] AC 345 at 355):

If an author writes a play or a book or a composer composes a musical work, he is submitting that work to the public
and, thereby, inviting comment. Not all the public will see or read or hear it, but the work is public in the same sense as a
case in the law courts is said to be heard in public. Obviously not all those who wish to attend a trial do so, but in so far as
there is room for them in the court all are entitled to do so, and the subject-matter upon which comment can be made is
indicated to the world at large. The same observation is true of a newspaper. Whether the criticism is confined to a
particular issue or deals with the matter in which it is, in general, conducted, the subject-matter on which criticism is made
has been submitted to the public, though by no means all those to whom the alleged libel has been published will have seen
or are likely to see the various issues. Accordingly, its contents and conduct are open to comment on the ground that the
public have at least the opportunity of ascertaining for themselves the subject-matter on which the comment is founded. I
am assuming that the reference is to a known journal. For the present purpose it is not necessary to consider how criticism
without facts on which to base it is subject to the same observation in the case of an obscure publication.

As Lord Oaksey in his speech in the same case pointed out ([1952] 1 All ER 501 at 508, [1952] AC 345 at 360361):

The forms in which a comment on a matter of public importance may be framed are almost infinitely various, and, in
my opinion, it is unnecessary that all the facts on which the comment is based should be stated in the libel in order to admit
the defence of fair comment. It is not, in my opinion, a matter of importance that the reader should be able to see exactly
the grounds of the comment. It is sufficient if the subject which, ex hypothesi, is of public importance is sufficiently and
not incorrectly or untruthfully stated.

In Kemlseys case it was ultimately admitted on behalf of the appellant that 831 the facts necessary to justify comment might
be implied from the terms of the impugned article:

therefore the inquiry ceased to be: Can the defendant point to definite assertions of fact in the alleged libel on
which the comment is made? and becomes: Is there subject-matter indicated with sufficient clarity to justify comment
being made?, and whether the comment actually made is such an honest though prejudiced man might make?

(See [1952] 1 All ER 501 at 505, [1952] AC 345 at 357 per Lord Porter.)
Quite apart from the principle of the matter, an important practical point is made by Lloyd LJ in his judgment and repeated
by Glidewell LJ in his judgment (see [1990] 3 All ER 865 at 871, 880, [1991] 1 QB 102 at 110, 122). If the question, statement
of fact or comment?, had fallen to be decided by the jury, the judge would have to direct the jury that they must refer to the article
in deciding whether any comment was fair or not but if Mr Brownes contention was correct, they must not refer to the article in
deciding whether it was comment at all.
If this be the law, then I echo the words of Russell LJ, in Broadway Approvals Ltd v Odhams Press Ltd [1965] 2 All ER 523
at 540, [1965] 1 WLR 805 at 825:

the law of libel seems to have characteristics of such complication and subtlety that I wonder whether a jury on
retiring can readily distinguish their heads from their heels.

Given that the judge was entitled, and indeed the jury would have been entitled to consider the whole of the article, I have
no difficulty in agreeing with the Court of Appeal that the jury would have been bound to conclude that the matters of which
complaint is made in the letter were, though perhaps expressed as if they were statements of fact, in reality comment on the
contents of the article or part of it. In just the same way as it is accepted that the reference to a blood test (despite what appears
in the particulars of the statement of claim) is not to be taken literally, the same is true of the appellants alleged demand in para
(6) of the letter. I agree with the Court of Appeal that any fair-minded man reading the letter as a whole in the light of the article
would regard it as an inference drawn by the author from the first paragraph of the excerpt from the article which I have quoted,
part of which was set out in the respondents letter, together with the penultimate and final paragraphs of the article. The sense of
the words is Mr Telnikoff in effect demands The same applies, mutatis mutandis, to para 7 of the letter.
Accordingly, I would have dismissed this appeal.
LORD OLIVER OF AYLMERTON. My Lords, I have had the advantage of reading the speech prepared by my noble and
learned friend Lord Keith of Kinkel. I agree with it and for the reasons which he gives I, too, would allow the appeal.

Appeal allowed in part

Solicitors: Peter Carter-Ruck & Partners; Bindman & Partners.

Mary Rose Plummer Barrister.

832
[1991] 4 All ER 833

Owens Bank Ltd v Bracco and others

CONFLICT OF LAWS

COURT OF APPEAL (CIVIL DIVISION)

PARKER, BALCOMBE AND RALPH GIBSON LJJ
11, 13 FEBRUARY, 27 MARCH 1991

Conflict of laws Foreign judgment Recognition in England Judgment obtained in courts of non-convention country
Plaintiff seeking to enforce foreign judgment in England Defendant alleging that judgment obtained by fraud Issue of fraud
raised in proceedings pending in foreign court Whether English court required to stay or decline jurisdiction in enforcement
proceedings in favour of court first seised of issue Whether lis alibi pendens provisions in European Judgments Convention
applying to enforcement of judgments of non-convention countries Administration of Justice Act 1920, s 9 Civil Jurisdiction
and Judgments Act 1982, Sch 1, arts 21, 22.

Conflict of laws Foreign judgment Enforcement Fraud Allegation that foreign judgment obtained by fraud Issue of
fraud raised in proceedings pending in foreign court Rules of evidence applicable to enforcement of foreign judgments
Whether sufficient for judgment debtor to show prima facie case of fraud Whether requirement of fresh evidence to support
allegation of fraud necessary Whether trial of issue of fraud should proceed in England.

The plaintiff bank alleged that on 31 January 1979 it lent 9m Swiss francs to an Italian company on terms agreed orally between
the banks managing director and the president of the company, who was also Italian. The bank claimed that the existence of the
transaction was supported by receipts and acknowledgements signed by the companys president which gave the St Vincent
courts jurisdiction in respect of any dispute arising under the loan agreement. However, the Italian company and its president
(the defendants) denied the entire transaction, asserting that the loan documents were forgeries which the president had not
signed. The bank subsequently sought to recover the funds allegedly advanced by bringing an action against the defendants in St
Vincent, where the court accepted jurisdiction on the basis of the jurisdiction clause contained in the loan documents. At the trial
of the action in St Vincent and after the banks case was closed, the defendants sought to set up a new defence, alleging that
although the signatures which appeared on the loan documents were genuine, the documents themselves had been altered to show
a different agreement to the one signed. The judge refused to permit the defendants to set up the new defence at such a late stage
and gave judgment for the bank for 10,543,372 Swiss francs. The defendants appeal was dismissed by the St Vincent Court of
Appeal and they made no further appeal. The bank applied under s 9 a of the Administration of Justice Act 1920 to register the St
Vincent judgment in the United Kingdom with a view to enforcing it in the United Kingdom. The defendants then sought orders
to set aside the English enforcement proceedings, contending that before, during and after the St Vincent proceedings both parties
had commenced criminal and civil proceedings in Italy in which the issue of fraud was squarely raised and that therefore, under
the lis alibi pendens provisions of arts 21b and 22c of the Convention on Jurisdiction and the Enforcement of Judgments in Civil
and Commercial Matters 8331968 (which had the force of law in the United Kingdom by virtue of s 2(1) of the Civil Jurisdiction
and Judgments Act 1982 and was set out in Sch 1 to that Act), the court should either stay or decline jurisdiction in the
enforcement proceedings in favour of the Italian courts as the courts first seised of the issue, or alternatively, the court should
order issues to be tried as to whether registration of the St Vincent judgment was precluded by s 9(2)( d) and (f) of the 1920 Act,
which prohibited the registration of a judgment obtained in a British dominion or territory if it was obtained by fraud or if the
cause of action, by reason of public policy, would not have been entertained in the United Kingdom. The judge (i) refused to set
aside the English enforcement proceedings, on the ground that the 1968 convention did not apply to the enforcement of a
judgment given in a non-convention country and (ii) directed that the issue of fraud raised in defence to the banks application be
tried. He also refused to exercise his discretion to stay the English proceedings despite strong factors in favour of the Italian
forum, on the ground that it was by no means clear that the Italian proceedings would inevitably lead to a decision whether the St
Vincent judgment was obtained by fraud and the evidence showed that a decision on that issue in Italy was not imminent. The
defendants appealed from the judges first order. The bank appealed from the second order, contending that under the rules of
evidence applicable to the enforcement of both English and foreign judgments there was no issue to be tried, since there was no
fresh evidence to support the defendants allegations of fraud.
________________________________________
a Section 9, so far as material, is set out at p 849 g to 850 c, post
b Article 21 is set out at p 842 d, post
c Article 22 is set out at p 842 f g, post

Held (1) The 1968 convention did not apply to proceedings for the recognition and enforcement of the judgments of non-
convention countries and in particular to proceedings under the 1920 Act, since the preamble to the 1968 convention indicated
that it was concerned with the jurisdiction and reciprocal recognition and enforcement of judgments of courts of convention
countries as between themselves and nothing in the convention suggested any wider interpretation than was indicated by the
preamble. Even if the 1968 convention did apply, arts 21 and 22 could not avail a defendant in enforcement proceedings under
the 1920 Act, since both articles were clearly directed to original proceedings which might lead to a judgment and not to
proceedings to enforce a judgment which had been obtained in original proceedings, such enforcement proceedings being
expressly dealt with under Title III and expressly committed by art 16(5) d to the exclusive jurisdiction of the courts of the
convention country in which the original judgment had been or was to be enforced. It followed that the court was not obliged to
decline jurisdiction in respect of enforcement proceedings brought under s 9 of the 1920 Act and had no power to stay those
proceedings pursuant to arts 21 and 22 of the 1968 convention. The defendants appeal would accordingly be dismissed (see p
840 b to d, p 841 c d, p 842 b e h j, p 843 c d and p 859 c, post).
________________________________________
d Article 16(5), so far as material, is set out at p 840 j, post

(2) The rules of evidence applicable to the enforcement of foreign judgments were more liberal than the rules applicable to
setting aside English judgments in the sense that defence allegations that a foreign judgment had been obtained by fraud could be
tried in English enforcement proceedings if the judgment debtor was able to show a prima facie case of fraud, irrespective of
whether he was able to produce fresh evidence to support his allegations or had refrained from raising the plea of fraud in the
original foreign proceedings even though the facts were known to him at all material times and irrespective of whether the issue
of fraud had already been investigated by the foreign court and would involve a 834 retrial of matters adjudicated on by the
foreign court. On the evidence, there was a prima facie case that the St Vincent judgment had been obtained by fraud which
should be tried pursuant to s 9(2)(d) and (f) of the 1920 Act as ordered by the judge and, although the court had power to grant a
stay of the English enforcement proceedings pending resolution in Italy of the same issue of fraud, there was no valid basis for
asserting that the judge had been incorrect in declining to exercise that discretion. Accordingly, the issue of fraud directed by the
judge to be tried would proceed and the banks appeal would be dismissed (p 851 g h, p 854 f g, p 857 f g, p 858 e to p 859 c
post); Abouloff v Oppenheimer & Co [18815] All ER Rep 307 and Vadala v Lawes [188690] All ER Rep 853 applied; dictum
of Goff LJ in McIlkenny v Chief Constable of West Midlands Police Force [1980] 2 All ER 227 distinguished.

Notes
For enforcement of foreign judgments under the Administration of Justice Act 1920, see 8 Halsburys Laws (4th edn) paras 752
756.
For impeachment of foreign judgments for fraud, see ibid paras 726727, and for cases on the subject, see 11 Digest
(Reissue) 601603, 14731486.
For stay of proceedings on the ground of lis alibi pendens, see 8 Halsburys Laws (4th edn) paras 787789, and for cases on
the subject, see 11 Digest (Reissue) 631642, 16861753.
For the Administration of Justice Act 1920, s 9, see 22 Halsburys Statutes (4th edn reissue) 314.
For the Civil Jurisdiction and Judgments Act 1982, s 2, Sch 1, arts 16, 21, 22, see 11 Halsburys Statutes (4th edn) (1991
reissue) 1108, 1143, 1147, 1148. As from a date to be notified in the London Gazette s 2 and Sch 1 are to be substituted by the
Civil Jurisdiction and Judgments Act 1982 (Amendment) Order 1990, SI 1990/2691, art 12(1), Sch 1.

Cases referred to in judgment

Abouloff v Oppenheimer & Co (1882) 10 QBD 295, [18815] All ER Rep 307, CA.
Adams v Cape Industries plc [1991] 1 All ER 929, [1990] 2 WLR 657, Ch D and CA.
Bank of Australasia v Nias (1851) 16 QB 717, 117 ER 1055.
Boswell v Coaks (1894) 6 R 167, HL.
Cammell v Sewell (1860) 5 H & H 728, 157 ER 1371, Ex Ch.
Carl-Zeiss-Stiftung v Rayner & Keeler Ltd (No 2) [1966] 2 All ER 536, [1967] 1 AC 853, [1966] 3 WLR 125, HL.
Flower v Lloyd (No 2) (1879) 10 Ch D 327, CA.
Harrods (Buenos Aires) Ltd, Re [1991] 4 All ER 334, [1991] 3 WLR 397, CA.
Henderson v Henderson (1843) 3 Hare 100, [184360] All ER Rep 378, 67 ER 313, V-C.
House of Spring Gardens Ltd v Waite [1990] 2 All ER 990, [1991] 1 QB 241, [1990] 3 WLR 347, CA.
Jet Holdings Inc v Patel [1989] 2 All ER 648, [1990] 1 QB 335, [1988] 3 WLR 295, CA.
Kingstons (Duchess) Case (1776) 1 East PC 468, [17751802] All ER Rep 623, HL.
McIlkenny v Chief Constable of West Midlands Police Force [1980] 2 All ER 227, [1980] QB 283, [1980] 2 WLR 689, CA; affd
sub nom Hunter v Chief Constable of West Midlands Police Force [1981] 3 All ER 727, [1982] AC 529, [1981] 3 WLR 906,
HL.
Ochsenbein v Papelier (1873) LR 8 Ch App 695, LC and LJ.
835
Phosphate Sewage Co Ltd v Molleson (1879) 4 App Cas 801, HL.
Russell v Smyth (1842) 9 M & W 810, 152 ER 343.
Schibsby v Westenholz (1870) LR 6 QB 155, [186173] All ER Rep 988.
Sennar, The (No 2) [1985] 2 All ER 104, [1985] 1 WLR 490, HL.
Spiliada Maritime Corp v Cansulex Ltd, The Spiliada [1986] 3 All ER 843, [1987] AC 460, [1986] 3 WLR 972, HL.
Syal v Heyward [1948] 2 All ER 576, [1948] 2 KB 443, CA.
Vadala v Lawes (1890) 25 QBD 310, [188690] All ER Rep 853, CA.
Yat Tung Investment Co Ltd v Dao Heng Bank Ltd [1975] AC 581, [1975] 2 WLR 690, PC.
Young v Bristol Aeroplane Co Ltd [1944] 2 All ER 293, [1944] KB 718, CA; affd [1946] 1 All ER 98, [1946] AC 163, HL.

Cases also cited

Birch v Birch [1902] P 130, CA.
Codd v Delap (1905) 92 LT 510, HL.
DPP v Humphrys [1976] 2 All ER 497, [1977] AC 1, HL.
European Asian Bank AG v Punjab & Sind Bank (No 2) [1983] 2 All ER 508, [1983] 1 WLR 642, CA.
Ladd v Marshall [1954] 3 All ER 745, [1954] 1 WLR 1489, CA.
Lloyds Bank Ltd v Ellis-Fewster [1983] 2 All ER 424, [1983] 1 WLR 559, CA.
Manger (Syndics under bankruptcy of Rodrigues et Cie) v Cash (1889) 5 TLR 271, DC.
Morrison Rose & Partners (a firm) v Hillman [1961] 2 All ER 891, [1961] 2 QB 266, CA.
Rakhit v Carty [1990] 2 All ER 202, [1990] 2 QB 315, CA.
Williams v Fawcett [1985] 1 All ER 787, [1986] QB 604, CA.

Appeals
The defendants, Fulvio Bracco and Bracco Industria Chimica SpA, an Italian company of which Sig Bracco was the president,
appealed from a decision of Sir Peter Pain sitting as a judge of the Queens Bench Division of the High Court ((1990) Times, 29
August) made on 18 July 1990 refusing to set aside an order of Sheen J made on 7 March 1990 providing for the registration
under the Administration of Justice Act 1920 of part of a judgment of the Supreme Court of St Vincent (Singh J) on 29 January
1988 awarding the plaintiff, Owens Bank Ltd, a company registered in the Republic of St Vincent and the Grenadines, the sum of
10,543,372 Swiss francs on the ground that the court should either stay or decline jurisdiction in the enforcement proceedings
under the Act pursuant to arts 21 and 22 of the Convention on Jurisdiction and the Enforcement of Judgments in Civil and
Commercial Matters 1968 since the defendants plea that the judgment was obtained by fraud was already pending in the Italian
courts. The bank appealed from a second decision of Sir Peter Pain sitting as a judge of the High Court of the Queens Bench
Division ((1991) Times, 8 January) made on 9 November 1990 ordering that the issues between the parties be tried as to whether
the registration of the St Vincent judgment should be set aside on the ground that it was obtained by fraud or that the cause of
action, by reason of public policy, would not have been entertained in the United Kingdom within the meaning of s 9(2)(d) or (f)
of the 1920 Act. The facts are set out in the judgment of the court.

Martin Mann QC and Michael Gadd for the bank.

Barbara Dohmann QC and Thomas Beazley for the defendants.

Cur adv vult

836

27 March 1991. The following judgment of the court was delivered.

PARKER LJ. This is the judgment of the court to which all its members have contributed. In it we shall refer to Owens Bank
Ltd as the bank, or the plaintiffs as may in a particular context be more appropriate, to Bracco Industria Chimica SpA as
Bracco SpA and to Fulvio Bracco as Bracco, or, if more appropriate in a particular context, individually as the second
defendant and the first defendant and collectively as the defendants.
We have before us two appeals for determination, first an appeal by Bracco SpA and Bracco against a judgment of Sir Peter
Pain, sitting as a High Court judge in chambers, given on 19 July 1990, to which the bank are respondents, and, secondly, an
appeal by the bank from a judgment also of Sir Peter Pain given on 9 November 1990 to which Bracco SpA and Bracco are
respondents.
Both appeals arise out of an application by the bank under s 9 of the Administration of Justice Act 1920 to register a
judgment of the Supreme Court of St Vincent (Singh J) entered on 29 January 1988. Such judgment, against Bracco SpA and
Bracco jointly and severally, was in the sum of 10,543,372 Swiss francs together with interest on the principal sum of Swiss fracs
9m and costs.
An appeal from that judgment was dismissed by the Court of Appeal of St Vincent in December 1989. There has been no
further appeal to Her Majesty in Council nor has there been any action in St Vincent seeking to set aside the judgment on the
ground of fraud. It is however, inter alia, on that ground that Bracco SpA and Bracco seek to resist the banks application to
register the judgment.

The background
The banks claim in the St Vincent action was simple but remarkable. It was that on 31 January 1979, Mr Armando Nano
(Nano), the then managing director of the bank and acting on its behalf, had lent to Bracco SpA the sum of 9m Swiss francs,
which had then been handed over in cash by Nano to Bracco, the president of Bracco SpA, acting on its behalf, or his own behalf.
The loan was made, it was said, on terms agreed orally including inter alia that it should be repayable in three tranches of 2m, 3m
and 4m Swiss francs on 27, 28 and 29 August 1979. This transaction was said to have taken place in the Hotel du Rhone,
Geneva, and was sought to be supported by three receipts, four acknowledgements and a letter on Hotel du Rhone paper (the loan
documents) all of which were said to have been signed by Bracco. The documents included provisions that gave the St Vincent
Supreme Court jurisdiction in the event of dispute.
Bracco denied the transaction in toto asserting that no loan had been agreed or made, that no cash had been handed over and
that the loan documents were forgeries never having been signed by him. Bracco SpA asserted that if Bracco had entered into
any such transaction he had no authority whatsoever to do so.
The bank is a St Vincent company but Bracco SpA is an Italian company and Bracco resides in that country. Nano is also an
Italian. The jurisdiction of the St Vincent courts thus rested on the jurisdiction provisions in the loan documents. That
jurisdiction was challenged and was decided in favour of the bank by Renwick J on the hearing of an application to strike out the
action for want of jurisdiction. From that decision there was no appeal. The point was sought to be raised again at the trial
before Singh J but he held that the matter had already been determined.
During the course of the banks case in St Vincent, the defence admitted that the signatures on the receipts and
acknowledgements were the signatures of Bracco. After the plaintiffs case was closed however, the defence intimated that they
wished to set up a new defence, namely that the signatures on the receipts 837 and acknowledgements were genuine signatures
but that they had originally appeared in the wide margins of a contract concerning a wholly different matter, that the margins with
the signatures had been cut off and that Nano or someone on his behalf or on behalf of the bank had then typed in the rest of what
appeared on the document. The contentions with regard to the letter were more complex but it is not necessary to set them out.
Singh J ruled that the defendants were not entitled to set up this defence at such a late stage and his ruling was upheld on appeal.
Singh J accepted the evidence of Nano and accordingly gave judgment for the bank.
The foregoing is a very much simplified account of the litigation in St Vincent. It is however sufficient for present purposes.
It will be apparent from it that there could be no possibility other than that either Nano or Bracco was committing perjury and
trying deliberately to deceive the court. By accepting the evidence of Nano, Singh J found, in effect, that it was Bracco who was
attempting to deceive it.
Before the St Vincent action was tried, the matter of the genuineness of the loan documents had already been raised
elsewhere. Bracco in response to a demand for repayment in November 1980 had stated in a letter of 4 December 1980 that the
documents were false and had never been signed by him, and there had been both criminal and civil proceedings in Italy in which
the question of fraud had been raised. Between the judgment in the Supreme Court of St Vincent and the dismissal of the appeal
therefrom yet further proceedings had been commenced in Italy including (1) civil proceedings at the suit of Bracco SpA and
Bracco seeking declarations of non-liability to the bank and (2) proceedings by the bank to enforce the St Vincent judgment.
After the St Vincent appeal was dismissed, yet further proceedings both criminal and civil were commenced in Italy. It is
unnecessary to go into the details of any of those proceedings. It is sufficient to say that the issue of fraud is squarely raised but
has not yet been decided.

The proceedings the subject of the appeal

On 7 March 1990 upon the ex parte application of the bank two orders were made by Sheen J. The first order was for a
Mareva injunction against Bracco SpA given upon the bank undertaking by counsel, inter alia, forthwith to issue an originating
summons in the form initialled by the judge. That summons sought registration of the St Vincent judgment and, in effect, the
continuation of the Mareva injunction.
The second order, somewhat surprisingly in the light of the first order, ordered that the said judgment be registered pursuant
to the 1920 Act, that the defendants be at liberty to apply to set aside the registration at the first hearing of the originating
summons if they had grounds for so doing and that execution on the judgment should not issue until after such hearing or any
extension granted by the judge or, if an application to set aside the registration were made, until such application was disposed of.
On 2 April the defendants issued an originating summons seeking orders inter alia that the aforementioned orders of Sheen J
and all subsequent proceedings be set aside.
Various alternative forms of relief were advanced but for present purposes the defendants contentions as revealed by the
summons may be summarised as follows.
 (1) The Convention on Jurisdiction and the Enforcement of Judgments in Civil and Commercial Matters 1968, the 1971
Protocol and the Accession Convention, 838all as defined in the Civil Jurisdiction and Judgments Act 1982, apply to proceedings
for registration and enforcement under the 1920 Act.
(2) The Italian civil proceedings were commenced before the plaintiffs application under the 1920 Act and raised the
question whether the St Vincent judgment was obtained by fraud.
(3) This court must, by virtue of art 21 of the 1968 convention, therefore decline jurisdiction in favour of the Italian courts.
(4) Alternatively, if art 21 is inapplicable, art 22 is applicable and the court can and should stay the proceedings here.
(5) If the convention does not apply, or notwithstanding that it does apply neither art 21 nor art 22 applies, the court has
power at common law to stay the proceedings here and should do so.
(6) Alternatively the court should order issues to be tried whether registration is prohibited on the facts by s 9(2)(d) and (f) of
the 1920 Act.
(7) It is in all the circumstances in any event not just and convenient to order registration.
We shall deal first with the applicability of the 1968 convention and the effect of arts 21 and 22. We do so under a general
heading.

Convention points
By way of preliminary it is first necessary to consider shortly the nature of the proceedings here. The long title to the 1920
Act includes the words to facilitate the reciprocal enforcement of judgments and awards in the United Kingdom and other parts
of His Majestys Dominions or Territories under His Majestys protection. The provisions for such facilitation are contained in
Pt II. Section 9(1) enables a judgment creditor who has obtained a judgment in a superior court of a dominion or territory to
which Pt II extends, to apply within 12 months after the date of the judgment to the High Court to have the judgment registered.
Upon such an application the court may, if in all the circumstances it thinks it just and convenient that the judgment should be
enforced in the United Kingdom, order the judgment to be registered.
It is to be noticed that registration is discretionary. What the court has to consider is whether it is just and convenient that
the judgment should be enforced in the United Kingdom. The power to register is, however, limited by sub-s (2) which provides
that a judgment shall not be registered in the cases set out in sub-paras ( a) to (f) of the subsection. We set out paras (d) and (f)
since they are or may be relevant to matters with which we shall deal later:

(d) the judgment was obtained by fraud; or (f) the judgment was in respect of a cause of action which for reasons
of public policy or for some other similar reason could not have been entertained by the registering court.

We can now turn to the 1968 convention which appears as Sch I to the Civil Jurisdiction and Judgments Act 1982, by s 2(1)
of which it is given the force of law. The preamble is in the following terms:

The High Contracting Parties to the Treaty establishing the European Economic Community,
Desiring to implement the provisions of Article 220 of that Treaty by virtue of which they undertook to secure the
simplification of formalities governing the reciprocal recognition and enforcement of judgments of courts or tribunals;
839
Anxious to strengthen in the community the legal protection of persons therein established;
Considering that it is necessary for this purpose to determine the international jurisdiction of their courts, to facilitate
recognition and to introduce an expeditious procedure for securing the enforcement of judgments, authentic instruments
and court settlements

This preamble appears to us to indicate clearly, as one might expect, that the convention is concerned with the jurisdiction of
the courts of contracting states inter se and the reciprocal recognition and enforcement of the judgments of the courts of
contracting states inter se. We say as one might expect because it would be surprising if contracting states were seeking to
affect the position of persons over whom their courts had no jurisdiction or to concern themselves with the recognition or
enforcement of judgments of the courts of non-contracting states. The latter would depend upon the particular arrangements
between a particular non-contracting state and whichever of the contracting states was addressed. At least prima facie the
reciprocal recognition and enforcement of the judgments of non-contracting state A in contracting states B and C must depend
wholly on the arrangements between state A and states B and C respectively. It has nothing whatever to do with anyone else.
Is there then anything in the body of the convention to support or militate against what appears to us to be the clear intention
indicated by the preamble?
The convention is divided into a number of titles of which we are principally concerned with the first three only: Title I
Scope; Title II Jurisdiction and Title III Recognition and Enforcement. Title I contains only art 1. It provides that the
convention shall apply in civil and commercial matters whatever the nature of the court or tribunal. The courts and tribunals
referred to must plainly be the courts and tribunals of contracting states only.
Title II contains arts 2 to 24 and is divided into eight sections. Section 1 is headed General Provisions. Articles 2 and 3
provide that, subject to the provisions of the convention, persons domiciled in a contracting state shall be sued in the courts of
that state and may only be sued in another contracting state by virtue of the rules set out in Sections 2 to 6 of Title II. Article 4
deals with cases where the defendant is not domiciled in a contracting state. In such cases the jurisdiction of the courts of each
contracting state is, subject to the provisions of art 16, to be determined by the law of that state and as against such a defendant a
person domiciled in a contracting state may avail himself in that state of the rules of jurisdiction there in force including in
particular certain rules which by art 3 are inapplicable as against persons who are domiciled in a contracting state.
This contrast is in our view of significance for it indicates what might be termed the internal intention of the convention.
There follow in Section 2 of Title II provisions concerning special jurisdiction for enabling a person domiciled in one
contracting state to be sued in another contracting state. Again the convention is dealing with internal matters.
The same can be said also of Sections 3 and 4 dealing with insurance and consumer contracts.
We come then to Section 5, Exclusive Jurisdiction. Article 16 provides that in five cases certain courts shall have
exclusive jurisdiction regardless of domicile. The fifth such case (art 16(5)) is in proceedings concerned with the enforcement of
judgments. In such a case exclusive jurisdiction is given to the Courts of the Contracting State in which the judgment has been
or is to be enforced.
This is the only provision in Title II which deals with jurisdiction in such cases. With it must be considered arts 19 and 23
which provide:
840

Article 19
Where a court of a Contracting State is seised of a claim which is principally concerned with a matter over which the
courts of another Contracting State have exclusive jurisdiction by virtue of Article 16, it shall declare of its own motion that
it has no jurisdiction.
 Article 23
Where actions come within the exclusive jurisdiction of several courts, any court other than the court first seised shall
decline jurisdiction in favour of that court.

In our view art 19 cannot apply to proceedings concerned with the enforcement of a judgment of a non-contracting state. It
envisages a claim in a contracting state which does not have exclusive jurisdiction, which is principally concerned with a matter
over which the courts of another contracting state do have conclusive jurisdiction. Such a situation cannot occur in the case of
enforcement proceedings. Nor do we consider that art 23 can apply. It refers to actions within the exclusive jurisdiction of
several courts and can in our view have no application to enforcement proceedings for in such a case exclusive jurisdiction is
given only to the courts of the contracting state in which the judgment is to be enforced.
Thus far everything appears to us to reinforce rather than detract from the indication to be drawn from the preamble. We
have not as yet mentioned arts 21 and 22 which are relied on by the defendants and we shall return to them in detail hereafter.
Suffice it for the present to say that we find nothing in either to indicate a wider scope for the convention than is indicated in the
preamble.
We move to Title III. Article 26 provides that a judgment given in a contracting state shall be recognised in the other
contracting states without any special procedure being required. This is beyond question reciprocal recognition of the judgments
of the courts of contracting states inter se.
By art 27 a judgment, which must mean a judgment of a contracting statesee art 25shall not be recognised in certain
cases. They are five in number. The first four are plainly internal cases. The fifth is

if the judgment is irreconcilable with an earlier judgment given in a non-Contracting State involving the same cause of
action and between the same parties, provided that the latter judgment fulfils the conditions necessary for its recognition in
the State addressed.

This is the only provision to which we were referred which mentions judgments of non-contracting states. It is a provision
of some importance. It envisages a judgment given in a non-contracting state, followed by a judgment in a contracting state
between the same parties and involving the same cause of action which is irreconcilable with it, followed by a question of
recognition of the later judgment in another contracting state. In such a case the later judgment is not to be recognised if, but
only if, the earlier judgment fulfils the conditions for recognition in the contracting state in which the question of recognition
arises. Here, surely, is explicit acceptance that as between a non-contracting state and a contracting state the recognition of the
judgment of the non-contracting state is a matter wholly dependant upon the arrangements between the non-contracting state and
the contracting state and that those arrangements will prevail in the event of conflict if the judgment of the non-contracting state
precedes the irreconcilable judgment of the contracting state. If it does not, the later judgment will be recognised as between
contracting states. No provision is made or needs to be made with regard to any conflict between the two judgments in such a
case.
841
As to enforcement, art 31 provides:

A judgment given in a Contracting State and enforceable in that State shall be enforced in another Contracting State
when, on the application of any interested party, the order for its enforcement has been issued there

Here again the convention is dealing explicitly only with the reciprocal enforcement of judgments of contracting states inter
se.
Nothing in the further provisions of the convention suggest any wider intention than is indicated by the preamble and the
provisions to which we have already referred. We conclude therefore, as did Sir Peter Pain, that it has no application to
proceedings for the recognition and enforcement of the judgments of non-contracting states and in particular to proceedings
under the 1920 Act.
We go on to consider whether, if we are wrong in that conclusion, either art 21 or art 22 applies. Article 21 provides:

Where proceedings involving the same cause of action and between the same parties are brought in the courts of
different Contracting States, any court other than the court first seised shall of its own motion decline jurisdiction in favour
of that court. A court which would be required to decline jurisdiction may stay its proceedings if the jurisdiction of the
other court is contested.

In our view this article could not avail the defendants. The courts of this country would have, by art 16(5), exclusive
jurisdiction in proceedings under the 1920 Act and in any event the article is clearly directed to proceedings which may lead to a
judgment, ie original proceedings, and not to proceedings to enforce a judgment which has been obtained in original proceedings,
such enforcement proceedings being expressly dealt with under Title III and expressly committed by art 16(5) to the courts of the
contracting state in which the original judgment has been or is to be enforced.
Article 22 provides:

Where related actions are brought in the courts of different Contracting States, any court other than the court first
seised may, while the actions are pending at first instance, stay its proceedings.
A court other than the court first seised may also, on the application of one of the parties, decline jurisdiction if the law
of that court permits the consolidation of related actions and the court first seised has jurisdiction over both actions.
For the purposes of this Article, actions are deemed to be related where they are so closely connected that it is
expedient to hear and determine them together to avoid the risk of irreconcilable judgments resulting from separate
proceedings.

Here again the article is in our view concerned with original proceedings or actions and not with proceedings for the
enforcement of judgments obtained in original proceedings. Moreover the provisions in the last paragraph appear to show that it
is only intended to apply where its application would avoid the risk of irreconcilable judgments from separate proceedings and
lead to both actions being heard and determined together. These requirements cannot apply where enforcement proceedings are
pending in different contracting states, each of which has by art 16(5) exclusive jurisdiction over the proceedings to enforce a
foreign judgment in its own jurisdiction.
Miss Dohmann QC submitted that the concluding phrase of the second 842 paragraph would be surplusage if this were so.
The second paragraph is not easy to follow. It envisages a situation where the court second seised has power to consolidate
related actions, ie related actions within its own jurisdiction. In such a situation it may decline jurisdiction over the second action
but only if the court first seised has jurisdiction over both actions. This must mean it would have jurisdiction if, the second court
having declined jurisdiction, the plaintiff could recommence the action in the court first seised. Thus far we see no difficulty. We
are however not clear why the paragraph should only apply when the court second seised has power to consolidate. Be that as it
may, Miss Dohmanns point does not appear to us to override the, to us, clear meaning of the final paragraph. In our view the
apparent surplusage can be explained by the fact that whereas the first paragraph provides only for a stay of the second action the
second deals with a refusal of jurisdiction. In such a case it may have been thought necessary to make it doubly clear that the
second court should only decline jurisdiction where the plaintiff had a clear right to resort to the first court.
We conclude therefore that even if the convention does in general apply the court here is not obliged to decline jurisdiction
under art 21 and has no power to stay the banks proceedings under the first paragraph of art 22, or decline jurisdiction under the
second paragraph of that article.
It is convenient now to turn to the question whether, as Sir Peter Pain held, an issue arises on the plaintiffs application for
registration under the 1920 Act, for if it does not no question of staying the proceedings can arise. This depends on the question
whether, in a challenge to registration of a foreign judgment or by way of defence to an action to enforce such a judgment on the
ground that it was obtained by fraud the respondent or defendant is bound by the rules of evidence applicable in such a case to the
enforcement of an English judgment or whether, as Sir Peter Pain held, the more liberal rules applicable where the judgment
attacked is a foreign judgment apply.
If the latter is the case Mr Mann QC for the bank accepts that there is clearly such an issue. If the former is the case Miss
Dohmann, while not formally accepting that there would be no issue, did not pursue any argument that there would still be such
an issue. In our view she was right to take this course. Under the rules applicable in the case of an English judgment there would
clearly be no issue. Accordingly Mr Mann contends that what may be called the English rules apply whilst Miss Dohmann
contends for the foreign rules.
Which of them is right depends essentially on whether we are bound by the decisions in Abouloff v Oppenheimer & Co
(1882) 10 QBD 295, [18815] All ER Rep 307 and Vadala v Lawes (1890) 25 QBD 310, [188690] All ER Rep 853, or whether,
notwithstanding those decisions, we are free to hold and should hold that the English rules apply also in the case of foreign
judgments.
We consider that question under the following heading.

The authority of Abouloff v Oppenheimer & Co

Miss Dohmann submitted that the question whether the defendants have put forward a sufficient case of fraud to require that
issue to be tried, and all the questions arising in the trial of that issue, are to be decided by the principles of common law by
reference to which the 1920 Act was passed, including those established by the decisions in Abouloff and Vadala. A judgment
debtor on a foreign judgment may, therefore, defend himself in this country by showing that the judgment was obtained by fraud
and it matters not that the fraud alleged has already been investigated by the foreign court even though, in such a case, the pleas
of fraud will involve a retrial in this country of the matters adjudicated 843 upon by the foreign court. It also matters not that the
unsuccessful party in the foreign proceedings refrained from raising the plea of fraud in those proceedings although the facts
were known to him at all material times. The learned judge was, therefore, wrong to require sufficient fresh evidence to support
the allegations of fraud on the authority of McIlkenny v Chief Constable of West Midlands Police Force [1980] 2 All ER 227 at
247, [1980] QB 283 at 333 per Goff LJ, which was not a decision on a foreign judgment; but, if fresh evidence is required by law,
the learned judge was right to hold that the requirement was satisfied.
Before stating the submissions made by Mr Mann for the bank, which have raised questions of fundamental importance in
the law of enforcement of foreign judgments which are not covered by the 1968 convention, it is necessary to state briefly the
course of the development of the common law on this subject. The first method of enforcement here of a foreign judgment was y
an action upon the judgment. The foreign judgment, in the absence of statute, could have no direct operation in England and
Wales because of the principle of the territoriality of a courts jurisdiction. At first, the basis for enforcing the foreign judgment
by action in this country was thought to be the doctrine of comity but that was later replaced by the doctrine of obligation, namely
that the judgment of a court having competent jurisdiction over the defendant imposed upon him an obligation to pay the sum for
which judgment had been given: see Russell v Smyth (1842) 9 M & W 810 at 819, 152 ER 343 at 347, Schibsby v Westenholz
(1870) LR 6 QB 155, [186173] All ER Rep 988, and the cases cited in Dicey and Morris The Conflict of Laws (11th edn, 1987)
vol 1, p 420. It followed that anything which may properly be held to negative that obligation was a defence to the action upon
the judgment. It is pointed out by the learned editors of Dicey and Morris p 421 that the right, which the plaintiff seeks to
enforce in such proceedings, is a right created and defined by English law and not by foreign law. Thus, in order for the foreign
judgment to be enforced in this country, it is essential that the foreign court should have had jurisdiction over the defendant, not
in the sense of the foreign law but according to the rules of our law: see Adams v Cape Industries plc [1991] 1 All ER 929 at 999,
[1990] Ch 433 at 513; and the defences which may be pleaded by the defendant in an action upon a foreign judgment, such as
that the judgment was obtained by fraud, are themselves creatures exclusively of English law.
Two principles of our law were liable to be brought into direct conflict in such proceedings: the first was that no man should
be permitted to take advantage of his own wrong, such as by enforcing for his benefit a judgment which he had procured by
fraud; and the second was that the decision of a court of competent jurisdiction, including a foreign court, was not examinable
upon its merits, whether as to decisions of law or of fact. Since it was clearly established that fraud is an extrinsic collateral act
which vitiates the most solemn proceedings of courts of justice (per De Gray CJ in the Duchess of Kingstons Case (1776) 1 East
PC 468, [17751802] All ER Rep 623) the resolution of the conflict between those principles in a particular case might depend
upon whether our law would permit the judgment debtor to raise again, for decision in our courts, allegations of fraud which he
had raised against the plaintiff in the foreign court and which had been rejected by the foreign court, or allegations of fraud which
he might have, but had not raised in that court, or whether our law would limit the judgment debtor to allegations of fraud which
are based upon facts which he had been unable to raise in the foreign court through ignorance of them. In short, the questions
were whether the foreign court was to be trusted to have decided correctly, if raised before it, the issue whether the claim was
fraudulently made, just as it was trusted 844 to decide all other questions of law and fact; and whether a party to proceedings in a
foreign court was to be required to bring forward for decision before that court all matters of defence and evidence in support of
them available to him, as was a party to proceedings in this country: see Henderson v Henderson (1843) 3 Hare 100 at 115, 67
ER 313 at 319 per Wigram V-C, cited in Yat Tung Investment Co Ltd v Dao Heng Bank Ltd [1975] AC 581 at 590.
In Bank of Australasia v Nias (1851) 16 QB 717, 117 ER 1055 a judgment had been obtained in the court of New South
Wales by plaintiffs against the chairman of the banking company for 175,000 for damages for breach of contract by the
company. By a statute of New South Wales the action against the chairman was effective to establish the liability of the
shareholders in the banking company and the judgment had the same effect beyond the territory of New South Wales which it
would have had if the shareholders had been personally served with the proceedings. The court, Lord Campbell CJ, Patteson,
Coleridge and Wightman JJ, held that, although in an action on a foreign or colonial judgment the judgment is examinable to a
certain extent, as for the purpose of showing want of jurisdiction, or that the defendant was not summoned, or that the judgment
was fraudulently obtained, yet such judgment was not examinable upon the merits, as for the purpose of showing that the contract
sued upon was not made, or was procured by fraud, or that the judgment was erroneous. The court held in particular that the plea
that the contractual promises in respect of which the judgment was obtained had been procured by the fraud of the plaintiffs and
others in collusion with them, was bad in law as a defence by a shareholder to an action upon the judgment. They explained that
conclusion, in words upon which Mr Mann has much relied, as follows ((1851) 16 QB 717 at 735737, 117 ER 1055 at 1063):

We do not think that there would be any advantage in going over the authorities seriatim, attempting either to reconcile
them or to contrast them. It may be enough to say that the dicta against retrying the cause are quite as strong as those in
favour of this proceedings and, being left without any express decision, now that the question must be expressly decided,
 we must look to principle and expediency. The pleas demurred to might have been pleaded, and, if there by any foundation
for them, they ought to have been pleaded, in the original action. They must now be taken to have been in due manner
decided against the defendant. How far it would be permitted to a defendant to impeach the competency, or the integrity,
of a foreign Court from which there was no appeal, it is unnecessary here to inquire: for no imputation is cast upon the
Court by which this judgment was pronounced; and we are bound to take judicial notice that by the law and constitution of
this empire there is an appeal from it to Her Majesty, who would refer the appeal to the Judicial Committee of Her Privy
Council. I will not take notice of the fact of there having been an appeal; but I may say that either there has or there has not
been an appeal; and in either case it seems contrary to principle and expediency for the same questions to be again
submitted to a jury in this country. A regular mode having been provided by which an erroneous judgment of a colonial
Court may be examined and reversed, that mode ought to be pursued. Before the Judicial Committee, the Judges there
presiding would fairly examine the judgment, and only set it aside if it was unjust. But, although perfectly regular and just,
it may be set aside if the same questions are again to be submitted to a jury. Although the onus probandi is now to be
shifted to the defendant, he is to be at liberty to adduce 845 new witnesses, whom he may suborn, to prove that the
Company never made the promises which were the foundation of the judgment, or that these promises were obtained by the
fraud and covin of the plaintiffs. The documents by which the original cause of action was established in a distant quarter
of the globe may be lost or not forthcoming; and the witnesses who truly swore to it may be dead or absent. The defendant
may have failed in an appeal to the Judicial Committee, or may be conscious that there is no ground for it; and, if he has
this opportunity of again contesting his liability, he may, from the loss of evidence by the plaintiffs, or from a temptation to
bring forward false evidence himself, unconscientiously resist the payment of a just demand which had been solemnly
adjudicated by a competent tribunal. No hardship whatsoever is cast upon him by requiring him to follow the course to
obtain redress against an unjust or erroneous judgment which the law has provided for him. It is to be said that the peril to
the plaintiffs may be obviated by establishing a rule that the cause shall be retried upon the very evidence given in the
Court below, the jury acting as a Court of Appeal? But there is no authority for this limitation of the enquiry; and these
pleas must lead to a new trial, not to an appeal, upon the merits of the judgment which has been pronounced. (Our
emphasis.)

The effect of that decision, which was upon the sufficiency of a plea in law without reference to the nature of the evidence
which might be said to be available in support of it, was to apply the rule in Henderson v Henderson to the defence to an action
on a foreign judgment at least so far as concerns an allegation of fraud affecting the cause of action upon which the judgment
creditor had based his claim as distinct from an allegation of fraud affecting the conduct of the proceedings or of the court itself.
In effect, in such a case, the rules applied to the questioning of a foreign judgment were the same as those which were applicable
by an English court to any attempt to set aside an English judgment. Our law had long permitted the party against whom an
English judgment had been given to bring an independent action to set aside the judgment on the ground that it had been obtained
by fraud but strict limits were imposed in order to preserve the principle that a judgment which brings litigation to an end should
not be too easily disturbed. In particular the court would not permit the new action to proceed unless the plaintiff could put
forward fresh evidence, discovered since the first trial, being evidence which could not have been produced then with reasonable
diligence, and which is such that, if it had been put forward at the trial, it would in probability have caused a different conclusion
to be reached: see Dicey and Morris p 467, citing Boswell v Coaks (1894) 6 R 167 and other cases. A similar rule was applied in
Scotland as appears from Phosphate Sewage Co Ltd v Molleson (1879) 4 App Cas 801 at 814 where Earl Cairns LC said:

As I understand the law with regard to res judicata, it is not the case, and it would be intolerable if it were the case,
that a party who has been unsuccessful in a litigation can be allowed to re-open that litigation merely by saying, that since
the former litigation there is another fact going exactly in the same direction with the facts stated before, leading up to the
same relief which I asked for before, but it being in addition to the facts which I have mentioned, it ought now to be
allowed to be the foundation of a new litigation, and I should be allowed to commence a new litigation merely upon the
allegation of this additional fact. My Lords, the only way in which that could possibly be admitted would be if the litigant
were prepared to say, I will shew 846 you that this is a fact which entirely changes the aspect of the case, and I will shew
you further that it was not, and could not by reasonable diligence have been ascertained by me before.

In 1882 this court decided Abouloff v Oppenheimer & Co (1882) 10 QBD 295, [18815] All ER Rep 307. The plaintiff
claimed upon a Russian judgment whereby the defendants had been ordered to return to the plaintiff certain goods, or to pay to
her their value. The defence alleged that the plaintiff obtained the foreign judgment by fraudulently representing to the foreign
court that the goods were not then in her possession and by fraudulently concealing from the foreign court that the goods were in
her possession. The plaintiff demurred to that defence and then contended that, assuming the facts to be as alleged, the plaintiffs
were nevertheless entitled to enforce the Russian judgment. It was argued for the plaintiff that it was consistent with the defence
that the question as to the alleged fraud was investigated in the Russian courts and decided against the defendant and that, upon
the authority of Bank of Australasia v Nias, the English court could not enquire into the merits of the case.
Lord Coleridge CJ clearly rejected any connection that the rules applicable to the raising of fraud as a defence to an action
upon a foreign judgment were the same as those applicable to an attempt to set aside in this country a judgment of an English
court. He held (10 QBD 295 at 301, [18815] All ER Rep 307 at 309):

the question for the Courts of this country to consider is whether, when a foreign judgment is sought to be enforced
by an action in this country, the foreign court has been misled intentionally by the fraud of the person seeking to enforce it,
whether a fraud has been committed upon the foreign court with the intention to procure its judgment.

Then he continued (10 QBD 295 at 302, [18815] All ER Rep 307 at 310):

An ingenious attempt has been made to take this case out of the general proposition, and to call in aid another equally
clear proposition, namely, that the courts of this country in dealing with a foreign judgment will not inquire whether the
foreign court pronounced the judgment correct in point of law, or right and accurate in point of fact, and that inasmuch as
the defence now relied upon might have been, and perhaps was, brought before the foreign court which decided against the
allegation of fraud, the foreign court, in the words of De Grey, C.J., was mistaken and not misled. The answer to that
contention has been given in the course of the argument for the defendants. We are to decide whether the courts at Tiflis
have been misled by the fraud of the plaintiff; but the question whether they were misled, never could have been submitted
to them, never could have been in issue before them, and therefore never could have been decided by them. The English
courts are not either re-trying or even re-discussing any question which was or could have been submitted to the
determination of the Russian courts.

Baggallay LJ said (10 QBD 295 at 303, [18815] All ER Rep 307 at 310):

If the judgments had not been improperly obtained, the right of the plaintiff would be clear. In using the words
improperly obtained, I desire to be understood as not limiting them to a case where a fraud had been perpetrated upon the
 foreign court itself. I apply them also to a case where a fraud has been perpetrated and the foreign court was not ignorant
of the facts on which the assertion of fraud was based.

Brett LJ said (10 QBD 295 at 306, [18815] All ER Rep 307 at 311):
847

I will assume that in the suit in the Russian courts the plaintiffs fraud was alleged by the defendants, and that they
gave evidence in support of the charge: I will assume even that the defendants gave the very same evidence which they
propose to adduce in this action; nevertheless the defendants will not be debarred at the trial of this action from making the
same charge of fraud and from adducing the same evidence in support of it

Vadala v Lawes (1890) 25 QBD 310, [188690] All ER Rep 853 was decided in this court by Lindley and Bowen LJJ. The
facts of that case raised again the question whether, in an action here on a foreign judgment, the defendant could plead as a
defence that the plaintiff had obtained the judgment by fraud when that very allegation had been considered by the foreign court
and rejected. The plaintiff had obtained judgment upon the judges direction but the Divisional Court had directed a new trial on
the ground that such a defence was open to the defendant. The argument for the plaintiff in this court was supported by reference
to authorities which included Bank of Australasia v Nias, Flower v Lloyd (No 2) (1879) 10 Ch D 327, Henderson v Henderson
and Ochsenbein v Papelier (1873) LR 8 Ch App 695. It was submitted for the plaintiff that the decision in Abouloff must be read
with reference to the special circumstances of the case, and could not have been intended to overrule the long current of previous
authorities. To say that the English court is not retrying the question as decided by the foreign court, if all the facts were before
the foreign court, merely because the question of fraud was not submitted to it, would be to fritter away the rule that the merits
cannot be retried by the English court.
The attempt to persuade this court to modify or to depart from the decision in Abouloff did not succeed. In a judgment with
which Bowen LJ agreed, Lindley LJ said (25 QBD 310 at 316317, [188690] All ER Rep 853 at 855856):

But we now come to another and a more difficult question, and that is, whether this defence can be gone into at all.
There are two rules relating to these matters which have to be borne in mind, and the joint operation of which gives rise to
the difficulty. First of all, there is the rule that a party to an action can impeach the judgment in it for fraud. Whether it
is the judgment of an English Court or of a foreign Court does not matter; using general language, that is a general
proposition unconditional and undisputed. Another general proposition which, speaking in equally general language, is
perfectly well settled, is, that when you bring an action on a foreign judgment, you cannot go into the merits which have
been tried in a foreign Court. But you have to combine those two rules and apply them in the case where you cannot go
into the alleged fraud without going into the merits. Which rule is to prevail? That point appears to me to have been one of
very great difficulty before the case of Abouloff v. Oppenheimer. At the time when that case was decided, namely, in 1882,
there was a long line of authorities including Bank of Australasia v. Nias, Ochsenbein v. Papelier and Cammell v. Sewell
((1860) 5 H & N 728, 157 ER 1371), all recognising and enforcing the general proposition, that in an action on a foreign
judgment you cannot retry the merits. But until Abouloffs case the difficulty of combining the two rules and saying what
ought to be done where you could not enter into the question of fraud to prove it without reopening the merits, had never
come forward for explicit decision. That point was raised directly in the case of Abouloff v. Oppenheimer and it was
decided. I cannot fritter away that judgment, and I cannot read the judgments without seeing that they amount to this: that
if the fraud upon the foreign Court consists in the fact that the 848 plaintiff has induced that Court by fraud to come to a
wrong conclusion, you can reopen the whole case even although you will have in this Court to go into the very facts which
were investigated, and which were in issue in the foreign Court. The technical objection that the issue is the same is
technically answered by the technical reply that the issue is not the same, because in this Court you have to consider
whether the foreign Court has been imposed upon. That, to my mind, is only meeting technical argument by a technical
answer, and I do not attach much importance to it; but in that case the Court faced the difficulty that you could not give
effect to the defence without retrying the merits. The fraud practised on the court, or alleged to have been practised on the
Court, was the misleading of the Court by evidence known by the plaintiff to be false. That was the whole fraud. The
question of fact, whether what the plaintiff had said in the Court below was or was not false, was the very question of fact
that had been adjudicated on in the foreign Court; and, notwithstanding that was so, when the Court came to consider how
the two rules, to which I have alluded, could be worked together, they said: Well, if that foreign judgment was obtained
fraudulently, and if it is necessary, in order to prove that fraud, to re-try the merits, you are entitled to do so according to the
law of this country. I cannot read that case in any other way.

The rule thus established with reference to foreign judgments has been criticised by distinguished academic authors: see the
references in Dicey and Morris p 469, footnote 66, from which it seems that the rule applied in Canada is different. The rule has,
however, not been doubted as to its authority in any judgments in this court or in the House of Lords. Decisions in which the rule
has been recognised and applied will be noted later in this judgment.
We have, hitherto, been considering the enforcement of foreign judgments by proceedings at law in this country. Some
foreign judgments have long been enforceable under statute. The Judgments Extension Act 1868 applied to United Kingdom
judgments but the terms of that statute need not be considered here. The 1920 Act, under which the bank seeks to register the St
Vincent judgment, provided for the reciprocal enforcement of the judgments of the superior courts within the United Kingdom
and corresponding courts of other territories within the Commonwealth. Part of the submissions for the bank rests upon the terms
of the 1920 Act and reference must be made to some of them.
The power to register a foreign judgment which is given by s 9(1) of the 1920 Act is discretionary:

the court may, if in all the circumstances of the case they think it is just and convenient that the judgment should be
enforced in the United Kingdom, and subject to the provisions of this section, order the judgment to be registered
accordingly.

The remaining provisions of the section which need to be set out, are as follows:

(2) No judgment shall be ordered to be registered under this section if(a) the original court acted without
jurisdiction; or (b) the judgment debtor, being a person who was neither carrying on business nor ordinarily resident within
the jurisdiction of the original court, did not voluntarily appear or otherwise submit or agree to submit to the jurisdiction of
that court; or (d) the judgment was obtained by fraud; or (f) the judgment was in respect of a cause of action which
for reasons of public policy or for some other similar reason could not have been entertained by the registering court.
849
(3) Where a judgment is registered under this section(a) the judgment shall, as from the date of registration, be of the
same force and effect, and proceedings may be taken thereon, as if it had been a judgment originally obtained or entered up
on the date of registration in the registering court; (b) the registering court shall have the same control and jurisdiction over
the judgment as it has over similar judgments given by itself, but in so far only as relates to execution under this section;
 (4) Rules of court shall provide(a) for service on the judgment debtor of notice of the registration of a judgment
under this section; and (b) for enabling the registering court on an application by the judgment debtor to set aside the
registration of a judgment under this section on such terms as the court thinks fit; and (c) for suspending the execution of a
judgment registered under this section until the expiration of the period during which the judgment debtor may apply to
have the registration set aside

The statute contains no provision for rules by reference to which the court is required to decide whether a prima facie case
has been raised by a judgment debtor to the effect that the judgment was obtained by fraud, or whether such a contention has
been established in law. Parliament is to be taken to have intended that such questions be decided by reference to the common
law which, as Parliament knows, is developed by the courts to meet particular cases as they arise.
The Foreign Judgments (Reciprocal Enforcements) Act 1933 was based upon reciprocity and is capable of being applied,
and has been applied, to countries outside the Commonwealth. We do not find it necessary for the purposes of this case to
consider the language of the provisions of the 1933 Act. It is sufficient to note that by s 4

the registration of [a foreign judgment] (a) shall be set aside if the registering court is satisfied (iv) that the
judgment was obtained by fraud

Again, in this Act, no rules are enacted with reference to the decision of any issue as to whether the judgment was obtained
by fraud.

The submissions for the bank on Abouloff

Mr Manns submissions were directed to showing that the evidence put forward by Bracco did not in law justify a direction
for the trial of the alleged issue of fraud. We believe that those submissions can be fairly summarised as follows.
(i) The principles on which the court will, at common law, refuse to recognise or to enforce a foreign judgment are the same
as those on which the court will set aside an English judgment.
(ii) Those principles apply to a decision of the question whether a foreign judgment is shown to have been obtained by fraud
under the 1920 Act.
(iii) In particular, once a judgment has been registered under the 1920 Act it has effect, by virtue of s 9(3)( a) thereof, which
is set out above, as if it were an English judgment. Therefore, upon fraud being raised by the judgment debtor, the court, in
exercising its discretion whether or not to direct an issue to be tried, is, by implication, directed to apply the principles which the
court would apply upon an application to set aside an English judgment.
(iv) The principles applicable to the setting aside of an English judgment are those which were laid down in Bank of
Australasia v Nias and in Boswell v Coaks (1894) 6 R 167, and which have been recently expressed in McIlkenny v Chief 850
Constable of West Midlands Police Force [1980] 2 All ER 227 at 247, [1980] QB 283 at 333 by Goff LJ:

where the issue at the first trial was which of two parties or their witnesses was committing perjury, it is not
sufficient merely to aver that the judgment was obtained by perjury since that is no more than to say the decision ought to
have gone the other way. There must be sufficient fresh evidence to support the allegation.

(v) This court went wrong in Abouloff. Neither Abouloff nor Vadala was distinguishable on its facts from Bank of
Australasia v Nias which, in Ochsenbein v Papelier (1873) LR 8 Ch App 695, had received the stamp of approval of the Court of
Appeal.
(vi) This court is free to decline to follow Abouloff and Vadala, under the principles stated in Young v Bristol Aeroplane Co
Ltd [1944] 2 All ER 293 at 300, [1944] KB 718 at 729, in that: (a) the court is entitled to decide which of two conflicting
decisions of this court it will follow, ie it should follow the decision in Bank of Australasia v Nias as approved in Ochsenbein; (b)
the court should hold itself bound to refuse to follow Abouloff on the ground that it cannot stand with a decision of the House of
Lords, namely Boswell v Coaks, which settled the general principles; and (c) this court should hold itself free not to follow
Abouloff on the ground that the decision was there made per incuriam in that the court acted in apparent ignorance of previous
decisions of courts of co-ordinate jurisdiction which covered the facts in Abouloff, namely the cases which established the
Chancery practice for the setting aside of English judgments and the decision in Phosphate Sewage Co Ltd v Molleson (1879) 4
App Cas 801.
(vii) The attempt to raise the issue of fraud in the banks enforcement proceedings falls clearly within the mischief perceived
by the court in Bank of Australasia v Nias and described in the passage cited above: the defendants did appeal the judgments in
St Vincent and their appeal was dismissed; and they could have appealed to the Privy Council but did not do so, perhaps because
they were conscious that there was no ground for such appeal.
(viii) As we understood his submissions, Mr Mann did not seek to uphold the judges ruling that, if the rule in Abouloff is to
be applied, there was now a requirement of fresh evidence.

Conclusion: the authority of Abouloff

We have found it impossible to accept the submissions for the bank on this part of the case. The decisions in Abouloff and
Vadala are, in our judgment, clearly binding on this court. In particular, it is clear to us that the rules for setting aside an English
judgment on the ground that it was obtained by fraud are not the same as those applicable in registration proceedings or in a
common law action to the raising of an issue of fraud with reference to a foreign judgment. As to the point that the defendants
could have appealed to the Privy Council but did not, we have noted what was said in Bank of Australasia v Nias on the matter.
It was part of the reasoning on which the conclusion in that case was reached. It was not, however, and could not now be treated
as, a separate rule applicable to judgments of countries which retain such a right of appeal.
In Abouloff the court declined to apply the principles stated in Bank of Australasia v Nias, namely that a judgment debtor in
this country could not raise as a defence an allegation that the judgment creditors cause of action had been fraudulently
advanced, whether that allegation had or had not been put forward in the foreign court. One part of the courts reasoning in
Abouloff, namely that the question 851 whether the Russian court had been misled, in deciding that the plaintiff had not advanced
a fraudulent claim, was a question which had not been and could not have been considered by that court, is one which seems to
us, with respect, to be unconvincing. Any court, in considering whether a claim is honest or fraudulent, having regard to the
evidence of both sides, must, if it is acting in good faith, be considering and deciding whether the claimant is trying to mislead
the court; and, in the absence of significant fresh evidence not before the foreign court, it seems to us that, in substance, the court
in Abouloff was being asked to consider again the same question which the Russian court had decided. The decision in Abouloff
was, no doubt, based at least in part upon the courts view of what was the better course, having regard to policy and expediency,
just as was, explicitly, the preceding decision in Bank of Australasia v Nias. In Vadala, that part of the reasoning in Abouloff,
which we have said we find to be unconvincing, was acknowledged by Lindley LJ to be the meeting of technical argument by
technical answer and he did not attach much importance to it, but, in agreement with Bowen LJ, he declined to depart from the
decision in Abouloff. Criticisms of the case, and the fact that a different rule might have been developed by the common law,
seem to us to be of no force for the purpose for which they are put forward. The court in Abouloff made a decision that the rules
relating to the defence to an action on a foreign judgment were not the same as those applying to the setting aside of an English
judgment. It is of no relevant effect that the court might have decided the case differently.
 Next, the submission that Bank of Australasia v Nias was approved in Ochsenbein, in such a way that the two cases
constitute decisions of this court in conflict with Abouloff, seems to us to be unsustainable. In Ochsenbein Papelier sued
Ochsenbein in the Court of Queens Bench upon a judgment obtained by Papelier at Nancy in France. Ochsenbein then filed a
bill in Chancery against Papelier alleging that the French judgment had been obtained by fraud, in that Papelier had by deceit
caused Ochsenbein not to defend the French proceedings; that Ochsenbein had thereby no defence to the action at law; and that
Papelier should be enjoined from proceeding at law. The injunction was refused by Lord Selborne LC and Mellish LJ on the
ground that if the foreign judgment was shown to have been obtained by fraud it was void as much at law as it was in equity.
There was therefore no need for the equitable remedy claimed. Both Lord Selborne and Mellish LJ referred, without adverse
comment, to Bank of Australasia v Nias and Mellish LJ said (LR 8 Ch App 695 at 700701):

It was always held that a foreign judgment could be impeached at law on the ground that the judgment was
fraudulently obtained. But the doubt was whether the Court could not enter into the merits, and whether, when the action
was brought in this country, the foreign judgment was more than a prim facie case, to which the Defendant might plead
that the matter was improperly decided. That doubt was settled in the case of Bank of Australasia v Nias, which shewed
that the merits could not be opened again, and that if the question between the parties had been decided by a foreign Court
with jurisdiction, that decision was conclusive; but if the foreign judgment was obtained by fraud, that would be an answer
to any proceedings founded on that judgment.

The distinction between alleged fraud, which if proved would destroy the cause of action, such as was put forward in Nias, and
fraud such as was alleged by Ochsenbein, which was unknown to him and therefore not considered by the foreign court, was not
expressly examined. It did not require to be examined. 852That sort of alleged fraud, which was held in Nias not to give rise to
a defence in proceedings on a foreign judgment, was, quite plainly, not alleged by Ochsenbein. The case does not, in our view,
contain any implicit ruling that the common law courts required the same quality of evidence to raise a plea of fraud as a defence
to an action on a foreign judgment as was required by the Chancery courts with reference to the setting aside of an English
judgment.
Next, as to the submission that there is an inconsistent decision of the House of Lords, namely that in Boswell v Coaks, there
is, in our judgment, a short answer. Abouloff was a decision upon the enforcement of a foreign judgment. The decision in
Boswell v Coaks in the House of Lords was made in proceedings to set aside an English judgment on the ground that it was
obtained by fraud. It decided, in our view, nothing with reference to foreign judgments. Reliance on Boswell v Coaks, in this
context, becomes irrelevant upon the failure by Mr Mann to demonstrate that the rules for foreign judgments are the same as for
English judgments.
Finally, the decision in Abouloff was very plainly not, in our judgment, in any sense per incuriam. It is as impossible to
suppose that the judges who decided that case were ignorant of the rules of practice to set aside English judgments as it would be
to hold that the failure to cite or to refer to the Phosphate Sewage case affected in any way the validity of the decision. The
Phosphate Sewage case was, again, and was expressly stated to be, not a case of enforcement of a foreign judgment.
The decisions in Abouloff and Vadala have been consistently treated by this court as binding authorities. Some of the later
decisions must be mentioned but we do not find it necessary to refer to all which were cited. In Syal v Heyward [1948] 2 All ER
576, [1948] 2 KB 443 the issue arose in enforcement proceedings with reference to an Indian judgment under the 1933 Act. This
court refused to apply the rules applicable to the setting aside of an English judgment and applied the rule stated in Abouloff as
explained in Vadala citing the passage from the judgment of Lindley LJ which is set out above in this judgment.
In Jet Holdings Inc v Patel [1989] 2 All ER 648, [1990] 1 QB 335, an action was brought to enforce a judgment of the
Superior Court of California. The defence included the contention that the judgment had been obtained by fraud. The defendant
appealed to this court from an order giving the plaintiff summary judgment for the amount of the foreign judgment. Staughton
LJ, with whose judgment Nicholls LJ agreed, said ([1989] 2 All ER 648 at 652, [1990] 1 QB 335 at 344):

That doctrine [based on the decision in Abouloff] has encountered criticism from academic writers A possible view
which is taken by some is that the fraud relied on must be extraneous or collateral to the dispute which the foreign court
determines. But in my judgment it is a hundred years too late for this court to take that view. The decisions in Abouloff
and Vadala show that a foreign judgment cannot be enforced if it was obtained by fraud, even though the allegation of
fraud was investigated and rejected by the foreign court.

As to House of Spring Gardens Ltd v Waite [1990] 2 All ER 990, [1991] 1 QB 241, which is considered later in this
judgment with reference to issue estoppel arising from a foreign judgment, it is sufficient to note at this point that this court again
held itself bound by Abouloff and Vadala.
As to the point put forward on the terms of the 1920 Act, there is, in our judgment, no force in it. The meaning of the
provisions in s 9 of that Act is, we think, clear. The intention is that there should be no effective registration of a 853 foreign
judgment if a prima facie case is put forward to the effect that it was obtained by fraud, until that issue has been decided. It is
contemplated by s 9(4) that the court may, in a particular case, order on an ex parte application that a judgment be registered
before it is known whether the judgment debtor will claim to challenge the registration on any of the grounds set out in s 9(3). If
the court does so order, execution of the judgment so registered must be suspended until the expiration of the period during which
the judgment debtor may apply to have the judgment set aside: see RSC Ord 71, rr 2 to 9, made pursuant to ss 9(4) and 11 of the
1920 Act. In particular, it is to be noted that when the application is made ex parte, the court, under r 2, may direct a summons to
be issued. In this case, as has been stated earlier in this judgment, the court ordered registration on the ex parte application and
directed a summons to be issued because, in discharge of its obligation on an ex parte application, the bank had informed the
court of the fact that the defendants were contending that the judgment had been obtained by fraud. There was, we think, clearly
some confusion because it cannot be right to direct registration and, at the same time, order that a summons be issued for
determination of the question whether the judgment should be registered. It is, however, clear that no harm was caused by this
element of confusion. The essential point at this stage is that, in our judgment, it is impossible to attribute to Parliament, from the
words used in s 9, any intention that, if the court should order registration, subject to the judgment debtors right to apply to have
that registration set aside, the rules then applicable to the question whether the judgment debtor has any defence against
enforcement are to be the same as if he were applying to have an English judgment set aside. It is, in our view, wholly clear that
the words in s 9(3)(a), to the effect that, from the date of registration, the foreign judgment is to be of the same effect as if it had
been a judgment originally obtained in the courts of this country, are directed to a judgment registered after the decision of any
question raised by the judgment debtor under s 9(2).
It is, therefore, clear that in the banks proceedings under the 1920 Act the rule in Abouloff is to be applied. That rule did not
include, as the above citations from the judgments in Abouloff and Vadala make clear, any requirement of fresh evidence whether
in the limited sense derived by the learned judge from McIlkenny v Chief Constable of West Midlands Police Force, or any other
terms. The decision in McIlkenny was not directed to the enforcement of a foreign judgment. The question to be considered on
the evidence in this case is whether a prima facie case had been put forward by the defendants that the St Vincent judgments were
obtained by fraud. In our judgment, there is clearly such a prima facie case. We accordingly agree with Sir Peter Pain that there
is an issue to be tried.
 There remain for consideration two questions to be answered: (1) has the court power to grant a stay of the English
enforcement proceedings pending the resolution in Italy of the same issue and (2) if so, should the court, as a matter of discretion,
grant a stay in the circumstances of the present case?
(1) Jurisdiction
Rule 33 in Dicey and Morris The Conflict of Laws (11th edn, 1987) vol 1, p 389 is in the following terms:

(1) English courts have jurisdiction, whenever it is necessary to prevent injustice, to stay an action or other
proceeding in England
(2) As a general rule in order to justify a stay of English proceedings (a) there must be another forum to whose
jurisdiction the defendant is amenable 854 in which justice can be done between the parties at substantially less
inconvenience or expense and (b) the stay must not deprive the plaintiff of a legitimate personal or juridical advantage
which would be available to him if he invoked the jurisdiction of the English court .

(Clause (3) concerns the 1968 Convention.)

This passage in Dicey and Morris is supported by copious citation of authority and we accept it as an accurate statement of
the relevant principles. The jurisdiction is frequently invoked in circumstances covered by the Latin tags forum non conveniens
and lis alibi pendens, but these are no more than convenient labels to describe particular fields in which the general principle,
the prevention of injustice, may be applicable. The principles applicable to staying of actions on the basis of forum non
conveniens have recently been restated by the House of Lords in Spiliada Maritime Corp v Cansulex Ltd, The Spiliada [1986] 3
All ER 843, [1987] AC 460, from which it is apparent that the tag may be inapt to describe the relevant principles, since the
question is not one of convenience, but of the suitability or appropriateness of the relevant jurisdiction. Stated thus, it is apparent
that the English court must always be the appropriate forum to determine whether a foreign judgment should be enforced in
England. So we agree with the judge when he said:

In relation to enforcement, there is no question of forum conveniens, nor is there any ground for compelling a
judgment creditor to elect as to his forum. He is perfectly entitled to seek enforcement until his judgment debt is satisfied.
The English court must control enforcement in England. There is no good ground for subordinating the English
proceedings to the proceedings in Italy.

However, in the course of proceedings in England to enforce a foreign judgment an issue may arise which may also have
arisen in a foreign court. That foreign court may, or may not, be the court of the country from which the judgment to be enforced
originates. In the present case that issue is whether the St Vincent judgment was obtained by fraud. That issue has also arisen in
the Italian courts. It might have been, but was not, raised as such in the courts of St Vincent. The question is: in these
circumstances does the English court have power to stay the English enforcement proceedings until the issue has been determined
in Italy? It seems to us to be irrelevant whether we approach this question under the label lis alibi pendens, or whether we
approach it by considering whether the Italian court is the appropriate forum for the determination of this particular issue: the
question is still one of the application of the general principles set out in r 33 in Dicey and Morris.
We find it helpful to approach this question by considering first whether, if the Italian courts were to reach a decision on the
issue before it comes to be tried in England, that decision would create an issue estoppel binding on the parties in the English
enforcement proceedings. It is now well established that issue estoppel can be based on a foreign judgmentsee Carl-Zeiss-
Stiftung v Rayner & Keeler Ltd (No 2) [1966] 2 All ER 536, [1967] 1 AC 853; The Sennar (No 2) [1985] 2 All ER 104, [1985] 1
WLR 490although the doctrine must be applied with caution because of the uncertainties arising from the differences of
procedure in foreign countries. Further, this court in House of Spring Gardens Ltd v Waite [1990] 2 All ER 990, [1991] 1 QB 241
held that a decision that a foreign judgment had not been obtained by fraud raised an issue estoppel against defendants who
sought to raise the same allegations in English proceedings to enforce the judgment. In that 855 case the judgment sought to be
enforced was a 1982 judgment given by Costello J in the High Court of the Republic of Ireland. In 1985 the defendants started
proceedings in the Republic of Ireland claiming that the 1982 judgment had been obtained by fraud. That action was heard and
dismissed by Egan J in the High Court of Ireland in 1987. The plaintiffs sought to enforce the 1982 judgment in England by an
action at common law and the defendants again sought to raise the defence that the 1982 judgment had been obtained by fraud.
This court (Fox, Stuart-Smith and McCowan LJJ), upholding the judgment of Sir Peter Pain, held that the 1987 judgment (which
was not itself impeachable for fraudsee per Stuart-Smith LJ ([1990] 2 All ER 990 at 997, [1991] 1 QB 241 at 250251))
created an issue estoppel which prevented the defendants from contending here that the 1982 judgment had been obtained by
fraud. So clearly a decision by a foreign court that a foreign judgment has (or has not) been obtained by fraud can create an issue
estoppel in English proceedings to enforce that judgment. There are two respects in which House of Spring Gardens v Waite
differs from the present case.
(1) The English proceedings to enforce the Irish judgment were at common law: they were not under any of the statutes (the
Administration of Justice Act 1920, the Foreign Judgments (Reciprocal Enforcement) Act 1933 and the Civil Jurisdiction and
Judgments Act 1982) which make express provision for the enforcement of foreign judgments. Nevertheless we are satisfied
and in the course of argument we were referred by Miss Dohmann to the reports of the Committees which led up to the enactment
of the 1920 and 1933 Actsthat the process of enforcement of foreign judgments under the statutory provisions is not a
procedure which is different in kind, although it may differ considerably in detail, to the procedure at common law. Accordingly
the fact that in the present case the issue whether the St Vincent judgment was obtained by fraud arises under s 9(2)( d) of the
1920 Act is not, of itself sufficient to preclude the principles of House of Spring Gardens v Waite being applicable.
(2) The decision which gave rise to the issue estoppel was a decision of the court of the country (Ireland) from which the
judgment to be enforced originated. At first blush this might appear to be a highly material factor and in many cases it will
undoubtedly be so. But it cannot be said that the courts of the country from which the judgment originates are necessarily best
qualified to determine whether the judgment was, or was not obtained by fraud. The allegation may be that the fraud consisted of
the bribery of a judicial officer and there may be evidence which gives some credence to that allegation. In those circumstances
there may be a lack of confidence in a decision by the same court that there was no fraud. In our judgment there is no especial
significance in the fact that it is the court of the originating country which decided the issue which gives rise to an estoppel: of
greater importance is the necessity for observing the requirement to be cautious to which reference was made in the Carl-Zeiss-
Stiftung case. This is particularly so where, as in the case of a judgment of the courts of country. A enforcement proceedings
may be started by the judgment creditor in the courts of England and Wales and of countries B and C. The judgment debtor may
have substantial assets in this jurisdiction, but very few assets in countries B and C. He raises the issue that the original judgment
was obtained by fraud in all three countries but may, on ground of expense or availability of evidence, be unwilling to deploy his
full case in countries B and C. In those circumstances it may be that, in the particular case, a judgment in country B that the
original judgment in country A had been obtained by fraud would not create an issue estoppel in our courts. As Lord Reid said in
the Carl-Zeiss case [1966] 2 All ER 536 at 555, [1967] 1 AC 853 at 918:
856

I can see no reason in principle why we should deny the possibility of issue estoppel based on a foreign judgment, but
there appear to me to be at least three reasons for being cautious in any particular case. In the first place, we are not
familiar with modes of procedure in many foreign countries, and it may not be easy to be sure that a particular issue has
 been decided or that its decision was a basis of the foreign judgment and not merely collateral or obiter. Secondly, I have
already alluded to the practical difficulties of a defendant in deciding whether, even in this country he should incur the
trouble and expense of deploying his full case in a trivial case: it might be most unjust to hold that a litigant here should be
estopped from putting forward his case because it was impracticable for him to do so in an earlier case of a trivial character
abroad with the result that the decision in that case went against him.

His third reason for caution was the difficulty of establishing whether the judgment said to give rise to an issue estoppel was
a final judgment on the merits. To the like effect was Lord Wilberforce (see [1966] 2 All ER 536 at 585, [1967] 1 AC 853 at
967).
In our judgment, therefore, House of Spring Gardens v Waite does lay down a general principle, which is binding upon us,
that a decision by a foreign court (whether or not a court of the country from which the judgment originates) that a foreign
judgment was (or was not) obtained by fraud can create an estoppel in English proceedings to enforce that judgment, although it
will always be necessary to be cautious in the particular case. We do not accept Mr Manns submission, unsupported by
authority, that, as a matter of policy, no issue estoppel can arise in enforcement proceedings.
So, in theory at any rate, if the Italian courts were to reach a decision that the St Vincent judgment was, or was not, obtained
by fraud, before that issue comes to be tried in England, that decision could create an issue estoppel binding on the parties in the
English enforcement proceedings. Accordingly, in our judgment there must be a power in the English court to stay the trial in
England of the issue whether the St Vincent judgment was obtained by fraud pending the trial of the same issue in Italy. It could
be productive of great injustice to allow the issue to go ahead in England when the same issue could be better tried in Italy and
the Italian decision could be determinative of the issue for the purposes of the English proceedings.
(2) Discretion
The judge clearly considered that he had a discretion to stay the English proceedings but that it was inappropriate now to
exercise that discretion. He said:

As a matter of discretion it might have been right to stay the English proceedings pending a decision in Italy were such
a decision imminent and were it reasonably likely to give rise to an issue estoppel in the English proceedings, and I have
House of Spring Gardens v Waite in mind. But the evidence does not show that a decision in Italy is imminent: rather the
reverse. In saying this I make it clear that I am not making any criticism of the Italian courts, which have obviously been
pursuing the matter vigorously. Nor can I have any confidence that the decision in Italy will take a shape which will give
rise to issue estoppel in view of the complex nature of the Italian proceedings and, in particular, their relationship to the
criminal proceedings against Mr Nano and Mr Lane.
857

This court would in any event be reluctant to interfere with the exercise by a judge of first instance of a discretion based on
the circumstances of the particular case. But in our judgment there is no valid basis for asserting that the judge exercised his
discretion wrongly. Admittedly there are strong grounds for the defendants submission that the Italian courts may be the
appropriate forum to decide the issue whether the St Vincent judgment was obtained by fraud. Those grounds may be
summarised as follows.
(1) The Italian courts have been seised of the issues between the parties since 1968.
(2) The main protagonists, Nano and Bracco, as well as the majority of the witnesses, are native Italian speakers, with little
or no knowledge of the English language. This court is well aware of the difficulties attendant upon evidence given through
translators.
(3) Nearly all the relevant documents are in Italian. Crucial original documents are in the custody of the Italian courts and
cannot be released until the conclusion of the Italian criminal proceedings.
(4) Italy is the place of the domicile and residence of Bracco and Bracco SpA. The majority of the witnesses are domiciled
and resident in Italy. None of the witnesses is domiciled or resident in England. The bank is neither domiciled nor resident in
England, nor does it carry on business here.
(5) The experts appointed by the Italian court and on behalf of each party are Italian and have prepared and written their
reports in Italian. Again translation would present very great difficulties.
(6) What is called the Cambridgeshire factorthe accumulated expertise of the Italian lawyers and experts(see the
Spiliada case [1986] 3 All ER 843 at 861862, [1987] AC 460 at 485).
All these are factors of great weight to which may be added one other factor. Although, for the reasons we have given, this
is not a convention case, both the United Kingdom and Italy are members of the European Economic Community and are parties
to the 1968 convention. In our judgment the English courts should adopt a communautaire, and not a national and chauvinistic,
approach to the determination of this questioncf Re Harrods (Buenos Aires) Ltd [1991] 4 All ER 334 at 344, [1991] 3 WLR
397 at 418 per Bingham LJ.
Despite these strong factors in favour of an Italian forum, there are, as the judge recognised, two main objections to the grant
of a stay at the present time. First, it is by no means clear to us that the Italian proceedings will inevitably lead to a decision
whether the St Vincent judgment was obtained by fraud. The only evidence to this effect is the following statement in an
affidavit by Mr Woodall, an English solicitor for Bracco:

In the judgment enforcement proceedings in Italy the issue whether the St Vincent judgment was obtained by fraud
arises and will have to be determined by the Italian courts.

However an examination of an English translation of the pleadings in the Italian enforcement proceedings, which were in
the agreed core bundle before us, makes it clear that the issue whether the St Vincent judgment was obtained by fraud is only one
(and described as a subordinate issue) of several defences raised by Bracco. In the absence of any convincing evidence from an
Italian lawyer, we are not satisfied that the Italian courts will necessarily have to determine the issue whether the St Vincent
judgment was obtained by fraud if one of Braccos other and principal defences were to succeed.
Secondly we do not interpret the judges statement that a decision on the issue 858 in Italy is not imminent as being, as Miss
Dohmann submits, an impermissible comparison between the relative merits of the legal systems of this country and Italy; rather
it is a ground for refusing now to stay the English proceedings. We can find nothing wrong in this. That is not to say that there
may not come a time when Bracco will be able to satisfy the English court that the issue whether the St Vincent judgment was
obtained by fraud will necessarily arise in the Italian enforcement proceedings in a form that could create an issue estoppel in the
English proceedings and that a decision on this issue in Italy is sufficiently proximate that, taking all other relevant matters into
consideration, a stay of the English proceedings would not cause undue hardship to the bank. That time has not yet come.
In the result we dismiss both the appeal of the bank and appeal of Bracco SpA and Bracco. The issue of fraud directed by
Sir Peter Pain to be tried will proceed.
We add in conclusion that pending the determination of the issue the question whether it is just and convenient to enforce the
St Vincent judgment here cannot be determined. We are indebted to counsel for their very full and clear skeleton arguments. The
fact that we have not dealt specifically with all the points made in them implies no disrespect. The omission to do so stems solely
from the need to prevent a long judgment being even longer.
 Although we have power to refer questions as to the interpretation of the 1968 convention to the Court of Justice of the
European Communities we do not consider that in this case we should exercise that power.

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

18 July. The Appeal Committee of the House of Lords gave leave to appeal.

Solicitors: Charles Russell; Clifford Chance.

Dilys Tausz Barrister.

859
[1991] 4 All ER 860

R v Nottingham Justices, ex parte Taylor

CRIMINAL; Criminal Procedure

QUEENS BENCH DIVISION

WATKINS LJ AND FRENCH J
5 FEBRUARY, 5 MARCH 1991

Magistrates Summary trial Offence triable summarily or on indictment Determination of mode of trial of person attaining
age of 17 after pleading to charge Mode of trial determined before defendant attaining age of 17 Whether fact that defendant
turns 17 before trial affecting mode of trial Whether defendant must be tried summarily as if he was still 16 years of age
Magistrates Courts Act 1980, s 24.

Where a juvenile under the age of 17 charged with an indictable offence or an offence triable either way appears before the court
whether for the first time or on remand and he pleads not guilty when the charge is put directly to him and the mode of trial is
determined, the fact that he thereafter turns 17 before trial can have no effect on the mode of trial and if summary trial in the
juvenile court was ordered pursuant to s 24 a of the Magistrates Court Act 1980 when the charge was put to him he must continue
to be tried summarily as if he were still 16 years of age and not committed for trial in the Crown Court (see p 864 h j, p 869 j and
p 870 d to f, post).
________________________________________
a Section 24, so far as material, is set out at p 861 e to g, post

Re Daley [1982] 2 All ER 974 explained.

R v St Albans Juvenile Court, ex p Godman [1981] 2 All ER 311 disapproved in part.

Notes
For summary trial of young persons, see 24 Halsburys Laws (4th edn) paras 898:9898:10.
For the mode of trial for offences triable either way, see 29 Halsburys Laws (4th edn) para 302, and for cases on the subject,
see 28(4) Digest (2nd reissue) 8788, 45134515.
For the Magistrates Courts Act 1980, s 24, see 27 Halsburys Statutes (4th edn) 191.

Cases referred to in judgment

Daley, Re [1982] 2 All ER 974, [1983] 1 AC 347, [1982] 3 WLR 344, HL.
Hill v Anderton [1982] 2 All ER 963, sub nom R v Manchester Stipendiary Magistrate, ex p Hill [1983] 1 AC 328, [1982] 3 WLR
331, HL.
R v Amersham Juvenile Court, ex p Wilson [1981] 2 All ER 315, [1981] QB 969, [1981] 2 WLR 887, DC.
R v Lewes Juvenile Court, ex p Turner (1985) 149 JP 186, DC.
R v St Albans Juvenile Court, ex p Godman [1981] 2 All ER 311, [1981] QB 964, [1981] 2 WLR 882, DC.
R v Vale of Glamorgan Juvenile Justices, ex p Beattie (1985) 82 Cr App R 1, DC.

Application for judicial review

Marlon Taylor applied by his next friend, Arlette Taylor, with the leave of the Divisional Court of the Queens Bench Division
given on 25 April 1990 for orders of certiorari to quash decisions of the Nottingham Justices made on 8 December 1989 and 6
February 1990, declining jurisdiction in relation to trials of offences of robbery and possessing an offensive weapon and of
robbery and attempted 860 robbery, and for orders of mandamus requiring the justices to hear the trials of those offences. The
facts are set out in the judgment of Watkins LJ.

Adrian Fulford for the applicant.

Kathryn Thirlwall for the prosecutor.
Guy Sankey as amicus curiae.

Cur adv vult

5 March 1991. The following judgment was delivered.

WATKINS LJ. Marlon Taylor was born on 14 November 1972. He has leave to apply, by his next friend, for judicial review of
decisions of the Nottingham justices not to try him summarily for serious offences in the juvenile court. These decisions were
made on 8 December 1989 in respect of a robbery allegedly committed on 12 August 1989 and on 6 February 1990 in respect of a
robbery and an attempted robbery allegedly committed on 7 April 1989.
The issue before the court is whether the fact that the applicant became 17 years of age on 14 November 1989 compelled the
justices in law to commit the applicant for trial on indictment seeing that it is said, and in my view rightly, they had previously
ordered that he be tried summarily in the juvenile court. When they so ordered they were governed by and applied the provisions
of s 24 of the Magistrates Court Act 1980, which as material state:
 (1) Where a person under the age of 17 appears or is brought before a magistrates court on an information charging
him with an indictable offence other than homicide, he shall be tried summarily unless(a) he has attained the age of 14
and the offence is such as is mentioned in subsection (2) of section 53 of the Children and Young Persons Act 1933(under
which young persons convicted on indictment of certain grave crimes may be sentenced to be detained for long periods)
and the court considers that if he is found guilty of the offence it ought to be possible to sentence him in pursuance of that
subsection; or (b) he is charged jointly with a person who has attained the age of 17 and the court considers it necessary in
the interests of justice to commit them both for trial; and accordingly in a case falling within paragraph ( a) or (b) of this
subsection the court shall commit the accused for trial if either it is of opinion that there is sufficient evidence to put him on
trial or it has power under section 6(2) above so to commit him without consideration of the evidence

The procedure on summary trial of an information is contained in s 9 of the 1980 Act, which states:

(1) On the summary trial of an information, the court shall, if the accused appears, state to him the substance of the
information and ask him whether he pleads guilty or not guilty.
(2) The court, after hearing the evidence and the parties, shall convict the accused or dismiss the information.
(3) If the accused pleads guilty, the court may convict him without hearing evidence.

The relevant facts are that on 10 April 1989 the applicant came before justices charged with the robbery and the attempted
robbery allegedly committed on 7 April 1989. He was remanded on bail to 8 May and upon a number of occasions 861 thereafter
until on 13 November 1989, the day before his 17th birthday, he appeared before justices and pleaded not guilty to both offences.
His solicitor made representations about the matter of grave crimes when consideration was given to final disposal of the case
following the applicants pleas of not guilty. As the court, police records and affidavits bear out, summary trial in the juvenile
court on 6 February 1990 was ordered. It was recorded that Pros. didnt have W (witnesses) available today. On 25 January
1990 the Crown Prosecution Service, because a police witness was going on holiday, applied to adjourn the trial. The deputy
clerk to the justices advised the justices that since the applicant was then 17 years of age and the decision in R v Vale of
Glamorgan Juvenile Justices, ex p Beattie (1985) 82 Cr App R 1 appeared so to rule s 24 ceased to apply. Thus a robbery charge
against a person 17 years of age and over being triable only on indictment, which is the law, committal proceedings had to ensue.
Argument about this contention was adjourned to 6 February, the trial date.
On 6 February, a court clerk, Miss Hall, having taken advice from the deputy clerk, advised the justices likewise, making no
reference to authority apart from, briefly, Ex p Beattie. She also informed the justices of a decision of their colleagues on 8
December 1989 to decline jurisdiction to hold a summary trial in respect of the charge of robbery allegedly committed by the
applicant on 12 August 1989. The justices, despite representations made by the applicants solicitor against that course, accepted
Miss Halls advice. They too declined jurisdiction and ordered committal proceedings to be heard some time later. As for the
decision made on 8 December, the applicant first appeared before the justices on 14 August. There were several remands on bail
following a remand on that day. On 2 October consideration was given to final disposal of the case including the matter of grave
crimes. The applicant pleaded not guilty. A summary trial was ordered to be held on 8 December. On that day another court
clerk adopting the view she believed to be held by the deputy clerk to the justices, if not the clerk himself, advised the justices,
despite the objections of the applicants solicitor, to decline jurisdiction because the applicant was then 17 years of age and to
order committal proceedings to be held. The justices followed that advice and so ordered.
In neither case have there been proceedings of any kind. They have been stayed pending the outcome of this application.
We were informed during the submissions of counsel that the advice given to the justices in Nottingham is similar to that
given to justices in some other magistrates courts in relation to the effect of an accused becoming 17 years of age between when
charged and when proceeded against by either summary trial or committal to the Crown Court. Dissimilar advice is apparently
given to justices elsewhere. Thus an unsatisfactory situation has arisen calling, it is said, for clear guidance from this court as to
the proper construction to be placed on the combination of the provisions contained in ss 17 to 24 inclusive of the 1980 Act so
that suitable legal guidance of universal application may henceforth be given by clerks to the justices.
The importance in this respect of all accused of 16 years when charged becoming 17 years of age when evidence is called in
summary trial or committal proceedings being treated alike cannot be overstated. The importance to such a person charged with
an offence triable on indictment only, robbery for instance, and being regarded for all purposes as 17 years of age is that he loses
the benefit of s 24, the possibility that is to say of being tried in the juvenile court, which he may prefer, as opposed to trial by
jury. It may also be of significance to the administration of justice. For example, to take away from an accused upon becoming
17 a benefit of s 24 which was his whilst 16 years of age, namely a mode of trial in the juvenile court ordered by justices but not
embarked upon 862 only because the prosecution was not ready to proceed, could be regarded as unfair. Furthermore, it may
lead to unnecessary and, of course, costly trials in the Crown Court.
The point in issue has previously received the attention of this court and of the House of Lords. Justices, including those at
Nottingham, are being guided differently, as I have said, by the reported decisions in those cases. All of them save Ex p Beattie,
the charge there was robbery, related to offences triable either way. Three days after that case was decided the same court,
Stephen Brown LJ and McNeill J, gave judgment in R v Lewes Juvenile Court, ex p Turner (1985) 149 JP 186. The judgments in
both those cases were strongly influenced by the speech of Lord Diplock in Re Daley [1982] 2 All ER 974, [1983] 1 AC 347. All
three cases appear in Stones Justices Manual 1990, vol 1, para 1653 as the material authorities.
It was contended by Mr Fulford, counsel for the applicant, that they do not support the guidance provided to the
respondents. The true ratio of Re Daley is, he submits, that the relevant date for determining age is when the court determines the
mode of trial and that is so whether the accused is charged with an offence triable either way or triable only on indictment. Thus,
he maintained, the mode of trial having here on both relevant occasions been determined by justices when the applicant was 16
years of age, he is entitled to orders of certiorari to quash the decisions of 2 December 1989 and 6 February 1990 and orders of
mandamus to require justices at Nottingham to try him in the juvenile court upon the outstanding charges.
In addition to Mr Fulfords submission we heard those from Mr Sankey, as amicus curiae, and from Miss Thirlwall for the
Crown Prosecution Service, who gave her support to Mr Sankey.
Before examining those submissions I set out, as material, the following sections of the 1980 Act, which relate to either way
offences:

18.(1) Sections 19 to 23 below shall have effect where a person who has attained the age of 17 appears or is brought
before a magistrates court on an information charging him with an offence triable either way.
(2) Without prejudice to section 11(1) above, everything that the court is required to do under sections 19 to 22 below
must be done before any evidence is called and, subject to subsection (3) below and section 23 below, with the accused
present in court
19.(1) The court shall consider whether, having regard to the matters mentioned in subsection (3) below and any
representations made by the prosecutor or the accused, the offence appears to the court more suitable for summary trial or
for trial on indictment.
(2) Before so considering, the court(a) shall cause the charge to be written down, if this has not already been done,
and read to the accused; and (b) shall afford first the prosecutor and then the accused an opportunity to make
representations as to which mode of trial would be more suitable.
 (3) The matters to which the court is to have regard under subsection (1) above are the nature of the case; whether the
circumstances make the offence one of serious character; whether the punishment which a magistrates court would have
power to inflict for it would be adequate; and any other circumstances which appear to the court to make it more suitable
for the offence to be tried in one way rather than the other.
(4) If the prosecution is being carried on by the Attorney General, the Solicitor General or the Director of Public
Prosecutions and he applies for the offence to be tried on indictment, the preceeding provisions of this section 863 and
sections 20 and 21 below shall not apply, and the court shall proceed to inquire into the information as examining justices

20.(1) If, where the court has considered as required by section 19(1) above, it appears to the court that the offence is
more suitable for summary trial, the following provisions of this section shall apply (unless excluded by section 23 below).
(2) The court shall explain to the accused in ordinary language(a) that it appears to the court more suitable for him to
be tried summarily for the offence, and that he can either consent to be so tried or, if he wishes, be tried by a jury; and (b)
that if he is tried summarily and is convicted by the court, he may be committed for sentence to the Crown Court under
section 38 below if the convicting court, on obtaining information about his character and antecedents, is of opinion that
they are such that greater punishment should be inflicted than the convicting court has power to inflict for the offence.
(3) After explaining to the accused as provided by subsection (2) above the court shall ask him whether he consents to
be tried summarily or wishes to be tried by a jury, and(a) if he consents to be tried summarily, shall proceed to the
summary trial of the information; (b) if he does not so consent, shall proceed to inquire into the information as examining
justices.
21. If, where the court has considered as required by section 19(1) above, it appears to the court that the offence is more
suitable for trial on indictment, the court shall tell the accused that the court has decided that it is more suitable for him to
be tried for the offence by a jury, and shall proceed to inquire into the information as examining justices.

I think it would be helpful if at this juncture I referred in much more detail to the cases I have mentioned. Mr Sankey
submitted that Re Daley [1982] 2 All ER 974, [1983] 1 AC 347 approved R v St Albans Juvenile Court, ex p Godmang [1981] 2
All ER 311, [1981] QB 964, which remained, therefore, good law. In other words, in a s 24 case if on the day when evidence was
given and before it began the defendant had become 17, no matter what had happened on previous occasions when the defendant
(then 16) had appeared before the court he had to be treated as a 17yearold and the mode of trial determined accordingly.
Lord Diplock, he went on, if it could be said he did not specify it when stating in Re Daley [1982] 2 All ER 974 at 979, [1983] 1
AC 347 at 364 It is immediately before that happens that it is contemplated by s 20(3) that the decision as to mode of trial of
offences triable either way falls to be made, left open the question of when the mode of trial can properly be said to be
determined. Thus Ex p Godman is decisive as to that and should be followed. That was what, he said, the justices here had done
and they should be upheld.
Mr Fulford maintained that the approach of the court in Ex p Turner is in all essential respects correct. The judgments
clearly accurately reflected the true effect of Re Daley, which Stephen Brown LJ said did not approve entirely Ex p Godman. As
appears from his judgment he refused to hold that the day when evidence was called was necessarily the material day: that is
always, he said, when the court decides, no matter how long before trial, which mode of trial to adopt (see (1985) 149 JP 186 at
192).
With that I entirely agree. To suggest that Lord Diplock was saying, and the other Law Lords agreeing with him, that the
day of the commencement of the hearing of evidence and none other would suffice for deciding mode of trial would be to deny
them acquaintance with what must sometimes perhaps often happen in magistrates courts. It is well known that, generally for
good reasons, a 864 case in which pleas are taken in accordance with the 1980 Act, and the mode of trial decided following
representations to the court, can proceed no further that day. That may be because it is inconvenient for the court or witnesses are
not present and so on. Therefore, the case is adjourned for evidence to be called to another day, perhaps weeks, even longer,
ahead.
In Re Daley the applicant was 16 when he was charged with an offence which in the case of an adult was triable either
summarily or on indictment. He was released on police bail to appear before the juvenile court. When he surrendered to his bail,
at which time he was still aged 16, no plea was taken and the hearing was adjourned. When after a further adjournment the
applicant appeared before the court on a date after he had attained the age of 17, it was submitted on his behalf that since he was
then 17 he had a right to elect trial by jury, but the justices rejected the submission and proposed to try the charge summarily
under s 24(1). The Divisional Court rejected the applicants application for judicial review on the grounds, inter alia, that the
phrase appears or is brought before a magistrates court in ss 18(1) and 24(1) in the 1980 Act referred to the time when a
defendant first appeared or was brought before the court, and it was at that stage that it had to be ascertained whether he had
reached the age of 17.
It was held, allowing the appeal, that having regard to the subject matter of ss 17 to 28 of the 1980 Act, and on the true
construction of ss 18(1) and 24(1), the date at which a defendants age was material for the purpose of determining whether he
had acquired the right to elect trial by jury by reason of having attained the age of 17 was the date of that appearance of the
defendant when the court decided which mode of trial to adopt; and that since the applicant reached the age of 17 before such
decision had been made, he was entitled to elect jury trial.
In the course of his speech in Re Daley [1982] 2 All ER 974 at 977979, [1983] 1 AC 347 at 362365, with which the other
learned Law Lords agreed, Lord Diplock stated:

The key phrase in ss 18(1) and 24(1) alike is where a person appears or is brought before a magistrates court on
an information charging him with an offence. This must bear the same meaning in both subsections and if, as is
frequently the case, there are several occasions on which the accused appears before the court, it must be the date of one of
these occasions only that is decisive in determining the age of the accused for the purpose of seeing whether it is, on the
one hand, s 24 or on the other, ss 18 to 23 that apply for the purpose of deciding on his mode of trial for an offence in the
category of those that are triable either way under ss 18 to 23. The draftsman, however, does not state expressly which that
occasion is. The choice would appear to lie between (1) the occasion when the accused first appears or is brought before
the court (whether on that occasion a decision is reached as to the mode of his trial or he is merely remanded to appear
before the court on a later date without any such decision having been reached), and (2) the occasion on which the accused
appears or is brought before the court when the court makes its decision as to the mode of trial. The first meaning was
adopted by the Divisional Court in the instant case, preferring the opinion expressed in [R v Amersham Juvenile Court, ex p
Wilson [1981] 2 All ER 315, [1981] QB 969] to that expressed in [R v St Albans Juvenile court, ex p Godman [1981] 2 All
ER 311, [1981] QB 964] It is to be noted that Parliament has not selected either the date of the offence with which the
accused is charged or the date of the commencement of the criminal proceedings against him by the laying of the
information which, as this House has to-day determined 865 in Hill v Anderton [1982] 2 All ER 963, [1983] 1 AC 328
bears no necessary temporal relationship to the first appearance of the accused before the court. Either of these dates
would provide for uniformity of treatment as between one offender and another, and some rational justification for the
selection of either of these dates as the decisive date could be found. Instead of either of these dates, Parliament has
selected the date of an occasion on which the accused actually appears in court in person or is represented by counsel or
solicitor in the circumstances provided for by s 23. What will be the first occasion on which this happens may depend on a
variety of factors which would not appear to have any rational connection with the right of the accused to elect to be tried
 by jury. For instance, it is a common practice in magistrates courts to incorporate in the summons to the accused to appear
before the court on a particular date, an intimation that, if he intends to plead not guilty he need not attend or be
represented on the date stated in the summons, but that he will be notified in due course of the new date for the hearing
when he should attend with any witnesses he may wish to call. If, on the other hand, he has been arrested and detained in
custody or released on police bail, he will be brought before the court within 48 hours of his arrest in the latter case to
answer to his bail. On this first appearance nothing more is likely to occur than a remand and there may be several
consecutive appearances on remand before any decision as to the mode of trial is made or the trial, if summary, begun
The mere fact that a person accused of an offence triable either way expresses to the magistrates court, either orally on his
first appearance before the court or in writing, his intention to plead not guilty, whichever be the mode of trial adopted,
does not constitute the beginning of a summary trial or the opening of an inquiry by the court as examining magistrates;
nor, if the decision is subsequently reached that the offence shall be tried summarily, does that expression of what had been
his intention operate as a plea of not guilty by the accused in the summary trial itself. Section 9 provides for a summary
trial of an information to begin with the courts stating to the accused the substance of the information and asking him
whether he pleads guilty or not guilty; and, if he pleads not guilty, the court then proceeds to hear the evidence. It is
immediately before that happens that it is contemplated by s 20(3) that the decision as to mode of trial of offences triable
either way falls to be made. My Lords, it seems to me that reason and justice combine to indicate that the only appropriate
date at which to determine whether an accused person has attained an age which entitles him to elect to be tried by jury for
offences which under s 18 or s 22 are triable either way is the date of his appearance before the court on the occasion when
the court makes its decision as to the mode of trial. In this connection I would draw attention to the fact that so far as
concerns the liability of persons who have attained particular ages to severer punishment than those who have not yet
attained that age (a matter dealt with in ss 36 to 38), this depends on whether the particular age had been attained by the
accused at the date of his conviction, ie when the decision as to the appropriate punishment falls to be made by the court. It
would be odd if when it was a question of deciding whether the accused was subject to a disadvantageous liability if he had
attained a specified age the date on which the decision as to the punishment is made was crucial rather than some earlier
date, whereas when it was a question of deciding whether an accused was entitled to some advantageous right if he had
attained a specified age, some earlier date than that of the decision should be adopted. For these reasons I am of opinion
that 866 what I have referred to as the second meaning, which was that adopted in the St Albans case, is the correct one. I
would therefore allow this appeal.

In R v Vale of Glamorgan Juvenile Justices, ex p Beattie (1985) 82 Cr App R 1 the defendant, aged 16, appeared in the
juvenile court on 22 March 1984 to answer a charge of robbery. The charge was not put, no plea was entered, and the decision of
the court was merely to adjourn the case to 26 April 1984. By the time of the adjourned hearing the defendant was aged 17. The
justices decided that the defendant had not appeared or been brought before the magistrates court on an information charging
him with an indictable offence before 26 April 1984 when the charge was initially put to him and therefore s 24 of the 1980 Act
did not apply.
It was held that the material date for determining the mode of trial was the date when the defendant appeared before the
justices when the charge was put and the proceedings were ready to be commenced. On that date the defendant was aged 17 and
the justices had no discretion to allow summary trial.
It is of importance to note, in my view, that there had been in that case no attempt by the justices to deal in any way
whatsoever with the provisions of s 24 and to contrast that fact with the position in the present case where on two occasions the
mode of trial had been determined.
In the course of his judgment, with which McNeill J agreed, Stephen Brown LJ, having referred to Re Daley, stated (at 45):

In this case, of course, the Court is not concerned with a person who wishes to make an election for trial. The opposite
situation obtains, where this applicant says that he wishes to retain a right to be tried in the juvenile court, he does not wish
to be committed for trial to the Crown Court. Nevertheless, the question of the construction of section 18 and section 24 is
the same, and the relevant date must be the same. For my part, I have no doubt that the Justices were correct in
determining that it was not March 22, 1984 when the applicant first went to the court to answer his bail which was the
material date for deciding his mode of trial, it was the date when he appeared before the justices, when the charge was put
and the proceedings were ready to be commenced. That was the material date. Accordingly, in my view, the advice given
by the justices clerk, which he has set out in an affidavit before this Court, was correct. Counsel takes the additional point
that, in any event, even if the court should come to the conclusion to which I have come, the court should consider the
provisions of section 29 of the Children and Young Persons Act 1963. That section, under the heading Provisions as to
persons between the ages of 17 and 18 provides: Where proceedings in respect of a young person are begun under
section 1 of the Children and Young Persons Act 1969 or for an offence and he attains the age of 17 before the conclusion
of proceedings, the court may deal with the case and make any order which it could have made if he had not attained that
age. The submission made to this Court is that that gives the justices a discretion to consider whether they should try the
case themselves or commit for trial in the case of some person against whom proceedings have been begun before he
attained the age of 17. By begun in that context, Mr. Curran argues again for the earliest date when the charge is
preferredby the police in this case. He says that that initiated the proceedings and that ought to be when the proceedings
are begun. In the St Albans case, Skinner, J had to consider the effect of section 29(1), and he said in the course of his
judgment: I would accept the submissions by both counsel that section 86729(1) of the Children and Young Persons
Act 1963 applies only to questions of disposal and not to questions of trial. Accordingly, I would reject the submission
made on behalf of this applicant, that the justices would in any event have a discretion in the matter. For these reasons, I
would dismiss this application and express the view that the justices were correct in the decision to which they came.

He then went on to deal with a submission that s 1 of the Children and Young Persons Act 1969 could be invoked by that
applicant. He rejected that submission in terms with which I respectfully and entirely agree.
Finally, I turn to R v Lewes Juvenile Court, ex p Turner (1985) 149 JP 186. There the accused, aged 16, appeared in the
juvenile court to answer a charge of theft. He entered a plea of not guilty. The case was adjourned for summary trial but for
various reasons it was not ready to commence until almost six months later. By then the accused had become 17, and he sought
to be allowed to elect trial by jury. The justices decided that the decision on the mode of trial had already been determined on the
occasion of the case being adjourned for summary trial, and it was therefore too late for the defendant to seek to elect trial by
jury.
It was held that the material date for determining whether a defendant was of age for electing jury trial was the date upon
which the court made the mode of trial decision. That had been whilst the defendant was 16.
Stephen Brown LJ in his judgment, having referred to Re Daley, stated (at 191192):

Mr. Carr, on behalf of the justices, submits that this case is very different, on its facts, from the St. Albans case. He
submits that the decision as to the mode of trial was made long before September 1, 1983. In point of fact, the decision
was made on April 28 when everyone present was ready to proceed, but the fortuitous non-appearance of a prosecution
witness caused the trial to be adjourned. Then, on June 16, everyone was ready to proceed. However, because the justices
had previous knowledge of the applicant on that occasion, the matter was adjourned lest there be any risk of prejudice to
 the applicant. Once again, summary trial was fixed for July 7. On that occasion, it was only the unexplained non-
appearance of the applicant which prevented the trial from proceeding on that occasion. It was adjourned yet again until
August 4. On that occasion again, the matter would have proceeded because everyone was present and ready except that
the applicant once again failed to appear and his non-appearance was not satisfactorily explained. That was the reason and
the only reason why the matter was adjourned yet again until September 1. Meanwhile the applicant attained the age of 17.
In my judgment, applying the test which Lord Diplock sets out in the case of Daley, the date when the decision as to the
mode of the trial was made was plainly April 28 and if it was not April 28, it was June 16, reinforced on the subsequent
days when everyone expected the matter to proceed to trial. I would distinguish this case, on its facts, from those in the
case of St Albans and I would also be unwilling to read the passage in Lord Diplocks speech [in Re Daley [1982] 2 All ER
974 at 979, [1983] 1 AC 347 at 364365], when he says: For these reasons I am of opinion that what I have referred to as
meaning (2), which was that adopted in R v St Albans Juvenile Court, ex parte Godman, is the correct one, as meaning
that he accepted that it was at the time that the evidence was actually called. The conflict between the Amersham and the
St. Albans cases seems to me to have been resolved when Lord Diplock said that it was the date when the decision of the
mode of trial is made. As I have already 868 indicated, in my judgment, that date in this case was April 28. For these
reasons, I would dismiss this application and hold that the justices were correct in the view which they took.

McNeill J stated (at 192):

I agree. I venture to suggest, if it is not already the practice, that where a person under the age of 17 pleads not guilty
before a juvenile court, and the circumstances set out in s. 24 of the Magistrates Courts Act 1980 do not apply, but when
the juvenile court is not there and then able to take the evidence in the trial which is to follow, the register of the court
should be marked remanded for summary trial. That, to my mind, would be decisive and determinative of the date on
which, for the purposes of the section, the defendant appeared or was brought before the court.

This recital of case law would be incomplete without, finally, reference to R v St Albans Juvenile Court, ex p Godman
[1981] 2 All ER 311, [1981] QB 964. There the accused, aged 16, was charged before the juvenile court with theft. The
predecessor of s 24 of the 1980 Act applied. That contained similar provisions. Upon his first appearance the accused pleaded
not guilty and the matter was adjourned for hearing to a later date which, as was known to the court, would follow the accuseds
17th birthday. When he appeared on that date he sought to elect trial by jury. The justices refused, saying that his first
appearance in court was the only time at which he could so elect, but he was then only 16. The court quashed that decision. It
was held ([1981] QB 964):

granting the application, that although in the ordinary case it was contemplated that an election should take place
before the plea was taken, where a person who had attained the age of 17 was brought before a court on an information
charging him with an offence triable either way, he had a statutory right by virtue of section 19(1) to trial by jury if he so
elected under section 21(2) if his trial had not yet begun; that as the applicant had only entered a plea of not guilty and as
no evidence had been called his trial had not yet begun when the matter was adjourned and accordingly when the case
came on for hearing after he had attained the age of 17 he was then entitled to be put to his election

Skinner J stated ([1981] 2 All ER 311 at 314, [1981] QB 964 at 969):

The watershed, or point of no return, for the purpose of the problem which arises in this case, is the calling of evidence
and not the taking of the plea.

What I have said so far applies equally to either way cases and to those within the purview of s 24. It is inconceivable, in
my view, that Parliament intended there to be a difference with regard to them as to the effect of an accused becoming 17
between being charged and being tried. It is, I agree, possible to argue about the benefits or deprivations befalling an accused by
the adoption of one time for the mode of trial to be determined in contrast to another. That cannot, however, in my view, serve to
influence a conclusion as to what the effect of the relevant sections in the 1980 Act have upon the point in issue.
It seems to me that there has been a misunderstanding of Re Daley and a failure to appreciate the soundness of the judgment
in Ex p Turner which, I think, properly represents the true effects of the legislation and gives a proper expression to the ratio of
Re Daley. In so far as Ex p Godman was not approved by Re Daley it has, in my view, to be disregarded for that reason.
869
Finally, I return to Ex p Beattie. That, I think, has even more obviously been misunderstood. Stephen Brown LJ did not
state, and cannot possibly be understood to have meant, that generally speaking the material date was the date when proceedings
were ready to be commenced by the calling of evidence. In that context he was referring to the precise facts of that case. There
had never been, before the time when the accused became 17, consideration given to the mode of trial. Thus, it was absolutely
right on the facts for Stephen Brown LJ to say that the material date (having regard to those facts) was the date when the charge
was put and proceedings were ready to be commenced. Proceedings are ready to be commenced once the mode of trial has been
decided. Whether the evidence can be called is, for the reasons I have already explained, quite often not possible.
It was strongly urged upon us that if we were not to follow Ex p Godman confusion would reign. I do not agree. Following
Ex p Turner, and especially the advice provided by McNeill J, should cause no difficulty whatsoever. Providing records are
carefully kept, as they should be, of the proceedings when mode of trial is decided upon, I cannot imagine anybody being in
doubt as to where, when and how a case is to be dealt with by the calling of evidence in a magistrates court either in committal
proceedings or in summary trial.
Thus the position in law is that if before he becomes 17 a juvenile appears before the court, whether it be for the first time or
on remand charged with an indictable offence or an offence triable either way, and (1) he pleads not guilty when the charge is put
directly to him and (2) the mode of his trial is discussed with him or his legal representative, decided upon and the decision
thereupon recorded in clear terms, then, whether evidence is called on that occasion or not, his becoming 17 before trial can have
no effect upon the already determined mode of trial. In other words he must be tried as though he were still 16 years of age. It is
only if mode of trial has not before then been determined that his becoming 17 years of age can have any material effect
whatsoever.
For these reasons, I would allow this appeal, quash the decisions of the justices and order that this applicant be tried in the
juvenile court.
French J, who is not able to be here today, says he entirely agrees with my judgment. Thus the appeal is allowed. The
decisions of the justices are quashed and this applicant will be tried in the juvenile court.

Application granted.

Solicitors: Roberts & Sale, Ilkestone; Crown Prosecution Service, Nottingham; Treasury Solicitor.

Kate OHanlon Barrister.

 870
[1991] 4 All ER 871

Dimskal Shipping Co SA v International Transport Workers Federation

The Evia Luck
SHIPPING

HOUSE OF LORDS
LORD KEITH OF KINKEL, LORD TEMPLEMAN, LORD ACKNER, LORD GOFF OF CHIEVELEY AND LORD LOWRY
7, 8 MAY, 7 NOVEMBER 1991

Trade dispute Duress Economic duress Threat to black ship International trade union federation threatening to black ship
berthed in Sweden until shipowners entered into contracts with federation and crew Contracts requiring shipowners to pay
compensation to federation in respect of crews past wages and enter into fresh contracts of employment with crew on terms
approved by federation Shipowners complying with demands and signing required documents on threat of blacking
Shipowners seeking to avoid contracts with federation on ground of economic duress and claiming restitution of sums paid
Proper law of contracts English law Economic pressure lawful under Swedish law Whether legitimacy of economic duress to
be determined by local law of place where industrial action occurred or by law governing contract Whether shipowners
entitled to avoid contracts and recover sums paid and losses.

The appellants (the ITF) were an international federation of trade unions which sought to prevent the employment of cheap
labour on vessels flying flags of convenience. The respondents were the owners of a vessel flying the Panamanian flag which
employed a crew recruited in Greece and the Philippines on terms, governed by Greek and Philippine law respectively, which
were inferior to those approved by the ITF. In March 1983 agents of the ITF boarded the vessel after it had berthed and
commenced loading at a Swedish port and informed the master, officers and crew that the vessel would be blacked until the
respondents entered into contracts with the ITF and crew on terms which required the respondents, inter alia, to pay
compensation to the ITF in London for the crew in respect of past wages, to provide a bank performance guarantee to the ITF at a
London bank and to enter into fresh contracts of employment with the crew on terms approved by the ITF. Induced by the threat
of blacking, which was subsequently carried out, the respondents agreed to comply with the demands and signed the required
agreements and other contractual documents, which were expressed to be governed by English law. As a result of the threats and
the blacking of the vessel the respondents incurred expenditure and losses totalling $140,067.31, most of which was back-dated
wages for the Filipino crew. The respondents brought an action in England against the ITF seeking, inter alia, a declaration that
all the contracts were void on the ground of duress and claiming restitution of all the sums paid under the contracts avoided by
duress or, alternatively, as having been paid under duress. It was common ground that the questions whether the agreement for
payment and the contracts had been avoided for duress and whether the respondents were entitled to restitution of the moneys fell
to be determined according to English law. The judge dismissed the respondents claims on the ground that the pressure exerted
by the ITF in Sweden was lawful by Swedish law. The respondents appealed to the Court of Appeal, which allowed their appeal
and made the order sought in respect of the avoidance of the contracts and recovery of the money paid by them to the ITF, on the
ground that whether 871 the pressure exerted by the ITF amounted to economic duress had to be determined by reference to
English law, under which such duress was unlawful. The ITF appealed to the House of Lords.

Held (Lord Templeman dissenting) The question whether economic pressure amounted to duress sufficient to justify avoidance
of the relevant contract by the innocent party was prima facie a matter for the proper law of the contract regardless of where that
pressure had been exerted. Accordingly, although the conduct of the ITF was lawful in Sweden its legitimacy fell to be
determined by English law and since in English law the blacking or the threat of blacking constituted illegitimate economic
pressure amounting to duress the respondents were entitled to avoid the contracts and to restitution of the moneys paid by them
under duress to the ITF. The appeal would therefore be dismissed (see p 873 b, p 875 f, p 878 h j, p 880 c e to p 881 b j, p 882 b
c and p 883 d e, post).

Notes
For contracts entered into under duress, see 9 Halsburys Laws (4th edn) para 297, and for cases on the subject, see 12(1) Digest
(2nd reissue) 211222, 17031784.

Cases referred to in opinions

Barton v Armstrong [1975] 2 All ER 465, [1976] AC 104, [1975] 2 WLR 1050, PC.
Boys v Chaplin [1969] 2 All ER 1085, [1971] AC 356, [1969] 3 WLR 322, HL.
Crescendo Management Pty Ltd v Westpac Banking Corp (1988) 19 NSWLR 40, NSW CA.
International Transport Workers Federation v Sheldon Ship Co Inc (Judgment DT 49, Case T137/86, 16 December 1987),
Swedish SC.
North Ocean Shipping Co Ltd v Hyundai Construction Co Ltd, The Atlantic Baron [1978] 3 All ER 1170, [1979] QB 705, [1979]
3 WLR 419.
Pao On v Lau Yiu [1979] 3 All ER 65, [1980] AC 614, [1979] 3 WLR 435, PC.
Siboen, The, and the Sibotre, Occidental Worldwide Investment Corp v Skibs A/S Avanti, Skibs A/S Glarona and Skibs A/S
Navalis [1976] 1 Lloyds Rep 293.
Skeate v Beale (1841) 11 Ad & El 983, 113 ER 683.
Universe Tankships Inc of Monrovia v International Transport Workers Federation, The Universe Sentinel [1982] 2 All ER 67,
[1983] 1 AC 366, [1982] 2 WLR 803, HL.

Appeal
The defendants, the International Transport Workers Federation, appealed with leave of the Appeal Committee of the House of
Lords given on 5 April 1990 from the decision of the Court of Appeal (McCowan LJ and Sir Roger Ormrod (Neill LJ dissenting))
([1990] 1 Lloyds Rep 319) on 11 December 1989 allowing the appeal of the plaintiffs, Dimskal Shipping Co SA, a Panamanian
company who were the owners of the mv Evia Luck, from the judgment of Phillips J ([1989] 1 Lloyds Rep 166) given on 20
July 1988 dismissing the plaintiffs action for, inter alia, a declaration that certain agreements entered into with the defendants in
March 1983 were void for duress and repayment of moneys which they had been induced to pay to the defendants in England as
a result of industrial action taken in Sweden. The facts are set out in the opinion of Lord Goff.
Michael Burton QC and Paul Lowenstein for the appellants. 872
Peter Leaver QC and Steven Gee for the respondents.

Their Lordships took time for consideration

7 November 1991. The following opinions were delivered.

LORD KEITH OF KINKEL. My Lords, I have had the opportunity of considering in draft the speech to be delivered by my
noble and learned friend Lord Goff of Chieveley. I agree with it, and for the reasons he gives would dismiss this appeal.

LORD TEMPLEMAN. My Lords, the appellant federation is a trade union which seeks to prevent the employment of cheap
labour on vessels flying flags of convenience. The respondents own the Evia Luck, which was registered in Panama and
employed a crew recruited in Greece and in the Philippines on terms which were inferior to those approved by the federation.
The Evia Luck put into a port in Sweden and the federation blacked the ship by persuading local workers not to load the ship or
to assist her to depart the port until the owners entered into contracts with the federation and the crew whereby the owners paid
compensation to the federation for the crew in respect of past wages, entered into fresh contracts of employment with the crew on
terms approved by the federation and made a contribution to the welfare fund of the federation.
The contracts entered into by the owners as a result of the blacking organised by the federation were expressed to be
governed by English law. In this appeal the owners seek to uphold the decision of the Court of Appeal (McCowan LJ and Sir
Roger Ormrod (Neill LJ dissenting)) ([1990] 1 Lloyds Rep 319) whereby the Court of Appeal ordered the federation to pay the
owners $111,743 with interest and declared that the agreements to which the federation and the owners were parties were void.
The Court of Appeal by a majority thus reversed the judgment of Phillips J ([1989] 1 Lloyds Rep 166), who had dismissed the
action by the owners.
In Universe Tankships Inc of Monrovia v International Transport Workers Federation, The Universe Sentinel [1982] 2 All
ER 67 at 76, [1983] 1 AC 366 at 384 Lord Diplock commented:

Commercial pressure, in some degree, exists wherever one party to a commercial transaction is in a stronger
bargaining position than the other party In the instant appeal the economic duress complained of was exercised in the
field of industrial relations to which very special considerations apply.

Under the English common law an employer has never been guilty of economic duress if at a time when unemployment is
high and workers are weak wages are low. Under the English common law a trade union is guilty of economic duress if the union
forces an employer to increase wages by procuring a boycott of the employers business. Parliament has intervened to restrict the
common law rights of employers and to confer immunities on trade unions and other persons engaged in industrial action. Thus s
13(1) of the Trade Union and Labour Relations Act 1974 as amended provided:

An act done by a person in contemplation or furtherance of a trade dispute shall not be actionable in tort on the ground
only(a) that it induces another 873 person to break a contract or interferes or induces any other person to interfere with
its performance; or (b) that it consists in his threatening that a contract (whether one to which he is a party or not) will be
broken or its performance interfered with, or that he will induce another person to break a contract or to interfere with its
performance.

In The Universe Sentinels the 1974 Act protected the federation against claims similar to those made in the present
proceedings save only for the contribution to the welfare fund of the federation. Lord Diplock said ([1982] 2 All ER 67 at 77,
[1983] 1 AC 366 at 385):

The immunities from liability in tort provided by ss 13 and 14 are not directly applicable to the shipowners cause of
action for money had and received. Nevertheless, these sections, together with the definition of trade dispute in s 29, afford
an indication, which your Lordships should respect, of where public policy requires that the line shall be drawn between
what kind of commercial pressure by a trade union on an employer in the field of industrial relations ought to be treated as
legitimised despite the fact that the will of the employer is thereby coerced, and what kind of commercial pressure in that
field does amount to economic duress that entitles the employer victim to restitutionary remedies.

In The Universe Sentinel Lord Diplock held, and the majority of the House agreed, that the contribution to the welfare fund
was not concerned with the terms and conditions of employment of the crew so as to be protected by the 1974 Act and that this
contribution was therefore recoverable as money had and received as a result of economic duress. The contracts of employment
were, however, valid notwithstanding that s 13 only applied to liability in tort. Lord Diplock refused to draw any distinction
between tort and restitution.
Thereafter s 17 of the Employment Act 1980 provided:

(1) Nothing in section 13 of the 1974 Act shall prevent an act from being actionable in tort on a ground specified in
subsection (1)(a) or (b) of that section in any case where(a) the contract concerned is not a contract of employment, and
(b) one of the facts relied upon for the purpose of establishing liability is that there has been secondary action which is not
action satisfying the requirements of subsection (3), (4) or (5) below.
(2) For the purposes of this section there is secondary action in relation to a trade dispute when, and only when, a
person(a) induces another to break a contract of employment or interferes or induces another to interfere with its
performance, or (b) threatens that a contract of employment under which he or another is employed will be broken or its
performance interfered with, or he will induce another to break the contract of employment or to interfere with its
performance, if the employer under the contract of employment is not a party to the trade dispute

The Evia Luck was blacked by secondary action, namely industrial action by workers in Sweden who were not employed by
the owner but by Swedish port authorities.
The Universe Sentinel concerned a ship which had been blacked within the jurisdiction of the courts of this country. The
agreements between the owners and the federation had been made in this country and were valid under the 1974 Act. If the Evia
Luck had been blacked in this country and the agreements had been made in this country, s 17 of the Employment Act 1980
amending the 1974 874Act would have entitled the owners to avoid the contracts and recover the moneys paid thereunder.
The 1974 and 1980 Acts are only two illustrations of the fact that the relationship between economic duress, industrial action
and the law is governed by legislative powers rather than by the judicial common law and that this relationship is altered from
time to time by the legislature in accordance with what is perceived to be the public interest. Outside the United Kingdom the
legality of industrial action depends on the current legislation of each country; economic duress and the doctrine of restitution
may appear in different guises or not appear at all, and the common law itself may be applied in a different manner or not at all.
 The federation did not do anything wrong according to Swedish law. The owners actions against the federation in tort were
dismissed both by Phillips J and by the Court of Appeal because the conduct of the federation in Sweden was not unlawful by the
law of that country. And yet the Court of Appeal has ordered the federation to pay damages for that conduct.
In my opinion the owners are not entitled to succeed in this country. In the first place the courts of this country should not
concern themselves with industrial action lawfully carried out in the place where that action occurred. In the second place as
Lord Diplock pointed out there is no difference between tort and restitution. Moneys paid as a result of conduct lawful where
committed and irrecoverable in this country under the law of tort should not be recoverable in this country under the law of
restitution. The contents of a bottle cannot be changed by altering the label.
I gratefully adopt the views cogently and forcefully expressed by Phillips J and by Neill LJ and for the reasons given by
them, which I have endeavoured to reinforce, I would allow this appeal.

LORD ACKNER. My Lords, I have had the advantage of reading in draft the speech of my noble and learned friend Lord Goff
of Chieveley. I agree with it and for the reasons which he gives I, too, would dismiss the appeal.

LORD GOFF OF CHIEVELEY. My Lords, this appeal is concerned with the campaign which has been waged for many years
by the International Transport Workers Federation (the ITF) against shipowners whose ships fly flags of convenience. The last
case of this kind before your Lordships House was Universe Tankships Inc of Monrovia v International Transport Workers
Federation, The Universe Sentinel [1982] 2 All ER 67, [1982] AC 366, to which I shall have to refer in a moment. That case was
concerned with a Liberian ship. The present case is concerned with a Panamanian ship, the Evia Luck, owned by the
respondents, Dimskal Shipping Co SA (the owners). It arose out of events which occurred in February and March 1983 when the
vessel lay at Uddevalla in Sweden. She was then manned by a crew consisting of 10 Greek nationals (under contracts of
employment governed by Greek law) and 20 Filipino nationals (under contracts of employment governed by Philippine law).
Agents of the ITF boarded the vessel at Uddevalla. They informed the master, officers and crew that the vessel, which had then
commenced loading, would be blacked unless the owners entered into ITF employment contracts with the crew. They made the
following demands on the owners: (a) a sum, representing all crew members wages calculated in accordance with the ITFs
wage scales and backdated to the commencement of the employment of the crew members, should be paid to the ITF in London;
(b) a 875 bank performance guarantee in the sum of $US200,000 should be provided to the ITF at a bank in London nominated
by the ITF; (c) deeds of undertaking should be provided by the plaintiffs to the effect that the plaintiffs would not institute
proceedings against the Filipino nationals who were members of the crew of the vessel in the Republic of the Philippines or
elsewhere; (d) an ITF special agreement should be entered into by the plaintiffs; (e) ITF employment contracts should be
provided by the plaintiffs for all members of the crew of the vessel; (f) a document declaring that the plaintiffs were complying
voluntarily with the ITFs demands should be signed; (g) letters of indemnity should be provided for all members of the crew.
As a result of the threat of blacking, the owners agreed to pay the sums demanded of them and to sign the required
documents. Pursuant to that agreement, on 4 March 1983 they made the payments to the ITFs account in London. By that date
they had not however executed the required documents, whereupon the stevedores at Uddevalla refused to continue loading the
vessel. On 7 March the owners signed the documents. On the same day the require performance bond was provided to the ITF
by Grindlays Bank in the sum of $US200,000, which was expressly governed by English law, as was the undertaking.
Subsequently, the contracts with the Filipino seamen were forwarded to the Philippines for registration. As a result of the threats
and the blacking of the vessel, the owners incurred expenditure and losses in the total sum of $US140,06731. The greater part of
this sum consisted of $US103,463 in respect of backdated wages for the Filipino seamen. In addition, there were payment in
respect of ITF entrance fees, ITF membership fees and an ITF welfare fund contribution, a small sum for bank charges incurred
in providing the guarantee and the balance of $US28,26320 consisted of a loss incurred while the vessel was off-hire at
Uddevalla, and other expenses incurred at Uddevalla.
In the present action, the owners claimed declarations that they had lawfully avoided all the above contracts on the ground
of duress, including the contracts with the ITF and the contracts with the Filipino seamen. They claimed restitution in respect of
the payments made to the ITF, including the backdated wages for the Filipino seamen, and the entrance fees, membership fees
and welfare fund contributions; these sums were claimed as having been paid under contracts avoided for duress, or alternatively
as having been paid under duress. They also claimed the total sum of $US140,067.31 as damages in tort, the torts relied on being
intimidation and interference with contractual rights. It was agreed between the parties that (1) the agreement for payment was
governed by English law as its proper law, (2) the contractual documents concluded between the parties were governed by
English law as their proper law, (3) the question whether the agreement for payment and the contractual documents had been
avoided for duress fell to be determined according to English law and (4) the question whether the owners were entitled to
restitution of the moneys paid fell to be determined according to English law. The agreement between the parties did not extend
to the proper law of the new contracts of employment of the Filipino seamen. Phillips J held that this was Philippine law, as the
system of law with which those contracts had their closest connection. The judge decided, however, that he should not make any
declarations in respect of those contracts, since the crew members were not before the court.
It is a crucial feature of the present case that, on the findings of the judge, the pressure exerted by the ITF upon the owners at
Uddevalla, although by English law it amounted to economic duress which was not at the relevant time legitimised 876 by any
applicable statutory provision in this country, was lawful under Swedish domestic law. On that basis, the judge dismissed the
owners claim in tort, because the acts committed by the ITF in Sweden were not actionable by the law of that country. That
claim was not pursued by the owners in the Court of Appeal. Accordingly, the Court of Appeal, like your Lordships House, was
concerned only with the owners claim so far as it related to avoidance of the relevant contract and recovery in restitution of the
money paid thereunder to the ITF. It appears to have been common ground between the parties that under English law the
pressure exerted by the ITF which induced the owners to enter into the contract under which they made the payments to the ITF
would amount to duress unless such pressure was legitimised under the relevant system of law. The point at issue between the
parties related to the identity of the legal system by reference to which the question whether such pressure had been so
legitimised had to be answered. For the owners, it was submitted that it had to be answered by reference to English law as the
proper law of the contract, which at the relevant time did not legitimise such action. For the ITF, on the other hand, it was
submitted that the relevant system of law was Swedish law, as the law of the country where the pressure was exerted; and, as I
have recorded, at the relevant time such pressure was lawful by Swedish law.
The judge accepted the submission of the ITF. He considered that there were three options open to the court. These were
(1) to consider whether the action was legitimate according to English law without reference to the English statutes which govern
industrial relations, (2) to consider whether the action would have been legitimate if it had taken place in England under the
regime of those English statutes or (3) to consider whether the action was legitimate according to the law of the country where
the action too place. The first option he rejected as unrealistic, and productive of uncertainty and injustice. The second he
dismissed because he considered that it would be ludicrous to apply English labour law in order to judge the legitimacy of
industrial action taken in a foreign jurisdiction. The third option commended itself to him not merely by default of the other two.
He said ([1989] Lloyds Rep 166 at 180):

Mr. Burton submitted that a man ought to be able safely to regulate his conduct by complying with the laws of the
country in which he finds himself. The attraction of his proposition is self-evident. Furthermore the third option is
consonant with the approach of English law to liability in tort. A defendant will not be subject to liability in respect of
conduct that is tortious at English law if the conduct was not actionable in the country where it took place. It seems to me
 that the policy underlying this rule should, a fortiori, protect a defendant from a claim to restitution when the conduct
alleged to give rise to that claim was lawful in the country where it took place.

On this basis, he dismissed the owners claims. In the Court of Appeal ([1990] 1 Lloyds Rep 319), however, only Neill LJ, who
considered that in this particular branch of the law the concept of economic duress must take account of the local law of the place
where the activities in question occurred, agreed with Phillips J. The majority (McCowan LJ and Sir Roger Ormrod) accepted
the submission of the owners, and held that the question must be answered by reference to English law. The Court of Appeal
accordingly allowed the appeal of the owners, and made the order asked for by them in respect of the avoidance of the contracts
and 877 recovery of the money paid by them to the ITF. It is against that decision that the ITF now appeals to your Lordships
House.
It was common ground between the parties before your Lordships that the money in respect of which the owners claimed
restitution was paid to the ITF under a contract, albeit a contract which the owners claim to have been voidable by them, and
indeed to have been avoided by them, on the ground of duress. It follows that, before the owners could establish any right to
recover the money, they had first to avoid the relevant contract. Until this was done, the money in question was paid under a
binding contract and so was irrecoverable in restitution. But, once the contract was avoided, the money paid under it was
recoverable in restitution, on the ground either of duress or possibly of failure of consideration. It was not, in my opinion,
necessary for the owners, even if the duress relied upon by them was in fact tortious, to base their claim on waiver of tort (see the
note by Ewan McKendrick ((1990) 19 ILJ 195), nor have they done so. The present case is, however, concerned with the anterior
question whether the pressure exerted by the ITF constituted duress enabling the owners to avoid the contract on that ground, as
they claim to have been entitled to do.
We are here concerned with a case of economic duress. It was at one time thought that, at common law, the only form of
duress which would entitle a party to avoid a contract on that ground was duress of the person. The origin for this view lay in the
decision of the Court of Exchequer in Skeate v Beale (1841) 11 Ad & El 983, 113 ER 683. However, since the decisions of Kerr
J in The Siboen and the Sibotre, Occidental Worldwide Investment Corp v Skibs A/S Avanti, Skibs A/S Glarona and Skibs A/S
Navalis [1976] 1 Lloyds Rep 293, of Mocatta J in North Ocean Shipping Co Ltd v Hyundai Construction Co Ltd [1978] 3 All ER
1170, [1979] QB 705 and of the Judicial Committee of the Privy Council in Pao On v Lau Yiu [1979] 3 All ER 65, [1980] AC
614, that limitation has been discarded; and it is now accepted that economic pressure may be sufficient to amount to duress for
this purpose, provided at least that the economic pressure may be characterised as illegitimate and has constituted a significant
cause inducing the plaintiff to enter into the relevant contract (see Barton v Armstrong [1975] 2 All ER 465 at 476477, [1976]
AC 104 at 121 per Lord Wilberforce and Lord Simon of Glaisdale (referred to with approval in Pao On v Lau Yiu [1979] 3 All
ER 65 at 78, [1980] AC 614 at 635 per Lord Scarman) and Crescendo Management Pty Ltd v Westpac Banking Corp (1988) 19
NSWLR 40 at 46 per McHugh JA). It is sometimes suggested that the plaintiffs will must have been coerced so as to vitiate his
consent. This approach has been the subject of criticism (see Beatson Use and Abuse of Unjust Enrichment (1991) pp 113117;
and the notes by Professor Atiyah on Economic duress and the overborne will (1982) 98 LQR 197 and by Professor Birks in
The travails of duress [1990] Lloyds MCLQ 342). I myself, like McHugh JA, doubt whether it is helpful in this context to
speak of the plaintiffs will having been coerced. It is not, however, necessary to explore the matter in the present case. Nor is it
necessary to consider the broader question of what constitutes illegitimate economic pressure, for it is accepted that blacking or a
threat of blacking, such as occurred in the present case, does constitute illegitimate economic pressure in English law, unless
legitimised by statute. The question which has fallen for decision by your Lordships is whether, in considering the question
whether the pressure should be treated as legitimised, the English courts should have regard to the law of Sweden (where the
relevant pressure was exerted on the owners by the agents of the ITF) under which such pressure was lawful.
The starting point for the consideration of this question is the decision of your Lordships House in The Universe Sentinel
[1982] 2 All ER 67, [1983] 1 AC 366, 878and in particular the speech in that case of Lord Diplock, who delivered the leading
speech for the majority. For present purposes, the most relevant passage in Lord Diplocks speech is where he considered the
effect upon economic duress, as a basis for obtaining restitution, of the immunity then conferred by the Trade Union and Labour
Relations Act 1974. The pressure in that case took the form of blacking the plaintiffs ship, at the instigation of the ITF, while
she was lying at Milford Haven. The Act (in this respect no longer in force at the time of the events in the present case) conferred
an immunity against an action in tort in respect of pressure of the type there exerted by the ITF. It did not expressly provide for
any immunity in respect of an action in restitution. However, Lord Diplock said ([1982] 2 All ER 67 at 7677, [1983] 1 AC 366
at 385):

The use of economic duress to induce another person to part with property or money is not a tort per se; the form that
the duress takes may, or may not, be tortious. The remedy to which economic duress gives rise is not an action for
damages but an action for restitution of property or money exacted under such duress and the avoidance of any contract
that had been induced by it; but where the particular form taken by the economic duress used is itself a tort, the restitutional
remedy for money had and received by the defendant to the plaintiffs use is one which the plaintiff is entitled to pursue as
an alternative remedy to an action for damages in tort. In extending into the field of industrial relations the common law
concept of economic duress and the right to a restitutionary remedy for it which is currently in process of development by
judicial decisions, this House would not, in my view, be exercising the restraint that is appropriate to such a process if it
were so to develop the concept that, by the simple expedient of waiving the tort, a restitutionary remedy for money had
and received is made enforceable in cases in which Parliament has, over so long a period of years, manifested its
preference for a public policy that a particular kind of tortious act should be legitimised in the sense that I am using that
expression. It is only in this indirect way that the provisions of the Trade Union and Labour Relations Act 1974 are
relevant to the duress point. The immunities from liability in tort provided by ss 13 and 14 are not directly applicable to the
shipowners cause of action for money had and received. Nevertheless, these sections, together with the definition of trade
dispute in s 29, afford an indication, which your Lordships should respect, of where public policy requires that the line
should be drawn between what kind of commercial pressure by a trade union on an employer in the field of industrial
relations ought to be treated as legitimised despite the fact that the will of the employer is thereby coerced, and what kind
of commercial pressure in that field does amount to economic duress that entitles the employer victim to restitutionary
remedies.

It is not necessary for present purposes to explore the basis of this decision. It appears to bear some affinity to the principle
underlying those cases in which the courts have given effect to the inferred purpose of the legislature by holding a person entitled
to sue for damages for breach of a statutory duty, though no such right of suit has been expressly created by the statute imposing
the duty. It is enough to state that, by parity of reasoning, not only may an action of restitution be rejected as inconsistent with
the policy of a statute such as that under consideration in The Universe Sentinel, but in my opinion a claim that a contract is
voidable for duress by reason of pressure legitimised by such a statute may likewise be rejected on the same ground.
879
It is against the background of that decision that the problem in the present case falls to be considered. However, that
problem did not arise in The Universe Sentinel. There, all relevant events took place within the jurisdiction of the English courts;
and by common consent, English law was the only relevant system of law. In the present case, although the payments to the ITF
were made, as is agreed, under a contract governed by English law, nevertheless the pressure which induced the ITF to enter into
that contract was effected in Sweden, and by Swedish law such pressure was lawful. And so, as I have said, the question which
your Lordships have to consider is whether, and if so to what extent, regard should be had in such circumstances to Swedish law.
I start from the generally accepted proposition, embodied in r 184 set out in Dicey and Morris Conflict of Laws (11th edn,
1987) vol 2, p 1213 that the material or essential validity of a contract is governed by the proper law of the contract, which in the
present case is English law. Rule 184 is one of a group of rules (rr 181187) concerned with the scope of application of the
proper law of a contract. It is expressed to be subject to two exceptions. The first exception asserts that a contract is generally
invalid in so far as its performance is unlawful by the law of the place of performance; with that exception we are not, in my
opinion, here concerned. The second (which is not strictly an exception to r 184) concerns the primacy of what used to be called
the distinctive policy of English law over any provision of foreign law, in so far as such provision might be relevant to the
validity or invalidity of a contract; to that topic, I will briefly return in a moment.
Accordingly, in the present case we look to English law, as the proper law, to discover whether the contract may, as a matter
of principle, be affected by duress and, if so, what constitutes duress for this purpose, what impact such duress must have
exercised upon the formation of the contract, and what remedial action is available to the innocent party. We know, of course,
that by English law a contract induced by duress is voidable by the innocent party, and that one form of duress is illegitimate
economic pressure, including the blacking or the threat of blacking of a ship. I can see no reason in principle why, prima facie at
least, blacking or the threat of blacking a ship should not constitute duress for this purpose, wherever it is committedwhether
within the English jurisdiction or overseas; for in point of fact its impact upon the contract does not depend upon the place where
the relevant conduct occurs.
It follows therefore that, prima facie at least, whether or not economic pressure amounts to duress sufficient to justify
avoidance of the relevant contract by the innocent party is a matter for the proper law of the contract, wherever that pressure has
been exerted. Here, of course, the proper law is English law. Moreover in the present case there was at the relevant time no
applicable statutory provision of English law which required that blacking or the threat of blacking should not be regarded as
duress. So, unemcumbered by any such provision, we are left simply with an English contract which is voidable by the innocent
party if the formation of the contract has been induced by duress in the form of blacking or the threat of blacking a vessel. The
question then arises whether there is any basis in law for rejecting this simple approach, on the ground that the conduct in
question was lawful by the law of the place where it occurred, viz Swedish law.
Before your Lordships, it was the primary submission of Mr Burton QC on behalf of the ITF that, in relation to any duress
abroad, in English law the court should, subject to overriding questions of public policy, look to the law of the place of duress to
test its lawfulness or legitimacy. I of course accept that, if Mr Burtons submission is correct, it may be subject to the
qualification that, if it was 880 inconsistent with the distinctive policy of English law to treat the relevant conduct as lawful, the
English courts (consistently with the second exception to r 184 in Dicey and Morris Conflict of Laws) would refuse to do so. But
the question is whether Mr Burtons submission is correct. I have to say that I know of no authority which supports his
submission, which, if correct, would require the recognition and formulation of a fresh exception to r 184 in Dicey and Morris
Conflict of Laws.
Before your Lordships, as in the courts below, the ITF relied upon the analogy of tort. Under English law, since the decision
of your Lordships House in Boys v Chaplin [1969] 2 All ER 1085, [1971] AC 356, conduct in a foreign country is only
actionable as a tort in this country if it is both so actionable in English law (ie would be so actionable if the relevant conduct had
occurred in this country) and so actionable by the law of the foreign country where the relevant conduct occurred (see r 205 of
Dicey and Morris (11th edn, 1987) vol 2, p 1365ff and cases there cited). So, it was suggested, by parity of reasoning regard
should be paid to the law of Sweden in the present case, in order to decide whether the conduct of the ITF constituted duress
rendering an English contract voidable on that ground. I am bound to say, however, that I do not find the analogy compelling. In
the first place it is not to be forgotten that conduct does not have to be tortious to constitute duress for the purpose of English law;
this is so even at common law, and still more so if one has regard to the equitable doctrine of undue influence as an extended
form of duress. It is by no means difficult to envisage categories of duress or undue influence which might render a contract
voidable by English law as the proper law of the contract, but would not do so by the law of some other country where the
relevant conduct in fact occurred. It is difficult to see what relevance the analogy of the English rule of the conflict of laws
applicable in the case of tort can have to such a case. More fundamentally, however, there is a basic difference between the case
of a foreign tort and a case such as the present. In the case of a foreign tort, not only has the relevant conduct ex hypothesi
occurred outside the jurisdiction of the English court, but the only fact which brings in English law at all is the fact that the
defendant is amenable to the jurisdiction of the English court. In the present case, however, there is another English connection
of great importance, which is that the dispute relates to a contract whose proper law is English law, and the relevant incidents of
which are therefore governed by English law. Some cogent reason has to be produced why in such a case the English courts
should not simply apply the principles of English law in deciding whether or not the relevant conduct constitutes duress capable
of rendering the contract voidable. I do not find the analogy of tort sufficiently apposite or compelling to achieve that result.
What other reason can be adduced? The judge was impressed by another argument advanced on behalf of the ITF, which
was that a man ought to be able safely to regulate his conduct by complying with the laws of the country in which he finds
himself. This may be true so far as the criminal law is concerned; but I cannot see that it applies in the case of matters which may
affect the validity of a contract governed by some other system of law. If a person enters into such a contract, he has for most
purposes to accept the regime of the proper law of the contract; and if under that regime a particular form of conduct constitutes
duress, or for that matter undue influence, rendering the contract voidable wherever the relevant conduct occurs, he has in my
opinion to accept the consequences of his conduct under that system of law. He should not assume that, simply because his
conduct is lawful in the place overseas where it is performed, it cannot for that reason render an English contract voidable for
duress.
881
I wish to add that I do not see that any question of comity arises in this case, for I cannot see that the English courts, by
applying the criterion laid down by English law as the proper law of the relevant contract, would in any way infringe the
principle of comity so far as the Swedish jurisdiction is concerned. In reaching this conclusion, I am comforted by the fact that,
on the material before your Lordships, it appears that the Swedish courts would likewise, in a case such as the present, give effect
to the proper law of the contract (see the decision of the Swedish Supreme Court in International Transport Workers Federation
v Sheldon Ship Co Inc (Judgment DT 49, Case T137/86, 16 December 1987).
For these reasons I find myself to be in agreement with the conclusion reached by the majority of the Court of Appeal, and I
would dismiss the appeal with costs.

LORD LOWRY. My Lords, I have had the advantage of reading in draft the speech of my noble and learned friend Lord Goff
of Chieveley. I agree with it and, for the reasons which he gives, I, too, would dismiss this appeal.
The contrary view, by which I was at first attracted and which commended itself to Phillips J (see [1989] 1 Lloyds Rep 166)
and in the Court of Appeal to Neill LJ (see [1990] 1 Lloyds Rep 319 at 320), is that, although English law is admittedly the
proper law of the contract, the owners cannot rely on conduct in Sweden which is immune from suit in that country for the
purpose of avoiding their contract with the ITF, who say it is wrong that the legitimacy of action taken in Sweden should be
judged by a law other than the law currently in force there. The ITF concede that, generally speaking, a contract may, according
to English law (the law of the contract in this case), be avoided by conduct, even including innocent misrepresentation, which
does not amount to a tort but they go on to say, in reliance on what Lord Diplock said in Universe Tankships Inc of Monrovia v
International Transport Workers Federation, The Universe Sentinel [1982] 2 All ER 67 at 7677, [1983] 1 AC 366 at 384385,
that in an industrial context a contract can be avoided for duress or coercion only if the party coerced would have a cause of
action in tort; they argue that, if the owners won in the present action, they would be founding their case for avoidance on tortious
conduct which is immune from suit, thus achieving a result inconsistent with The Universe Sentinel and effecting an unwarranted
invasion of the principles of industrial relations law.
Phillips J was strongly of the opinion that it would be inappropriate to apply English labour law in order to judge the
legitimacy of industrial action taken in a foreign jurisdiction (see [1989] 1 Lloyds Rep 166 at 180) and for that reason held that
the legitimacy of ITFs conduct fell to be determined according to Swedish law.
In the Court of Appeal Neill LJ in his dissenting judgment noted Lord Diplocks observation in The Universe Sentinel and
continued ([1990] 1 Lloyds Rep 319 at 327):

In my judgment a similar approach should be adopted for the purpose of determining in the field of industrial relations
whether economic pressure applied abroad is or is not legitimate. On this basis one looks first to see whether an action lies
in tort. If an action in tort does not lie it is not permissible to waive the tort and bring an action based on economic
duress. The reason is that as a matter of general principle economic pressure applied in furtherance of a trade dispute is not
to be treated as illegitimate unless it is also actionable in tort. In my judgment this solution gives proper recognition to the
fact that most if not all industrial countries have developed special legal rules to regulate the use of economic pressure in
the field of industrial relations. To my mind in this particular branch of the law the concept of 882 economic duress must
take account of the local law of the place where the activities in question occurred.

I believe, however, that the answer to this approach has been convincingly expounded in the speech of my noble and learned
friend Lord Goff. English law says generally that a contract induced by coercion (whether tortious or not) can be avoided at the
instance of the party coerced. The Universe Sentinel illustrates an exception to that rule. The right way to view that exception is
to say that the party coerced cannot rely on coercive conduct which at the material time was legitimised by English law. The
wrong approach, having said correctly that coercion in England which our law has immunised from a claim in tort cannot give
rise to avoidance of the contract, is to deduce from that proposition the conclusion that a party to a contract governed by English
law cannot rely in England on coercive conduct which, although unlawful coercion at the material time according to English law,
is not actionable as tort in the country where it took place. The right answer is obtained by asking not whether the conduct relied
on is an actionable tort in the country where it took place, but whether according to English law at the relevant time the general
remedy of avoiding the contract for coercion has been curtailed by English law.
It would be unsatisfactory if the right to avoid by reason of coercion a contract governed by English law were to depend on
whether or not coercive conduct in a foreign country was actionable there as a tort, rather than on the view of that conduct which
is taken by English law. Different results would, moreover, be achieved according to the law which prevailed in the particular
country where the coercion had been exercised.

Appeal dismissed.

Solicitors: Denton Hall Burgin & Warrens; Holman Fenwick & Willan.

Mary Rose Plummer Barrister.

[1991] 4 All ER 883

Securities and Investments Board v Pantell SA and others (No 2)

BANKING & FINANCE: EQUITY

CHANCERY DIVISION
SIR NICOLAS BROWNE-WILKINSON V-C
15, 16, 29 JULY 1991

Investment business Restitution order Liability to make restitution Person contravening Act Carrying on investment
business in contravention of Act Person knowingly concerned in contravention of Act Solicitors acting for client allegedly
carrying on unauthorised investment business Swiss companies carrying on investment business in United Kingdom without
authority Solicitors alleged to be knowingly concerned in companies breaches of Act Whether person knowingly concerned
in contravention of Act can be ordered to repay to investors moneys lost Whether solicitors could be ordered to repay to
investors sums paid to companies Financial Services Act 1986, ss 6(2), 61(1).

The Securities and Investments Board (the SIB) brought an action against two overseas companies alleging that they, not being
authorised persons, had carried on investment business in the United Kingdom, made misleading statements, made unsolicited
calls and issued investment advertisements in the United 883 Kingdom contrary to the provisions of the Financial Services Act
1986. The claim was later amended to join the solicitors acting for the companies as defendants. The SIB alleged that the
solicitors had knowledge of the nature of the companies business and that the companies were operating in contravention of the
1986 Act and that accordingly the solicitors were knowingly concerned in the companies breaches of that Act in that the
solicitors operated the companies bank account in the United Kingdom, assisted in the distribution of advertisements and paid
cheques from United Kingdom investors into the companies bank account and could therefore be held to account under ss 6(2) a
and 61(1)b of the 1986 Act, which empowered the court to make an order against a person knowingly concerned in a
contravention of the Act requiring him to remedy that contravention. The SIB further alleged that investors had suffered loss and
damage as a result of the companies breaches of the 1986 Act in which the solicitors were knowingly concerned. The solicitors
denied the allegations and applied to strike out the claims made against them on the ground that on the true construction of ss
6(2) and 61(1) of the 1986 Act the SIB was not entitled to the relief sought because the SIBs claim against them was for
compensation for loss suffered by investors in the companies, which only a contravener could be ordered to pay and which was
not relief available under ss 6(2) and 61(1).
________________________________________
a Section 6(2), is set out at p 887 e f, post
b Section 61(1), is set out at p 888 d to f, post

Held The court had a general jurisdiction under ss 6(2) and 61(1) of the 1986 Act to order the statutory rescission of
transactions which were unlawful under that Act and the restoration of the parties to the position they were formerly in, and
accordingly the court could order a person knowingly concerned in a contravention of the Act as well as the contravener himself
to repay the moneys paid under the unlawful transaction whether or not the sums paid were capable of being identified as a
separate fund of money. Accordingly, solicitors acting for a client allegedly carrying on unauthorised investment business could
be ordered to repay to investors sums paid to the client if the solicitors were knowingly concerned in contraventions of the 1986
Act by the client. It followed that the application to strike out would be dismissed (see p 880 e to g and p 891 f, post).

Notes
For restriction on carrying on investment business, see 32 Halsburys Laws (4th edn) para 326.
For the Financial Services Act 1986, ss 6, 61, see 30 Halsburys Statutes (4th edn) (1991 reissue) 173, 233.

Case cited
Gorton v Champneys, Coventry v Champneys (1823) 1 Bing 287, 130 ER 116.

Application
By an application dated 15 March 1991 the third, fourth and fifth defendants (the solicitors), applied to strike out the claims made
against them in an action brought by the plaintiff, the Securities and Investments Board (the SIB), against two Swiss companies,
Pantell SA and Swiss Atlantic Holdings Ltd, and the solicitors, on the ground that the amended statement of claim disclosed no
reasonable cause of action or was scandalous, frivolous or vexatious or was otherwise an abuse of the process of the court. The
application was heard in chambers but judgment was 884 given by Sir Nicolas Browne-Wilkinson V-C in open court. The facts
are set out in the judgment.

David Oliver QC and Thomas Lowe for the SIB.

Jonathan Sumption QC and Leslie Kosmin for the solicitors.
The first and second defendants did not appear.

Cur adv vult

29 July 1991. The following judgment was delivered.

SIR NICOLAS BROWNE-WILKINSON V-C. This is an application to strike out the claims made against the third, fourth and
fifth defendants (the solicitors) in an action brought by the Securities and Investments Board (the SIB) against two overseas
companies, Pantell SA and Swiss Atlantic Holdings Ltd, and the solicitors.
The action was originally brought only against the first and second defendants (whom I will refer to collectively as
Pantell). In the statement of claim the SIB alleges that Pantell, not being an authorised person, carried on investment business
in the United Kingdom (contrary to s 3 of the Financial Services Act 1986), made misleading statements (contrary to s 47 of that
Act), made unsolicited calls (contrary to s 56 of that Act) and issued investment advertisements in the United Kingdom (contrary
to s 57 of that Act). In the broadest terms the SIB allege that Pantell, from outside the United Kingdom, was dishonestly pushing
and selling shares in an American company, Euramco, to English investors, who bought a total of 1,434,500 shares (which are
valueless) at a total price of over $US2m.
The claim was later amended to join the solicitors as the third, fourth and fifth defendants. By the amended statement of
claim it is alleged that between July 1988 and February 1989 the solicitors acted for Pantell and its moving light, a Dr Schubert.
It is further alleged that the solicitors had knowledge of the nature of Pantells business, that it was being carried on in
contravention of the 1986 Act, that investors were paying moneys to Pantell for investment purposes and other relevant facts. It
is then alleged that, by reason of the knowledge of such facts, the solicitors were knowingly concerned in Pantells breaches of
ss 3, 47, 56 and 57 of the 1986 Act in that they operated a Pantell bank account in this country, assisted in the distribution of
advertisements during September 1988 and paid cheques from United Kingdom investors into Pantells bank account. It is
alleged that investors thereby suffered loss and damage as a result of breaches of the 1986 Act by Pantell in which the solicitors
were knowingly concerned, particulars of such damage consisting of amounts collected by the solicitors during the postal strike
and sums paid by the solicitors into Pantells bank accounts (the total of such moneys being substantially less than the total sum
said to have been received by Pantell from UK investors).
The amended statement of claim claims the following relief against the solicitors:

10. A declaration that within the meaning of section 6(2) of the Act, [the solicitors] and each of them have at all
material times since 29th April 1988 been knowingly concerned in the contravention by the First Defendant of section 3.
11. An order under section 6(2) requiring [the solicitors] to pay such sums as the Court thinks fit to the Plaintiffs or
alternatively into Court for the 885 purpose of restoring persons who entered into transactions with the First Defendant that
were contrary to section 3 to the position in which they were before the transactions were entered into.
12. A declaration that within the meaning of section 61(1) of the Act [the solicitors] and each of them have at all
material times since 29 April 1988 been knowingly concerned in the contravention by the First Defendant of sections 47
and 57.
13. An order under section 61(1) [that the solicitors] and each of them pay such sum as the Court thinks fit to the
Plaintiffs or alternatively into Court or alternatively that they take such other steps as the Court may direct for the purpose
of remedying the contravention by the First Defendant of sections 47 and 57.

The solicitors emphatically deny the allegation that they were knowingly concerned in Pantells contraventions of the 1986
Act. But, in order to shorten what will otherwise be long and expensive proceedings, the solicitors make this application to strike
out the claims against them on the grounds that, even assuming that the allegations made against them are correct, on the true
construction of ss 6(2) and 61(1) the SIB is not entitled to the relief claimed against the solicitors.
Before turning to ss 6 and 61 I must first seek to set out the basic structure of the 1986 Act, so far as relevant to this
application. Section 3 of the 1986 Act provides as follows:

No person shall carry on, or purport to carry on, investment business in the United Kingdom unless he is an authorised
person under Chapter III or an exempted person under Chapter IV of this Part of this Act.

On the facts alleged which have to be taken as true, Pantell was not an authorised or exempted person and did carry on
investment business in the United Kingdom. Section 4 makes the carrying on of such investment business a criminal offence.
Section 5 provides that agreements entered into by a person in the course of carrying on an unlawful investment business are
made unenforceable against the investor and the investor is given a statutory right of action to recover any money or other
property paid or transferred by him under the agreement, together with compensation for any loss sustained by him as a result of
having parted with it. Section 6 then gives the Secretary of State certain statutory rights of action relating to the conduct of
unauthorised investment business which are the subject matter of the present proceedings.
 Section 47 provides that certain misleading statements and practices are criminal offences. However it does not give the
investor any statutory cause of action in relation to such contraventions.
Section 56 prohibits the making or procuring of investment agreements during unsolicited calls on investors or as a result of
such calls. It provides that such agreements shall not be enforceable against the investor and gives the investor a statutory cause
of action to recover from the contravener money or property transferred under the agreements and compensation for any loss
similar to those conferred by s 5.
Section 57 prohibits anyone other than an authorised person from issuing investment advertisements. Contravention is made
a criminal offence and an investor is given the same rights of action as under s 56, mutatis mutandis, in relation to any investment
agreement entered into after the issue of a contravening advertisement.
Section 61 then confers on the Secretary of State certain statutory rights of 886 action relating to contraventions of, inter
alia, ss 47, 56 and 57 of the 1986 Act, which are the basis of the present claims against the solicitors.
Finally, s 62 gives the individual investor a private right of action for damages for certain specified breaches of other
provisions of the 1986 Act.
Pausing at this stage, the 1986 Act therefore gives the individual investor a private right of action to recover money or
property transferred under an investment agreement made in consequence of breaches of ss 3, 56 and 57 of that Act and a right of
action to recover compensation for any loss suffered by the investor. But there are three points to be noted. First, and most
important, the statutory rights of action of the individual investor lie only against the person who contravenes the statutory
prohibition: the individual investor is given no cause of action against third parties (such as the solicitors) knowingly concerned
in such contravention. Second, the individual investor has no right to claim an account of the profits made by the contravener.
Third, the individual investor is given no right of action for contravention of s 47.
Sections 6 and 61 of the 1986 Act confer on the Secretary of State certain statutory rights of action the enforcement of which
he has delegated to the SIB. Section 6 confers on the Secretary of State rights of action arising from contraventions of s 3 and
provides as follows:

(1) If, on the application of the Secretary of State, the court is satisfied( a) that there is a reasonable likelihood that a
person will contravene section 3 above; or (b) that any person has contravened that section and that there is a reasonable
likelihood that the contravention will continue or be repeated, the court may grant an injunction restraining the
contravention or, in Scotland, an interdict prohibiting the contravention.
(2) If, on the application of the Secretary of State, the court is satisfied that a person has entered into any transaction in
contravention of section 3 above the court may order that person and any other person who appears to the court to have
been knowingly concerned in the contravention to take such steps as the court may direct for restoring the parties to the
position in which they were before the transaction was entered into.
(3) The court may, on the application of the Secretary of State, make an order under subsection (4) below or, in relation
to Scotland, under subsection (5) below if satisfied that a person has been carrying on investment business in contravention
of section 3 above and(a) that profits have accrued to that person as a result of carrying on that business; or (b) that one
or more investors have suffered loss or been otherwise adversely affected as a result of his contravention of section 47 or
56 below or failure to act substantially in accordance with any of the rules or regulations made under Chapter V of this Part
of this Act.
(4) The court may under this subsection order the person concerned to pay into court, or appoint a receiver to recover
from him, such sum as appears to the court to be just having regard(a) in a case within paragraph (a) of subsection (3)
above, to the profits appearing to the court to have accrued; (b) in a case within paragraph (b) of that subsection, to the
extent of the loss or other adverse effect; or (c) in a case within both paragraphs (a) and (b) of that subsection, to the profits
and to the extent of the loss or other adverse effect
(6) Any amount paid into court by or recovered from a person in pursuance of an order under subsection (4) or (5)
above shall be paid out to such person or distributed among such persons as the court may direct, being a person or persons
appearing to the court to have entered into transactions 887 with that person as a result of which the profits mentioned in
paragraph (a) of subsection (3) above have accrued to him or the loss or other adverse effect mentioned in paragraph (b) of
that subsection has been suffered.
(7) On an application under subsection (3) above the court may require the person concerned to furnish it with such
accounts or other information as it may require for establishing whether any and, if so, what profits have accrued to him as
mentioned in paragraph (a) of that subsection and for determining how any amounts are to be paid or distributed under
subsection (6) above; and the court may require any such accounts or other information to be verified in such manner as it
may direct
(9) Nothing in this section affects the right of any person other than the Secretary of State to bring proceedings in
respect of any of the matters to which this section applies.

Section 61 confers on the Secretary of State very similar rights in relation to contraventions of other prohibitions. So far as
relevant s 61 provides as follows:

(1) If on the application of the Secretary of State the court is satisfied(a) that there is a reasonable likelihood that
any person will contravene any provision of(i) rules or regulations made under this Chapter; (ii) sections 47, 56, 57, or
59 above; (iii) any requirements imposed by an order under section 58(3) above; or (iv) the rules of a recognised self-
regulating organisation, recognised professional body, recognised investment exchange or recognised clearing house to
which that person is subject and which regulate the carrying on by him of investment business, or any condition imposed
under section 50 above; (b) that any person has contravened any such provision or condition and that there is a reasonable
likelihood that the contravention will continue or be repeated; or (c) that any person has contravened any such provision or
condition and that there are steps that could be taken for remedying the contravention, the court may grant an injunction
restraining the contravention or, in Scotland, an interdict prohibiting the contravention or, as the case may be, make an
order requiring that person and any other person who appears to the court to have been knowingly concerned in the
contravention to take such steps as the court may direct to remedy it
(3) The court may, on the application of the Secretary of State, make an order under subsection (4) below or, in relation
to Scotland, under subsection (5) below if satisfied(a) that profits have accrued to any person as a result of his
contravention of any provision or condition mentioned in subsection (1)(a) above; or (b) that one or more investors have
suffered loss or been otherwise adversely affected as a result of that contravention.
(4) The court may under this subsection order the person concerned to pay into court, or appoint a receiver to recover
from him, such sum as appears to the court to be just having regard(a) in a case within paragraph (a) of subsection (3)
above, to the profits appearing to the court to have accrued; (b) in a case within paragraph (b) of that subsection, to the
extent of the loss or other adverse effect; or (c) in a case within both paragraphs (a) and (b) of that subsection, to the profits
and to the extent of the loss or other adverse effect

Subsections (6), (7) and (9) of s 61 contain provisions relating to the distribution of sums recovered under sub-ss (3) and (4),
accounts of profits and preservation of individual causes of action corresponding to those in sub-ss (6), (7) and (9) of s 6.
 It is to be noted that the only powers conferred on the court to make orders against third parties are contained in ss 6(2) and
61(1), both of which empower 888 the court to make orders to remedy the contravention of the statutory prohibition not only
against the person contravening but also against any other person who appears to the court to have been knowingly concerned in
the contravention. It is for this reason that the only relief claimed in the action by the SIB against the solicitors is under those
sections. The power of the court to order an account of profits or compensation for loss suffered by the investor is only
exercisable against the contravener himself.
It is this factor which was the basis for Mr Sumption QCs initial submissions on behalf of the solicitors. In outline they
were as follows. In sub-ss (3) and (4) of ss 6 and 61 Parliament has conferred on the court an express jurisdiction to order
monetary compensation for loss suffered by the investors. That power can only be exercised, first, if the circumstances specified
in sub-s (3)(b) are satisfied, second, by an order against the contravener himself and, third, by ordering payment into court or to a
receiver. Parliament, having so specified the requirements of monetary compensation in sub-ss (3) and (4), cannot have intended
that the power of the court to order the contravener to take such steps as the court may direct for restoring the parties to the
position in which they were before the transaction was entered into (s 6(2)) or to take such steps as the court may direct to
remedy it (s 61(1)) includes the power to order the contravener to pay compensation for loss in circumstances where the three
conditions attached by sub-s (3) are not satisfied. If such compensation order could not be made against the contravener under s
6(2) or s 61(1), nor can it be made against a person knowingly concerned in the contravention.
Mr Sumption supported this contention by pointing out that the machinery contained in sub-s (6) for distributing the moneys
recovered on behalf of investors in respect of profits and compensation under sub-ss (3) and (4) do not apply to orders made
under s 6(2) or s 61(1). How then are the moneys recovered under those latter sections to be dealt with? Generally, he submitted
that ss 6 and 61 are mere machinery whereby the SIB, on behalf of all investors, is empowered to enforce the investors rights as
a class.
Therefore, submitted Mr Sumption, the relief claimed under ss 6(2) and 61(1) by the SIB against the solicitors, as being
persons knowingly concerned, cannot succeed since it is a claim for compensation for loss: there is no jurisdiction to order
compensation for loss against persons knowingly concerned.
On the pleadings as they stand, these were powerful submissions. In my judgment there is no power to order the payment of
compensation for loss under ss 6(2) or 61(1) and the present pleadings are certainly capable of being construed as making such a
claim. But Mr Oliver QC, at the outset of his submissions on behalf of the SIB, accepted that there was no power to order
compensation for loss under s 6(2) or s 61(1). He submitted that those subsections provided for a form of statutory restitution,
under which the contravener could be ordered to restore what he had received (whether property or money) to each investor who
had entered into a transaction as a result of the contravention of the statutory prohibitions. Sections 6(2) and 61(1) were not
concerned with compensation for loss but with a form of statutory rescission under which the unlawful transactions were reversed
and the parties restored to the status quo ante. Such statutory rescission would frequently involve the repayment by the
contravener of moneys paid by the investor to the contravener under an unlawful transaction. The sections make it clear that such
an order for repayment could also be made against a person knowingly concerned in the contravention. Therefore, submitted
Mr Oliver, the claim against the solicitors for restitution was maintainable.
As I understood Mr Sumptions reply, he broadly accepted that ss 6(2) and 61(1) were directed to some form of statutory
restitution or rescission and that the court could order the return of identifiable property, whether tangible (eg share 889
certificates) or intangible (eg an identifiable fund of money). However, in his submission, the subsections did not authorise the
court, as part of the restitution process, to order either the contravener himself or the third party who was knowingly concerned to
recoup, out of his own pocket, sums equal to those paid by the investor under the transaction. Mr Sumption persisted in his
contention that ss 6 and 61 were mere machinery to enable the SIB on behalf of all investors to enforce the substantive rights
given to the investors by the other sections of the 1986 Act.
In my judgment, Mr Sumptions last submission is plainly ill-founded. Although the SIBs rights of action under ss 6 and 61
overlap those of the individual investors they are in some respects wider. Unlike the SIB, individual investors have no statutory
rights of action in relation to contraventions of s 47, have no right to an account of profits from the contravener and are given no
rights of action against third parties knowingly concerned in contraventions. Therefore, on their face, ss 6 and 61 are not mere
machinery enabling the SIB to enforce the investors individual rights. Certainly ss 6 and 61 are designed to enable the SIB to
bring proceedings for the collective enforcement of rights conferred on individual investors. But the jurisdiction under ss 6 and
61 is wider than that. It is therefore no answer to SIBs claim against the solicitors that an individual investor would have no
right of action against the solicitors.
In my judgment, ss 6(2) and 61(1) provide for a statutory rescission of unlawful transactions. The sections authorise the
court to order steps to be taken for restoring the parties to the position in which they were before the transaction was entered
into (s 6(2)) or to remedy [the contravention] (s 61(1)). These are the classic features of a rescission in equity: restitutio in
integrum or the putting back of the parties into the position they were formerly in. I can see no reason why, as against the
contravener himself, the court should not order repayment by the contravener of the sums paid to him under the unlawful
transaction, whether or not the actual sums paid are capable of being identified as a separate fund of money. There is nothing in
the words of the section which justify such a restriction nor is it a prerequisite of an order for repayment of the price by the
vendor when a contract is rescinded in equity. If, as I think clear, the court can order the contravener to repay the price out of his
own pocket, the section appears to provide that the same order can be made against the third party knowingly concerned. The
words of the section are general: the court can make the same order either against the contravener or against the third party
knowingly concerned.
Such a result accords with common sense. The most obvious example of a person knowingly concerned in a contravention
will be a person who is the moving light behind a company which is carrying on investment business in an unlawful manner.
Professor Gower in his report (which was the basis on which the 1986 Act was introduced) specifically pointed out the mischief
of directors hiding behind the corporate veil of companies: see Review of Investor Protection (Cmnd 9125) para 10.31. If, as is
often the case, the company is not worth powder and shot, it is obviously just to enable the court, as part of the statutory remedy
of quasi-rescission, to order the individual who is running that company in an unlawful manner to recoup those who have paid
money to the company under an unlawful transaction. Mr Sumption submitted that this was neither the purpose nor the effect of
the sections. He suggested that a fraudulent director would not be allowed to hide behind the corporate veil but would himself be
treated as a contravener of the statutory prohibition. I very much doubt if that is correct: in any event, that would not cover the
case where the contraventions, although unlawful, were not fraudulent.
The basic problem is to discover why the court is given jurisdiction only under ss 6(2) and 61(1) to make orders against third
parties who are knowingly 890 concerned. Mr Sumption suggested that the purpose was to enable orders to be made against
such third parties where they are holding property transferred by the investor. He gave the example of a third party bank holding,
and asserting a lien against, share certificates relating to shares transferred under the unlawful transaction. He suggests that no
order could be made against the bank if it had acted innocently but that Parliament wished to ensure that if the bank was not
innocent it could be forced to disgorge. This may well have been part of the Parliamentary intention, but there is nothing in the
words or context of the section so to limit its effect. I confess that there is no explanation why the power to make orders against
third parties knowingly concerned is not extended to claims for compensation for loss or to claims made by investors
individually. But that factor does not, in my judgment, provide any basis for giving the words an artificially limited meaning.
Nor in my judgment does it matter that the distribution machinery contained in sub-s (6) relating to moneys recovered under
sub-ss (3) and (4) does not apply to moneys recovered under ss 6(2) or 61(1). Claims under sub-ss (3) and (4) for compensation
for loss suffered by investors as a body or for an account of profits made by the contravener may well not be capable of being
attributable to any one investor. Therefore there has to be machinery in sub-s (6) to decide how the sums recovered are to be
distributed. In contrast, any sums recovered under ss 6(2) or 61(1) are of quite a different type. The SIB will have to provide in
relation to each individual transaction the amount paid by the individual investor. There is no provision (corresponding to sub-s
(4)) directing payment into court or to a receiver. Therefore the order will have to direct repayment of the sum paid to each
individual investor who has made the original payment. Accordingly, there is no need for a distribution system similar to that
contained in sub-s (6).
I therefore reach the conclusion that under ss 6(2) and 61(1) the court has jurisdiction to order the solicitors (if they have
been knowingly concerned in a relevant contravention by Pantell) to repay to investors sums paid to Pantell and will declare
accordingly.

Application dismissed.

Solicitors: Booth & Blackwell; Barlow Lyde & Gilbert.

Celia Fox Barrister.

[1991] 4 All ER 891

Henry J Garratt & Co v Ewing

CIVIL PROCEDURE: ADMINISTRATION OF JUSTICE; Courts

COURT OF APPEAL, CIVIL DIVISION

LORD DONALDSON OF LYMINGTON MR, RUSSELL AND LEGGATT LJJ
7, 15 OCTOBER 1991

Vexatious proceedings Instituting proceedings Appeal from county court judgment in proceedings brought against vexatious
litigant Plaintiffs bringing proceedings against vexatious litigant in county court and obtaining judgment against him
Whether vexatious litigant requiring leave of High Court to appeal from judgment Whether Court of Appeal having jurisdiction
to cause or allow appeal to be set down or adjudicated upon before leave given by the High Court Supreme Court Act 1981, s
42(1)(1A).

A vexatious litigant who is the subject of a civil proceedings order made under s 42(1) a of the Supreme Court Act 1981
restraining him from, inter alia, 891instituting any civil proceedings in any court or making any application in any civil
proceedings whether instituted by him or by another person in any court unless he first obtains leave of the High Court requires
such leave before he can appeal to the Court of Appeal from a judgment given against him in the county court in proceedings
brought against him by another person since the proposed appeal constitutes the instituting of civil proceedings in the Court of
Appeal or the making of an application in the civil proceedings in the county court for the purposes of s 42(1A). Accordingly,
the Court of Appeal has no jurisdiction to cause or allow the appeal to be set down or to adjudicate upon it unless and until the
litigant obtains the leave of the High Court (see p 896 d to g, post).
________________________________________
a Section 42, so far as material, is set out at p 893 j to p 894 b, post

Notes
For vexatious litigants, see 37 Halsburys Laws (4th edn) para 143, and for cases on the subject, see 37(2) Digest (Reissue) 255
257, 16651670.
For the Supreme Court Act 1981, s 42, see 11 Halsburys Statutes (4th edn) (1991 reissue) 1008.

Cases referred to in judgments

A-G v Ewing (21 December 1989, unreported), DC.
A-G v Ewing [1990] CA Transcript 674.
A-G v Jones [1990] 2 All ER 636, [1990] 1 WLR 859, CA; leave to appeal refused [1990] 2 All ER xix, [1990] 1 WLR 1089,
HL.
Hood Barrs v Heriot [1897] AC 177, HL.
Megarity v Law Society [1981] 1 All ER 641, [1982] AC 81, [1981] 2 WLR 335, HL.
Morelle Ltd v Wakeling [1955] 1 All ER 708, [1955] 2 QB 379, [1955] 2 WLR 672, CA.
Williams v Fawcett [1985] 1 All ER 787, [1986] QB 604, [1985] 1 WLR 501, CA.

Reference
The Registrar of Civil Appeals referred to the Court of Appeal for a ruling the question whether the Court of Appeal had
jurisdiction to hear an appeal or any application in connection therewith by the defendant, Terence Patrick Ewing, who was the
subject of an order made under s 42 of the Supreme Court Act 1981 on 21 December 1989 restraining him from (i) instituting any
civil proceedings, (ii) continuing any civil proceedings instituted by him in any court before the making of the order and (iii)
making any application in any civil proceedings instituted by him or another in any court, unless and until he had obtained the
leave of the High Court. The defendant wished to appeal from a judgment for 5,000 given against him in the Bow County Court
by Judge Butter QC on 16 April 1991 in an action brought against him by the plaintiffs, Henry J Garratt & Co. The facts are set
out in the judgment of Lord Donaldson MR.

The defendant appeared in person.

The plaintiffs did not appear.

15 October 1991. The following judgments were delivered.

LORD DONALDSON OF LYMINGTON MR. Mr Ewing is, if I may say so, an experienced and well-informed litigant in
person, but his enthusiasm for litigation has led to proceedings being taken against him by the Attorney General under s 42 of the
Supreme Court Act 1981 as amended by s 24 of the Prosecution of Offences Act 1985. As a result of these proceedings an order
was made on 21 December 1989 whereby Mr Ewing was prohibited from (i) instituting any civil 892 proceedings in any court,
(ii) continuing any civil proceedings instituted by him in any court before the making of the order and (iii) making any
application (other than an application for leave as required by the order) in any civil proceedings instituted by him or another in
any court unless he obtains the leave of the High Court and satisfies the court that the proceedings are not an abuse of the process
of the court in question and that there are reasonable grounds for the proceedings or application.
Mr Ewing appealed to this court against that order and on 24 July 1990 his appeal was dismissed (see A-G v Ewing [1990]
CA Transcript 674). He then petitioned the House of Lords for leave to appeal from this courts decision, as was of course his
right, but leave to appeal was refused on 3 December 1990.
In those circumstances the validity of the order cannot be impugned, but a novel question has arisen as to its effect. That
question can, I think, be simply stated as follows: so far as the s 42 order is concerned, is Mr Ewing entitled as of right to appeal
against a county court judgment given against him in proceedings begun by someone else or does he first need to obtain the leave
of the High Court?
The judgment against which Mr Ewing wishes to appeal was given in proceedings instituted in the county court not by Mr
Ewing but by Henry J Garratt & Co We have few details about these proceedings, but Mr Ewing has told us that it related to
share transactions. It was apparently a final judgment for about 5,000, including interest, and was given in the Bow County
Court by Judge Butter QC on 16 April 1991.
Mr Ewing gave notice of appeal within the appropriate time, but the Registrar of Civil Appeals rightly declined to set the
appeal down until this court had had an opportunity of considering and ruling whether it had jurisdiction to hear the proposed
appeal, the leave of the High Court not yet having been obtained. The need for such a ruling has inevitably involved some delay
and in the event has introduced a minor complication. This arises out of the fact that as from 1 July 1991 there has been a change
in the general requirements for leave to appeal from the county court. Whereas, apart from the effect of the s 42 order, Mr Ewing
had an unfettered right of appeal when he sought to have his appeal set down in May, he may now require the leave of Judge
Butter or of this court. I describe this as a minor complication because it would manifestly be wholly unjust that the passage of a
short time whilst awaiting a ruling from this court on a novel point of procedural law should alter the rights of the parties.
Accordingly, at the outset of the argument on the first occasion upon which Mr Ewing appeared before us we made it clear to him
that if the absence of leave from the High Court had created no obstacle to his proposed appeal (that is to say the absence of leave
under s 42), we would remove any obstacle arising out of the change in the law by giving him leave to appeal. In doing so we
would not, of course, have been considering whether his proposed appeal had any merit whatsoever, but would have been merely
seeking to restore the status quo ante.
Section 42 in its amended form reads, so far as material, as follows:

(1) If, on an application made by the Attorney General under this section, the High Court is satisfied that any person
has habitually and persistently and without any reasonable ground(a) instituted vexatious civil proceedings, whether in
the High Court or any inferior court, and whether against the same person or against different persons; or ( b) made
vexatious applications in any civil proceedings, whether in the High Court or any inferior court, and whether instituted by
him or another the court may, after hearing that person or giving him an opportunity of being heard, make a civil
proceedings order
893
(1A) In this sectioncivil proceedings order means an order that(a) no civil proceedings shall without the leave of
the High Court be instituted in any court by the person against whom the order is made; (b) any civil proceedings instituted
by him in any court before the making of the order shall not be continued by him without the leave of the High Court; and
(c) no application (other than one for leave under this section) shall be made by him, in any civil proceedings instituted in
any court by any person, without the leave of the High Court

As one might expect, the s 42 order made in respect of Mr Ewing follows closely the wording of s 42(1A) and must be
construed consistently with it.
Paragraph (ii) of the s 42 order (reflecting para (b) of the definition of civil proceedings order in s 42(1A)) can be
disregarded for present purposes because, whatever else Mr Ewing was doing when he sought to launch an appeal, he was not
continuing civil proceedings instituted by him. The pre-existing proceedings were instituted by the plaintiffs. It is also probable
that they were instituted after the s 42 order was made.
Authority apart, one might perhaps have thought that, the proceedings in the court below having been concluded by Judge
Butters judgment, the exercise upon which Mr Ewing was engaged was one of instituting any civil proceedings in any court,
thus requiring leave under para (i) of the s 42 order. Authority apart, one might also have thought that someone who appeals to
the Court of Appeal as of right is not making an application in the proceedings instituted in the court below. This preliminary
view would have been strengthened by the practice of distinguishing appeals and applications to this court, the subject matter
of the latter in the context of this courts appellate jurisdiction being any jurisdiction incidental to any cause or matter
pending before the civil division of the Court of Appeal and not involving the determination of an appeal (see s 58(1) of the 1981
Act). However, the matter is not free from authority.
Mr Ewing has referred us to the decision of the House of Lords in Hood Barrs v Heriot [1897] AC 177, where it was held
that for the purposes of s 2 of the Married Womens Property Act 1893 the question of who instituted the proceedings in the
context of an appeal fell to be determined by considering who brought the action in the court of first instance. Against this has to
be set a more recent decision of the House of Lords in Megarity v Law Society [1981] 1 All ER 641, [1982] AC 81, in which it
was held, adopting a purposive construction, that an interlocutory appeal to this court constituted separate proceedings for the
purposes of s 13(1) of the Legal Aid Act 1974. Neither decision was concerned with the construction of s 42 of the 1981 Act and
neither casts any light on whether the launching of an appeal can appropriately be described as the making of an application to
the Court of Appeal.
I therefore turn to A-G v Jones [1990] 2 All ER 636, [1990] 1 WLR 859, which was a decision of this court on the
construction of s 42 and which has been held to be binding on this court by a differently constituted division consisting of Dillon,
Butler-Sloss and Leggatt LJJ in A-G v Ewing [1990] CA Transcript 674. It was a decision in Mr Ewings own appeal against the
making of the s 42 order, a decision which, incidentally, the House of Lords refused to review. Mr Ewing submits that A-G v
Jones was wrongly decided, was reached per incuriam and/or should not be followed on principles which this court adopted in
Williams v Fawcett [1985] 1 All ER 787, [1986] QB 604.
For my part, I have no doubt that, whatever it decides, A-G v Jones binds this court. The decision was not per incuriam in
that it was not given in ignorance or forgetfulness of some inconsistent statutory provision or of some authority 894 binding on
this court (see Morelle Ltd v Wakeling [1955] 1 All ER 708 at 718, [1955] 2 QB 379 at 406). Whether the decision was right or
wrong, I can detect no manifest slip or error (ibid). Furthermore, it was not a decision which the House of Lords was unlikely
to have an opportunity of reviewing, which was a factor in our decision in Williams v Fawcett. Indeed, Mr Jones himself gave
the House of Lords that opportunity, but it was declined (see [1990] 2 All ER xix, [1990] 1 WLR 1089). I have no doubt,
therefore, that it is binding upon us.
What then does A-G v Jones decide? Mr Marcus Jones was appealing against a decision of the Divisional Court of the
Queens Bench Division (Stocker LJ and Schiemann J) on the ground, inter alia, that the Divisional Court should not have taken
his conduct into account in connection with the Court of Appeal, since s 42 on its true construction applied only to proceedings in
the High Court or in an inferior court. A similar point was subsequently argued by Mr Ewing himself before a differently
constituted Divisional Court (in that case Mann LJ and Rose J) (see A-G v Ewing (21 December 1989, unreported)), judgment
being given before Mr Joness appeal was heard in this court. Both courts reached the conclusion that civil proceedings, whether
in the High Court or any inferior court included appeals from orders of such courts. In both cases they were seeking to construe
s 42(1)(b), which refers to vexatious applications in any civil proceedings, whether in the High Court or any inferior court and
concluded that the reference to the levels of court qualified the word proceedings and not the word applications. Thus the
issue which came before this court in A-G v Jones was whether the vexatious conduct of litigation in the Court of Appeal fell
within s 42(1)(b), which in terms applies only to applications.
Stuart-Smith LJ referred to and relied upon s 151 of the 1981 Act as showing that Parliament intended that appeals to the
Court of Appeal were, or included, applications to set aside or vary a verdict, finding or judgment in proceedings in the High
Court (see [1990] 2 All ER 636 at 639, [1990] 1 WLR 854 at 864). Alternatively, if, contrary to his view, s 42(1)( b) was
ambiguous, he saw no logical reason why appeals to the Court of Appeal should be excluded and would have adopted a purposive
construction.
Personally I expressed the view that s 42(1)(b) was ambiguous and, adopting a purposive construction, held that civil
proceedings included proceedings in the Court of Appeal on appeal from the High Court or any inferior court, but did not extend
to proceedings originating in the Court of Appeal or to appeals from bodies which were not courts (see [1990] 2 All ER 636 at
638639, [1990] 1 WLR 859 at 862863). Since s 42(1)(b) refers only to applications, I impliedly held that appeals to this court
were properly described as applications for the purposes of the subsection.
Staughton LJ also adopted a purposive construction and held expressly that vexatious appeals constituted vexatious
applications in any civil proceedings, whether in the High Court or any inferior court within the meaning of those words in s
42(1)(b) (see [1990] 2 All ER 636 at 640, [1990] 1 WLR 859 at 864865).
I have referred at some length to the decision in A-G v Jones, both because Mr Ewing attaches importance to our declining
to follow it, and also because in a long letter to the Registrar of Civil Appeals dated 23 May 1991, which is perhaps in the nature
of a skeleton argument, Mr Ewing, after submitting that the decision in A-G v Jones was not binding on this court, said:

However, in any event, in Attorney General-v-Jones, the point was never ruled upon, as to what circumstances would
entail an appeal being an application in civil proceedings, and the Court did not in Attorney-General- 895v-Jones construe
the meaning of the words in Civil Proceedings in section 42(1A)(c) of the Supreme Court Act 1981, and if they did, then
it would be per incuriam, as none of the cases in relation to the meaning of the word in, were cited to the Court. I take
the view [that is Mr Ewing], that the present appeal is not an application in civil proceedings, as the proceedings in the
County Court have terminated, as judgment was entered against me, and the proceedings and judgment are final under
section 70 of the County Courts Act 1984. Therefore, if an appeal be an application in this case, it is the continuation of the
proceedings by way of a substantive application per se, but not an application in any other proceedings. (Mr Ewings
emphasis).

Whilst it is true that there is no detailed discussion of the circumstances which would entail an appeal being an application
in civil proceedings, I do interpret the judgment as holding that substantive appeals to the Court of Appeal and applications to that
court in connection therewith are all within the designation of applications in any civil proceedings within the meaning of s
42(1)(b). However, I agree with Mr Ewing that this court was not in terms considering any of the paragraphs of s 42(1A).
For my part, I do not think that this advances Mr Ewings argument. It can, of course, be said that s 42(1A) should be
construed consistently with s 42(1). So construed, any appeal or application to the Court of Appeal without the leave of the High
Court would be barred by para (iii) of the s 42 order (which reflects para (c) of the definition of civil proceedings order in
42(1A)). It is, however, possible that the two subsections fall to be construed separately. On this view sub-s (1) is concerned
with the test to be applied when deciding whether or not to make a s 42 order. If on the evidence an order is made it should be in
the terms of s 42(1A). If s 42(1A) is to be construed without regard to the construction put upon s 42(1)(b) in A-G v Jones, then it
is plain that Mr Ewings proposed appeal is at present barred either under para (i) of the s 42 order as constituting the instituting
by Mr Ewing of a civil proceeding in the Court of Appeal or under para (iii) as the making of an application by Mr Ewing in civil
proceedings instituted by the plaintiffs in the Bow County Court.
I would hold that, unless and until Mr Ewing obtains the leave of the High Court, this court has no jurisdiction to cause or
allow his appeal to be set down or to adjudicate upon it.

RUSSELL LJ. I agree.

LEGGATT LJ. I too agree.

Order accordingly.

Mary Rose Plummer Barrister.

896
[1991] 4 All ER 897

McCarthy & Stone (Developments) Ltd v Richmond upon Thames London

Borough Council
LOCAL GOVERNMENT

HOUSE OF LORDS
LORD MACKAY OF CLASHFERN LC, LORD BRIDGE OF HARWICH, LORD BRANDON OF OAKBROOK, LORD ACKNER AND LORD LOWRY
20, 21 MAY, 14 NOVEMBER 1991

Local authority Powers Subsidiary powers Power to do any thing calculated to facilitate or conducive or incidental to
discharge of functions Power to make charges Local authority making charges for pre-application planning consultations
Whether charges calculated to facilitate or conducive or incidental to discharge of planning functions Whether local authority
having statutory authority to levy charges Local Government Act 1972, s 111.

The respondent council adopted a policy of charging a fee of 25 for consultations between developers and the councils planning
officers before a formal application for planning permission for speculative development or redevelopments was made. In
accordance with that policy the council charged the appellants 25 for each of two meetings with a planning officer to discuss the
appellants proposals for a housing development. The appellants questioned the legality of the charge and paid the fees under
protest. They then applied for judicial review of the councils decision to continue its policy of charging for pre-application
consultations. The judge dismissed the application on the ground that the council had power to levy charges in respect of pre-
application consultations by virtue of s 111 a of the Local Government Act 1972, which conferred on local authorities power to
do any thing which is calculated to facilitate, or is conductive or incidental to, the discharge of any of their functions. The
appellants appealed to the Court of Appeal, which dismissed the appeal. The appellants appealed to the House of Lords.
________________________________________
a Section 111 is set out at p 899 h to p 900 a, post

Held A local authority could not lawfully impose a charge for pre-application planning consultations since, although the giving
of pre-application planning advice facilitated or was conducive or incidental to the councils planning functions, a charge for that
advice did not facilitate nor was it conducive or incidental to those functions and it was therefore not within the authoritys
ancillary powers under s 111 of the 1972 Act. The appeal would therefore be allowed (see p 898 h to p 899 a, p 902 g h, p 903 d
to f j, p 906 e to j and p 907 b, post).
Decision of the Court of Appeal sub nom R v Richmond upon Thames London BC, ex p McCarthy & Stone (Developments)
Ltd [1990] 2 All ER 852 reversed.

Notes
For the general and subsidiary powers of local authorities, see 28 Halsburys Laws (4th edn) paras 1314, 1356, and for cases on
the subject, see 33 Digest (Reissue) 4247, 130145.
For the Local Government Act 1972, s 111, see 25 Halsburys Statutes (4th edn) (1990) reissue) 272.
897

Cases referred to in opinions

A-G v Fulham Corp [1921] 1 Ch 440.
A-G v Great Eastern Rly Co (1880) 5 App Cas 473, HL.
A-G v Manchester Corp [1906] 1 Ch 643.
A-G v Smethwick Corp [1932] 1 Ch 562, [1932] All ER Rep 304, CA.
A-G v Wilts United Dairies Ltd (1922) 91 LJKB 897, HL; affg (1921) 37 TLR 884, CA.
Ashbury Railway Carriage and Iron Co Ltd v Riche (1875) LR 7 HL 653.
Associated Provincial Picture Houses Ltd v Wednesbury Corp [1947] 2 All ER 680, [1948] 1 KB 223, CA.
Gosling v Veley (1850) 12 QB 328, 116 ER 891, Ex Ch; rvsd (1853) 4 HL Cas 679, 10 ER 627.
Harris v Wyre Forest DC [1989] 2 All ER 514, [1990] 1 AC 831, [1989] 2 WLR 790, HL; rvsg [1988] 1 All ER 691, [1988] QB
835, [1988] 2 WLR 1173, CA.
Hazell v Hammersmith and Fulham London BC [1991] 1 All ER 545, [1991] 2 WLR 372, HL; rvsg [1990] 3 All ER 33, [1990] 2
QB 697, [1990] 2 WLR WLR 11038, CA; rvsg in part [1990] 3 All ER 33, [1990] 2 QB 697, [1990] 2 WLR 17, DC.
Ormond Investment Co v Betts [1928] AC 143, [1928] All ER Rep 709, HL.

Appeal
McCarthy & Stone (Developments) Ltd appealed with leave of the Court of Appeal from the decision of that court (Slade, Mann
LJJ and Sir David Croom-Johnson) ([1990] 2 All ER 852, [1990] 2 WLR 1294) on 23 February 1990 dismissing their appeal
from the decision of Popplewell J dated 30 January 1989 dismissing their application for judicial review by way of an order of
certiorari to bring up and quash the decision of Richmond upon Thames London Borough Council given by letter dated 27
October 1987 to the appellants stating that the council did not intend to revoke its policy adopted on 2 July 1985 of levying
charges for pre-application planning consultations. The facts are set out in the opinion of Lord Lowry.

Anthony Scrivener QC and Richard Rundell for the appellants.

David Mole QC and Jane Oldham for the council.

Their Lordships took time for consideration

14 November 1991. The following opinions were delivered.

LORD MACKAY OF CLASHFERN LC. My Lords, I have had the advantage of reading in draft the speech to be delivered by
my noble and learned friend Lord Lowry. I agree with him that this appeal should be allowed with costs, for the reasons he gives.

LORD BRIDGE OF HARWICH. My Lords, I have had the advantage of reading in draft the speech of my noble and learned
friend Lord Lowry. I agree with it and for the reasons he gives I would allow the appeal.

LORD BRANDON OF OAKBROOK. For the reasons given in the speech to be delivered by my noble and learned friend
Lord Lowry, I would allow the appeal.
898

LORD ACKNER. My Lords, I have had the advantage of reading in draft the speech to be delivered by my noble and learned
friend Lord Lowry. I agree with it and for the reasons he gives I, too, would allow this appeal with costs.

LORD LOWRY. My Lords, this appeal is concerned with the legality of the policy of the respondent council, the Richmond
upon Thames London Borough Council, which it adopted on 2 July 1985 and under which it has made a charge for consultations
concerning speculative development or redevelopment proposals between developers and the councils planning officers
preliminary to the making of formal applications for planning permission. The charge fixed by the council (which was selective)
was 25 and is conceded to be reasonable in both its incidence and its amount. It is, however, the lawfulness of charging at all
for this service which is in issue.
The appellants, McCarthy & Stone (Developments) Ltd (the developers), paid under protest for two consultations which
were held on 13 August 1986 and 12 January 1987 and then, having first made unsuccessful representations to the council
concerning the legality of its policy, sought by way of judicial review to challenge the councils decision (contained in a letter
dated 27 October 1987) to continue the practice of charging for preliminary consultations.
Popplewell J dismissed the developers application and the Court of Appeal (Slade, Mann LJJ and Sir David Croom-
Johnson) unanimously dismissed the appeal from his decision. The judgment of the court was delivered by Slade LJ and contains
an admirable summary of the facts which I could not hold to improve on and which I gratefully adopt (see [1990] 2 All ER 852 at
853854, [1990] 2 WLR 1294 at 12961297).
The council is a local planning authority and by virtue of s 29 of the Town and Country Planning Act 1971 (now superseded
by the Town and Country Planning Act 1990, of which the corresponding provision is s 70) was charged with the duty of
determining applications for planning permission properly submitted to it. Section 87(1) of the Local Government, Planning and
Land Act 1980 empowers the Secretary of State to provide by regulations for the payment of a fee of the prescribed amount to a
local planning authority in respect of planning applications. Such regulations have been made, but it is common ground that the
fees which they authorise (or could properly authorise, having regard to the power conferred) relate only to planning applications
and not to any pre-application inquiries or consultations.
It is agreed that, in order to charge for pre-application advice, the council needs a further statutory authority and that that
authority must be found, if found at all, in s 111(1) of the Local Government Act 1972 either in express words or by necessary
implication. The section reads as follows:

(1) Without prejudice to any powers exercisable apart from this section but subject to the provisions of this Act and
any other enactment passed before or after this Act, a local authority shall have power to do any thing (whether or not
involving the expenditure, borrowing or lending of money or the acquisition or disposal of any property or rights) which is
calculated to facilitate, or is conducive or incidental to, the discharge of any of their functions.
(2) For the purposes of this section, transacting the business of a parish or community meeting or any other parish or
community meeting or any other parish or community business shall be treated as a function of the parish or community
council.
899
(3) A local authority shall not be virtue of this section raise money, whether by means of rates, precepts or borrowing,
or lend money except in accordance with the enactments relating to those matters respectively.
(4) In this section local authority includes the Common Council.

The basis for the proposition, which was accepted by both sides, that statutory authority to charge is required is the well-
known principle exemplified by the ratio decidendi of A-G v Wilts United Dairies Ltd (1921) 37 TLR 884, CA; affd (1922) 91
LJKB 897, HL:

In these circumstances, if an officer of the executive seeks to justify a charge upon the subject made for the use of the
Crown (which includes all the purposes of the public revenue), he must show, in clear terms, that Parliament has authorized
the particular charge. The intention of the Legislature is to be inferred from the language used, and the grant of powers
may, though not expressed, have to be implied as necessarily arising from the words of a statute; but in view of the historic
struggle of the Legislature to secure for itself the sole power to levy money upon the subject, its complete success in that
struggle, the elaborate means adopted by the Representative House to control the amount, the conditions and the purposes
of the levy, the circumstances would be remarkable indeed which would induce the Court to believe that the Legislature
had sacrificed all the well-known checks and precautions, and, not in express words, but merely by implication, had
entrusted a Minister of the Crown with undefined and unlimited powers of imposing charges upon the subject for purposes
connected with his department.

(See per Atkin LJ (37 TLR 884 at 886).) Atkin LJ further observed (at 887):

It makes no difference that the obligation to pay the money is expressed in the form of an agreement. It was illegal for
the Food Controller to require such an agreement as a condition of any licence. It was illegal for him to enter into such an
agreement. The agreement itself is not enforceable against the other contracting party; and if he had paid under it he could,
having paid under protest, recover back the sums paid, as money had and received to his use.

I refer also to the observation of Scrutton LJ (at 885):

It is conceivable that Parliament, which may pass legislation requiring the subject to pay money to the Crown, may
also delegate its powers of imposing such payments to the Executive, but in my view the clearest words should be required
before the Courts hold that such an unusual delegation has taken place. As Chief Justice Wilde said in Gosling v. Veley
((1850) 12 QB 328 at 407, 116 ER 891 at 921): The rule of law that no pecuniary burden can be imposed upon the
subjects of this country, by whatever name it may be called, whether tax, due, rate or toll, except upon clear and distinct
legal authority established by those who seek to impose the burthen, has been so often the subject of legal decision that it
may be deemed a legal axiom, and requires no authority to be cited in support of it.

It is further conceded by the council that the principle applies whether the money is to be received by the Crown or central
government or by a local authority such as the council here.
In order to succeed in the appeal, the developers must demonstrate to your Lordships that the Court of Appeal was wrong,
but, speaking generally, as the 900 courts below rightly said, it is for the local authority to show that it has the right to charge for
the service provided.
My Lords, I have said that the power to charge a fee for the relevant service must, if it exists, be found in s 111(1) either
expressly or by necessary implication. This provision, as both sides agree, gives statutory recognition to the common law rule
governing the activities of local authorities and other statutory corporations, as recognised in such well-known authorities on the
doctrine of ultra vires as Ashbury Railway Carriage and Iron Co Ltd v Riche (1875) LR 7 HL 653, A-G v Great Eastern Rly Co
(1880) 5 App Cas 473 and A-G v Fulham Corp [1912] 1 Ch 440. A local authority could at common law do anything which was
reasonably incidental to its functions and the council here relies on the proposition that to impose a charge for pre-application
advice is reasonably incidental, not merely to the giving of that advice, but also to the councils function of considering and
determining applications for planning permission.
The definition of function is important and I would therefore refer at this point to the recent case of Hazell v Hammersmith
and Fulham London BC [1990] 3 All ER 33, [1990] 2 QB 697, DC and CA; [1991] 1 All ER 545, [1991] 2 WLR 372, HL, where
certain local authorities had engaged in speculative financial transactions and their power to do so was in question. In the
Divisional Court Woolf LJ reviewed s 111(1) and continued ([1990] 3 All ER 33 at 4950, [1990] 2 QB 697 at 722723):

This sub-section puts in a statutory form the long-established principle that local authorities have implied power to do
anything which is ancillary to the discharge of any of their functions. The fact that s 111(1) is expressly made subject to
the provisions of this Act makes it clear that it is important to construe s 111(1) in its context. The references to
expenditure, borrowing or lending etc within the brackets in the sub-section do not themselves confer any power to expend,
borrow or lend money etc, but only make it clear that the fact that those activities are involved does not prevent the
activities being within the power of the authority which are authorised by this subsection. The critical part of the
subsection is the words calculated to facilitate, or is conducive or incidental to, the discharge of any of their functions.
Before the subsection can authorise an activity which is not otherwise authorised there must be some other underlying
function which is authorised, to the discharge of which the activity will facilitate or be conducive or incidental. What is a
function for the purposes of the subsection is not expressly defined but in our view there can be little doubt that in this
context function refers to the multiplicity of specific statutory activities the council is expressly or impliedly under a duty
to perform or has power to perform under the other provisions of the 1972 Act or other relevant legislation. The subsection
 does not of itself, independently of any other provision, authorise the performance of any activity. It only confers, as the
sidenote to the section indicates, a subsidiary power. A subsidiary power which authorises an activity where some other
statutory provision has vested a specific function or functions in the council and the performance of the activity will assist
in some way in the discharge of that function or those functions.

In the Court of Appeal, Sir Stephen Brown P, delivering the judgment of the court, adverted to A-G v Great Eastern Rly Co
and, having set out s 111(1), said ([1990] 3 All ER 33 at 83, [1990] 2 QB 697 at 785):

Standing by itself, this subsection would not seem to give rise to any particular difficulty. We agree with the
Divisional Court that in this 901 subsection the word functions, which is accompanied by no statutory definition, is used
in a broad sense, and is apt to embrace all the duties and powers of a local authority: the sum total of the activities
Parliament has entrusted to it. Those activities are its functions. Section 111(1) confirms that, subject always to any
contrary statutory provision, a local authority has power to do all the ancillary things requisite for carrying out those
activities properly. This construction accords with the codifying purpose for which the subsection was enacted.

In this House, Lord Templeman said ([1991] 1 All ER 545 at 554, [1991] 2 WLR 372 at 383):

In A-G v Great Eastern Rly Co (1880) 5 App Cas 473 at 481 Lord Blackburn said: where there is an Act of
Parliament creating a corporation for a particular purpose, and giving it powers for that particular purpose, what it does not
expressly or impliedly authorize is to be taken to be prohibited In the same case Lord Selbourne LC said (at 478) that
the doctrine of ultra viresought to be reasonably, and not unreasonably, understood and applied, and that whatever may
fairly be regarded as incidental to, or consequential upon, those things which the Legislature has authorized, ought not
(unless expressly prohibited) to be held, by judicial construction, to be ultr vires. In the same vein Lord Blackburn said
(at 481): those things which are incident to, and may reasonably and properly be done under the main purpose, though
they may not be literally within it, would not be prohibited. Section 111 embodies these principles. I agree with the Court
of Appeal that in s 111 the word functions embraces all the duties and powers of a local authority: the sum total of the
activities Parliament has entrusted to it (see [1990] 3 All ER 33 at 83, [1990] 2 QB 679 at 785). Those activities are its
functions.

The observations of my noble and learned friend Lord Ackner were to the same effect where he said ([1991] 1 All ER 545 at 567,
[1991] 2 WLR 372 at 398): I accept that functions in s 111(1) covers the powers and duties of the local authority under the
various provisions of the Act. (My emphasis.)
It is, accordingly, clear that the consideration and determining of planning applications is a function of the council, but the
giving of pre-application advice, although it facilitates, and is conducive and incidental to, the function of determining planning
applications, it not itself a function of the council.
Thus, it is one thing to say that the giving of pre-application planning advice facilitates or is conducive or incidental to the
councils planning functions but it is quite another thing to say that for the council to charge for that advice also facilitates or is
conducive or incidental to those functions. The council presented its case on the basis that charging for the service facilitates, or
is conducive or incidental to, the giving of the pre-application advice; but, even assuming that to be a fact, this way of presenting
the case would simply amount to saying that imposing a charge facilitates, or is conducive or incidental to, a service which in its
turn facilitates, or is conducive or incidental to, the councils planning functions. The developers, on the other hand, submit that,
in order to qualify as something which is authorised by s 111(1) the imposition of a charge for pre-application advice must
facilitate, or be conducive or incidental to, the planning functions themselves. If not, the developers contend, the charge is not
within the powers of the council, since it is admittedly not authorised by any provision outside s 111. In this connection the
argument that something which is incidental to the incidental 902(but not incidental to the function) does not pass the test is not a
novelty: see A-G v Manchester Corp [1906] 1 Ch 643 at 656 per Farwell J, cited in Hazell v Hammersmith and Fulham London
BC [1990] 3 All ER 33 at 51, [1990] 2 QB 697 at 724).
My Lords, let me now turn to another argument for the council which found favour in the courts below. In its judgment the
Court of Appeal has contrasted functions, such as planning, which the council has a duty to provide, with those, such as providing
a museum, a library or a public park, which it has power to provide, on the basis that without statutory authority the council
cannot charge for the provision of a function which it has a duty to provide, whereas it can charge for a function which it has
merely power to provide (or not to provide) at its discretion. Thus, it is said, the council can charge for a service which at its
discretion it provides by virtue of s 111(1), as facilitating or being conducive or incidental to the relevant function (in this case the
function of considering and determining planning applications).
My Lords, the councils interpretation of s 111(1) is built on that proposition, but I consider its reasoning to be mistaken,
because it does not by any means follow that all of the discretionary functions of the council or all of the facilitating or incidental
activities contemplated or possibly contemplated by s 111 are services for which it is permissible to charge in the absence of
express authority to do so. The rule is that a charge cannot be made unless the power to charge is given by express words or by
necessary implication. These last words impose a rigorous test going far beyond the proposition that it would be reasonable or
even conducive or incidental to charge for the provision of a service. Furthermore, as it seems to me, the relevance of the
contrast attempted to be drawn, with respect to the power of a council to charge, between duty functions and discretionary
functions is vitiated when one has regard to the large number of discretionary functions for the provision of which express
statutory authority to charge has been enacted. I am not impressed by the submission that an express power to charge for the
performance of discretionary functions may have been conferred for the sake of clarity.
In support of its case the council instanced situations in which, without any express authority, it seemed obvious that a
charge would properly be made, but to say that the council can receive payment for the sale of redundant and worn-out
equipment does not, to my mind, advance the argument that a council can without statutory authority charge for a service. The
power to sell, for example, old motor cars for which the council no longer has a use necessarily implies that, in the interests of the
ratepayers, the council will recover from a commercial transaction the return which any seller would expect to receive, as a
normal incident of local government administration. The provision for a financial consideration of facilities to hold a conference
was also discussed. This, on the assumption that it is a legitimate activity, has the character of conducting a business, and it
would be a strange and unjust result if those who enjoyed the use of the facilities provided were to do so at the expense of the
ratepayers or their modern equivalent. I would not be prepared to say (and it is for present purposes unnecessary to say) that, in
the absence of express statutory power, there can never be a case in which the power to charge arises by necessary implication,
but I have heard no convincing argument to show how the present facts could support such an implication.
The council has cited Harris v Wyre Forest DC [1988] 1 All ER 691, [1988] QB 835, CA; rvsd [1989] 2 All ER 514, [1990]
1 AC 831, HL, where, as a prospective mortgagee, the local authority charged the prospective purchasers and mortgagors 903 of
a house a valuation and administration fee of 22. The explanation for this may be that Parliament, having authorised the council
to lend money on mortgage and having, by s 43(3)(e) of the Housing (Financial Provisions) Act 1958, required the council to
obtain a valuation before advancing any money, must be taken to have authorised the council to conduct its business transaction
in the same way as a bank or a building society might do. The question in that case, as your Lordships will recall, was not
concerned with the lawfulness of demanding payment of the 22 fee. That point was not discussed and I refrain from discussing
it now.
 Your Lordships have seen the affidavit of Mr GR Chesman, assistant head of legal services with the council. There is, of
course, statutory authority for a council to charge for a land charges search. As for the charges made for the other services
mentioned, they would all need to be considered individually in order to decide by what authority, if any, and with what propriety
each one has been imposed.
Mr Scrivener QC, for the developers, relied before your Lordships, as he had in the Court of Appeal, on s 150 of the Local
Government and Housing Act 1989, which only came into force on 16 January 1990, having received the royal assent on 16
November 1989. It reads:

(1) The Secretary of State may make regulations providing that a charge may be imposed in respect of anything( a)
which is done by any relevant authority or by any relevant authority of a prescribed description, (b) which is prescribed or
falls within a prescribed description, (c) in respect of which there is no power or duty to impose a charge apart from the
regulations, and (d) which is not done in the course of exercising an excepted function.
(2) The regulations may include such provision as the Secretary of State sees fit as regards charges for which the
regulations provide; and nothing in subsections (3) to (5) below or section 190(1) below is to prejudice this.
(3) The regulations(a) may be made as regards services rendered, documents issued, or any other thing done by an
authority (whether in pursuance of a power or a duty); (b) may provide that the amount of a charge (if imposed) is to be at
the authoritys discretion or to be at its discretion subject to a maximum.
(4) Where the regulations provide that a charge may not exceed a maximum amount they may(a) provide for one
amount, or a scale of amounts to cover different prescribed cases; (b) prescribe, as regards any amount, a sum or a method
of calculating the amount.
(5) The regulations may include such supplementary, incidental, consequential or transitional provisions as appear to
the Secretary of State to be necessary or expedient.
(6) No regulations may be made under this section unless a draft of them has been laid before and approved by a
resolution of each House of Parliament.

It should be noted that regulations made pursuant to this provision are to be subject to affirmative resolution of both Houses.
The claim on the part of the developers is that the enactment of this section shows that the councils interpretation of s
111(1) cannot be well founded, because, if it were, s 150 would be left without a useful function. I do not think, however, that
this contention is necessarily correct, because s 150(1)(c) might be contemplating a duty function in regard to which neither a
power nor a duty to charge had been enacted. The circumstances in which resort can be had to later legislation for the purpose of
statutory interpretation are not entirely clear: see Maxwell Interpretation of Statutes (12th edn, 1969) pp 6971 and Ormond
Investment 904 Co v Betts [1928] AC 143, [1928] All ER Rep 709, but I do not propose to trouble your Lordships with a
discussion of the point on this occasion because I do not consider in any event that s 150 of the 1989 Act provides a reliable
indication as to the meaning of s 111. Two things, however, can be said: s 150(3)( a) does not make in the charging context any
distinction between discretionary functions and duty functions; and the legislature, having enacted s 150, has provided a
convenient means of tidying up a confused scene, so far as charging for services in the future is concerned.
What the Court of Appeal had to say about s 150 in its judgment is ([1990] 2 All ER 852 at 860, [1990] 2 WLR 1294 at
1304):

ss 150 to 154 of the Local Government and Housing Act 1989 contain a number of new provisions relating to the
imposition of charges by certain authorities, but we do not think that this legislation affects the question which we have to
decide.

I respectfully agree.
The developers in their notice of appeal from Popplewell J put forward another argument based on s 111(3) to the effect that
that subsection completely prevents a local authority from raising money by virtue of s 111, and in particular by virtue of s 111(1),
with the result that no charge can be made for any service unless authority is found outside s 111. The Court of Appeal, quite
rightly in my view, rejected that argument. The subsection forbids (1) the raising of money by any one of three methods and (2)
the lending of money, in each case except in accordance with the specific enactments which deal with the subject. The
developers argument would require the addition of the words or otherwise after the word borrowing to get off the ground and,
even then, in the context of rates, precepts or borrowing, to equate charging for a service with the raising of money appears to
me to demand a very forced interpretation of language. I therefore agree with the conclusion of the Court of Appeal that s 111(3)
imposes no restrictions on the councils powers directly material for present purposes (see [1990] 2 All ER 852 at 856, [1990] 2
WLR 1294 at 1299). I would, however, point out that s 111(3), on its true construction, does not provide any affirmative support
for the argument that s 111(1) is an authority for making the charge with which this appeal is concerned.
The clues to interpretation to be deprived from other statutory provisions were of modest persuasive force, but perhaps I
might mention certain paragraphs of circular 1983/28 (publication by local authorities of information about the handling of
planning applications) issued jointly by the Department of the Environment and the Welsh Office (1983/23) on 29 December
1983:

7. The Secretaries of State recognise that local planning authorities are concerned to ensure that the development
control system is operated in a way which serves the best interest of the community and secures developments of good
quality. They also attach great importance to the timely handling of planning applications, and authorities are reminded of
the need to take account of the advice contained in DOE Circular 22/80 (Welsh Office Circular 40/80). Local authorities,
applicants and consultees all have important roles to play in ensuring not only a speedy and efficient service but also one
which takes proper steps to secure local planning policies.
8. Local authorities attention is drawn to the need for: (i) prompt decisions to be seen to be a priority by local
authority members and officers; (ii) procedures to be designed to avoid unnecessary delay; (iii) those procedures to be
reviewed periodically and adjustments made to meet changing circumstances; (iv) early informal discussions with
applicants and their agents 905 to be encouraged. Where possible, these should include discussion about features of
schemes which may give rise to the imposition of conditions in the event of permission being granted. Applicants can then
consider the scope for adjusting the scheme prior to formal submission of a planning application so as to render the
conditions unnecessary if the local planning authority are minded to grant planning permission; (v) planning departments to
(a) co-ordinate the requirements of statutory consultees; (b) make particular efforts to resolve any conflicting requirements;
and (c) where necessary, invite those organisations and departments with an interest in applications to be represented at any
meetings with applicants or their agents.
9. The attention of applicants is drawn to the need for early discussions to be held with local planning authorities so that

16. There will be some financial and manpower costs associated with the implementation of this code. These costs will
vary between local authorities according to the extent to which information is already collected by them for their own use.
However, there may be some off-setting benefits to be obtained by local authorities from the use of the information
required by the code in the management of their development control duties
The developers placed some reliance on para 16 as showing that local authorities were expected to incur expense by providing a
mutually helpful service, but, as your Lordships have seen in the present case, even if fees were charged, the recommended
service was unlikely to pay for itself out of direct revenue. I do not consider that it is either justifiable or necessary for the
developers to look to such a slender argument in order to support their case.
My Lords, I come back to s 111(1), the relevant provision. The council admits that it cannot without express authority
charge for a duty function, but it still has to say that the ability to charge for pre-application advice is based on the power to do
any thing which is incidental [I deliberately choose the most neutral qualification] to the discharge of any of [the councils]
functions. To charge for performing a function (subject always to Wednesbury considerations (see Associated Provincial Picture
Houses Ltd v Wednesbury Corp [1947] 2 All ER 680, [1948] 1 KB 223), which do not arise here) must always be incidental to the
provision of the service provided. Therefore the councils interpretation of s 111(1) would allow it to charge for the performance
of every function, both obligatory and discretionary, which provided a service. (And, even without s 87(1), there would be
nothing unreasonable or irrational in charging a proper fee for determining a planning application.) Such a construction of the
subsection cannot possibly be justified, and I say this before even considering the point that, in the absence of express statutory
authority, the power to charge can only be implied, in the words of Atkin LJ in A-G v Wilts United Dairies Ltd (1921) 37 TLR
884 at 886, as necessarily arising from the words of a statute.
There is yet a further point, to which I have already adverted. As the Court of Appeal has said ([1990] 2 All ER 852 at 859,
[1990] 2 WLR 1294 at 1302), the power to give pre-application advice is neither a duty nor a discretionary express power, but is
a subsidiary power arising by virtue of s 111(1) (which has codified the common law), because it is calculated to facilitate, or is
conducive or incidental to, the discharge of one of the councils functions. To charge for the exercise of that power is, at best,
incidental to the incidental and not incidental to the discharge of the functions.
A further point which commended itself to the Court of Appeal was the argument that, since the council was not obliged to
provide the service in question, it could state on a take it or leave it basis that it was willing to provide 906 it for a reasonable
fee, as if entering into a contract (see [1990] 2 All ER 852 at 859860, [1990] 2 WLR 1294 at 1303). I consider this to be an
untenable proposition which, if correct, would justify a local authority in charging for any discretionary service, but which in
reality is in conflict with the second principle enunciated by Atkin LJ in A-G Wilts United Dairies Ltd 37 TLR 884 at 887
(already cited).
My Lords, for these reasons I would allow the appeal and would order the council to pay the developers costs in this House
and in the courts below.

Appeal allowed.

Solicitors: Metson Cross & Co; GR Chesman, Twickenham.

Mary Rose Plummer Barrister.

[1991] 4 All ER 907

Alcock and others v Chief Constable of the South Yorkshire Police

CIVIL PROCEDURE

HOUSE OF LORDS
LORD KEITH OF KINKEL, LORD ACKNER, LORD OLIVER OF ALYMERTON, LORD JAUNCEY OF TULLICHETTLE AND LORD LOWRY
7, 8, 9, 10, 14 OCTOBER, 28 NOVEMBER 1991

Damages Personal injury Nervous shock Disaster at football stadium involving many deaths and injuries Events at
stadium televised live Plaintiffs relatives and friends among persons killed or injured Plaintiffs seeing events at stadium on
live television or hearing about tragedy on radio Plaintiffs suffering nervous shock Tragedy caused by defendants negligence
Whether defendant owing duty of care to plaintiffs Whether plaintiffs within class of persons entitled to recover damages for
nervous shock Whether persons who saw live television broadcast of events entitled to sue Whether live television broadcast
of events providing proximity of time and space.

Shortly before the commencement of a major football match at a football stadium the police responsible for crowd control at the
match allowed an excessively large number of intending spectators into a section of the ground which was already full, with the
result that 95 spectators were crushed to death and over 400 injured. Scenes from the ground were broadcast live on television
from time to time during the course of the disaster and were broadcast later on television as news items. News of the disaster was
also broadcast over the radio. However, in accordance with television broadcasting guidelines none of the television broadcasts
depicted suffering or dying of recognisable individuals. Sixteen persons, some of whom were at the match but not in the area
where the disaster occurred, and all of whom were relatives, or in one case the fianc, of persons who were in that area, brought
actions against the chief constable of the force responsible for crowd control the match claiming damages for nervous shock
resulting in psychiatric illness alleged to have been caused by seeing or hearing news of the disaster. In the case of thirteen of the
plaintiffs their relatives and friends were killed, in the case of two of the plaintiffs their relatives and friends were injured and in
the case of one plaintiff the relative escaped unhurt. The chief constable admitted liability in negligence in respect of those who
were killed and injured in the disaster but denied that he owed any duty of care to the plaintiffs. The question whether, assuming
that each plaintiff had suffered 907 nervous shock causing psychiatric illness as a result of the experiences inflicted on them by
the disaster, they were entitled in law to recover damages for nervous shock against the defendant was tried as a preliminary
issue. The judge found in favour of ten out of the plaintiffs and against six of them. The defendant appealed in respect of nine of
the successful plaintiffs and the six unsuccessful plaintiffs cross-appealed. The Court of Appeal allowed the appeals and
dismissed the cross-appeals, holding that none of the plaintiffs was entitled to recover damages for nervous shock. Ten of the
plaintiffs appealed to the House of Lords, contending that the only test for establishing liability for shock-induced psychiatric
illness was whether such illness was reasonably foreseeable.

Held A person who sustained nervous shock which caused psychiatric illness as a result of apprehending the infliction of
physical injury or the risk thereof to another person could only recover damages from the person whose negligent act caused the
physical injury or the risk to the primary victim if he satisfied both the test of reasonable foreseeability that he would be affected
by psychiatric illness as a result of the consequences of the accident because of his close relationship of love and affection with
the primary victim and the test of proximity in relationship to the tortfeasor in terms of physical and temporal connection between
the plaintiff and the accident. Accordingly, the plaintiff could only recover if (i) his relationship to the primary victim was
sufficiently close that it was reasonably foreseeable that he might sustain nervous shock if he apprehended that the primary victim
had been or might be injured, (ii) his proximity to the accident in which the primary victim was involved or its immediate after
match was sufficiently close both in time and space and (iii) he suffered nervous shock through seeing or hearing the accident or
its immediate aftermath. Conversely, persons who suffered psychiatric illness not caused by sudden nervous shock through
seeing or hearing the accident or its immediate aftermath or who suffered nervous shock caused by being informed of the
accident by a third party did not satisfy the tests of reasonable foreseeability and proximity to enable them to recover and, given
the television broadcasting guidelines, persons such as the plaintiffs who saw the events of a disaster on television could not be
considered to have suffered nervous shock induced by sight or hearing of the event since they were not in proximity to the events
and would not have suffered shock in the sense of a sudden assault on the nervous system. It followed that none of the appellants
was entitled to succeed because either they were not at the match but had seen the disaster on television or heard radio broadcasts
or their relationship to the victim had not been shown to be sufficiently close to enable them to recover. The appeals would
therefore be dismissed (see p 914 a b d to f h, p 915 b to h, p 917 d f, p 918 b f to h, p 919 h to p 920 a j to p 921 f h to p 922 a, p
925 f g j to p 926 a d to h, p 929 j to p 930 b g to j, p 931 c to e j to p 932 a, p 933 e to j, p 935 j to p 936 b f to j and p 937 b to e,
post).
Dicta of Lord Wilberforce in McLoughlin v OBrian [1982] 2 All ER 298 at 304305 and of Gibbs CJ and Deane J in
Jaensch v Coffey (1984) 54 ALR 417 at 462463 applied.
Hevican v Ruane [1991] 3 All ER 65 and Ravenscroft v Rederiaktieblaget Transatlantic [1991] 3 All ER 73 doubted.
Per curiam. The class of persons to whom a duty may be owed to take reasonable care to avoid inflicting psychiatric illness
through nervous shock sustained by reason of physical injury or peril to another is not limited by reference to particular
relationships such as husband and wife or parent and child although it must be within the defendants contemplation (see p 914 d
to g, p 919 h j, p 920 f, p 930 b c, p 935 j to p 936 b and p 937 e, post).
Per Lord Keith, Lord Ackner and Lord Oliver. A bystander who suffers shock-induced psychiatric illness after witnessing a
particular horrific catastrophe close 908 to him may be entitled to recover damages from the person whose negligent act caused
the catastrophe if a reasonably strong-nerved person would have been so affected (see p 914 g, p 919 f to h and p 930 e, post);
dictim of Atkin LJ in Hambrook v Stokes Bros [1924] All ER Rep 110 at 117 applied.
Per Lord Ackner and Lord Oliver. There may be circumstances where the element of direct visual perception may be
provided by witnessing the actual injury to the primary victim on simultaneous television (see p 921 f g and p 931 c, post).
Decision of the Court of Appeal sub nom Jones v Wright [1991] 3 All ER 88 affirmed.

Notes
For liability for nervous shock, see 34 Halsburys Laws (4th edn) para 8, and for cases on the subject, see 17 Digest (Reissue)
145147, 377391.

Cases referred to in opinions

Abramzik v Brenner (1967) 65 DLR (2d) 651, Sask CA.
Bell v Great Northern Rly Co of Ireland (1890) 26 LR Ir 428, Ex D.
Benson v Lee [1972] VR 879, Vict SC.
Best v Samuel Fox & Co Ltd [1952] 2 All ER 394, [1952] AC 716, HL.
Caparo Industries plc v Dickman [1990] 1 All ER 568, [1990] 2 AC 605, [1990] 2 WLR 358, HL.
Chadwick v British Transport Commission [1967] 2 All ER 945, sub nom Chadwick v British Railways Board [1967] 1 WLR
912.
Dillon v Legg (1968) 68 Cal 2d 728, Cal SC.
Dooley v Cammell Laird & Co Ltd [1951] 1 Lloyds Rep 271, Assizes.
Dulieu v White & Sons [1901] 2 KB 669, [19003] All ER Rep 353, DC.
Galt v British Railways Board (1983) 133 NLJ 870.
Hambrook v Stokes Bros [1925] 1 KB 141, [1924] All ER Rep 110, CA.
Hay (or Bourhill) v Young [1942] 2 All ER 396, [1943] AC 92, HL; affg 1941 SC 395, Ct of Sess.
Heaven v Pender (1883) 11 QBD 503, [18815] All ER Rep 35, CA.
Hevican v Ruane [1991] 3 All ER 65.
Hinz v Berry [1970] 1 All ER 1074, [1970] 2 QB 40, [1970] 2 WLR 684, CA.
Jaensch v Coffey (1984) 54 ALR 417, Aust HC.
King v Phillips [1953] 1 All ER 617, [1953] 1 QB 429, [1953] 2 WLR 526, CA.
Kirkham v Boughey [1957] 3 All ER 153, [1958] 2 QB 338, [1957] 3 WLR 626.
MAlister (or Donoghue) v Stevenson [1932] AC 562, [1932] All ER Rep 1, HL.
McKew v Holland & Hannen & Cubbits (Scotland) Ltd [1969] 3 All ER 1621, HL.
McLoughlin v OBrian [1982] 2 All ER 298, [1983] 1 AC 410, [1982] 2 WLR 982, HL; rsvg [1981] 1 All ER 809, [1981] QB
599, [1981] 2 WLR 1014, CA.
Owens v Liverpool Corp [1938] 4 All ER 727, [1939] 1 KB 394.
Ravenscroft v Rederiaktieblaget Transatlantic [1991] 3 All ER 73.
Schneider v Eisovitch [1960] 1 All ER 169, [1960] 2 QB 430, [1960] 2 WLR 169.
Smith v Johnson & Co (January 1897, unreported), QBD.
Wagner v International Rly Co (1921) 232 NY 176, NY Ct of Apps.
Wigg v British Railways Board (1986) 136 NLJ 446.

Consolidated appeals
The plaintiffs, Robert Alcock, Catherine Marea Jones, Joseph Kehoe, Alexandra Penk, Agnes Copoc, Harold Copoc, Brian
Harrison, Brenda Julie Hennessy, Denise Hough and Stephen Jones, appealed with leave of the Court of Appeal from the decision
of that court (Parker, Stocker and Nolan LJJ) (sub nom Jones v Wright [1991] 3 All ER 88) on 3 May 1991 (1) allowing the
appeal of the defendant, Peter Wright, the Chief Constable of the South Yorkshire Police, from the judgment of Hidden J sitting
in the Queens Bench Division at Liverpool ([1991] 1 All ER 353, 909[1991] 2 WLR 814) on 31 July 1990 whereby he entered
judgment for, inter alios, the plaintiffs Stephen Jones, Harold Copoc, Brenda Hennessey, Brian Harrison, Agnes Copoc and
Denise Hough in their action against the defendant for damages for personal injuries and/or physical harm and consequential
losses and expenses occasioned to them by the negligence and/or breach of statutory duty of the defendant at Hillsborough
Football Stadium, Sheffield, South Yorkshire, and (2) dismissing the cross-appeals of, inter alios, the plaintiffs Joseph Kehoe,
Alexandra Penk and Robert Alcock from the judges decision dismissing their actions against the defendant on the ground that
they did not fall within the range of persons of whom the defendant, in his management and control of the arrangements at the
Hillsborough Stadium on the occasion of the FA Cup semi-final football match on 15 April 1989, owed a duty of care. The facts
are set out in the opinion of Lord Keith.

Benet Hytner QC and T R A King QC for the appellants.

William Woodward QC and Patrick Limb for the respondent.

Their Lordships took time for consideration

28 November 1991. The following opinions were delivered.

LORD KEITH OF KINKEL. My Lords, the litigation with which these appeals are concerned arose out of the disaster at
Hillsborough Stadium, Sheffield, which occurred on 15 April 1989. On that day a football match was arranged to be played at
the stadium between the Liverpool and the Nottingham Forest football clubs. It was a semi-final of the FA Cup. The South
Yorkshire police force, which was responsible for crowd control at the match, allowed an excessively large number of intending
spectators to enter the ground at the Leppings Lane end, an area reserved for Liverpool supporters. They crammed into pens 3
and 4, below the West Stand, and in the resulting crush 95 people were killed and over 400 physically injured. Scenes from the
ground were broadcast live on television from time to time during the course of the disaster, and recordings were broadcast later.
The Chief Constable of South Yorkshire has admitted liability in negligence in respect of the deaths and physical injuries.
Sixteen separate actions were brought against him by persons none of whom was present in the area where the disaster occurred,
although four of them were elsewhere in the ground. All of them were connected in various ways with persons who were in that
area, being related to such persons or, in one case, being a fianc. In most cases the person with whom the plaintiff was
concerned was killed, in other cases that person was injured, and in one case turned out to be uninjured. All the plaintiffs claim
damages for nervous shock resulting in psychiatric illness which they allege was caused by the experiences inflicted on them by
the disaster.
The actions came on for trial before Hidden J on 19 June 1990, and he gave judgment on 31 July 1990 (see [1991] 1 All ER
353, [1991] 2 WLR 814). That judgment was concerned with the question whether the defendant owed a duty of care in relation
to nervous shock to any, and if so to which, of the plaintiffs. The defendant admitted that if he owed such a duty to any plaintiff,
and if that plaintiff could show causation, then the defendant was in breach of duty and liable in damages to that plaintiff. For the
purposes of his judgment Hidden J 910 assumed in the case of each plaintiff that causation was established, leaving that matter to
be dealt with, if necessary, in further proceedings. In the result, he found in favour of ten out of the sixteen plaintiffs before him
and against six of them. The defendant appealed to the Court of Appeal in the cases of nine out of the ten successful plaintiffs,
and the six unsuccessful plaintiffs also appealed to that court. On 3 May 1991 the Court of Appeal (Parker, Stocker and Nolan
LJJ) gave judgment allowing the defendants appeals in the cases of the nine formerly successful plaintiffs and rejecting the
appeals of the six unsuccessful ones (see [1991] 3 All ER 88). Ten only of these fifteen plaintiffs now appeal to your Lordships
House, with leave granted in the Court of Appeal.
The circumstances affecting each of the ten appellants were thus summarised in the judgment of Parker LJ ([1991] 3 All ER
88 at 9294):

Brian Harrison was at the ground. He was in the West Stand. He knew both of his brothers would be in the pens
behind the goal. He saw the hoffiying scene as it developed and realised that people in the two pens had been either killed
or injured. When, six minutes after the start, the match was abandoned he tried to find his brothers. He failed to do so. He
stopped up all night waiting for news. At 6 am he learnt that his family were setting off for Sheffield. At 11 am he was
informed by telephone that both his brothers were dead
Mr and Mrs Copoc lost their son. They saw the scenes on live television. Mrs Copoc was up all night. She was
informed by police officers at 6 am that her son was dead. Mr Copoc went to Sheffield at 4 am with his nephew. He was
informed at 6.10 am of his sons death and later identified the body
Brenda Hennessey lost her brother. She watched television from about 3.30 pm and, although she then realised there
had been deaths and injuries in the pens, she was not worried because she believed her brother to be in a stand seat.
However, at about 5 pm she learnt from her brothers wife that he had a ticket in the Leppings Lane terrace. At 6 pm she
learnt from members of the family who had gone to Sheffield that her brother was dead.
Denise Hough lost her brother. She was 11 years older than her brother and had fostered him for several years although
he no longer lived with her. She knew he had a ticket at the Leppings Lane end and would be behind the goal. She was
told by a friend that there was trouble at the game. She watched television. At 4.40 am she was informed by her mother
that her brother was dead. Two days later, on 17 April, she went with her mother to Sheffield and confirmed an earlier
identification of the body. His face was bruised and swollen.
Stephen Jones lost his brother. He knew that his brother was at the match. He watched television and saw bodies and
believed them to be dead. He did not know his brother was dead until 2.45 am when, having gone to the temporary
mortuary at Hillsborough, he found his parents there in tears
Robert Alcock lost his brother-in-law. He was in the West Stand, with his nephew (the brother-in-laws son). He
witnessed the scenes from the West Stand and was sickened by what he saw but was not then concerned for his brother-in-
law whom he believed to be in the stand because, on the way to the match, he had swapped a terrace ticket which he held
for a stand ticket. Tragically, however, the brother-in-law had, unknown to the plaintiff, returned to the terrace. After the
match the plaintiff left the ground for a rendezvous with the brother-in-law, who did not arrive. He and his nephew became
worried and searched without success. At about midnight they went to the mortuary, where the plaintiff identified the body,
which was blue with bruising and the chest of which was red. The sight appalled him
Catherine Jones lost a brother. She knew he was at the match and would 911 normally be behind the goal. At 3.30 pm
whilst shopping she heard that there was trouble at the match and at 4.30 pm that there were deaths. At 5.15 pm she went
home and heard on the radio that the death toll was mounting. At 7 pm a friend telephoned from Sheffield to say that
people at the hospital were describing someone who might be her brother. At 9 pm her parents set off for Sheffield. At 10
pm she watched recorded television in the hope of seeing her brother alive. She thought mistakenly, she saw him collapsed
on the pitch. At 5 am her father returned from Sheffield and told her that her brother was dead.
Joseph Kehoe lost a 14-year-old grandson, the son of his daughter and her divorced husband. Unknown to the
grandfather the boy had gone to the match with his father. In the afternoon the plaintiff heard on the radio that there had
been deaths at Hillsborough. He later saw scenes of the disaster on recorded television. He later still learnt that his
grandson was at the match. He became worried. At 3 am he was telephoned by another daughter to say that both the boy
and his father were dead
Alexander Penk lost her fianc, Carl Rimmer. They had known each other for four years and recently became engaged.
They planned to marry in late 1989 or at the latest early in 1990. She knew he was at the match and would be on the
Leppings Lane terraces. She saw television in her sisters house and knew instinctively that her fianc was in trouble. She
continued to watch in the hope of seeing him but did not do so. She was told at about 11 pm that he was dead.

The question of liability in negligence for what is commonly, if inaccurately, described as nervous shock has only twice
been considered by this House, in Hay (or Bourhill) v Young [1942] 2 All ER 396, [1943] AC 92 and in McLoughlin v OBrian
[1982] 2 All ER 298, [1983] 1 AC 410. In the latter case the plaintiff, after learning of a motor accident involving her husband
and three of her children about two hours after it had happened, went to the hospital where they had been taken. There she was
told that one of the children had been killed, and saw her husband and the other two in a distressed condition and bearing on their
persons the immediate effects of the accident. She claimed to have suffered psychiatric illness as a result of her experience, and
at the trial of her action of damages against those responsible for the accident this was assumed to be the fact. This House,
reversing the Court of Appeal (see [1981] 1 All ER 809, [1981] QB 599), held that she was entitled to recover damages. The
leading speech was delivered by Lord Wilberforce. Having set out the position so far reached in the decided cases on nervous
shock ([1982] 2 All ER 298 at 301302, [1983] 1 AC 410 at 418419), he expressed the opinion that foreseeability did not of
itself and automatically give rise to a duty of care owed to a person or class of persons and that considerations of policy entered
into the conclusion that such a duty existed. He then considered the arguments on policy which had led the Court of Appeal to
reject the plaintiffs claim, and concluded that they were not of great force. He continued ([1982] 2 All ER 298 at 304305,
[1983] 1 AC 410 at 421423):

But these discounts accepted, there remains, in my opinion, just because shock in its nature is capable of affecting so
wide a range of people, a real need for the law to place some limitation on the extent of admissible claims. It is necessary
to consider three elements inherent in any claim: the class of persons whose claims should be recognised; the proximity of
such persons to the accident; and the means by which the shock is caused. As regards the class of persons, the possible
range is between the closest of family ties, of parent and child, or husband and wife, and the ordinary bystander. Existing
912 law recognises the claims of the first; it denies that of the second, either on the basis that such persons must be
assumed to be possessed of fortitude sufficient to enable them to endure the calamities of modern life or that defendants
cannot be expected to compensate the world at large. In my opinion, these positions are justifiable, and since the present
case falls within the first class it is strictly unnecessary to say more. I think, however, that it should follow that other cases
involving less close relationships must be very carefully scrutinised. I cannot say that they should never be admitted. The
closer the tie (not merely in relationship, but in care) the greater the claim for consideration. The claim, in any case, has to
be judged in the light of the other factors, such as proximity to the scene in time and place, and the nature of the accident.
As regards proximity to the accident, it is obvious that this must be close in both time and space. It is after all, the fact and
consequence of the defendants negligence that must be proved to have caused the nervous shock. Experience has shown
that to insist on direct and immediate sight or hearing would be impractical and unjust and that under what may be called
the aftermath doctrine, one who, from close proximity comes very soon on the scene, should not be excluded Finally,
and by way of reinforcement of aftermath cases, I would accept, by analogy with rescue situations, that a person of
whom it could be said that one could expect nothing else than that he or she would come immediately to the scene
(normally a parent or a spouse) could be regarded as being within the scope of foresight and duty. Where there is not
immediate presence, account must be taken of the possibility of alterations in the circumstances, for which the defendant
should not be responsible. Subject only to these qualifications, I think that a strict test of proximity by sight or hearing
should be applied by the courts. Lastly, as regards communication, there is no case in which the law has compensated
shock brought about by communication by a third party. In Hambrook v Stokes Bros [1925] 1 KB 141, [1924] All ER Rep
110, indeed, it was said that liability would not arise in such a case, and this is surely right. It was so decided in Abramzik
v Brenner (1967) 65 DLR (2d) 651. The shock must come through sight or hearing of the event or of its immediate
aftermath. Whether some equivalent of sight or hearing, eg through simultaneous television, would suffice may have to be
considered.

Lord Bridge of Harwich, with whom Lord Scarman agreed (see [1982] 2 All ER 298 at 310, [1983] 1 AC 410 at 429), appears to
have rested his finding of liability simply on the test of reasonable foreseeability of psychiatric illness affecting the plaintiff as a
result of the consequences of the road accident (see [1982] 2 All ER 298 at 317320, [1983] 1 AC 410 at 439443). Lord
Edmund-Davies and Lord Russell of Killowen both considered the policy arguments which had led the Court of Appeal to
dismiss the plaintiffs claim to be unsound (see [1982] 2 All ER 298 at 309, 310, [1983] 1 AC 410 at 428, 429). Neither speech
contained anything inconsistent with that of Lord Wilberforce.
It was argued for the appellants in the present case that reasonable foreseeability of the risk of injury to them in the
particular form of psychiatric illness was all that was required to bring home liability to the respondent. In the ordinary case of
direct physical injury suffered in an accident at work or elsewhere, reasonable foreseeability of the risk is indeed the only test that
need be applied to determine liability. But injury by psychiatric illness is more subtle, as Lord Macmillan observed in Bourhill v
Young [1942] 2 All ER 396 at 402, [1943] AC 92 at 103. In the present type of case it is a secondary sort of injury brought about
by the infliction of physical injury, or the risk of physical injury, upon another person. 913That can affect those closely
connected with that person in various ways. One way is by subjecting a close relative to the stress and strain of caring for the
injured person over a prolonged period, but psychiatric illness due to such stress and strain has not so far been treated as founding
a claim in damages. So I am of the opinion that in addition to reasonable foreseeability liability for injury in the particular form
of psychiatric illness must depend in addition upon a requisite relationship of proximity between the claimant and the party said
to owe the duty. Lord Atkin in MAlister (or Donoghue) v Stevenson [1932] AC 562 at 580, [1932] All ER Rep 1 at 11 described
those to whom a duty of care is owed as being

persons who are so closely and directly affected by my act that I ought reasonably to have them in contemplation as
being so affected when I am directing my mind to the acts or omissions which are called in question.

The concept of a person being closely and directly affected has been conveniently labelled proximity, and this concept has been
applied in certain categories of cases, particularly those concerned with pure economic loss, to limit and control the consequences
as regards liability which would follow if reasonable foreseeability were the sole criterion.
As regards the class of persons to whom a duty may be owed to take reasonable care to avoid inflicting psychiatric illness
through nervous shock sustained by reason of physical injury or peril to another, I think it sufficient that reasonable foreseeability
should be the guide. I would not seek to limit the class by reference to particular relationships such as husband and wife or
parent and child. The kinds of relationship which may involve close ties of love and affection are numerous, and it is the
existence of such ties which leads to mental disturbance when the loved one suffers a catastrophe. They may be present in family
relationships or those of close friendship, and may be stronger in the case of engaged couples than in that of persons who have
been married to each other for many years. It is common knowledge that such ties exist, and reasonably foreseeable that those
bound by them may in certain circumstances be at real risk of psychiatric illness if the loved one is injured or put in peril. The
closeness of the tie would, however, require to be proved by a plaintiff, though no doubt being capable of being presumed in
appropriate cases. The case of a bystander unconnected with the victims of an accident is difficult. Psychiatric injury to him
would not ordinarily, in my view, be within the range of reasonable foreseeability, but could not perhaps be entirely excluded
from it if the circumstances of a catastrophe occurring very close to him were particularly horrific.
In the case of those within the sphere of reasonable foreseeability the proximity factors mentioned by Lord Wilberforce in
McLoughlin v OBrian [1982] 2 All ER 298 at 304, [1983] 1 AC 410 at 422, must, however, be taken into account in judging
whether a duty of care exists. The first of these is proximity of the plaintiff to the accident in time and space. For this purpose
the accident is to be taken to include its immediate aftermath, which in McLoughlins case was held to cover the scene at the
hospital which was experienced by the plaintiff some two hours after the accident. In Jaensch v Coffey (1984) 54 ALR 417 the
plaintiff saw her injured husband at the hospital to which he had been taken in severe pain before and between his undergoing a
series of emergency operations, and the next day stayed with him in the intensive care unit and thought he was going to die. She
was held entitled to recover damages for the psychiatric illness she suffered as a result. Deane J said (at 462463):

the aftermath of the accident extended to the hospital to which the injured person was taken and persisted for so
long as he remained in the state 914 produced by the accident up to and including immediate post-accident treatment
Her psychiatric injuries were the result of the impact upon her of the facts of the accident itself and its aftermath while she
was present at the aftermath of the accident at the hospital.
As regards the means by which the shock is suffered, Lord Wilberforce said in McLoughlins case [1982] 2 All ER 298 at 305,
[1983] 1 AC 410 at 423 that it must come through sight or hearing of the event or of its immediate aftermath. He also said that it
was surely right that the law should not compensate shock brought about by communication by a third party. On that basis it is
open to serious doubt whether Hevican v Ruane [1991] 3 All ER 65 and Ravenscroft v Rederiaktieblaget Transatlantic [1991] 3
All ER 73 were correctly decided, since in both of these cases the effective cause of the psychiatric illness would appear to have
been the fact of a sons death and the news of it.
Of the present appellants two, Brian Harrison and Robert Alcock, were present at the Hillsborough ground, both of them in
the West Stand, from which they witnessed the scenes in pens 3 and 4. Brian Harrison lost two brothers, while Robert Alcock
lost a brother-in-law and identified the body at the mortuary at midnight. In neither of these cases was there any evidence of
particularly close ties of love or affection with the brothers or brother-in-law. In my opinion the mere fact of the particular
relationship was insufficient to place the plaintiff within the class of persons to whom a duty of care could be owed by the
defendant as being foreseeably at risk of psychiatric illness by reason of injury or peril to the individuals concerned. The same is
true of other plaintiffs who were not present at the ground and who lost brothers, in one case a grandson. I would, however, place
in the category of members to which risk of psychiatric illness was reasonably foreseeable Mr and Mrs Copoc, whose son was
killed, and Alexandra Penk, who lost her fianc. In each of these cases the closest ties of love and affection fall to be presumed
from the fact of the particular relationship, and there is no suggestion of anything which might tend to rebut that presumption.
These three all watched scenes from Hillsborough on television, but none of these depicted suffering of recognisable individuals,
such being excluded by the broadcasting code of ethnics, a position known to the defendant. In my opinion the viewing of these
scenes cannot be equiparated with the viewer being within sight or hearing of the event or of its immediate aftermath, to use the
words of Lord Wilberforce in McLoughlin v OBrian [1982] 2 All ER 298 at 305, [1983] 1 AC 410 at 423, nor can the scenes
reasonably be regarded as giving rise to shock, in the sense of a sudden assault on the nervous system. They were capable of
giving rise to anxiety for the safety of relatives known or believed to be present in the area affected by the crush, and undoubtedly
did so, but that is very different from seeing the fate of the relative or his condition shortly after the event. The viewing of the
television scenes did not create the necessary degree of proximity.
My Lords, for these reasons I would dismiss each of these appeals.

LORD ACKNER. My Lords, if sympathy alone were to be the determining factor in these claims, then they would never have
been contested. It has been stressed throughout the judgments in the courts below and I would emphasise it yet again in your
Lordships House that the human tragedy which occurred on the afternoon of 15 April 1989 at the Hillsborough Stadium when 95
people were killed and more than 400 others received injuries from being crushed necessitating hospital treatment remains utterly
an appalling one.
It is, however, trite law that the respondent, the Chief Constable of South Yorkshire, is not an insurer against psychiatric
illness occasioned by the shock sustained by the relatives or friends of those who died or were injured, or were 915 believed to
have died or to have been injured. This is, of course, fully recognised by the appellants, the plaintiffs in these actions, whose
claims for damages to compensate them for their psychiatric illnesses are based upon the allegation that it was the chief
constables negligence, that is to say his breach of his duty of care owed to them as well as to those who died or were injured in
controlling the crowds at the stadium, which caused them to suffer their illnesses. The chief constable, for the purposes of these
actions, has admitted that he owed a duty of care only to those who died or were injured and that he was in breach of only that
duty. He has further accepted that each of the plaintiffs has suffered some psychiatric illness. Moreover, for the purpose of
deciding whether the chief constable is liable to pay damages to the plaintiffs in respect of their illnesses, the trial judge, Hidden
J, made the assumption that the illnesses were caused by the shocks sustained by the plaintiffs by reason of their awareness of the
events at Hillsborough (see [1991] 1 All ER 353 at 358359, [1991] 2 WLR 814 at 819820). The chief constable has
throughout contested liability on the ground that, in all the circumstances, he was not in breach of any duty of care owed to the
plaintiffs.
Since the decision of your Lordships House in McLoughlin v OBrian [1982] 2 All ER 298, [1983] 1 AC 410, if not earlier,
it is established law that (1) a claim for damages for psychiatric illness resulting from shock caused by negligence can be made
without the necessity of the plaintiff establishing that he was himself injured or was in fear or personal injury and (2) a claim for
damages for such illness can be made when the shock results (a) from death or injury to the plaintiffs spouse or child or the fear
of such death or injury and (b) the shock has come about through the sight or hearing of the event, or its immediate aftermath.
To succeed in the present appeals the plaintiffs seek to extend the boundaries of this cause of action by (1) removing any
restrictions on the categories of persons who may sue, (2) extending the means by which the shock is caused, so that it includes
viewing the simultaneous broadcast on television of the incident which caused the shock, and (3) modifying the present
requirement that the aftermath must be immediate.
A recital of the cases over the last century show that the extent of the liability for shock-induced psychiatric illness has been
greatly expanded. This has largely been due to a better understanding of mental illness and its relation to shock. The extension
of the scope of this cause of action sought in these appeals is not on any such ground but, so it is contended, by the application of
established legal principles.
Mr Hytner QC for the plaintiffs relies substantially upon the speech of Lord Bridge of Harwich in McLoughlins case [1982]
2 All ER 298 at 311, [1983] 1 AC 410 at 431 and on the judgment of Brennan J in the Australian High Court decision of Jaensch
v Coffey (1984) 54 ALR 417 at 423 for the proposition that the test for establishing liability is the unfettered application of the
test of reasonable foreseeability, viz whether the hypothetical reasonable man in the position of the defendant, viewing the
position ex post facto, would say that the shock-induced psychiatric illness was reasonably foreseeable. Mr Woodward QC for
the chief constable relies upon the opinion expressed by Lord Wilberforce supported by Lord Edmund-Davies in McLoughlins
case [1982] 2 All ER 298 at 303, [1983] 1 AC 410 at 420 that foreseeability does not of itself, and automatically, lead to a duty of
care:

foreseeability must be accompanied and limited by the laws judgment as to persons who ought, according to its
standards of value or justice, to have been in contemplation.
916

He also relies on similar views expressed by Gibbs CJ and Deane J in the Jaensch case 54 ALR 417 at 418, 439.

The nature of the cause of action

In Hay (or Bourhill) v Young [1942] 2 All ER 396 at 402, [1943] AC 92 at 103 Lord Macmillan said:

In the case of mental shock there are elements of greater subtlety than in the case of an ordinary physical injury
and these elements may give rise to debate as to the precise scope of the legal liability.

It is now generally accepted that an analysis of the reported cases of nervous shock establishes that it is a type of claim in a
category of its own. Shock is no longer a variant of physical injury but a separate kind of damage. Whatever may be the pattern
of the future development of the law in relation to this cause of action, the following propositions illustrate that the application
simpliciter of the reasonable foreseeability test is, today, far from being operative.
 (1) Even though the risk of psychiatric illness is reasonably foreseeable, the law gives no damages if the psychiatric injury
was not induced by shock. Psychiatric illnesses caused in other ways, such as from the experience of having to cope with the
deprivation consequent upon the death of a loved one, attracts no damages. Brennan J in Jaenschs case (1984) 54 ALR 417 at
429 gave as examples: the spouse who has been worn down by caring for a tortiously injured husband or wife and who suffers
psychiatric illness as a result, but who, nevertheless, goes without compensation; a parent made distraught by the wayward
conduct of a brain-damaged child and who suffers psychiatric illness as a result also has no claim against the tortfeasor liable to
the child.
(2) Even where the nervous shock and the subsequent psychiatric illness caused by it could both have been reasonably
foreseen, it has been generally accepted that damages for merely being informed of, or reading, or hearing about the accident are
not recoverable. In Bourhill v Young [1942] 2 All ER 396 at 402, [1943] AC 92 at 103 Lord Macmillan only recognised the
action lying where the injury by shock was sustained through the medium of the eye or the ear without direct contact. Certainly
Brennan J in his judgment in Jaenschs case 54 ALR 417 at 430 recognised that A psychiatric illness induced by mere
knowledge of a distressing fact is not compensable; perception by the plaintiff of the distressing phenomenon is essential. That
seems also to have been the view of Bankes LJ in Hambrook v Stokes Bros [1925] 1 KB 141 at 152, [1924] All ER Rep 110 at
117. I agree with my noble and learned friend Lord Keith of Kinkel that the validity of each of the recent decisions at first
instance of Hevican v Ruane [1991] 3 All ER 65 and Ravenscroft v Rederiaktiebolaget Transatlantic [1991] 3 All ER 73 is open
to serious doubt.
(3) Mere mental suffering, although reasonably foreseeable, if unaccompanied by physical injury, is not a basis for a claim
for damages. To fill this gap in the law a very limited category of relatives are given a statutory right by the Administration of
Justice Act 1982, s 3, inserting a new s 1A into the Fatal Accidents Act 1976 to bring an action claiming damages for
bereavement.
(4) As yet there is no authority establishing that there is liability on the part of the injured person, his or her estate, for mere
phsychiatric injury which was sustained by another by reason of shock, as a result of a self-inflicted death, injury or peril of the
negligent person, in circumstances where the risk of such psychiatric injury was reasonably foreseeable. On the basis that there
must be a limit at some reasonable point to the extent of the duty of care owed to third parties which rests 917 upon everyone in
all his actions. Lord Robertson, the Lord Ordinary, in his judgment in Bourhills case 1941 SC 395 at 399, did not view with
favour the suggestion that a negligent window-cleaner who loses his grip and falls from a height, impaling himself on spiked
railings, would be liable for the shock-induced psychiatric illness occasioned to a pregnant woman looking out of the window of
a house situated on the opposite side of the street.
(5) Shock, in the context of this cause of action, involves the sudden appreciation by sight or sound of a horrifying event,
which violently agitates the mind. It has yet to include psychiatric illness caused by the accumulation over a period of time of
more gradual assaults on the nervous system.
I do not find it surprising that in this particular area of the tort of negligence, the reasonable foreseeability test is not given a
free rein. As Lord Reid said in McKew v Holland & Hannen & Cubitts (Scotland) Ltd [1969] 3 All ER 1621 at 1623: A
defender is not liable for the consequence of a kind which is not foreseeable. But it does not follow that he is liable for every
consequence which a reasonable man could foresee. Deane J pertinently observed in Jaenschs case (1984) 54 ALR 417 at 443:

Reasonable foreseeability on its own indicates no more than that such a duty of care will exist if, and to the extent that,
it is not precluded or modified by some applicable overriding requirement or limitation. It is to do little more than to state
a truism to say that the essential function of such requirements or limitations is to confine the existence of a duty to take
reasonable care to avoid reasonable foreseeable injury to the circumstances or classes of case in which it is the policy of the
law to admit it. Such overriding requirements or limitations shape the frontiers of the common law of negligence.

Although it is a vital step towards the establishment of liability, the satisfaction of the test of reasonable foreseeability does not, in
my judgment, ipso facto satisfy Lord Atkins well-known neighbourhood principle enunciated in MAlister (or Donoghue) v
Stevenson [1932] AC 562 at 580, [1932] All ER Rep 1 at 11. For him to have been reasonably in contemplation by a defendant
he must be:

so closely and directly affected by my act that I ought reasonably to have them in contemplation as being so
affected when I am directing my mind to the acts or omissions which are called in question.

The requirement contained in the words so closely and directly affected that constitutes a control upon the test of reasonable
foreseeability of injury. Lord Atkin was at pains to stress that the formulation of a duty of care, merely in the general terms of
reasonable foreseeability, would be too wide unless it were limited by the notion of proximity which was embodied in the
restriction of the duty of care to ones neighbour (see [1932] AC 562 at 580582, [1932] All ER Rep 1 at 1112).

The three elements

Because shock in its nature is capable of affecting such a wide range of persons, Lord Wilberforce in McLoughlin v
OBrian [1982] 2 All ER 298 at 304, [1983] 1 AC 410 at 422 concluded that there was a real need for the law to place some
limitation upon the extent of admissible claims and in this context he considered that there were three elements inherent in any
claim. It is common ground that such elements do exist and are required to be considered in connection with all these claims.
The fundamental difference in approach is that on behalf of the 918 plaintiffs it is contended that the consideration of these three
elements is merely part of the process of deciding whether, as a matter of fact, the reasonable foreseeability test has been
satisfied. On behalf of the chief constable it is contended that these elements operate as a control or limitation on the mere
application of the reasonable foreseeability test. They introduce the requirement of proximity as conditioning the duty of care.
The three elements are: (1) the class of persons whose claims should be recognised; (2) the proximity of such persons to the
accidentin time and space; (3) the means by which the shock has been caused.
I will deal with those three elements seriatim.

The class of persons whose claim should be recognised

When dealing with the possible range of the class of persons who might sue, Lord Wilberforce contrasted the closest of
family tiesparent and child and husband and wifewith that of the ordinary bystander. He said that while existing law
recognises the claims of the first, it denied that of the second, either on the basis that such persons must be assumed to be
possessed with fortitude sufficient to enable them to endure the calamities of modern life, or that defendants cannot be expected
to compensate the world at large. He considered that these positions were justified, that other cases involving less close
relationships must be very carefully considered, adding ([1982] 2 All ER 298 at 304, [1983] 1 AC 410 at 422):

The closer the tie (not merely in relationship, but in care) the greater the claim for consideration. The claim, in any
case, has to be judged in the light of the other facts, such as proximity to the scene in time and place, and the nature of the
accident.

I respectfully share the difficulty expressed by Atkin LJ in Hambrook v Stokes Bros [1925] 1 KB 141 at 158159, [1924] All
ER Rep 110 at 117how do you explain why the duty is confined to the case of parent or guardian and child and does not extend
to other relations of life also involving intimate associations; and why does it not eventually extend to bystanders? As regards the
latter category, while it may be very difficult to envisage a case of a stranger, who is not actively and foreseeably involved in a
disaster or its aftermath, other than in the role of rescuer, suffering shock-induced psychiatric injury by the mere observation of
apprehended or actual injury of a third person in circumstances that could be considered reasonably foreseeable, I see no reason
in principle why he should not, if in the circumstances, a reasonably strong-nerved person would have been so shocked. In the
course of argument your Lordships were given, by way of an example, that of a petrol tanker careering out of control into a
school in session and bursting into flames. I would not be prepared to rule out a potential claim by a passer-by so shocked by the
scene as to suffer psychiatric illness.
As regards claims to those in the close family relationships referred to by Lord Wilberforce, the justification for admitting
such claims is the presumption, which I would accept as being rebuttable, that the love and affection normally associated with
persons in those relationships is such that a defendant ought reasonably to contemplate that they may be so closely and directly
affected by his conduct as to suffer shock resulting in psychiatric illness. While as a generalisation more remote relatives and, a
fortiori, friends, can reasonably be expected not to suffer illness from the shock, there can well be relatives and friends whose
relationship is so close and intimate that their love and affection for the victim is comparable to that of the normal parent, spouse
or child of the victim and should for the purpose 919 of this cause of action be so treated. This was the opinion of Stocker LJ in
the instant appeal (see [1991] 3 All ER 88 at 113) and also that of Nolan LJ who thus expressed himself (at 120):

For my part, I would accept at once that no general definition is possible. But I see no difficulty in principle in
requiring a defendant to contemplate that the person physically injured or threatened by his negligence may have relatives
or friends whose love for him is like that of a normal parent or spouse, and who in consequence may similarly be closely
and directly affected by nervous shock The identification of the particular individual who comes within that category,
like that of parents and spouses themselves, could only be carried out ex post facto, and would depend upon evidence of the
relationship in a broad sense which gave rise to the love and affection.

It is interesting to observe that when, nearly 50 years ago, the New South Wales legislature decided to extend liability for
injury arising wholly or in part from mental or nervous shock sustained by a parent or husband or wife of the person killed,
injured or put in peril, or any other member of the family of such person, it recognised that it was appropriate to extend
significantly the definition of such categories of claimants. Section 4(5) of the Law Reform (Miscellaneous Provisions) Act 1944
(NSW) provides:

Member of the family means the husband, wife, parent, child, brother, sister, half-brother or half-sister of the person
in relation to whom the expression is used. Parent includes father, mother, grandfather, grandmother, stepfather,
stepmother and any person standing in loco parentis to another. Child includes son, daughter, grandson, granddaughter,
stepson, stepdaughter and any person to whom another stands in loco parentis.

Whether the degree of love and affection in any given relationship, be it that of relative or friend, is such that the defendant,
in the light of the plantiffs proximity to the scene of the accident in time and space and its nature, should reasonably have
foreseen the shock-induced psychiatric illness, has to be decided on a case-by-case basis. As Deane J observed in Jaenschs case
(1984) 54 ALR 417 at 457:

While it must now be accepted that any realistic assessment of the reasonably foreseeable consequences of an accident
involving actual or threatened serious bodily injury must, in an appropriate case, include the possibility of injury in the
form of nervous shock being sustained by a wide range of persons not physically injured in the accident, the outer limits of
reasonable foreseeability of mere psychiatric injury cannot be identified in the abstract or in advance. Much may depend
upon the nature of the negligent act or omission, on the gravity or apparent gravity of any actual or apprehended injury and
on any expert evidence about the nature and explanation of the particular psychiatric injury which the plaintiff has
sustained.

The proximity of the plaintiff to the accident

It is accepted that the proximity to the accident must be close both in time and space. Direct and immediate sight or hearing
of the accident is not required. It is reasonably foreseeable that injury by shock can be caused to a plaintiff, not only through the
sight or hearing of the event, but of its immediate aftermath.
Only two of the plaintiffs before us were at the ground. However, it is clear from McLoughlins case that there may be
liability where subsequent identification 920 can be regarded as part of the immediate aftermath of the accident. Mr Alcock
identified his brother-in-law in a bad condition in the mortuary at about midnight, that is some eight hours after the accident.
This was the earliest of the identification cases. Even if this identification could be described as part of the aftermath, it could
not in my judgment be described as part of the immediate aftermath. McLoughlins case was described by Lord Wilberforce as
being upon the margin of what the process of logical progression from case to case would allow. Mrs McLoughlin had arrived at
the hospital within an hour or so after the accident. Accordingly, in the post-accident identification cases before your Lordships
there was not sufficient proximity in time and space to the accident.

The means by which the shock is caused

Lord Wilberforce concluded that the shock must come through sight or hearing of the event or its immediate aftermath but
specifically left for later consideration whether some equivalent of sight or hearing, eg through simultaneous television, would
suffice (see [1982] 2 All ER 298 at 305, [1983] 1 AC 410 at 423). Of course it is common ground that it was clearly foreseeable
by the chief constable that the scenes at Hillsborough would be broadcast live and that amongst those who would be watching
would be parents and spouses and other relatives and friends of those in the pens behind the goal at the Leppings Lane end.
However he would also know of the code of ethics which the television authorities televising this event could be expected to
follow, namely that they would not show pictures of suffering by recognisable individuals. Had they done so, Mr Hytner
accepted that this would have been a novus actus breaking the chain of causation between the chief constables alleged breach
of duty and the psychiatric illness. As the chief constable was reasonably entitled to expect to be the case, there were no such
pictures. Although the television pictures certainly gave rise to feelings of the deepest anxiety and distress, in the circumstances
of this case the simultaneous television broadcasts of what occurred cannot be equated with the sight or hearing of the event or
its immediate aftermath. Accordingly shocks sustained by reason of these broadcasts cannot found a claim. I agree, however,
with Nolan LJ that simultaneous broadcasts of a disaster cannot in all cases be ruled out as providing the equivalent of the actual
sight or hearing of the event or its immediate aftermath. Nolan LJ gave an example of a situation where it was reasonable to
anticipate that the television cameras, whilst filming and transmitting pictures of a special event of children travelling in a
balloon, in which there was media interest, particularly amongst the parents, showed the balloon suddenly bursting into flames
(see [1991] 3 All ER 88 at 122). Many other such situations could be imagined where the impact of the simultaneous television
pictures would be as great, if not greater, than the actual sight of the accident.

Conclusion
 Only one of the plaintiffs who succeeded before Hidden J, namely Brian Harrison, was at the ground. His relatives who
died were his two brothers. The quality of brotherly love is well known to differ widelyfrom Cain and Abel to David and
Jonathan. I assume that Mr Harrisons relationship with his brothers was not an abnormal one. His claim was not presented upon
the basis that there was such a close and intimate relationship between them as gave rise to that very special bond of affection
which would make his shock-induced psychiatric illness reasonably foreseeable by the chief constable. Accordingly, the learned
judge did not carry out the requisite close scrutiny of their relationship. Thus there was no evidence to establish the necessary
proximity which would make his claim reasonably foreseeable and, subject to the other factors, to which I have referred, 921a
valid one. The other plaintiff who was present at the ground, Robert Alcock, lost a brother-in-law. He was not, in my judgment,
reasonably foreseeable as a potential sufferer from shock-induced psychiatric illness, in default of very special facts and none was
established. Accordingly their claims must fail, as must those of the other plaintiffs who only learnt of the disaster by watching
simultaneous television. I, too, would therefore dismiss these appeals.

LORD OLIVER OF AYLMERTON. My Lords, in each of these appeals the question raised is whether the defendant is to be
held responsible for psychiatric injury suffered by a plaintiff who was not himself or herself directly involved in the accident (for
which, for present purposes, the defendant accepts responsibility) but who was connected to a victim by the bonds of an
affectionate relationship such that he or she suffered extreme shock or anguish leading to the condition of which the plaintiff
complains.
The tragic circumstances out of which the present appeals arise have already been set out in the speech of my noble and
learned friend Lord Keith of Kinkel and no purpose would be served by repeating them. In each case damages are sought for
psychiatric illness, which, for present purposes, must be assumed to have been caused by the nervous impact on the plaintiff of
the death or injury of a primary victim with whom he or she had a strong bond of affection. In each case it is admitted for the
purposes of these proceedings that the respondent was in breach of a tortious duty of care owed to the primary victim and that
each plaintiff has suffered psychiatric illness. It is in issue whether the illness of which each plaintiff complains is causally
attributable to the circumstances in which he or she became aware of the death of the primary victim. But such a causal link is
assumed for the purposes of these appeals. What remains in issue is whether the defendant owed any duty in tort to the plaintiffs
to avoid causing the type of injury of which each plaintiff complains. In essence this involves answering the twin questions of (a)
whether injury of this sort to each particular plaintiff was a reasonably foreseeable consequence of the acts or omissions
constituting the breach of duty to the primary victim and (b) whether there existed between the defendant and each plaintiff that
degree of directness or proximity necessary to establish liability.
There is, to begin with, nothing unusual or peculiar in the recognition by the law that compensatable injury may be caused
just as much by a direct assault upon the mind or the nervous system as by direct physical contact with the body. This is no more,
than the natural and inevitable result of the growing appreciation by modern medical science of recognisable causal connections
between shock to the nervous system and physical or psychiatric illness. Cases in which damages are claimed for directly
inflicted injuries of this nature may present greater difficulties of proof but they are not, in their essential elements, any different
from cases where the damages claimed arise from direct physical injury and they present no very difficult problems of analysis
where the plaintiff has himself been directly involved in the accident from which the injury is said to arise. In such a case he can
be properly said to be the primary victim of the defendants negligence and the fact that the injury which he sustains is inflicted
through the medium of an assault on the nerves or senses does not serve to differentiate the case, except possibly in the degree of
evidentiary difficulty, from a case of direct physical injury.
It is customary to classify cases in which damages are claimed for injury occasioned in this way under a single generic label
as cases of liability for nervous shock. This may be convenient but in fact the label is misleading if and to the extent that it is
assumed to lead to a conclusion that they have more in common 922 than the factual similarity of the medium through which the
injury is sustainedthat of an assault of the nervous system of the plaintiff through witnessing or taking part in an eventand
that they will, on account of this factor, provide a single common test for the circumstances which give rise to a duty of care.
Broadly they divide into two categories, that is to say those cases in which the injured plaintiff was involved, either mediately or
immediately, as a participant, and those in which the plaintiff was no more than the passive and unwilling witness of injury
caused to others. In the context of the instant appeals the cases of the former type are not particularly helpful, except to the extent
that they yield a number of illuminating dicta, for they illustrate only a directness of relationship (and thus a duty) which is
almost self-evident from a mere recital of the facts.
Thus, Dulieu v White & Sons [1901] 2 KB 669, [19003] All ER Rep 353, where the plaintiff was naturally and obviously
put in fear for her own safety when a runaway vehicle broke through the front of the public house where she was employed, is, at
any rate to modern eyes, a tolerably obvious case. Had she sustained bodily injury from the incursion there could never have
been the slightest doubt about the defendants liability and the fact that what brought about the injury was not an actual contact
but the imminent threat to her personally posed by the defendants negligence could make no difference to the result. As the
person directly threatened, she was quite clearly in a sufficiently direct and proximate relationship with him. The principal
interest of the case lies in the view expressed by Kennedy J, apparently following an earlier unreported decision of Wright J,
Smith v Johnson & Co (January 1897), that illness caused by fear for the safety of anyone other than the plaintiff herself was not
capable of grounding liabilitya view clearly now unsustainable in the light of subsequent authority. The earlier Irish case of
Bell v Great Northern Rly Co of Ireland (1890) 26 LR Ir 428, where the plaintiff was personally threatened by a terrifying
experience, was similarly a case where there was no difficulty at all in ascertaining the existence of a proximate relationship.
There was, indeed, in that case, a contractual relationship as well, for the event occurred in the course of the carriage of the
plaintiff as a passenger on the defendants railway. So too Schneider v Eisovitch [1960] 1 All ER 169, [1960] 2 QB 430, where
the plaintiff was herself directly involved as a victim in the accident in which her husband was killed.
Into the same category, as it seems to me, fall the so-called rescue cases. It is well established that the defendant owes a
duty of care not only to those who are directly threatened or injured by his careless acts but also to those who, as a result, are
induced to go to their rescue and suffer injury in so doing. The fact that the injury suffered is psychiatric and is caused by the
impact on the mind of becoming involved in personal danger or in scenes of horror and destruction makes no difference. Danger
invites rescue. The cry of distress is the summons to relief the act, whether impulsive or deliberate, is the child of the
occasion (see Wagner v International Rly Co (1921) 232 NY 176 at 180181 per Cardozo J). So in Chadwick v British
Transport Commission [1967] 2 All ER 945, [1967] 1 WLR 912 the plaintiff recovered damages for the psychiatric illness caused
to her deceased husband through the traumatic effects of his gallantry and self-sacrifice in rescuing and comforting victims of the
Lewisham railway disaster.
These are all cases where the plaintiff has, to a greater or lesser degree, been personally involved in the incident out of
which the action arises, either through the direct threat of bodily injury to himself or in coming to the aid of others injured or
threatened. Into the same category, I believe, fall those cases such as Dooley v Cammell Laird & Co Ltd [1951] 1 Lloyds Rep
271, Galt v British Railways Board (1983) 133 NLJ 870 and Wigg v British Railways Board (1986) 136 NLJ 446 where the
negligent act of the defendant has put the plaintiff in the position of 923 being, or of thinking that he is about to be or has been,
the involuntary cause of anothers death or injury and the illness complained of stems from the shock to the plaintiff of the
consciousness of this supposed fact. The fact that the defendants negligent conduct has foreseeably put the plaintiff in the
position of being an unwilling participant in the event establishes of itself a sufficiently proximate relationship between them and
the principal question is whether, in the circumstances, injury of that type to that plaintiff was or was not reasonably foreseeable.
In those cases in which, as in the instant appeals, the injury complained of is attributable to the grief and distress of
witnessing the misfortune of another person in an event by which the plaintiff is not personally threatened or in which he is not
directly involved as an actor, the analysis becomes more complex. The infliction of injury on an individual, whether through
carelessness or deliberation, necessarily produces consequences beyond those to the immediate victim. Inevitably the impact of
the event and its aftermath, whether immediate or prolonged, is going to be felt in greater or lesser degree by those with whom
the victim is connected whether by ties of affection, of blood relationship, of duty or simply of business. In many cases those
persons may suffer not only injured feelings or inconvenience but adverse financial consequences as, for instance, by the need to
care for the victim or the interruption or non-performance of his contractual obligations to third parties. Nevertheless, except in
those cases which were based upon some ancient and now outmoded concepts of the quasi-proprietorial rights of husbands over
their wives, parents over their children or employers over their menial servants, the common law has, in general, declined to
entertain claims for such consequential injuries from third parties save possibly where loss has arisen from the necessary
performance of a legal duty imposed on such party by the injury to the victim. Even the apparent exceptions to this, the old
actions for loss of a husbands right to consortium and for loss of servitium of a child or menial servant, were abolished by the
Administration of Justice Act 1982.
So, for instance, in Kirkham v Boughey [1957] 3 All ER 153, [1958] 2 QB 338, a husband, whose wife had been severely
injured in a road accident as a result of the defendants negligence, failed to recover damages for a reduction in his earnings due
to his having, because of his anxiety for his wife, declined to resume more remunerative employment abroad, although in that
case Diplock J was prepared to allow his claim for the expenses incurred in providing medical care for his wife on the ground
that the plaintiff was under a legal duty to provide it. So too in Best v Samuel Fox & Co Ltd [1952] 2 All ER 394 at 400, [1952]
AC 716 at 734 Lord Morton of Henryton observed:

it has never been the law of England that an invitor, who has negligently but unintentionally injured an invitee, is
liable to compensate other persons who have suffered, in one way or another, as a result of the injury to the invitee. If the
injured man was engaged in a business, and the injury is a serious one, the business may have to close down and the
employees be dismissed. A daughter of the injured man may have to give up work which she enjoys and stay at home to
nurse a father who has been transformed into an irritable invalid as a result of the injury. Such examples could be easily
multiplied. Yet the invitor is under no liability to compensate such persons, for he owes them no duty and may not even
know of their existence.

A fortiori the law will not compensate such a person for the mental anguish and even illness which may flow from having lost a
wife, parent or child or from being compelled to look after an invalid, although there is a statutory exception to this where the
victim dies as a result of the accident and the plaintiff is his 924 widow or minor unmarried child. In such circumstances s 1A of
the Fatal Accidents Act 1976 (as inserted by s 3 of the Administration of Justice Act 1982) gives a limited right of compensation
for bereavement.
Beyond this, however, the law in general provides no remedy, however severe the consequences of the distress or grief may
be to the health or well-being of the third party and however close his relationship to the victim. I doubt whether the reason for
this can be found by an appeal to logic, for there is, on the face of it, no readily discernible logical reason why he who carelessly
inflicts an injury upon another should not be held responsible for its inevitable consequences not only to him who may
conveniently be termed the primary victim but to others who suffer as a result. It cannot, I think, be accounted for by saying
that such consequences cannot reasonably be foreseen. It is readily foreseeable that very real and easily ascertainable injury is
likely to result to those dependent upon the primary victim or those upon whom, as a result of negligently inflicted injury, the
primary victim himself becomes dependent. If one goes back to what may be regarded as the genesis of the modern law of
tortious negligence, that is to say the judgment of Brett MR in Heaven v Pender (1883) 11 QBD 503 at 509, [18815] All ER Rep
35 at 39, there is nothing in it which necessarily limits the liability of the tortfeasor to compensating only the primary victim of
the event. What was there postulated was a simple test of attributed foresight of that which the ordinary person, given the
hypothetical situation of his pausing to think about the consequences before acting, would see to be a likely consequence of his
conduct. That simple test, described by Lord Atkin in his classical exposition in MAlister (or Donoghue) v Stevenson [1932] AC
562 at 580, [1932] All ER Rep 1 at 11 as demonstrably too wideas indeed it clearly waswas, however, refined by him into
the more restricted neighbour test which introduced, in addition to the element of reasonable foreseeability, the essential but
illusive concept of proximity or directness. Citation of a principle so familiar may justly be described as trite but it is, I think,
of critical importance in the context of the instant appeals.
The failure of the law in general to compensate for injuries sustained by persons unconnected with the event precipitated by
a defendants negligence must necessarily import the lack of any legal duty owed by the defendant to such persons. That cannot,
I think, be attributable to some arbitrary but unenunciated rule of policy which draws a line as the outer boundary of the area of
duty. Nor can it rationally be made to rest upon such injury being without the area of reasonable foreseeability. It must, as it
seems to me, be attributable simply to the fact that such persons are not, in contemplation of law, in a relationship of sufficient
proximity to or directness with the tortfeasor as to give rise to a duty of care, though no doubt policy, if that is the right word, or
perhaps more properly, the impracticability or unreasonableness of entertaining claims to the ultimate limits of the consequences
of human activity, necessarily plays a part in the courts perception of what is sufficiently proximate.
What is more difficult to account for is why, when the law in general declines to extend the area of compensation to those
whose injury arises only from the circumstances of their relationship to the primary victim, an exception has arisen in those cases
in which the event of injury to the primary victim has been actually witnessed by the plaintiff and the injury claimed is
established as stemming from that fact. That such an exception exists is now too well established to be called in question. What
is less clear, however, is the ambit of the duty in such cases or, to put it another way, what is the essential characteristic of such
cases that marks them off from those cases of injury to uninvolved persons in which the law denies any remedy for injury of
precisely the same sort.
Although it is convenient to describe the plaintiff in such a case as a secondary 925victim, that description must not be
permitted to obscure the absolute essentiality of establishing a duty owed by the defendant directly to hima duty which
depends not only upon the reasonable foreseeability of damage of the type which has in fact occurred to the particular plaintiff
but also upon the proximity or directness of the relationship between the plaintiff and the defendant. The difficulty lies in
identifying the features which, as between two persons who may suffer effectively identical psychiatric symptoms as a result of
the impression left upon them by an accident, establish in the case of one who was present at or near the scene of the accident a
duty in the defendant which does not exist in the case of one who was not. The answer cannot, I think, like in the greater
foreseeability of the sort of damage which the plaintiff has suffered. The traumatic effect on, for instance, a mother on the death
of her child is as readily foreseeable in a case where the circumstances are described to her by an eye witness at the inquest as it
is in a case where she learns of it at a hospital immediately after the event. Nor can it be the mere suddenness or unexpectedness
of the event, for the news brought by a policeman hours after the event may be as sudden and unexpected to the recipient as the
occurrence of the event is to the spectator present at the scene. The answer has, as it seems to me, to be found in the existence of
a combination of circumstances from which the necessary degree of proximity between the plaintiff and the defendant can be
deduced. And, in the end, it has to be accepted that the concept of proximity is an artificial one which depends more upon the
courts perception of what is the reasonable area for the imposition of liability than upon any logical process of analogical
deduction.
The common features of all the reported cases of this type decided in this country prior to the decision of Hidden J in the
instant case ([1991] 1 All ER 353, [1991] 2 WLR 814) and in which the plaintiff succeeded in establishing liability are, first, that
in each case there was a marital or parental relationship between the plaintiff and the primary victim, secondly, that the injury for
which damages were claimed arose from the sudden and unexpected shock to the plaintiffs nervous system, thirdly, that the
plaintiff in each case was either personally present at the scene of the accident or was in the more or less immediate vicinity and
witnessed the aftermath shortly afterwards and, fourthly, that the injury suffered arose from witnessing the death of, extreme
danger to, or injury and discomfort suffered by the primary victim. Lastly, in each case there was not only an element of physical
proximity to the event but a close temporal connection between the event and the plaintiffs perception of it combined with a
close relationship of affection between the plaintiff and the primary victim. It must, I think, be from these elements that the
essential requirement of proximity is to be deduced, to which has to be added the reasonable foreseeability on the part of the
defendant that in that combination of circumstances there was a real risk of injury of the type sustained by the particular plaintiff
as a result of his or her concern for the primary victim. There may, indeed, be no primary victim in fact. It is, for instance,
readily conceivable that a parent may suffer injury, whether physical or psychiatric, as a result of witnessing a negligent act which
places his or her child in extreme jeopardy but from which, in the event, the child escapes unharmed. I doubt very much, for
instance, whether King v Phillips [1953] 1 All ER 617, [1953] 1 QB 429, where a mothers claim for damages for shock caused
by witnessing a near accident to her child was rejected, would be decided in the same way today in the light of later authorities.
It would, for instance, have made no difference to the result in Hambrook v Stokes Bros [1925] 1 KB 141, [1924] All ER Rep
110, if the plaintiffs child had not, as she did in fact, suffered any injury at all. In that case, the Court of Appeal, by a majority,
held that a plaintiff who, while using the highway, had seen a runaway lorry which 926 threatened, and indeed subsequently
caused, injury to her child, was entitled to recover so long as the shock from which she claimed to be suffering was due to her
own visual perception and not to what she had been subsequently told by third persons. The primary difficult here was that of
establishing the foreseeability of the injury which the plaintiff suffered rather than the proximity of her relationship to the
defendant, who owed her the same duty as he owed to any other users of the highway. It is interesting to note, however, that
Atkin LJ clearly contemplated the possibility of a successful action at the suit of a mere bystander given sufficiently horrifying
circumstances (see [1925] 1 KB 141 at 158159, [1924] All ER Rep 110 at 117). In Owens v Liverpool Corp [1938] 4 All ER
727, [1939] 1 KB 394 mourners at a funeral, apparently relatives of the deceased, recovered damages for shock allegedly
occasioned by negligence of the defendants tram driver in damaging the hearse and upsetting the coffin. Although this lends
support to the suggestion that such damages may be recoverable by a mere spectator, it is doubtful how far the case, which was
disapproved by three members of this House in Hay (or Bourhill) v Young [1942] 2 All ER 396 at 400, 406, 408409, [1943] AC
92 at 100, 110, 116 can be relied upon.
In Bourhill v Young the pursuer was neither related to or known to the deceased cyclist, who was the victim of his own
negligence, nor did she witness the accident, although she heard the crash from some 50 feet away and some time later saw blood
on the road. She had no apprehension of injury to herself but simply sustained a nervous shock as a result of the noise of the
collision. That injury sustained through nervous shock was capable of grounding a claim for damages was never in doubt, but the
pursuers claim failed because injury of that type to her was not within the area of the deceaseds reasonable contemplation. The
physical proximity of the pursuer to the point of collision was outside the area in which the deceased could reasonably have
contemplated any injury to her and that answered both the question of whether there was reasonable foresight and whether there
was any relationship with the deceased inferring a duty of care. The case is thus a good illustration of the coalescence of the two
elements of reasonable foreseeability and proximity, but otherwise it affords little assistance in establishing any criterion for the
degree of proximity which would establish the duty of care, save that it implies necessity for a closer degree of physical
propinquity to the event than has been thought necessary in subsequent cases. It is, however, worth noting that the pursuers
claim was not dismissed in limine on the ground that she was no more than, at highest, a mere spectator.
Hinz v Berry [1970] 1 All ER 1074, [1970] 2 QB 40 was a case where the only issue was not recoverability of damages but
the correct quantum in the particular circumstances. It is a useful illustration of the extreme difficulty of separating the
compensatable injury arising from the presence of the plaintiff at the scene of an accident from the non-compensatable
consequences flowing the simple fact that the accident has occurred, but it is of little assistance otherwise, save for a hint in the
judgment of Lord Denning MR that an award of damages for shock caused by the sight of an accident may be restricted to cases
where the plaintiff is a close relative (see [1970] 1 All ER 1074 at 1075, [1970] 2 QB 40 at 42).
The principal argument in the appeal has centred round the question whether, as the appellants contend, the decision of this
House in McLoughlin v OBrian [1982] 2 All ER 298, [1983] 1 AC 410 establishes as the criterion of a duty owed by the
defendants to the plaintiff a simple test of the foreseeability of injury of the type in fact sustained or whether, as the respondent
maintains, that case imports also a necessary requirement, either as a matter of public policy or as a measure of proximity, of the
existence of some close blood or marital relationship 927 between the appellants and the victims of the negligent conduct. In that
case the primary victims of the accident caused by the respondents negligence were the husband and two children of the
appellant, who were injured, and another child of hers who was killed. At the time of the accident she was some two miles away
but she was taken about an hour later to the hospital where the injured were being treated and saw them in more or less the state
in which they had been brought in. She claimed damages for the psychiatric injury which she alleged to be the result. The trial
judge having held that the injury complained of was not reasonably foreseeable, his decision was upheld by the Court of Appeal
on the rather different grounds (Stephenson LJ) that, although both the tests of reasonable foreseeability and proximity were
satisfied, a duty of care was precluded by considerations of public policy and (Griffiths LJ) that no duty was owed to those who
are nowhere near the scene of an accident when it occurs (see [1981] 1 All ER 809 at 820, 827828, [1981] QB 599 at 613614,
623624). In this House, although the members of the Appellate Committee were unanimous in allowing the appeal the speeches
displayed distinct differences of approach. All were agreed that actually witnessing or being present at or near the scene of an
accident was not essential to ground liability in an appropriate case, but that the duty might equally be owed to one who comes
upon the immediate aftermath of the event. Thus such a person, given always the reasonable foreseeability of the injury in fact
sustained and of such persons witnessing it, may be within the area of proximity in which a duty of care may be found to exist.
The diversity of view arose at the next stage, that is to say that of ascertaining whether the relationship between the plaintiff
and the primary victim was such as to support the existence of such a duty. That can be expressed in various ways. It may be
asked whether, as a matter of the policy of the law, a relationship outside the categories of those in which liability has been
established by past decisions can be considered sufficiently proximate to give rise to the duty, quite regardless of the question of
foreseeability. Or it may be asked whether injury of the type with which these appeals are concerned can ever be considered to
be reasonably foreseeable where the relationship between the plaintiff and the primary victim is more remote than that of an
established category. Or, again, it may be asked whether, even given proximity and foreseeability, nevertheless the law must
draw an arbitrary line at the boundary of the established category or some other wider or narrower category of relationships
beyond which no duty will be deemed to exist. Lord Wilberforce appears to have favoured the last of these three approaches, but
found it, in the event, unnecessary to determine the boundary since the case then before the House concerned a claim within a
category which had already been cleared established. He did not altogether close the door to an enlargement of the area of the
possible duty but observed ([1982] 2 All ER 298 at 304, [1983] 1 AC 410 at 422):

other cases involving less close relationships must be very carefully scrutinised. I cannot say that they should
never be admitted. The closer the tie (not merely in relationship, but in care) the greater the claim for consideration. The
claim, in any case, has to be judged in the light of the other factors, such as proximity to the scene in time and place, and
the nature of the accident.

In so far as this constituted an invitation to courts seised of similar problems in the future to draw lines determined by their
perception of what public policy requires, it was an invitation accepted by Parker LJ in the Court of Appeal in the instant case. It
was his view that liability should, as a matter of policy, determine 928 at the relationship of parents or spouse and should be
restricted to persons present at or at the immediate aftermath of the incident from which injury arose. The approach of Lord
Edmund-Davies and Lord Russell of Killowen, as I read their speeches, was similar to that of Lord Wilberforce. On the other
hand, Lord Bridge of Harwich, with whom Lord Scarman agreed, rejected an appeal to policy considerations as a justification for
fixing arbitrary lines of demarcation of the duty in negligence. Lord Bridge propounded simply a criterion of the reasonable
foreseeability by the defendant of the damage to the plaintiff which had occurred without necessarily invoking physical presence
at or propinquity to the accident or its aftermath or any particular relationship to the primary victim as limiting factors, although,
of course, clearly these elements would be important in the determination of what, on the facts of any given case, would be
reasonably foreseeable (see [1982] 2 All ER 298 at 319320, [1983] 1 AC 410 at 441443). He expressed himself as in complete
agreement with Tobriner J in Dillon v Legg (1968) 68 Cal 2d 728 at 740, that the existence of the duty must depend on reasonable
foreseeability and

must necessarily be adjudicated only upon a case-by-case basis. We cannot now predetermine defendants obligation
in every situation by a fixed category; no immutable rule can establish the extent of that obligation for every circumstance
of the future.

Counsel for the appellants and for the respondent respectively have invited your Lordships to accept or reject one or other of
these two approaches on the footing that they represent mutually exclusive alternatives and to say on the one hand that the only
criterion for the establishment of liability is the reasonable foreseeability of damage in accordance with the views expressed by
Lord Bridge (which, it is urged, existed in the case of each of the appellants) or, on the other hand, that liability must, as a matter
of public policy, be decreed to stop at the case of a spouse or parent and in any event must be restricted to injury to a person who
was physically present at the event or at its aftermath and witnessed one or the other.
My Lords, for my part, I have not felt able to accept either of these two extreme positions nor do I believe that the views
expressed in McLoughlin v OBrian [1982] 2 All ER 298, [1983] 1 AC 410 are as irreconcilable as has been suggested. If I may
say so with respect, the views expressed by Lord Bridge are open to the criticism that, on their face, they entirely ignore the
critical element of proximity to which reference has been made, taking us back to the demonstrably too wide proposition of
Brett MR in Heaven v Pender (1883) 11 QBD 503, [18815] All ER Rep 35. But the critical part played by this element is very
clearly expressed by Lord Bridge himself in his speech in Caparo Industries plc v Dickman [1990] 1 All ER 568 at 574, 576578,
[1990] 2 AC 605 at 618, 621, 623, and I do not believe for one moment that, in expressing his view with regard to foreseeability
in McLoughlin v OBrian, he was overlooking that element which is, after all, implicit in any discussion of tortious negligence
based upon Lord Atkins classical statement of principle (see Donoghue v Stevenson [1932] AC 562 at 579580, [1932] All ER
Rep 1 at 11), or was doing more than meeting the argument which had been advanced that, even given foreseeability, an
immutable line either had been or ought to be drawn by the law at the furthest point reached by previously decided cases.
Equally, I do not read Lord Wilberforce (whose remarks in this context were, in any event, obiter since the question of fixing
lines of demarcation by reference to public policy did not in fact arise) as excluding altogether a pragmatic approach to claims of
this nature. In any event, there is in many cases, as for instance cases 929 of direct physical injury in a highway accident, an
almost necessary coalescence of the twin elements of foreseeability and proximity, the one flowing from the other. But where
such convergence is not self-evident, the question of proximity requires separate consideration. In deciding it the court has
reference to no defined criteria and the decision necessarily reflects to some extent the courts concept of what policyor
perhaps common senserequires.
My Lords, speaking for myself, I see no logic and no virtue in seeking to lay down as a matter of policy categories of
relationship within which claims may succeed and without which they are doomed to failure in limine. So rigid an approach
would, I think, work great injustice and cannot be rationally justified. Obviously a claim for damages for psychiatric injury by a
remote relative of the primary victim will factually require most cautious scrutiny and faces considerable evidentiary difficulties.
Equally obviously, the foreseeability of such injury to such a person will be more difficult to establish than similar injury to a
spouse or parent of the primary victim. But these are factual difficulties and I can see no logic and no policy reason for excluding
claims by more remote relatives. Suppose, for instance, that the primary victim has lived with the plaintiff for 40 years, both
being under the belief that they are lawfully married. Does she suffer less shock or grief because it is subsequently discovered
that their marriage was invalid? The source of the shock and distress in all these cases is the affectionate relationship which
existed between the plaintiff and the victim and the traumatic effect of the negligence is equally foreseeable, given that
relationship, however the relationship arises. Equally, I would not exclude the possibility envisaged by my noble and learned
friend Lord Ackner of a successful claim, given circumstances of such horror as would be likely to traumatise even the most
phlegmatic spectator, by a mere bystander. That is not, of course, to say that the closeness of the relationship between plaintiff
and primary victim is irrelevant, for the likelihood or unlikelihood of a person in that relationship suffering shock of the degree
claimed from the event must be a most material factor to be taken into account in determining whether that consequence was
reasonably foreseeable. In general, for instance, it might be supposed that the likelihood of trauma of such a degree as to cause
psychiatric illness would be less in the case of a friend or a brother-in-law than in that of a parent or fianc.
But in every case the underlying and essential postulate is a relationship of proximity between plaintiff and defendant and it
is this, as it seems to me, which must be the determining factor in the instant appeals. No case prior to the hearing before Hidden
J ([1991] 1 All ER 353, [1991] 2 WLR 814) from which these appeals arise has countenanced an award of damages for injuries
suffered where there was not at the time of the event a degree of physical propinquity between the plaintiff and the event caused
by the defendants breach of duty to the primary victim nor where the shock sustained by the plaintiff was not either
contemporaneous with the event or separated from it by a relatively short interval of time. The necessary element of proximity
between plaintiff and defendant is furnished, at least in part, by both physical and temporal propinquity and also by the sudden
and direct visual impression on the plaintiffs mind of actually witnessing the event or its immediate aftermath. To use Lord
Wilberforces words in McLoughlins case [1982] 2 All ER 298 at 304305, [1983] 1 AC 410 at 422423:

As regards proximity to the accident, it is obvious that this must be close in both time and space The shock must
come through sight or hearing of the event or of its immediate aftermath.
930

Grief, sorrow, deprivation and the necessity for caring for loved ones who have suffered injury or misfortune must, I think,
be considered as ordinary and inevitable incidents of life which, regardless of individual susceptibilities, must be sustained
without compensation. It would be inaccurate and hurtful to suggest that grief is made any the less real or deprivation more
tolerable by a more gradual realisation, but to extend liability to cover injury in such cases would be to extend the law in a
direction for which there is no pressing policy need and in which there is no logical stopping point. In my opinion, the necessary
proximity cannot be said to exist where the elements of immediacy, closeness of time and space, and direct visual or aural
perception are absent. I would agree with the view expressed by Nolan LJ that there may well be circumstances where the
element of visual perception may be provided by witnessing the actual injury to the primary victim on simultaneous television,
but that is not the case in any of the instant appeals and I agree with my noble and learned friend Lord Keith of Kinkel that, for
the reasons which he gives, the televised images seen by the various appellants cannot be equiparated with sight or hearing of
the event. Nor did they provide the degree of immediacy required to sustain a claim for damages for nervous shock. That they
were sufficient to give rise to worry and concern cannot be in doubt, but in each case other than those of Brian Harrison and
Robert Alcock, who were present at the ground, the appellant learnt of the death of the victim at second hand and many hours
later. As I read the evidence, the shock in each case arose not from the original impact of the transmitted image which did not, as
has been pointed out, depict the suffering of recognisable individuals. These images provided no doubt the matrix for imagined
consequences giving rise to grave concern and worry, followed by a dawning consciousness over an extended period that the
imagined consequence had occurred, finally confirmed by news of the death and, in some cases, subsequent visual identification
of the victim. The trauma is created in part by such confirmation and in part by the linking in the mind of the plaintiff of that
confirmation to the previously absorbed image. To extend the notion of proximity in cases of immediately created nervous shock
to this more elongated and, to some extent, retrospective process may seem a logical analogical development. But, as I shall
endeavour to show, the law in this area is not wholly logical and whilst having every sympathy with the appellants, whose
suffering is not in doubt and is not to be underrated, I cannot for my part see any pressing reason of policy for taking this further
step along a road which must ultimately lead to virtually limitless liability. Whilst, therefore, I cannot, for the reasons which I
have sought to explain, accept Mr Woodward QCs submission that it is for your Lordships to lay down, on grounds of public
policy, an arbitrary requirement of the existence of a particular blood or marital relationship as a precondition of liability, I
equally believe that further pragmatic extensions of the accepted concepts of what constitutes proximity must be approached with
the greatest caution. McLoughlin v OBrian was a case which itself represented an extension not, as I think, wholly free from
difficulty and any further widening of the area of potential liability to cater for the expanded and expanding range of the media of
communication ought, in my view, to be undertaken rather by Parliament, with full opportunity for public debate and
representation, than by the process of judicial extrapolation.
In the case of both Brian Harrison and Robert Alcock, although both were present at the ground and saw scenes which were
obviously distressing and such as to cause grave worry and concern, their perception of the actual consequences of the disaster to
those to whom they were related was again gradual. In my judgment, the necessary proximity was lacking in their cases too, but
I also agree 931 with my noble and learned friend Lord Keith of Kinkel that there is also lacking the necessary element of
reasonable foreseeability. Accordingly, I too would dismiss the appeals and it follows from what I have said that I agree that the
correctness of the decisions in Hevican v Ruane [1991] 3 All ER 65 and Ravenscroft v Rederiaktieblaget Transatlantic [1991] 3
All ER 73 must be seriously doubted.
I would only add that I cannot, for my part, regard the present state of the law as either entirely satisfactory or as logically
defensible. If there exists a sufficient degree of proximity to sustain a claim for damages for nervous shock, why it may
justifiably be asked, does not that proximity also support that perhaps more easily foreseeable loss which the plaintiff may suffer
as a direct result of the death or injury from which the shock arises. That it does not is, I think, clear from Hinz v Berry [1970] 1
All ER 1074 esp at 10761077, [1970] 2 QB 40 esp at 44 per Lord Pearson. But the reason why it does not has, I think, to be
found not in logic but in policy. Whilst not dissenting from the case-by-case approach advocated by Lord Bridge in
McLoughlins case, the ultimate boundaries within which claims for damages in such cases can be entertained must I think
depend in the end upon considerations of policy. For example, in his illuminating judgment in Jaensch v Coffey (1984) 54 ALR
417 Deane J expressed the view that no claim could be entertained as a matter of law in a case where the primary victim is the
negligent defendant himself and the shock to the plaintiff arises from witnessing the victims self-inflicted injury. The question
does not, fortunately, fall to be determined in the instant case, but I suspect that an English court would be likely to take a similar
view. But if that be so, the limitation must be based upon policy rather than upon logic for the suffering and shock of a wife or
mother at witnessing the death of her husband or son is just as immediate, just as great and just as foreseeable whether the
accident be due to the victims own or to anothers negligence and if the claim is based, as it must be, on the combination of
proximity and foreseeability, there is certainly no logical reason why a remedy should be denied in such a case. Indeed, Mr
Hytner QC, for the appellants, has boldly claimed that it should not be. Take, for instance, the case of a mother who suffers
shock and psychiatric injury through witnessing the death of her son when he negligently walks in front of an oncoming motor
car. If liability is to be denied in such a case such denial can only be because the policy of the law forbids such a claim, for it is
difficult to visualise a greater proximity or a greater degree of foreseeability. Moreover, I can visualise great difficulty arising, if
this be the law, where the accident, though not solely caused by the primary victim has been materially contributed to by his
negligence. If, for instance, the primary victim is himself 75% responsible for the accident, it would be a curious and wholly
unfair situation if the plaintiff were enabled to recover damages for his or her traumatic injury from the person responsible only in
a minor degree whilst he in turn remained unable to recover any contribution from the person primarily responsible since the
latters negligence vis--vis the plaintiff would not even have been tortious.
Policy considerations such as this could, I cannot help feeling, be much better accommodated if the rights of persons injured
in this way were to be enshrined in and limited by legislation as they have been in the Australian statute law to which my noble
and learned friend, Lord Ackner, has referred.

LORD JAUNCEY OF TULLICHETTLE. My Lords, for some 90 years it has been recognised that nervous shock sustained
independently of physical injury and resulting in psychiatric illness can give rise to a claim for damages in an action founded on
negligence. The law has developed incrementally. In Dulieu v White & Sons [1901] 2 KB 669, [19003] All ER Rep 353, a
plaintiff who suffered 932 nervous shock as a result of fears for her own safety caused by the defendants negligence was held to
have a cause of action. However Kennedy J said that if nervous shock occasioned by negligence was to give a cause of action it
must arise from a reasonable fear of immediate personal injury to oneself (see [1901] 2 KB 669 at 675, [19003] All ER Rep
353 at 357). In Hambrook v Stokes Bros [1925] 1 KB 141, [1924] All ER Rep 110 Kennedy Js foregoing limitation was
disapproved by the majority of the Court of Appeal who held that a mother who had sustained nervous shock as a result of fear
for the safety of her three children due to the movement of an unmanned lorry had a cause of action against the owner of the
lorry. Until 1983 however there had in England been no case in which a plaintiff had been able to recover damages for nervous
shock when the event giving rise to the shock had occurred out of sight and out of earshot. I use the word event as including the
accident and its immediate aftermath. In McLoughlin v OBrian [1982] 2 All ER 298, [1983] 1 AC 410 a wife and a mother
suffered nervous shock after seeing her husband and children in a hospital to which they had been taken after a road accident.
The wife was not present at the locus but reached the hospital before her husband and son and daughter had been cleaned up and
when they were all very distressed. This was the first case in the United Kingdom in which a plaintiff who neither saw nor heard
the accident nor saw its aftermath at the locus successfully claimed damages for nervous shock. These appeals seek to extend
further the circumstances in which damages for nervous shock may be recovered.
I start with the proposition that the existence of a duty of care on the part of the defendant does not depend on foreseeability
alone. Reasonable foreseeability is subject to controls. In support of this proposition I rely on the speech of Lord Wilberforce in
McLoughlin v OBrian [1982] 2 All ER 298 at 303, [1983] 1 AC 410 at 420421 and on the carefully reasoned judgment of
Deane J in the High Court of Australia in Jaensch v Coffey (1984) 54 ALR 417 at 439445. In a case of negligence causing
physical injury to an employee or to a road user reasonable foreseeability may well be the only criterion by which liability comes
to be judged. However, in the case of negligence causing shock different considerations apply because of the wide range of
people who may be affected. For this reason Lord Wilberforce in McLoughlin v OBrian [1982] 2 All ER 298 at 304, [1983] 1
AC 410 at 421422 said:

there remains a real need for the law to place some limitation on the extent of admissible claims. It is
necessary to consider three elements inherent in any claim: the class of persons whose claims should be recognised; the
proximity of such persons to the accident; and the means by which the shock is caused.
The class of persons with recognisable claims will be determined by the laws approach as to who ought according to its
standards of value and justice to have been in the defendants contemplation. (Again McLoughlin v OBrian [1982] 2 All ER 298
at 303, [1983] 1 AC 410 at 420 per Lord Wilberforce). The requisite element of proximity in the relation of the parties also
constitutes an important control on the test of reasonable foreseeability (Deane J in the Jaensch case). The means by which the
shock is caused constitutes a third control, although in these appeals I find it difficult to separate this from proximity.
The present position in relation to recognisable claims is that parents and spouses have been held entitled to recover for
shock caused by fear for the safety of their children or the other spouse. No remoter relative has successfully claimed in the
United Kingdom. However a rescuer and a crane driver have recovered damages for nervous shock sustained as a result of fear
for the safety of others in circumstances to which I must now advert.
933
In Dooley v Cammell Laird & Co Ltd [1951] 1 Lloyds Rep 271 Donovan J awarded damages to a crane driver who suffered
nervous shock when a rope connecting a sling to the crane hooks snapped causing the load to fall into the hold of a ship in which
men were working. The nervous shock resulted from the plaintiffs fear that the falling load would injure or kill some of his
fellow workmen. Donovan J drew the inference that the men in the hold were friends of the plaintiff and later stated (at 277):

Furthermore, if the driver of the crane concerned fears that the load may have fallen upon some of his fellow
workmen, and that fear is not baseless or extravagant, then it is, I think, a consequence reasonably to have been foreseen
that he may himself suffer a nervous shock.

Although Donovan J treated the matter simply as one of reasonable foreseeability, I consider that the case was a very special one.
Unlike the three cases to which I have referred in which the plaintiff was merely an observer of the accident or its immediate
aftermath. Dooley was operating the crane and was therefore intimately involved in, albeit in no way responsible for, the
accident. In these circumstances the defendants could readily have foreseen that he would be horrified and shocked by the failure
of the rope and consequent accident which he had no power to prevent. I do not consider that this case is of assistance where, as
here, the plaintiffs were not personally involved in the disaster. In Chadwick v British Transport Commission [1967] 2 All ER
945, [1967] 1 WLR 912 the plaintiff recovered damages for nervous shock sustained as a result of his prolonged rescue efforts at
the scene of a serious railway accident which had occurred near his home. The shock was caused neither by fear for his own
safety nor for that of close relations. The position of the rescuer was recognised by Cardozo J in Wagner v International Rly Co
(1921) 232 NY 176 at 180:

Danger invites rescue. The cry of distress is the summons to relief. The law does not ignore these reactions of the
mind in tracing conduct to its consequences. It recognises them as normal. It places their effects within the range of the
natural and probable. The wrong that imperils life is a wrong to the imperilled victim; it is a wrong also to his rescuer.

Lord Wilberforce in McLoughlin v OBrian [1982] 2 All ER 298 at 302, [1983] 1 AC 410 at 419 considered that the principle of
rescuers ought to be accepted. This is a particular instance where the law not only considers that the individual responsible for an
accident should foresee that persons will come to the rescue and may be shocked by what they see but also considers it
appropriate that he should owe to them a duty of care. I do not however consider that either of these cases justify the further
development of the law sought by the appellants.
Of the six appellants who were successful before Hidden J only one, who lost two brothers, was present at the ground. The
others saw the disaster on television, two of them losing a son and the remaining three losing brothers. Of the four appellants
who were unsuccessful before the judge, one who lost his brother-in-law was at the ground, one who lost her fianc saw the
disaster on television, another who lost her brother heard initial news while shopping and more details on the wireless during the
evening and a third who lost a grandson heard of the disaster on the wireless and later saw a recorded television programme.
Thus all but two of the appellants were claiming in respect of shock resulting from the deaths of persons outside the categories of
relations so far recognised by the law for the purposes of this type of action. It was argued on their behalf that the law has never
excluded strangers to the victim from claiming for nervous shock resulting from the accident. In support of this proposition the
appellants relied 934 on Dooley v Cammell Laird & Co Ltd and Chadwick v British Transport Commission as well as upon the
following passage from the judgment of Atkin LJ in Hambrook v Stokes Bros [1925] 1 KB 141 at 157, [1924] All ER Rep 110 at
116:

Personally I see no reason for excluding the bystander in the highway who receives injury in the same way from
apprehension of or the actual sight of injury to a third party.

However, the suggested inclusion of the bystander has not met with approval in this House. In Hay (or Bourhill) v Young
[1942] 2 All ER 396 at 409, [1943] AC 92 at 117 Lord Porter said:

It is not every emotional disturbance or every shock which should have been foreseen. The driver of a car or vehicle
even though careless is entitled to assume that the ordinary frequenter of the streets has sufficient fortitude to endure such
incidents as may from time to time be expected to occur in them, including the noise of a collision and the sight of injury to
others, and is not to be considered negligent towards one who does not possess the customary phlegm.

In McLoughlin v OBrian [1982] 2 All ER 298 at 304, [1983] 1 AC 410 at 422 Lord Wilberforce said that existing law denied the
claims of the ordinary bystander

either on the basis that such persons must be assumed to be possessed of fortitude sufficient to enable them to endure
the calamities of modern life or that defendants cannot be expected to compensate the world at large.

While it is not necessary in these appeals to determine where stands the ordinary bystander I am satisfied that he cannot be
prayed in aid by the appellants.
Should claims for damages for nervous shock in circumstances such as the present be restricted to parents and spouses or
should they be extended to other relatives and close friends and, if so, where, if at all, should the line be drawn? In McLoughlin v
OBrian [1982] 2 All ER 298 at 304, [1983] 1 AC 410 at 422 Lord Wilberforce in the context of the class of persons whose claim
should be recognised said:

As regards the class of persons, the possible range is between the closest of family ties, of parent and child, or husband
and wife, and the ordinary bystander. Existing law recognises the claims of the first; it denies that of the second In my
opinion, these positions are justifiable, and since the present case falls within the first class it is strictly unnecessary to say
more. I think, however, that it should follow that other cases involving less close relationships must be very carefully
scrutinised. I cannot say that they should never be admitted. The closer the tie (not merely in relationship, but in care) the
greater the claim for consideration. The claim, in any case, has to be judged in the light of the other factors, such as
proximity to the scene in time and place, and the nature of the accident.
I would respectfully agree with Lord Wilberforce that cases involving less close relatives should be very carefully scrutinised.
That, however, is not to say they must necessarily be excluded. The underlying logic of allowing claims of parents and spouses is
that it can readily be foreseen by the tortfeasor that if they saw or were involved in the immediate aftermath of a serious accident
or disaster they would, because of their close relationship of love and affection with the victim, be likely to suffer nervous shock.
There may, however, be others whose ties of relationship are as strong. I do not consider that it would be profitable to try and
define who such others might be or to draw any dividing line between one degree 935 of relationship and another. To draw such
a line would necessarily be arbitrary and lacking in logic. In my view the proper approach is to examine each case on its own
facts in order to see whether the claimant has established so close a relationship of love and affection to the victim as might
reasonably be expected in the case of spouses or parents and children. If the claimant has so established and all other
requirements of the claim are satisfied he or she will succeed since the shock to him or her will be within the reasonable
contemplation of the tortfeasor. If such relationship is not established the claim will fail.
I turn to the question of proximity which arises in the context of those appellants who saw the disaster on television either
contemporaneously or in later recorded transmissions and of those who identified their loved ones in the temporary mortuary
some nine or more hours after the disaster had taken place. I refer once again to a passage in the speech of Lord Wilberforce in
McLoughlin v OBrian [1982] 2 All ER 298 at 304, [1983] 1 AC 410 at 422:

As regards proximity to the accident, it is obvious that this must be close in both time and space. It is after all, the fact
and consequence of the defendants negligence that must be proved to have caused the nervous shock. Experience has
shown that to insist on direct and immediate sight or hearing would be impractical and unjust and that under what may be
called the aftermath doctrine, one who, from close proximity comes very soon on the scene, should not be excluded. In
my opinion, the result in Benson v Lee [1972] VR 879 was correct and indeed inescapable. It was based, soundly, on
direct perception of some of the events which go to make up the accident as an entire event, and this includes the
immediate aftermath [at 880]

Lord Wilberforce expressed the view that a strict test of proximity by sight or hearing should be applied by the courts. Later he
said ([1982] 2 All ER 298 at 305, [1983] 1 AC 410 at 422423):

The shock must come through sight or hearing of the event or of its immediate aftermath. Whether some equivalent of
sight or hearing, eg through simultaneous television, would suffice may have to be considered.

Mr Lords, although Lord Wilberforce in McLoughlin v OBrian did not close the door to shock coming from the sight of
simultaneous television I do not consider that a claimant who watches a normal television programme which displays events as
they happen satisfies the test of proximity. In the first place a defendant could normally anticipate that in accordance with current
television broadcasting guidelines shocking pictures of persons suffering and dying would not be transmitted. In the second
place, a television programme such as that transmitted from Hillsborough involves cameras at different viewpoints showing
scenes all of which no one individual would see, edited pictures and a commentary superimposed. I do not consider that such a
programme is equivalent to actual sight or hearing at the accident or its aftermath. I say nothing about the special circumstances
envisaged by Nolan LJ in his judgment in this case (sub nom Jones v Wright [1991] 3 All ER 88 at 122). If a claimant watching a
simultaneous television broadcast does not satisfy the requirements of proximity it follows that a claimant who listens to the
wireless or sees a subsequent television recording falls even shorter of the requirement.
My Lords, what constitutes the immediate aftermath of an accident must necessarily depend upon the surrounding
circumstances. To essay any comprehensive definition would be a fruitless exercise. In McLoughlin v OBrian the immediate
aftermath extended to a time somewhat over an hour after the accident and to the hospital in which the victims were waiting to be
attended to. 936It appears that they were in very much the same condition as they would have been had the mother found them
at the scene of the accident. In these appeals the visits to the mortuary were made no earlier than nine hours after the disaster and
were made not for the purpose of rescuing or giving comfort to the victim but purely for the purpose of identification. This
seems to me to be a very different situation from that in which a relative goes within a short time after an accident to rescue or
comfort a victim. I consider that not only the purpose of the visits to the mortuary but also the times at which they were made
take them outside the immediate aftermath of this disaster.
Mr Lords, only two appellants, Mr and Mrs Copoc, lost a son, but they saw the disaster on television and Mr Copoc
identified the body on the following morning having already been informed that his son was dead. No appellant lost a spouse.
None of the other appellants who lost relatives sought to establish that they had relationships of love and affection with a victim
comparable to that of a spouse or parent. In any event only two of them were present in the ground and the remainder saw the
scenes on simultaneous or recorded television. In these circumstances none of the appellants having satisfied both the tests of
reasonable foreseeability and of proximity I would dismiss all the appeals.

LORD LOWRY. My Lords, I have enjoyed the advantage of reading in draft the speeches of your Lordships, all of whom have
reached the same conclusion, namely that these appeals should be dismissed. Concurring as I do in that conclusion, I do not
consider that it would be helpful to add further observations of my own to what has already been said by your Lordships.

Appeals dismissed.

Solicitors: Sharpe Pritchard agents for John Pickering, Liverpool, Cuff Roberts, Liverpool, Silverman Livermore, Liverpool,
Ford & Warren, Leeds, Alexander Harris & Co, Sale and Mace & Jones, Huyton; Penningtons agents for Hammond Suddards,
Bradford.

Mary Rose Plummer Barrister.

[1991] 4 All ER 937

Watts and another v Morrow

TORTS; Negligence: CONTRACT

COURT OF APPEAL, CIVIL DIVISION

SIR STEPHEN BROWN P, RALPH GIBSON, BINGHAM LJJ
4, 8, 9, 30 JULY 1991
Damages Measure of damages Negligence Building Surveyors report to purchaser negligently failing to disclose defects
Substantial repairs required to remedy defects Purchaser deciding to retain property and repair defects Whether proper
measure of damages cost of repairs or diminution in value if defects had been reported.

Contract Damages for breach Inconvenience, mental distress etc Negligent building surveyors report Whether damages
recoverable for mental distress not caused by physical discomfort or inconvenience resulting from breach Whether damages
limited to damages for distress caused by physical consequences of breach.

The plaintiffs purchased a country house for 177,500 in reliance on a survey prepared by the defendant surveyor in which he
stated that the overall dwelling house was sound, stable and in good condition although there were minor defects which could be
dealt with as a part of ordinary ongoing maintenance and repair. After taking possession the plaintiffs discovered substantial
defects not mentioned in the defendants report which required urgent repair, including the renewal of 937 the roof, windows and
floor boards. The plaintiffs carried out repairs to remedy the defects at a cost of 33,961. They brought an action against the
defendant claiming the cost of the repairs. It was common ground that at the date of purchase the value of the house in its true
condition was 162,500 and that therefore the plaintiffs had paid for the property 15,000 more than it was worth in its true
condition. The judge found the defendant liable for negligence in carrying out the survey and awarded the plaintiffs 33,961 for
the cost of the repairs and 8,000, being 4,000 to each plaintiff, for distress and inconvenience. The defendant appealed against
the amount of damages, contending that the damages should have been assessed according to the diminution in value of the
house, ie the difference in the value of the house as described in the negligent report and its value as it should have been
described, rather than the cost of the repairs and that either no or only modest damages should have been awarded for distress and
inconvenience.

Held The appeal would be allowed for the following reasons

(1) Where the purchaser of a house bought in reliance on a negligent survey report prepared under a normal contract of
survey requiring the surveyor to exercise proper care and skill but with no special terms and the cost of repairs to remedy defects
not disclosed in the report exceeded the diminution in value, being the difference between the price actually paid and the price
that would have been paid if the house had been correctly described, the proper measure of damages was the diminution in value
rather than the cost of the repairs notwithstanding that it had been reasonable for the purchaser to retain the property and do the
repairs, since, applying the principle of restitution to the terms of the contract, the amount required to put the plaintiff in the
position in which he would have been if the surveyor had carried out the contract of survey properly was the amount by which he
was caused to pay more than the value of the house in its true condition, and if he were to be permitted to recover the cost of the
repairs he would in effect be recovering damages for breach of a warranty that the condition of the house had been correctly
described by the surveyor when no such warranty had been given. Accordingly, the appeal would be allowed and, applying the
diminution in value rule, the damages would be reduced to 15,000 (see p 947 j to p 948 a, p 950 c d g, p 951 c to g, p 953 f g, p
954 d, p 958 g h, p 959 a b e h and p 960 f, post); Philips v Ward [1956] 1 All ER 874 and Perry v Sidney Phillips & Son (a firm)
[1982] 3 All ER 705 followed; Hipkins v Jack Cotton Partnership [1989] 2 EGLR 157 and Syrett v Carr & Neave [1990] 2
EGLR 161 disapproved.
(2) Damages for breach of a normal contract of survey were only recoverable for distress caused by physical consequences
of the breach and not for mental distress not caused by physical discomfort or inconvenience resulting from the breach.
Accordingly, the plaintiffs were not entitled to damages for distress and inconvenience but instead they would each be awarded
damages of 750 for physical discomfort (see p 954 f g, p 955 b f, p 956 h to p 957 a, p 958 c d g h and p 960 b c f g, post) Hayes
v James & Charles Dodd (a firm) [1990] 2 All ER 815 considered.

Notes
For the general principles relating to the measure of damages, see 12 Halsburys Laws (4th edn) 11271144, and for cases on the
subject, see 17 Digest (Reissue) 101119, 109208.

Cases referred to in judgments

Addis v Gramophone Co Ltd [1909] AC 488, [190810] All ER Rep 1, HL.
Admiralty Comrs v Chekiang (owners) [1926] AC 637, [1926] All ER Rep 114, HL.
938
Admiralty Comrs v Susquehanna (owners), The Susquehanna [1926] AC 655, [1926] All ER Rep 124, HL.
Bailey v Bullock [1950] 2 All ER 1167.
Bigg v Howard Son & Gooch [1990] 1 EGLR 173.
Bliss v South East Thames Regional Health Authority [1987] ICR 700, CA.
British Westinghouse Electric and Manufacturing Co Ltd v Underground Electric Railways Co of London Ltd [1912] AC 673,
[191113] All ER Rep 63, HL.
County Personnel (Employment Agency) Ltd v Alan R Pulver & Co (a firm) [1987] 1 All ER 289, [1987] 1 WLR 916, CA.
Cross v Martin & Mortimer [1989] 1 EGLR 154.
Dodd Properties (Kent) Ltd v Canterbury City Council [1980] 1 All ER 928, [1980] 1 WLR 433, CA.
Ford v White & Co [1964] 2 All ER 755, [1964] 1 WLR 885.
Groom v Crocker [1938] 2 All ER 394, [1939] 1 KB 194, CA.
Hayes v James & Charles Dodd (a firm) [1990] 2 All ER 815, CA.
Heywood v Wellers (a firm) [1976] 1 All ER 300, [1976] QB 446, [1976] 2 WLR 101, CA.
Hide v Thornborough (1846) 2 Car & Kir 250, 175 ER 103.
Hipkins v Jack Cotton Partnership [1989] 2 EGLR 157.
Hobbs v London and South Western Rly Co (1875) LR 10 QB 111, [187480] All ER Rep 111, DC.
Jackson v Horizon Holidays Ltd [1975] 3 All ER 92, [1975] 1 WLR 1468, CA.
Jarvis v Swan Tours Ltd [1973] 1 All ER 71, [1973] QB 233, [1972] 3 WLR 954, CA.
Livingstone v Rawyards Coal Co (1880) 5 App Cas 25, HL.
Lukin v Godsall (1795) Peake Add Cas 15, 170 ER 178, NP.
Moss v Christchurch RDC [1925] 2 KB 750.
Murphy v Wexford CC [1921] 2 IR 230, Ir CA.
Perry v Sidney Phillips & Son (a firm) [1982] 3 All ER 705, [1982] 1 WLR 1297, CA.
Philips v Ward [1956] 1 All ER 874, [1956] 1 WLR 471, CA.
Pilkington v Wood [1953] 2 All ER 810, [1953] Ch 770, [1953] 3 WLR 522.
Pinnock v Wilkins & Sons (1990) Times, 29 January, CA.
Roberts v J Hampson & Co (a firm) [1989] 2 All ER 504, [1990] 1 WLR 94.
Simple Simon Catering Ltd v J E Binstock Miller & Co (1973) 228 EG 527, CA.
Steward v Rapley [1989] 1 EGLR 159, CA.
Syrett v Carr & Neave [1990] 2 EGLR 161.
Cases also cited
Bacon v Cooper (Metals) Ltd [1982] 1 All ER 397.
Esso Petroleum Co Ltd v Mardon [1975] 1 All ER 203, [1975] QB 819; varied [1976] 2 All ER 5, [1976] QB 801, CA.
Harbutts Plasticine Ltd v Wayne Tank and Pump Co Ltd [1970] 1 All ER 225, [1970] 1 QB 447, CA.

Appeal
The defendant, Ralph Morrow, a building surveyor, appealed against the decision of Judge Peter Bowsher QC hearing official
referees business on 6 November 1990 (24 Con LR 125) whereby he gave judgment for the plaintiffs, Ian Roscoe Watts and
Lesley Mary Samuel Watts, for damages of 33,96135 with interest of 12,83987 and general damages of 8,000 with interest
of 47781 in the plaintiffs claim for damages for loss arising out of a negligent survey prepared by the defendant for the
plaintiffs in connection with the plaintiffs purchase of 939 Nutford Farm House, Blandford, Dorset. The facts are set out in the
judgment of Ralph Gibson LJ.

Rupert Jackson QC and Iain Hughes for the appellant.

Philip Naughton QC and Jonathan Acton Davis for the respondents.

Cur adv vult

30 July 1991. The following judgments were delivered.

RALPH GIBSON LJ (giving the first judgment at the invitation of Sir Stephen Brown P). This is an appeal by the defendant,
Mr Ralph Morrow FRICS, a building surveyor, against the judgment obtained by the plaintiffs, Mr and Mrs Watts, on 6
November 1990, after trial of the action by Judge Peter Bowsher QC (24 Con LR 125). The action arose out of a negligent
survey report by the defendant made in August 1986 upon Nutford Farm House, Blandford in Dorset, which the plaintiffs were
proposing to buy and thereafter bought. The judgment awarded 33,96135 for the cost of certain repairs to the house, with
12,83987 for interest, and 8,000 (4,000 for each plaintiff) for distress and inconvenience with interest of 47781. At the
trial liability was in issue but the defendants appeal is on damages only. He contends, firstly, that the judge was wrong in law to
award damages based upon the cost of repairs and that the award should have been, on the basis of diminution in value or excess
purchase price paid, in the sum of 15,000, secondly, that any award for distress and inconvenience was wrong in law,
alternatively that the award of 8,000 was excessive, and, thirdly, that the award of interest was based upon an excessive rate.
The case raises questions of general importance both for surveyors of houses and for those who buy houses in reliance upon
survey reports. The defendant contends that the judge has disregarded the rule which, since 1956 at least, has been generally held
to apply to such cases as this. The plaintiffs assert that there is no such rule or, if there is, that it is wrong to apply it in this case.
It is necessary to set out the facts in some detail.

Summary of the facts

(i) Mr Watts is a stockbroker employed by Barclays de Zoete Wedd UK Equities Ltd, Mrs Watts, a solicitor, is a director of
Kleinwort Benson Ltd, merchant bankers. In 1986 they were married and living in a house in Cloudesley Road, Islington. They
decided to look for a country house for use at weekends and holidays.
(ii) Their case at trial was that they both wanted a house which would be, so far as possible, trouble free and into which they
could move without the need for any substantial works of repair. It was to be a second home for use at weekends and holidays.
Each had a substantial income but considered that, although they could buy a new house within a budget of 170,000, they could
not afford to buy a house which required the carrying out of any expensive repairs. Further, they did not have the time or energy
to get involved in doing up a house which required extensive repairs or improvements.
(iii) Mr Watts found and fell in love with the house. It was a larger house than Mrs Watts had expected to buy but, as she
said, it was very beautiful, a house with a heart and difficult to resist, built in the eighteenth and nineteenth centuries. The
house is substantial with three quarters of an acre of garden and 940 three acres of paddock. It is near the river Stour and the
vendor was willing to let the purchaser have some fishing rights.
(iv) The asking price of the house was 175,000. There was another prospective purchaser. The plaintiffs decided to offer
177,500. That was acceptable to the vendor. Before entering into a contract to buy the plaintiffs decided to get a full and
detailed survey to ensure that there were going to be no unexpected costs.
(v) Mr Watts instructed the defendant in August 1986. The defendant was asked to provide a full structural survey of the
house. Mr Watts told Mrs Morrow, who received the instructions, that he wanted to be sure that the 177,500 offered was the
right price in the current market.
(vi) On 26 August the defendant sent to Mr Watts his structural report on the property. The fee chared was 400 plus
disbursements and value added tax. The report was detailed and long. It mentioned many defects and made recommendations
for repairs, but the plaintiffs found it reassuring. The general criticism made of the report, which the judge held to have been
made out, was that, as a recurring theme, the defendant pointed out a defect in the house and then gave a reassurance that the
defect could be dealt with as a part of ordinary ongoing maintenance and repair. The conclusion, which summarised the tone of
the report although not all its detail, was as follows:

Despite earlier minor settlement I found the overall dwelling house to be sound, stable and in good condition.
Attention is particularly required to the sometime eradication of wood borer in roofing timbers, and to minor works of
eradicating continued dampness in ground floor walls. Ideally some insulation would be introduced to upper ceiling areas,
but in general, the defects referred to within this report can normally be identified as being associated with regular
maintenance required with a building of this age and type. The foul drainage arrangements, while apparently adequate,
[are] not ideal, and some further rationalisation and improvement of this may be required in the sometime future, but with
attention given to the various aspects referred to within this report, which could well be attended to on an ongoing basis, I
am satisfied that a comfortable and largely trouble free dwelling of considerable charm can be attained.

Nothing was said in the report about the value of the house.
(vii) On receiving the report the plaintiffs read it with care and, as the judge held, reasonably concluded that there was
nothing to suggest that any major repairs would be required in the foreseeable future and that nothing was required which could
not wait until between them they had funds to spare for such work. Mr Watts by telephone asked the defendant whether the price
of 77,500 was fair and whether the repairs which the defendant had recommended would result in substantial expenditure. The
defendant replied that the valuation was fair and that no repairs would be substantial in terms of cost. That reply was not relied
upon as constituting a warranty, whether express or implied.
(viii) In reliance upon the report the plaintiffs decided to buy the house. The contract was made on 15 October 1986 at the
price of 177,500. It was agreed that completion would be deferred and it took place on 10 April 1987 with the assistance of a
mortgage loan from Kleinwort Benson to the plaintiffs on ordinary commercial terms.
(ix) Defects were discovered in the house beyond those of which warning was given in the defendants report. After taking
possession in 1987 Mr Watts asked Mr White, a builder, for a quotation for work which included the remedying of certain defects
identified by the defendant, namely the roof flashing and defective 941 windows. On examining the house for those purposes,
Mr White informed Mr Watts of other defects and, Mr Wadey FRICS was then instructed to carry out a full structural survey. His
report, dated 3 August 1987, included the following: (a) that the roof was due for renewal with felting, rebattening and retiling;
(b) the chimneys and main walls required repointing in places; (c) lead flashings needed to be installed; (d) window casements
and frames generally needed to be upgraded and replaced; (e) the first floor timbers needed specialist woodworm treatment and
refixing of firring pieces with extensive renewal of floor boarding. He reported other defects as well which were not relied upon
against the defendant at the trial.
(x) If Mrs Watts had known of the defects described in Mr Wadeys report she would not have gone ahead with the purchase.
If Mr Watts had known of those defects he would either not have agreed to buy the house or would have agreed to buy only if he
had been able to negotiate a substantial reduction in the price based on quotations for the work recommended to roof, to floors
and to windows.
(xi) Upon receipt of Mr Wadeys report it was obvious to Mr Watts that building costs running into many thousands of
pounds would have to be done urgently. He obtained advice as to his right to claim redress in law for the failure of the defendant
to describe the condition of the roof accurately. A formal letter before action was sent. Liability was denied.
(xii) Mr Watts then asked the builder to prepare an estimate for the repairs described in Mr Wadeys report. In September
and October Mr White carried out the work to the roof and on 3 November 1987 he was paid 11,21250 for that work.
(xiii) On 11 November 1987 the writ was issued and in March 1988 the statement of claim was served. The main allegation
was that the defendant had negligently failed to observe and advise the plaintiffs that the house was in a defective condition. The
loss and damage alleged were, firstly, the difference between the price paid and the value of the house, and, in addition, the cost
of repairs, of alternative accommodation, of furniture removal and storage, for loss of use of the property and for the cost in
investigation of the defects. There was no allegation of negligent valuation.
(xiv) Between April and October 1988, for a period of six months, the other works, in respect of which claims were made at
the trial, were carried out. Because claims in the action were to be made in respect of the work, it was carried out under separate
quotations. The times of doing the work and the amounts paid were: (a) replacing the first floor flooring 6,84001: before 20
May 1988; (b) first floor windows 7,19670: before 9 July 1988; (c) exterior brickwork 4,50742: before 9 September 1988;
(d) flooring 4,20472: before 28 October 1988. Those sums, together with the cost of the roof repairs, make up the total of
33,96135 awarded as special damages.
(xv) The cost of carrying out those repairs was paid by the plaintiffs by borrowing money. It was the plaintiffs case that,
when the defendant was instructed and made his negligent report, and when the plaintiffs entered into the contract to purchase in
October 1986, although the plaintiffs were both high earners, they were strapped for cash, and hence the importance to them of
knowing what the likely financial burdens would be from buying the house. However, between 1986 and 1988 the earned
income of both plaintiffs substantially increased. Mrs Watts in 1986 received a salary of 41,000 and a bonus of 6,000 paid in
January 1987. Her salary for 1987 was 70,000 and her bonus in January 1988 was 40,000. As to Mr Watts, he earned very
substantially more during 1987 (and subsequent years) than anticipated at the time of the purchase. In consequence, the
plaintiffs were able to finance the cost not only of 942 the repairs in respect of which the sums listed above were paid, but also
other repairs (of which the defendant was not said negligently to have failed to inform the plaintiffs) and, in addition, to decorate
and refurbish the house to a high standard. Mr Watts pointed out that: This process of refurbishment was considerably delayed
by the need to undertake the repairs which had neither been foreseen nor budgeted for. The sum expended on all the repairs,
decoration and refurbishment was in excess of 150,000.
(xvi) The circumstances which gave rise to the claim for damages for distress, worry, vexation and inconvenience were
described by Mr Watts as follows:

20 the quality of our life was very seriously affected. We had bought the house on the basis that apart from
regular maintenance, the property would not require attention. In the event, for eight months we spent almost every
weekend staying in a building site. The conditions were quite deplorable. At various times there was scaffolding around
the entirety of the house, the first floor floorboards and the first floor windows were removed in sequence. There was
constant dirt and dust permeating the air. Moving our possessions from room to room in accordance with the builders
requirements was a recurrent nightmare and our possessions and furniture became dirty. From time to time there was no
internal sanitation and we could not bath. [We] were forced to spend extended periods out of our first floor bedroom living
and sleeping in the unheated, undecorated attic rooms. We were most reluctant to entertain our friends and were
completely unable to entertain clients.
21. Throughout the period of building works [we] continued to spend weekends at the house. As there was no
supervising Architects or Surveyor employed the only supervision was that provided by me. I believed it to be essential
that I spent as much time as possible with the builders to provide them with an incentive to get on with it, to ensure that the
work was done to the requisite standard and to provide guidance with the numerous minor problems which arose. I met the
builder at the property virtually every weekend.
22. Our summer holiday in 1988, which we had planned to spend in the house, was spent in a hotel in the Western Isles
at an unplanned cost of 880. Both [of us] were employed in extremely stressful occupations in the City of London.
Weekend relaxation was essential to us, both in terms of our physical wellbeing and our capacity to perform our jobs to the
requisite standard. The denial of that relaxation by virtue of the building works caused us both great distress. I believe that
it was, at the very least, a contributory cause to the unfortunate breakdown of our marriage, which culminated in our
separation late in 1989.

The plaintiffs were divorced in April 1990 having separated early in 1989. Mr Watts still owns and occupies the house. Mrs
Watts lives in the house in Islington.
(xvii) As to the ground of liability, the judge held that the plaintiffs had reasonably concluded from the defendants report of
August 1986 that no major repairs would be required in the foreseeable future and that nothing was required which could not wait
until the two plaintiffs between them had the funds to spare for such work. There was, of course, no finding that the defendant
had warranted the absence of any need for major repairs. No such warranty was alleged.
(xviii) As to the difference in value, it was the unchallenged evidence of Mr Wadey, who gave evidence for the plaintiffs at
the trial, that in October 1986, the date of the contract to purchase, the value of the house in its true condition was 162,500. It
has been common ground in this court that in reliance on the 943 defendants advice, the plaintiffs paid for the property 15,000
more than the property was worth in its true condition.

The judges grounds of decision

The judge accepted the evidence of the plaintiffs. As to the measure of damages for the consequences of the negligent
advice, the judge accepted that the damages were to be assessed either on the cost of repairs or on the difference in value. He
directed himself by reference to the principles stated by Bingham LJ in County Personnel (Employment Agency) Ltd v Alan R
Pulver & Co (a firm) [1987] 1 All ER 289 at 297, [1987] 1 WLR 916 at 925, namely (in brief summary) that the diminution in
value rule is almost always appropriate where property is acquired following negligent advice by surveyors, but that that is not
an invariable approach and should not be mechanistically applied in cases where it may appear inappropriate. He observed that
the circumstances of the present case were remarkably similar to the facts in Syrett v Carr & Neave [1990] 2 EGLR 161, a case
also decided by him. The judge then, after reference to the receipt by the plaintiffs of Mr Wadeys report on 3 August 1987,
stated the ground of his decision in accordance with his reasoning in Syretts case as follows (24 Con LR 125 at 152):

If the plaintiffs had then sought to cut their losses by reselling, they would have incurred very considerable costs in
reselling (in the shape of agents and solicitors fees and stamp duty) and in finding a new property if that had been their
chosen course of action. In addition, they might have incurred a very substantial loss on the resale in very different market
conditions when they were selling what would have become a suspect house, and they would have had to devote much time
to the sale of the house. In the very difficult position in which they found themselves, I find that they acted entirely
reasonably in deciding to repair the premises rather than resell.

He therefore held that the plaintiffs were entitled to recover damages assessed as the cost of repair of the premises as to those
items of which complaint had been made, namely 33,96135. It is to be noted that there was nothing in the plaintiffs pleaded
case as to what costs they would have incurred upon reselling.
As to the claim for general damages for distress and inconvenience the judge rejected the submission for the defendant,
based upon Hayes v James & Charles Dodd (a firm) [1990] 2 All ER 815, that such damages are not recoverable in this class of
case. That case, he held, did illustrate features for which damages of that sort should not be awarded. He noted the reference to
the physical consequences of the breach of duty as justifying an award in the judgment of Kerr LJ in Perry v Sidney Phillips &
Son (a firm) [1982] 3 All ER 705, [1982] 1 WLR 1297. As a matter of policy, in his view, damages for mental distress in contract
are limited to certain classes of case including where the contract which has been broken was itself a contract to provide peace of
mind or freedom from distress: see per Dillon LJ in Bliss v South East Thames Regional Health Authority [1987] ICR 700 at
718. The judge held that, on the authorities cited, in appropriate circumstances a negligent surveyor of a residential property,
which he has undertaken to survey for a prospective purchaser of the property who intends to live there, may be liable to his
client in damages to compensate him or her for inconvenience and distress arising out of living in the property but not out of
litigation about it. The judge commented that a prospective buyer of a house goes to a surveyor not just to be advised on the
financial advisability of one of the most important transactions of his life, but also to receive reassurance that when he buys the
house he will have peace of mind and freedom from distress.
944
As to the amount of damages, they should be on a scale which is not excessive but modest: see per Lord Denning MR in
Perry v Sidney Phillips & Son (a firm) [1982] 3 All ER 705 at 709, [1982] 1 WLR 1297 at 13021303. The judge then set out the
description of the distress and inconvenience which the plaintiffs suffered in the house, limited to weekends, in the terms set out
in the proof of Mr Watts repeated in para (xvi) above. The judge declined to allow the 880, the cost of the holiday in 1988, as
special damages, but held that it was to be taken into account in assessing general damages for distress and inconvenience. He
rejected the contention that, since the plaintiffs had voluntarily undertaken works going far beyond the works the subject of the
action, therefore their alleged distress and inconvenience should be discounted. The answer of Mr Watts had been that, once it
became necessary to do certain works, other works naturally followed, eg once the floor had to come up it was only natural and
sensible that the wiring and underfloor plumbing also should be dealt with, even though those matters would not normally have
been considered for some years. The judge held that answer of Mr Watts to be sensible and well founded. The judge also
considered, although the point had not been argued for the plaintiffs, whether the breakdown of the plaintiffs marriage could be
taken into account and held that, as a matter of policy, it could not be. The judge then held that the totality of the distress and
inconvenience, assessed on a modest scale, should be set at 4,000 for each plaintiff.
As to interest, the judge was invited by counsel for the plaintiffs to allow interest at 15% on the award in respect of damages
based on the cost of repairs. The contention for the defendant was that interest should be at the short-term interest account rates.
Judge Bowsher, without giving any detailed reasons, held that the appropriate rate of interest was 15% on the 33,96135
calculated from the dates of payment by the plaintiffs and 2% on general damages.

The contest on the main issue: diminution in value or cost of repairs?

Before describing the submissions which have been made on this appeal it is necessary to refer to the decisions of this court
in Philips v Ward [1956] 1 All ER 874, [1956] 1 WLR 471 and Perry v Sidney Phillips & Son (a firm) [1982] 3 All ER 705,
[1982] 1 WLR 1297, to which detailed reference has been made in the submissions of counsel. In Philips v Ward the plaintiff, in
reliance upon a negligent report by a surveyor, purchased on June 1952 for 25,000 an Elizabethan manor house farm consisting
of house, two cottages and some land. The surveyor failed to report that the timbers of the house were badly affected by death
watch beetle and worm so that the only course was to replace the roof by a new roof and to rebuild the timbers etc. The market
value of the property in its actual condition was 21,000. After moving into the house with his family the plaintiff found that it
would require an additional expenditure of 7,000 at 1952 prices to put the property into the condition in which it had been
described in the report. The plaintiff claimed, among other heads of claim, the cost of repairs ruling at the date of trial. The
official referee awarded 4,000, namely the difference between the value of the property as it should have been described and its
value as described. This court (Denning, Morris and Romer LJJ) held that the proper measure of damages was the difference in
money between the value of the property in the condition described and its value as it should have been described, namely
4,000. It is necessary to set out some passages in the judgments. It has been common ground on this appeal that the diminution
in value rule is more accurately to be expressed as the difference between the price paid and the value in its true description, at
least where no point is taken, as in this case, that the plaintiff chose to pay above market value.
945
Denning LJ (as he then was) said ([1956] 1 All ER 874 at 875876, [1956] 1 WLR 471 at 473):

I take it to be clear law that the proper measure of damage is the amount of money which will put the plaintiff into as
good a position as if the surveying contract had been properly fulfilled: see British Westinghouse Electric &
Manufacturing Co., Ltd., v. Underground Electric Rys. Co. of London, Ltd. (([1912] AC 673 at 689, [191113] All ER Rep
63 at 69) per VISCOUNT HALDANE, L.C.). Now if the [surveyor] had carried out his contract, he would have reported
the bad state of the timbers. On receiving that report, the plaintiff either would have refused to have anything to do with
the house, in which case he would have suffered no damage, or he would have bought it for a sum which represented its
fair value in its bad condition, in which case he would pay so much less on that account. The proper measure of damages is
therefore the difference between the value in its assumed good condition and the value in the bad condition which should
have been reported to the client. We were referred to the cases where a house is damaged or destroyed by the fault of a
tortfeasor. These cases are, I think, different. If the injured person reasonably goes to the expense of repairing the house,
the tortfeasor may well be bound to pay the cost of repair, less an allowance because new work takes the place of old: see
Lukin v. Godsall ((1795) Peake Add Cas 15, 170 ER 178); Hide v. Thornborough ((1846) 2 Car & Kir 250, 175 ER 103).
In other cases, the tortfeasor may only have to pay the value of the house: see Moss v. Christchurch Rural District Council
([1925] 2 KB 750). It all depends on the circumstances of the case: see Murphy v. Wexford County Council ([1921] 2 IR
230). The general rule is that the injured person is to be fairly compensated for the damage he has sustained, neither more
nor less.

Later in his judgment Denning LJ said ([1956] 1 All ER 874 at 876, [1956] 1 WLR 471 at 474):
 So also in this action, if the plaintiff were to recover from the surveyor 7,000, it would mean that the plaintiff would
get for 18,000 (25,000 paid less 7,000 received) a house and land which were worth 21,000. That cannot be right.
The proper amount for him to recover is 4,000.

Morris LJ said ([1956] 1 All ER 874 at 878, [1956] 1 WLR 471 at 475476):

In my judgment, the damages to be assessed were such as could fairly and reasonably be considered as resulting
naturally from the failure of the defendant to report as he should have done It is said, however, that [the official referee]
was not warranted in proceeding on the basis of the difference between the value of the property as it was described in
the defendants report and its value as it should have been described. In my view, however, that was the correct basis on
the facts of this case.

Romer LJ, after giving the same reasons for holding that the diminution in value was the correct measure of damages, said
([1956] 1 All ER 874 at 879, [1956] 1 WLR 471 at 478):

It may well be that if, on learning of the real condition of the house, he had decided to leave and re-sell, he would have
been entitled to recover from the defendant, in addition to the 4,000, his costs and expenses of moving in and moving out
and of the re-sale. As, however, he elected to stay, after all the facts had become known to him, this point does not arise.

In Perry v Sidney Phillips & Son (a firm) [1982] 3 All ER 705, (1982] 1 WLR 1297 the surveyor failed to observe serious
defects, including a leaking roof and a septic 946 tank with an offensive smell. The plaintiff could not afford major repairs and
executed only minor repairs himself. At the date of the trial the plaintiff was still occupying the house as his home. The judge
awarded damages assessed in respect of repairing the defects as at the date of trial in 1981. Between the date of the trial and the
hearing of the appeal the plaintiff sold the property for 43,000. He had paid 27,000 in 1976 in reliance upon the negligent
report. It was acknowledged by the plaintiff that sale of the house without repairs having been executed made it difficult to
support the award based upon the cost of repairs and his contention was that damages should be assessed on the basis of the
difference in market value of the property as between its value taking into account the defects for which the judge found liability
established and its value in the condition the defendants reported it to be either on the basis of values at the date of the report or at
the date of judgment.
Lord Denning MR, after reference to the measure of damages for breach of contract to build a house, or to do repairs to it, or
in respect of damage done to it (see Dodd Properties (Kent) Ltd v Canterbury City Council [1980] 1 All ER 928, [1981] 1 WLR
433), continued ([1982] 3 All ER 705 at 708, [1982] 1 WLR 1297 at 1301):

where there is a contract by a prospective buyer with a surveyor under which the surveyor agrees to survey a house
and make a report on it, and he makes it negligently and the client buys the house on the faith of the report, then the
damages are to be assessed at the time of the breach, according to the difference in price which the buyer would have given
if the report had been carefully made from that which he in fact gave owing to the negligence of the surveyor. The
surveyor gives no warranty that there are no defects other than those in his report. There is no question of specific
performance. The contract has already been performed, albeit negligently. The buyer is not entitled to remedy the defects
and charge the cost to the surveyor. He is only entitled to damages for the breach of contract or for negligence. That was
so decided by this court in Philips v Ward [1956] 1 All ER 874, [1956] 1 WLR 471, followed in Simple Simon Catering Ltd
v Binstock Miller & Co (1973) 228 EG 527.

Oliver LJ said ([1982] 3 All ER 705 at 710, [1982] 1 WLR 1297 at 1304):

The position, as I see it, is simply this, that the plaintiff has been misled by a negligent survey report into paying more
for the property than that property was actually worth. The position, as I see it, is exactly the same as that which arose in
Philips v Ward and in the subsequent case of Ford v White & Co [1964] 2 All ER 755, [1964] 1 WLR 885 I see
nothing which justifies the proposition that damages are to be assessed on the basis of some hypothetical value at
the date of the trial because the plaintiff has chosen, as he did in this case, to retain the property and not to cut his loss by
reselling it the right measure of damage is the measure suggested in both Philips v Ward and Ford v White & Co, which
is simply the difference between what the plaintiff paid for the property and its value at the date when he obtained it.

Kerr LJ reserved his view as to whether in a case like this the approach by way of cost of repairs is necessarily right since
the point had not been argued.
Mr Jackson QC, in support of the contention that the judge was wrong in law in failing to apply the diminution in value rule,
submitted that this case on the facts cannot be validly distinguished from, and should therefore be decided in accordance with, the
decision of this court in Philips v Ward by awarding no more than the sum of 15,000, together with interest. Philips v Ward was,
he submitted, 947a decision in which, upon analysis of the ordinary relationship between the purchaser of a dwelling house and
the surveyor advising him as to the condition of that house, this court was applying, and not failing to apply, what has been called
the overriding rule of restitution in relation to damages, that is as stated by Lord Blackburn in Livingstone v Rawyards Coal Co
(1880) 5 App Cas 25, or as stated by Lord Haldane LC in the British Westinghouse Electric Co Ltd case [1912] AC 673, [1911
13] All ER Rep 63, to which Denning LJ referred in his judgment in Philips v Ward. That was recognised by this court in the
County Personnel case [1987] 1 All ER 289 at 297, [1987] 1 WLR 916 at 925, where, in a passage cited by Judge Bowsher in his
judgment in this case, Bingham LJ said, after reference to the overriding rule of restitution:

On the authorities as they stand the diminution in value rule appears almost always, if not always, to be appropriate
where property is acquired following negligent advice by surveyors. Such cases as Philips v Ward [1956] 1 All ER 874,
[1956] 1 WLR 471, Pilkington v Wood [1953] 2 All ER 810, [1953] Ch 770, Ford v White & Co [1964] 2 All ER 755,
[1964] 1 WLR 885 and Perry v Sidney & Son (a firm) [1982] 3 All ER 705, [1982] 1 WLR 1297 lay down that rule

In commenting upon the judges findings of fact with reference to the plaintiffs decision not to resell but to carry out
repairs. Mr Jackson submitted that, since on the plaintiffs expert evidence the value of the house in its true condition in August
1987 was 185,000 (7,500 more than the plaintiffs had paid in April 1987), the plaintiffs could have sold, have paid the sums
wasted on fees etc and have been in the same financial position in August 1987 as immediately before exchange of contracts.
This point was made, as I understood the argument, not in order to justify application of the diminution in value rule (which was
submitted to be correctly applied irrespective of the financial consequences on resale), nor to criticise the finding that it was
reasonable for the plaintiffs not to resell (it was conceded that it was reasonable if the plaintiffs wished so to act for their own
purposes), but to demonstrate the consequences of the application of the rule to either course of conduct which the plaintiffs
might have chosen to follow.
Mr Jackson drew to the courts attention a large number of cases decided since Philips v Ward in which the diminution in
value rule had been applied. He submitted that in those cases where the diminution in value rule had not been applied, and where
there was no justification on the facts for not applying it, the decisions were wrong, including, in his submission, Hipkins v Jack
Cotton Partnership [1989] 2 EGLR 157 (Scott Baker J) and Syrett v Carr & Neave [1990] 2 EGLR 161 (Judge Bowsher).
For the plaintiffs, Mr Naughton QC submitted that the judge was right in his conclusion for the reasons given by him. The
judge had correctly applied the overriding rule of restitution. This court, it was said, in Philips v Ward [1956] 1 All ER 874,
[1956] 1 WLR 471 had not laid down any particular rule which the judge was required to follow so as to prevent application of
that overriding rule: he referred to Admiralty Comrs v Chekiang (owners) [1926] AC 637, [1926] All ER Rep 637 and to
Admiralty Comrs v Susquehanna (owners), The Susquehanna [1926] AC 655, [1926] All ER Rep 114 for support for the
proposition that a rule cannot be laid down which will apply to the measure of damages in cases of a particular category if
application of the rule in a particular case in that category will result in departing from the rule of restitution.
The substance of Mr Naughtons submission on the facts of this case was: the plaintiffs had bought the house in reliance
upon the report of the defendant as to its condition: the house was not in the condition described; in consequence the 948
plaintiffs spent 33,961 to put the house in the condition in which, on reading the defendants report, they believed the house to
be; and, therefore, if the damages be limited to 15,000, in accordance with the diminution in value rule, the overriding rule of
restitution is not satisfied.
Mr Naughton was willing to concede that the principle in Philips v Ward, in so far as it can be regarded as a prima facie rule
for the measure of damages in a claim against a negligent surveyor, is applicable in, but, he said, only in, a case where it is clear
that the plaintiffs would have bought the house anyway, ie even if it had been accurately described by the surveyor. He referred
to and relied upon Hayes v James & Charles Dodd (a firm) [1990] 2 All ER 815, a case of negligent advice by solicitors as to the
existence of a necessary right of way for the use of land for a motor repair business by the clients who bought that land. Properly
advised, the clients would not have bought the premises. Staughton LJ referred to such a case as a no-transaction case and
contrasted it with a case where the claimant would still have bought the property if he had been correctly advised as to its
condition, which he referred to as a successful-transaction case (at 818819). In that case, the plaintiffs recovered damages on
the basis that it was a no-transaction case and damages were awarded in the amount of the capital expenditure thrown away in
the purchase of the business and the expenses incurred in extricating themselves from the purchase. He relied also on Steward v
Rapley [1989] 1 EGLR 159, where, he submitted, in a claim against a negligent surveyor, Staughton LJ again held that in a no-
transaction case the cost of repairs, as contrasted with the diminution in value, may be the appropriate measure of damage.
Mr Naughton made detailed submissions designed to show that, if these plaintiffs, on discovering the defects missed by the
defendant, had decided to sell the house, the damages which they would have suffered, and which would have been recoverable
from the defendant, would have been substantial and probably greater than the 33,961, the cost of repairs. In outline, those
damages, it was said, would have included at least 8,733 for agents commission and solicitors fees on resale, removal costs,
solicitors fees and stamp duty on a replacement purchase, the loss on resale, which would have been 17,250, the costs of
seeking an alternative property, the increase in cost of the replacement house in the sum of at least 25,800, being 15% on
172,000, and the wasted cost of borrowing the purchase price of the house, which Mr Naughton put at 1,000 per month from
completion in April 1987 until resale at earliest some months after August 1987, when Mr Wadeys report was received. The
points made by reference to these potential losses on resale were, as I understood the argument, primarily intended to answer the
submission made by Mr Jackson and then to show, firstly, that the award of the cost of repairs at 33,900 is thus shown to be
moderate and not excessive secondly, that the nature and extent of such damages upon resale had been left out of account in the
reasons given by the members of this court in Philips v Ward [1956] 1 All ER 874, [1956] 1 WLR 471 and, thirdly, by
demonstrating the unreality of any suggestion that the plaintiffs could sensibly have chosen to sell the house instead of deciding
to repair it, to make good the judges ruling that the plaintiffs are entitled to recover the cost of repairs because, as in Syretts case,
the plaintiffs had had no real opportunity of cutting their losses by reselling.
I have given no more than a brief summary of Mr Naughtons argument, in which he referred to a number of cases and to the
comments made in textbooks. The argument followed the reasoning in Judge Bowshers judgment in Syretts case and the
suggestion made in Dugdale and Stanton Professional Negligence (2nd edn, 1989) para 20.34, where it was submitted that if,
being correctly advised, the 949 plaintiff would have withdrawn the natural measure of his loss is to indemnify him against the
losses incurred as a result of acquiring the property that the correct measure of damage, despite the decision in Philips v Ward, is
the cost of repair provided that it is reasonable for him to retain the property and incur the cost of repairs, and that such an
award does not amount to a surveyor warranting the quality of the building, it merely reflects the losses which the plaintiff
incurs and needs to be indemnified against.
The reasoning of Judge Bowsher in Syretts case, and the argument based upon the alleged potential unfairness of the
application of the diminution in value rule, particularly in cases of the purchase of dwelling houses by purchasers of limited
means, makes it necessary to try to test the ruling in Philips v Ward by reference to basic principles in a variety of possible
situations. In the end, I have reached the conclusion that the defendant is right in his contentions on this issue and that, on the
facts of this case, the financial loss of the plaintiffs is in law limited to the diminution in value of 15,000 with interest thereon.
My reasons are as follows.
The task of the court is to award to the plaintiffs that sum of money which will, so far as possible, put the plaintiff into as
good a position as if the contract for the survey had been properly fulfilled: see Denning LJ in Philips v Ward [1956] 1 All ER
874 at 875, [1956] 1 WLR 471 at 473. It is important to note that the contract in this case, as in Philips v Ward, was the usual
contract for the survey of a house for occupation with no special terms beyond the undertaking of the surveyor to use proper care
and skill in reporting upon the condition of the house.
The decision in Philips v Ward was based upon that principle; in particular, if the contract had been properly performed the
plaintiff either would not have bought, in which case he would have avoided any loss, or, after negotiation, he would have paid
the reduced price. In the absence of evidence to show that any other or additional recoverable benefit would have been obtained
as a result of proper performance, the price will be taken to have been reduced to the market price of the house in its true
condition because it cannot be assumed that the vendor would have taken less.
The cost of doing repairs to put right defects negligently not reported may be relevant to the proof of the market price of the
house in its true condition: see Steward v Rapley [1989] 1 EGLR 159; and the cost of doing repairs and the diminution in value
may be shown to be the same. If, however, the cost of repairs would exceed the diminution in value, then the ruling in Philips v
Ward, where it is applicable, prohibits recovery of the excess because it would give to the plaintiff more than his loss. It would
put the plaintiff in the position of recovering damages for breach of a warranty that the condition of the house was correctly
described by the surveyor and, in the ordinary case, as here, no such warranty has been given.
It is clear, and it was not argued to the contrary, that the ruling in Philips v Ward may be applicable to the case where the
buyer has, after purchase, extricated himself from the transaction by selling the property. In the absence of any point on
mitigation, the buyer will recover the diminution in value together with costs and expenses thrown away in moving in and out
and of resale: see Romer LJ in Philips v Ward [1956] 1 All ER 874 at 879, [1956] 1 WLR 471 at 478. I will not here try to state
the nature or extent of any additional recoverable items of damage.
The damages recoverable where the plaintiff extricates himself from the transaction by resale are not necessarily limited to
the diminution in value plus expenses. The consequences of the negligent advice and of the plaintiff entering into the transaction
into which he would not have entered if properly advised 950 may be such that the diminution in value rule is not applicable. An
example is County Personnel (Employment Agency) Ltd v Alan R Pulver & Co (a firm) [1987] 1 All ER 289, [1987] 1 WLR 916,
a case of solicitors negligence, where the plaintiff recovered the capital losses caused by entering into the transaction.
It is also clear, and again there was no argument for the plaintiffs to the contrary, that, if the plaintiff would have bought the
house anyway, if correctly advised, the ruling in Philips v Ward is applicable: the fact that after purchase he discovers that the
unreported defects will cost more than the diminution in value does not entitle him to recover the excess. That is, again, because,
if the contract had been performed properly, he would have negotiated and, absent proof of a different outcome, would have done
no better than reduction to the market value in true condition.
It was rightly acknowledged for the plaintiffs that proof that the plaintiff, properly advised, would not have bought the
property does not by itself cause the diminution in value rule to be inapplicable. It was contended, however, that it becomes
inapplicable if it is also proved that it is reasonable for the plaintiff to retain the property and to do the repairs. I cannot accept
that submission for the following reasons.
(i) The fact that it is reasonable for the plaintiff to retain the property and to do the repairs seems to me to be irrelevant to
determination of the question whether recovery of the cost of repairs is justified in order to put the plaintiff in the position in
which he would have been if the contract, ie the promise to make a careful report, had been performed. The position is no
different from that in Philips v Ward: either the plaintiff would have refused to buy or he would have negotiated a reduced price.
Recovery of the cost of repairs after having gone into possession, that is to say in effect the acquisition of the house at the price
paid less the cost of repairs at the later date of doing those repairs, is not a position into which the plaintiff could have been put as
a result of proper performance of the contract. Nor is that cost recoverable as damages for breach of any promise by the
defendant because, as stated above, there was no promise that the plaintiff would not incur any such cost.
(ii) In the context of the contract proved in this case, I have difficulty in seeing when or by reference to what principle it
would not be reasonable for the purchaser of a house to retain it and to do the repairs. He is free to do as he pleases. He can owe
no duty to the surveyor to take any cheaper course. The measure of damages should depend, and in my view does depend, upon
proof of the sum needed to put the plaintiff in the position in which he would have been if the contract was properly performed,
and a reasonable decision by him to remain in the house and to repair it, upon discovery of the defects, cannot alter that primary
sum, which remains the amount by which he was caused to pay more than the value of the house in its condition.
(iii) If the rule were as contended for by the plaintiffs, what limit, if any, could be put on the nature and extent of the repairs
of which the plaintiff could recover the cost? Mr Naughton asserted that the cost of repairs awarded in this case was no more
than putting the house in the condition in which, on reading the report, they believed the house to be. That, however, contains no
relevant standard of reasonableness because, again, the defendant did not warrant that description to be true. To argue that to
award damages on that basis is not to enforce a warranty never given but merely to reflect the losses which the plaintiffs have
incurred seems to me to be a circular statement.
(iv) I have considered whether the reasonableness of the amount which a plaintiff might recover towards the cost of
repairing unreported defects in excess 951 of the diminution in value might be determined by reference to the amount which the
plaintiff could recover if he sold the property, ie the diminution in value plus any other recoverable losses and expenses. Such a
limit was not contended for by Mr Naughton. It has the apparent attraction of enabling a plaintiff who chooses to retain the
property to recover as much as he would recover if he chose to sell it. It seems to me, however, to be impossible to hold that such
is the law in the case of such a contract as was made in this case. The plaintiff must, I think, prove that the loss which he claims
to have suffered was caused by the breach of duty proved and he cannot do that by proving what his loss would have been in
circumstances which have not happened.
It is necessary to test the conclusion which I have reached as set out above by examining Hipkins v Jack Cotton Partnership
[1989] 2 EGLR 157 and Syrett v Carr & Neave [1990] 2 EGLR 161, which Mr Jackson submitted were wrongly decided.
In Hipkins case Scott Baker held that application of the diminution in value rule would manifestly not do justice in that
particular case. On applying that rule the damages would have been 8,900 with interest from the summer of 1981. The cost of
repairs which the plaintiff was held reasonably to have carried out in 1985, after advice in 1982 to wait and see, was 14,211. I
accept that, if I am right in the conclusion which I have described above, there is no valid ground of distinction reported in
Hipkins case and that, therefore, the award on the facts found should have been 8,900 with interest.
Next, in Syretts case the reasoning of Judge Bowsher may be summarised, I think, as follows. He held that it was to be
inferred that in Philips v Ward the purchaser, on discovering the defect on moving in, had the choice between selling the property
at its true value, making a loss which was less than the then cost of repairs, or of doing the repairs. To award in those
circumstances the cost of doing the repairs would have been to give him a benefit to which he was not entitled in the absence of a
warranty from the surveyor as to the state of the property. There was, however, no such giving of a benefit to which the plaintiff
was not entitled on the facts in Syretts case, because instant resale would not, at that date, have left the purchaser with a loss less
than the cost of repairs and, more importantly, the purchaser had no reason to make an instant sale of the property because she did
not know of the defect until two years after moving in. Similarly in Perry v Sidney Phillips & Son (a firm) [1982] 3 All ER 705,
[1982] 1 WLR 1297, the unreported defects were discovered soon after moving in and, in that case also, the plaintiff had a choice
of either cutting his loss by reselling or undertaking the necessary repairs. Since, however, the plaintiff in Syretts case was
unaware of the unreported defects until two years after the purchase, she was entitled to the cost of repairs because she had not
had an opportunity of cutting her losses about the date of purchase and had acted reasonably throughout.
With respect to the judge, I do not find that reasoning to be convincing and, in my view, the decision in Syretts case was
wrong. It is true that both in Philips v Ward and in Perrys case the plaintiff, on discovering the unreported defects, had the
choice of selling or undertaking the necessary repairs. This court held that, whichever choice was made, the primary sum for
damages was the diminution in value together with any expenses etc caused by the breach. There is, however, nothing to suggest
that it was the existence of that choice or opportunity at any particular time which caused the proper measure of damages to be
stated as the diminution in value. Since that statement was expressly explained by reference to putting the plaintiff in the position
in which he would have been if the contract had been properly performed, and since that concept is not affected by the
subsequent date of discovery of breach, the fact that in Syretts case the claimant did not discover the breach until two years after
purchase seems to me to be 952 irrelevant to the measure of damages as based upon the diminution in value. I would, however,
reserve with reference to this point the question as to the date at which the diminution in value is to be calculated. Upon
discovering the breach the plaintiff can decide whether on that ground to sell. In Philips v Ward [1956] 1 All ER 874 at 878,
[1956] 1 WLR 471 at 475476 the measure of damages was stated by Morris LJ as the difference between the value of the
property as it was described in the negligent report and its value as it should have been described in 1952. If the unreported
defects had been discovered three years later, and if the value of the property in either state had increased by 25% as a result of
inflation of house prices, it seems to me to be arguable that this measure of damage should be taken as the difference between the
values so increased, ie 5,000, being 31,250 less 26,250. No such point was raised in this case.
Next, as to the grounds of decision in Syretts case, if (in the case of the ordinary contract) an award of the cost of repairs to
a plaintiff who discovers the defects on moving in is to give to him a benefit to which he is not entitled (and I agree that it issee
Philips v Ward), it is no less the giving of a benefit to which the plaintiff is not entitled to award him the cost of repairs when he
discovers the defects years after moving in: the principle that an award of the cost of repairs is a benefit to which the plaintiff is
not entitled depends upon the terms of the contract between the plaintiff and the surveyor and not upon the time of discovery of
the unreported defects.
Lastly, in Syretts case the opportunity to cut losses at about the date of sale, which it was held was denied to the claiming
in Syretts case, is, as I understand it, the opportunity to decide to sell and to suffer the loss of the diminution in value which
would be recoverable. If the plaintiff decided instead to do the repairs he would incur any additional cost over this diminution in
value as a result of his own decision; but, if he did not discover the defects until two years later, having been deprived of that
earlier opportunity, he becomes, it is said, entitled to the full cost of repairs and not, be it noted, only the amount by which the
cost of repairs may be shown to have increased since the date of purchase. As I have said above, however, the opportunity to sell
on discovery of the defects was not the reason for holding in Philips v Ward that the measure of damages was the diminution in
value: that holding resulted from the application of the basic principle of restitution to the terms of the contract between the
claimant and the surveyor. Delay in discovery of the defects does not affect that application of that principle. A decision to
remain and to carry out repairs after such delayed discovery cannot, in my judgment, alter the proper measure of damages.
One further matter must, I think, be examined. It is, I think, clear law that where a claimant is caused to enter into a
transaction in consequence of negligent advice, as in the case of a surveyor employed under the ordinary contract, the claimant
may be entitled to all the losses incurred as a result of entering into the transaction where he would not have entered into the
transaction if properly advised and the losses are caused by entry into the transaction and by extrication from it. An example in
the case of a solicitors advice is, as I have mentioned above, County Personnel (Employment Agency) Ltd v Alan R Pulver & Co
(a firm) [1987] 1 All ER 289, [1987] 1 WLR 916. Can the claim of these plaintiffs to the cost of repairs properly be put on the
same basis, ie as damages caused by entering into a transaction in reliance on the bad advice, and, if not, why not? On this part
of the argument, Mr Naughton referred to a number of matters and, in particular, to the fact that it is in many cases unrealistic to
measure the damages of the purchaser by reference to the value of the property where it is not his intention to resell the house but
to live in it and resale is impossible for reasons unconnected with value in the market. If the buyer is caused to buy a house by a
negligent 953 report which does not warn him of the existence of defects, and which he must cause to be repaired in order to live
in the house in the condition in which he expected it to be, why is not the cost of repairs a loss resulting from entering into the
transaction just as much as the payments recovered in the County Personnel case? Since such a buyer has no intention of selling
he is repairing his home, not an article of commerceany addition to the value of the house, it was said, will not be at once
realised and he is not in truth thereby getting any advantage beyond what he reasonably thought he was getting when he relied
upon the surveyors advice.
I recognise the force of these points so far as concerns the position of such an unfortunate claimant. From his point of view,
it would, indeed, be better if the surveyor could be treated as having warranted that no repairs, beyond those described as
indicated in the survey report, would be required within some period of time. No such warranty, however, was given in this case,
or said to have been given, and, in the absence of such a warranty, there is no basis for awarding the cost of repairs.
I would, therefore, hold that the judgment for 33,961, the cost of repairs, must be set aside and that, in substitution
therefore, judgment should be entered for financial loss in the sum of 15,000 with interest at 15% from the date of payment until
judgment. I understand it to be common ground that payment is to be taken as having been made as to 1,500, from the date of
payment of the deposit of 17,750 on the making of the contract, and as to the balance of 13,500 at the date of completion,
based upon the proportion of the excess payment of 15,000 to the total sum agreed to be paid. If I am wrong in my
understanding I would wish to hear counsel upon that matter. I shall deal later in this judgment with my reasons for confirming
the rate of interest at 15% as awarded by the judge.

General damages: the award for distress and inconvenience

For the defendant Mr Jackson submitted that, on the facts of this case, the plaintiffs were entitled to no award under this
head but that, if any sum was due, the award was plainly excessive and far greater than sums commonly awarded, in accordance
with Perry v Sidney Phillips & Son (a firm) [1982] 3 All ER 705, [1982] 1 WLR 1297, as modest compensation. His contention
was that, in a contract of this nature, general damages are not recoverable for mere mental distress, but are recoverable only for
the enduring of physical discomfort and inconvenience, in the measuring of which regard may properly be had to the mental
reaction to such physical discomfort. He further criticised the judges conclusion on this part of the case on the ground that the
judge did not make any finding as to the nature or extent of any physical discomfort which had been caused by the defendants
breach of contract as contrasted with physical discomfort caused by the plaintiffs decision to carry out substantial additional
repairs and refurbishment.
Mr Naughton submitted that it was decided by the decision of this court in Perrys case that damages for mental distress can
be recovered against a negligent surveyor in the ordinary case and that such a contract is in the same category as contracts for the
provision of a holiday: see Jarvis v Swans Tours Ltd [1973] 1 All ER 71, [1973] QB 233 and Jackson v Horizon Holidays Ltd
[1975] 3 All ER 92, [1975] 1 WLR 1468. The misery and discomfort experienced by the claimants in the position of these
plaintiffs is not, he said, linked to the cost of the works carried out or to the time taken to complete them. The hardship should be
seen as subjective and that is best assessed by the judge who heard the evidence. The fact that this was the second home for hard-
working and stressed individuals 954 should be seen as increasing the proper compensation and not as reducing it. Further, the
fact that the house was expensive, and that the use of it for relaxation could be regarded as costing the interest on the price paid,
would justify a larger award in comparison with an award in respect of a cheaper house.
As to the law, it is, in my judgment, clear that the plaintiffs were not entitled to recover general damages for mental distress
not caused by physical discomfort or inconvenience resulting from the breach of contract. It is true that in Perrys case [1982] 3
All ER 705 at 709, [1982] 1 WLR 1297 at 13021303 Lord Denning MR justified the award of damages for anxiety, worry and
distress (ie modest compensation) by reference to the holiday cases of Jarvis v Swans Tours Ltd and Jackson v Horizon Holiday
Ltd and to Heywood v Wellers (a firm) [1976] 1 All ER 300, [1976] QB 446, a solicitors case. I do not, however, accept that
Perrys case is authority for that proposition. It is, I think, clear that, in that case, the award of damages, which was upheld, was
for

vexation, that is the discomfort and so on suffered by the plaintiff as a result of having to live for a lengthy period in a
defective house which for one reason or another was not repaired over the period between the acquisition by the plaintiff
and the date of the trial.

(See [1982] 3 All ER 705 at 710, [1982] 1 WLR 1297 at 1307 per Oliver LJ.) Further, in Perrys case [1982] 3 All ER 705 at
712, [1982] 1 WLR 1297 at 1307 Kerr LJ said:

it should be noted that the deputy judge has awarded these [damages for vexation and inconvenience] not for the
tension or frustration of a person who is involved in a legal dispute in which the other party refuses to meet its liabilities. If
he had done so, it would have been wrong, because such aggravation is experienced by almost all litigants. He awarded
these damages because of the physical consequences of the breach, which were all foreseeable at the time.

Mr Jacksons submission is, I think, correct. In Bailey v Bullock [1950] 2 All ER 1167 Barry J, in a case of solicitors
negligence, held that damages for inconvenience and discomfort could be recovered for the solicitors failure to get possession of
premises for his client but not damages for annoyance and mental distress. So holding he relied upon the judgment of Scott LJ in
Groom v Crocker [1938] 2 All ER 394 at 415, [1939] 1 KB 194 at 224, where Addis v Gramophone Co Ltd [1909] AC 488,
[190810] All ER Rep 1 was held to be a conclusive authority against general damages for injury to reputation or feelings. Barry
J contrasted that decision with that of Hobbs v London and South Western Rly Co (1875) LR 10 QB 111, [187480] All ER Rep
111, where damages for physical inconvenience were upheld for breach of a contract of carriage.
In Jarviss case it was held that the old authorities excluding damages for disappointment of mind were out of date and that
damages for mental distress can be recovered in contract in a proper case. One such proper case was held there to be breach of a
contract for a holiday or of a contract to provide entertainment and enjoyment. Breach of a contract of carriage, where vexation
may be caused, was distinguished from breach of a contract for a holiday where the provision of pleasure is promised.
Again, in Heywood v Wellers (a firm) [1976] 1 All ER 300, [1976] QB 446 damages were awarded against a negligent
solicitor for failure to obtain protection from his client against molestation, and in particular for the clients distress, because the
solicitors were employed to protect the client from molestation, 955which was causing distress. In Hayes v James & Charles
Dodd (a firm) [1990] 2 All ER 815 at 826 Purchas LJ, with reference to a claim to damages for mental distress in a claim against
a surveyor, said:

I agree with the approach adopted by Staughton LJ reflecting, as it does, the judgment of Dillon LJ in Bliss v South
East Thames Regional Health Authority [1987] ICR 700 at 718, namely that damages of this kind are only recoverable
when the subject matter of the contract or duty in tort is to provide peace of mind or freedom from distress.

If, then, the plaintiffs, for breach of a contract of this nature, are entitled only to damages in respect of physical discomfort
or inconvenience resulting from the breach, it is clear, as in Perrys case, that such damages are recoverable where, as
contemplated by the defendant, the plaintiffs move into the property and live there in physical discomfort because of the
existence of unreported defects such as an evil-smelling cesspit or a leaking roof. But what of physical discomfort caused not by
the defects but by the process of repairing them in a case where, as here, the surveyor has not warranted that there are no defects?
Thus, in this case, there was no discomfort caused by any defect in the roof: it was replaced before it leaked or collapsed. Mr
Jackson, rightly, I think, did not contend that damages for physical discomfort are not recoverable where caused by the carrying
out of repairs to negligently unreported defects even though the surveyor is not in law liable for the cost of those repairs. The
concession seems to me to be rightly made provided it is shown that the parties contemplated that, upon the plaintiff occupying
the house as his home in reliance upon the report, he would in fact have to live there while the repairs are done and it is
reasonable for him to do so. We do not have to decide whether, if the plaintiff has to rent other accommodation during the
carrying out of repairs, such costs will be recoverable in the absence of any contractual warranty as to the existence of defects
requiring repairs, and I would reserve my decision upon it.
In his judgment, Judge Bowsher, after reference to Hayes v James & Charles Dodd (a firm) and to Perrys case, held that a
negligent surveyor of a residential property, which he has undertaken to survey for a prospective purchaser who intends to live
there, may be liable to his client in damages to compensate him for inconvenience and distress arising out of living in the
property, not out of litigation about it (see 24 Con LR 125 at 145). Judge Bowsher continued that that seemed to him to be the
case whether the position be rationalised by reference to special relationship or a contract to provide peace of mind or freedom
from distress. A prospective buyer of a house goes to a surveyor, said Judge Bowsher, not just to be advised on the financial
advisability of one of the most important transactions of his life, but also to receive reassurance that, when he buys the house, he
will have peace of mind and freedom from distress.
It is clear, I think, that the judge was regarding the contract between these plaintiffs and the defendant as a contract in which
the subject matter was to provide peace of mind or freedom from distress within the meaning of Dillon LJs phrase in Blisss
case [1987] ICR 700 at 718 cited by Purchas LJ in Hayes v Dodd [1990] 2 All ER 815 at 826. That, with respect, seems to me to
be an impossible view of the ordinary surveyors contract. No doubt house buyers hope to enjoy peace of mind and freedom
from distress as a consequence of the proper performance by a surveyor of his contractual obligation to provide a careful report,
but there was no express promise for the provision of peace of mind or freedom from distress and no such implied promise was
alleged. In my view, in the case of the ordinary surveyors contract, damages are only recoverable for 956 distress caused by
physical consequences of the breach of contract. Since the judge did not attempt to assess the award on that basis this court must
reconsider the award and determine what it should be.
For my part, I accept that the award was excessive even if the judge had directed himself correctly. It was very substantially
more than the awards made in similar cases apart from the award by the same judge in Syrett v Carr & Neave [1990] 2 EGLR
161. The other cases to which we were referred for this purpose included the following and I have listed the amount of the award
together with the amount adjusted for inflation since the date of the award: Roberts v J Hampson & Co (a firm) [1989] 2 All ER
504, [1990] 1 WLR 94: 1,500 (1,890); Cross v Martin & Mortimer [1989] 1 EGLR 154: 1,000 (1,260); Steward v Rapley
[1989] 1 EGLR 159: 2,000 (2,520); Bigg v Howard Son & Gooch [1990] 1 EGLR 173: 1,600 (1,744) and Hipkins v Jack
Cotton Partnership [1989] 2 EGLR 157: 750 (877). In the first three cases the award stated was to two plaintiffs. In each
case the award was in respect of a period of inconvenience and discomfort in the claimants home.
The judge accepted the evidence of the plaintiffs in full. The period of physical discomfort caused by the carrying out of
work extended over eight months. It started in Septmeber 1987 when work to the roof began and was completed in October. The
time taken in performing that work is not more exactly proved. Scaffolding was around the house. Work in respect of unreported
defects began again in 1988 and was done under separate quotations before the several dates stated in para (xiv) above ending in
October 1988. The periods of physical discomfort were limited to visits to the house at weekends, most but not all weekends
over the relevant time. Some of the matters complained of were clearly not caused by the breach of contractfor example the
interference with the use of bath and WC caused by work to the plumbing, which the plaintiffs chose to carry out at the same time
as repair to the flooring.
Further, as explained in the judgment, the plaintiffs, finding that they had sufficient money to do so, decided to carry out
work going far beyond the works the subject of the action. The judge held that the distress and inconvenience alleged by the
plaintiffs was not to be discounted at all because he accepted, as sensible and well founded, the explanation by Mr Watts of his
decision. For my part, while I have no doubt that it was a sensible and well-founded decision for Mr Watts to do all the other
work which he had decided to do at the same time as the repairs in respect of unreported defects, it does not seem to me thereby
to be demonstrated that the physical discomfort and inconvenience throughout the period of work was caused by the failure to
report those defects. It is clear that by 1987 the plaintiffs earnings had risen and were rising. They decided that they would
decorate and refurbish the house to a high standard. The need to do the repairs to unreported defects was not the reason why all
the work was done when it was done. Indeed the need to carry out the unreported defects was seen by Mr Watts as delaying the
process of refurbishment in the course of which the repairs of many other defects, of which there was no failure to give warning,
were carried out. It is difficult, in my judgment, to be confident as a matter of probability that such physical discomfort as there
was over the period of six months in 1988 was caused by the breach of contract of the defendant as contrasted with the decision
of the plaintiffs to refurbish and redecorate the house. It is not clear to me that in any real sense the plaintiffs had to live in the
house at weekends: their decision to do so appears to have resulted largely from their view that it was necessary for them to
supervise personally all the work which they were having done.
The judge, however, accepted the plaintiffs evidence and was not caused to 957 doubt that all their complaints were caused
by that breach of contract. It does not seem that the factual basis for the plaintiffs claims to general damages was examined in
any close detail at the trial. The right course, in my view, is for this court, accepting and applying the principle that damages for
mental distress resulting from the physical consequences of such a breach of contract should be modest, to accept the judges
finding that, during the weekends over a period of eight months, there was discomfort from the physical circumstances of living
in the house caused by the presence of the plaintiffs during the carrying out of repairs in respect of unreported defects. I reject
the suggestion that, in comparing the proper awards in other cases of discomfort in a plaintiffs only home, there should be
allowed, in respect of discomfort at weekends in an expensive second home, a comparatively larger sum. The proper approach is
to fix a modest sum for the amount of physical discomfort endured having regard to the period of time over which it was endured.
I would not take into account, as did the judge, in fixing the general damages, anything in respect of the plaintiffs expenditure on
a holiday in Scotland. There was no claim to loss of use. Any vexation in respect of taking a holiday away from the second
home is not associated with physical discomfort in that home.
I would award to each plaintiff, since it has not been suggested that there is any basis for distinguishing between them,
general damages in the sum of 750.
The award of interest
In my judgment there is no ground for interfering with the judges decision that interest at the rate of 15% should be
awarded on the damages for financial loss. Mr Jacksons submission was that the rate customarily awarded is the short-term
investment account rate: reference was made to The Supreme Court Practice 1991 vol 1, para 6/2/16 (4); and that the judge erred
in awarding a flat rate of 15% which was the same as the Judgments Act 1838 rate.
The award of interest at 15% was, in my judgment, within the judges discretion and it is not shown that he misdirected
himself or went wrong in principle in taking that rate. The facts that that rate was the same as the judgment rate and was higher
than the short-term interest account rates over the relevant period do not cause to be wrong the selection of that rate as the
appropriate rate on the facts of this case: see the judgment of Nicholls LJ in Pinnock v Wilkins & Sons (1990) Times, 29 January.
I would, accordingly, allow this appeal to the extent described above.

BINGHAM LJ. I am in complete agreement with the judgment of Ralph Gibson LJ, which I have read in draft. I would allow
the appeal to the extent he indicates for the reasons he gives. Since we are in part differing from the trial judge, who considered
the matter with great care, I shall briefly give my own reasons.
(1) Diminution in value or cost of repairs?
The restitutory or compensatory principle which underlies the award of damages in contract is not open to question. Since it
is ultimately a question of fact what sum of money is necessary to put a particular plaintiff in the position he would have been in
if the particular defendant had properly performed the contract in question, I would accept Mr Naughton QCs contention that the
measure of damages cannot be governed by an inflexible rule of law to be applied in all cases irrespective of the particular facts
and regardless of whether or not such measure gives effect to the underlying principle. But this does not mean that there may not
be sound prima facie rules to be applied in the ordinary run of 958 cases. Examples may be found in ss 51(3) and 53(3) of the
Sale of Goods Act 1979: these are only prima facie rules, but they reflect the same underlying principle and they govern cases to
which they are not shown to be inapplicable. In the present field, by which I mean the purchase of houses by private buyers in
reliance on a negligent survey of structure or condition, Philips v Ward [1956] 1 All ER 874, [1956] 1 WLR 471 has been
generally thought to lay down and in my view did lay down a prima facie rule for measuring damages. The crucial question is
whether that prima facie rule was, as the judge held, inapplicable to the facts of the present case.
I do not think so. In Philips v Ward, as in the present case, the cost of repairs exceeded the diminution in value. The Court
of Appeal there pointed out that if the plaintiff received the house (for which he had paid 25,000) and 7,000 (the cost of
repairs) he would in effect have obtained the house for 18,000. But the value of the house in the defective state in which it had
actually been was 21,000, and had the defendant properly performed his contract the plaintiff could not have bought at any
lower price. An award of 7,000 would not therefore have put him in the same position as if the defendant had properly
performed his contract. It would have improved his position to the extent of 3,000 and thus put him in an advantageous position
he could never have enjoyed had the defendant properly performed.
The same simple approach applies here. The plaintiffs paid 177,500, the value of the house as it was represented to be.
The value of the house in its actual condition was 162,500, a difference of 15,000. The actual cost of repairs was (in rounded
up figures) 34,000. If the plaintiff were to end up with the house and an award of 34,000 damages he would have obtained the
house for 143,500. But even if the defendant had properly performed his contract this bargain was never on offer. The effect of
the award is not to put the plaintiffs in the same position as if the defendant had properly performed but in a much better one.
I would be willing to accept, as Romer LJ did in Philips v Ward, that if, on learning of the true state of the house, the
plaintiffs had at once moved out and sold, they might well have been able to recover the costs thrown away in addition to the
diminution in value. But these plaintiffs, no doubt for good reason, did not do that. They stayed and did the repairs. But the
quantum of their claim would in theory be the same whether they had actually done and paid for the repairs or not, and if they
had not the figures demonstrate a clear windfall profit. If, on learning of the defects which should have been but were not
reported, a purchaser decides (for whatever reason) to retain the house and not move out and sell, I would question whether any
loss he thereafter suffers, at least in the ordinary case, can be laid at the door of the contract-breaker.
In the course of interesting and wide-ranging argument, a number of hypothetical situations were suggested in which the
prima facie rule might be ousted or call for variation. I think it is wise to leave such cases for decision until they arise. I can see
nothing in the present case to take it outside the prima facie rule in Philips v Ward, and that is enough to resolve this issue in the
defendants favour.
(2) Damages for distress and inconvenience
A contract-breaker is not in general liable for any distress, frustration, anxiety, displeasure, vexation, tension or aggravation
which his breach of contract may cause to the innocent party. This rule is not, I think, founded on the assumption that such
reactions are not foreseeable, which they surely are or may be, but on considerations of policy.
959
But the rule is not absolute. Where the very object of a contract is to provide pleasure, relaxation, peace of mind or freedom
from molestation, damages will be awarded if the fruit of the contract is not provided or if the contrary result is procured instead.
If the law did not cater for this exceptional category of case it would be defective. A contract to survey the condition of a house
for a prospective purchaser does not, however, fall within this exceptional category.
In cases not falling within this exceptional category, damages are in my view recoverable for physical inconvenience and
discomfort caused by the breach and mental suffering directly related to that inconvenience and discomfort. If those effects are
foreseeably suffered during a period when defects are repaired I am prepared to accept that they sound in damages even though
the cost of the repairs is not recoverable as such. But I also agree that awards should be restrained, and that the awards in this
case far exceeded a reasonable award for the injury shown to have been suffered. I agree with the figures which Ralph Gibson LJ
proposes to substitute.
(3) Interest
Since the award of interest on damages is intended to compensate a plaintiff for being kept out of money lawfully due to
him, there is much to be said for applying a rate of interest which reflects the cost or value of money over the relevant period
rather than a flat rate under the Judgments Act 1838, which has remained fixed over a number of years despite fluctuations in
interest rates during that time. But the choice of an interest rate is discretionary and the judgment of Nicholls LJ in Pinnock v
Wilkins & Sons (1990) Times, 29 January precludes the argument that choice of the Judgments Act rate of 15% is a challengeable
exercise of discretion. On this point the judges ruling cannot be disturbed.

SIR STEPHEN BROWN P. I have had the advantage of reading in draft the judgments of Ralph Gibson and Bingham LJJ. I
am in complete agreement with their conclusions.
The measure of damages in this case is governed by the principle clearly stated in Philips v Ward [1956] 1 All ER 874,
[1956] 1 WLR 471 and reaffirmed in Perry v Sidney Phillips & Son (a firm) [1982] 3 All ER 705, [1982] 1 WLR 1297. I agree
that the appeal should be allowed on this head as proposed by Ralph Gibson and Bingham LJJ.
I further agree that the quantum of damage awarded for distress and inconvenience was greatly excessive and that the sums
proposed by Ralph Gibson LJ should be substituted. As to the appeal on the question of the rate of interest, I also agree that this
was within the judges discretion and should not be disturbed.
I therefore agree that the appeal should be allowed to the extent proposed by Ralph Gibson and Bingham LJJ.
Appeal allowed. Defendant refused leave to appeal to the House of Lords on question of interest. Plaintiffs refused leave to
appeal to the House of Lords.

Solicitors: Pinsent & Co; Goodman Derrick & Co.

Bebe Chua Barrister.

960
[1991] 4 All ER 961

Lonrho plc v Fayed and others (No 2)

TRUSTS: CIVIL PROCEDURE

CHANCERY DIVISION
MILLETT J
18, 19, 20, 21, 22 MARCH, 12 APRIL 1991

Statement of claim Striking out Abuse of process Claim not bound to fail Action brought to discredit defendant Whether
claim an abuse of process Whether claim should be struck out.

Trust and trustee Constructive trust Shares in company Plaintiff wishing to bid for company but restrained by undertaking
given to Secretary of State Plaintiff selling shareholding to defendants Defendants mounting successful bid for company
Plaintiff not making counterbid Plaintiff alleging defendants dishonestly misrepresented to plaintiff that they would not bid for
company Plaintiff seeking declaration that defendants held entire issued share capital in company in trust for plaintiff
Whether constructive trust arising in view of plaintiffs inaction when defendants mounted takeover.

In 1981 the plaintiff, which then owned 299% of the share capital of a public company, gave an undertaking to the Secretary of
State for Trade and Industry that it would not acquire more than 30% of the companys share capital. On 2 November 1984 the
plaintiff sold almost all of its shares in the company to the fourth defendant, H Ltd, which was the corporate vehicle of the first
three defendants. On 4 March 1985 H Ltd made a public offer for the remaining shares in the company. Shortly afterwards the
Secretary of State released the plaintiff from its undertaking but by then it was too late for the plaintiff to bid for the company
since H Ltd had acquired further shares and owned more than 50% of the shares of the company. H Ltds bid ultimately proved
successful and it became the owner of the entire issued share capital of the company. The plaintiff brought an action against the
defendants seeking (1) rescission of the sale of its shareholding to H Ltd or, alternatively, damages for fraudulent
misrepresentation and (2) a declaration that H Ltd held the entire issued share capital in the company in trust for the plaintiff or,
alternatively, an order that the defendants divest themselves of the company. The plaintiff alleged that the defendants had
dishonestly and intentionally misrepresented to the plaintiff that they had neither the intention nor the means to make a bid for the
whole of the issued share capital of the company. The defendants applied to have the statement of claim struck out on the ground
that it disclosed no reasonable cause of action or was frivolous, vexatious and an abuse of the process of the court.

Held (1) Although on the evidence the prospects of the plaintiff succeeding in its claim for rescission of the sale of its
shareholding to H Ltd were probably only minimal, the claim was not bound to fail and was not so obviously unsustainable that it
should be struck out as disclosing no reasonable cause of action. However, having regard to the history of the dispute between
the parties and the long-running campaign conducted by the plaintiffs chief executive to discredit the defendants by every means
open to him and the fact that the allegation that the plaintiff had been deceived by the defendants into selling its shareholding had
been raised for the first time in the action, it was clear that the claim had no foundation in fact and was not made in good faith
with a genuine belief in its merits but had been manufactured to provide a vehicle for further public 961 denunciation of the
defendants and as such it was an abuse of process and would be struck out (see p 966 g, p 967 g to j and p 973 b, post); Lawrance
v Lord Norreys [188690] All ER Rep 858 applied.
(2) Although equity would intervene by way of constructive trust to compel a defendant to restore to the plaintiff property
acquired by the defendant which, but for his wrongdoing, would have belonged to the plaintiff or which had been acquired by the
defendant in circumstances in which he could not conscientiously retain it as against the plaintiff, that principle did not apply to
the plaintiffs claim because in 1985, with full knowledge of the fraud it alleged to have been practised on it, the plaintiff had
stood by without protest and allowed H Ltd to mount a take-over bid for the outstanding shares in the company in the belief that
H Ltd was acquiring them for its own benefit. That not only destroyed the plaintiffs claim for rescission of the sale of the
shareholding but, even if it had not, made it plainly unconscionable for the plaintiff afterwards to assert a beneficial interest in the
remaining shares, since to accede to such a claim would not be consonant with the fundamental principles on which a court of
equity acted because it would convert the doctrine of constructive trust into an instrument of fraud. Accordingly, the plaintiff had
not pleaded the facts necessary to support its claim to a beneficial interest in the shares (see p 969 b c j to p 970 a c, p 972 b to e
and p 973 b, post); Walker v Webb (1845) Res & Eq Jud 19, Homeward Bound Gold Mining Co v McPherson (1896) 17 NSW Eq
281, Reading v A-G [1951] 1 All ER 617, Pallant v Morgan [1952] 2 All ER 951 and English v Dedham Vale Properties Ltd
[1978] 1 All ER 382 distinguished.
(3) On the plaintiffs alternative claim that the defendants divest themselves of the company the court would not be justified
in making an order in an action not brought or supported by the Secretary of State, but in any event the facts did not support an
order for divestment. Accordingly the whole of the amended statement of claim should be struck out and the action dismissed
(see p 972 h and p 973 b, post).
Per curiam. Where a plaintiff brings an action for rescission of a contract or for damages for fraudulent misrepresentation he
has to allege and prove both that the representation was material and induced him to enter the contract and that the representor
knew that the representation was material and intended it to induce the representee to enter the contract. However, he is not
required to allege or prove that the representor knew why it was material or the precise process of reasoning which it would
generate in the mind of the representee (see p 966 c to e, post).

Notes
For striking out pleadings as showing no reasonable cause of action or as being frivolous, vexatious or an abuse of the process of
the court, see 36 Halsburys Laws (4th edn) paras 7374, and for cases on the subject, see 37(1) Digest (Reissue) 273-290, 1782-
1858.
For constructive trusts, see 48 Halsburys Laws (4th edn) paras 584586, and for cases on the subject, see 48 Digest
(Reissue) 139158, 10791217.
Cases referred to in judgment
Archer v Stone (1898) 78 LT 34.
Daly v Sydney Stock Exchange Ltd (1986) 160 CLR 371, Aust HC.
English v Dedham Vale Properties Ltd [1978] 1 All ER 382, [1978] 1 WLR 93.
Homeward Bound Gold Mining Co v McPherson (1896) 17 NSW Eq 281, NSW SC.
Lawrance v Lord Norreys (1890) 15 App Cas 210, [188690] All ER Rep 858, HL.
962
Lonrho plc v Fayed [1991] 3 All ER 303, [1991] 3 WLR 188, HL; rvsg in part [1989] 2 All ER 65, [1990] 2 QB 479, [1989] 3
WLR 631, CA; rvsg [1988] 3 All ER 464, [1990] 1 QB 490, [1989] 2 WLR 356.
Lonrho plc v Secretary of State for Trade and Industry [1989] 2 All ER 609, [1989] 1 WLR 525, HL.
Pallant v Morgan [1952] 2 All ER 951, [1953] Ch 43.
Reading v A-G [1951] 1 All ER 617, [1951] AC 507, HL.
Taylor v Salmon (1838) 4 My & Cr 134, 41 ER 53, LC.
Walker v Webb (1845) Res & Eq Jud 19, NSW SC.
Wenlock v Moloney [1965] 2 All ER 871, [1965] 1 WLR 1238, CA.

Cases also cited

Frogmore Estates plc v Berger (1989) 139 NLJ 1560.
McCormick v Grogan (1869) LR 4 HL 82.

Summons
The defendants (1) Mohamed Fayed, (2) Salah Fayed, (3) Ali Fayed and (4) House of Fraser Holdings plc, applied by summons
dated 15 October 1990 to strike out the statement of claim and dismiss the action brought against them by the plaintiff, Lonrho
plc, by writ issued on 20 September 1990 claiming (1) rescission of the sale of its shareholding in House of Fraser plc to the
fourth defendant on 2 November 1984 or, alternatively, damages for fraudulent misrepresentation and (2) a declaration that the
fourth defendant held the entire issued share capital in House of Fraser plc in trust for the plaintiff, or alternatively, an order that
the defendants divest themselves of House of Fraser plc. The grounds of the application were that the statement of claim
disclosed no reasonable cause of action or was frivolous, vexatious and an abuse of the process of the court. The facts are set out
in the judgment.

Lord Irvine of Lairg QC, David Oliver QC, Alastair Walton and Philip Sales for the defendants.
John Beveridge QC, Ian Geering QC and George Bompas for Lonrho.

Cur adv vult

12 April 1991. The following judgment was delivered.

MILLETT J. This is the latest round in the long-running and highly-publicised vendetta between Lonrho plc (Lonrho) and the
three Fayed brothers (the Fayeds), whose corporate vehicle, House of Fraser Holdings Ltd (Holdings), in 1985 acquired House of
Fraser plc (House of Fraser) and its well-known department store, Harrods. It will certainly not be the last. It is an application
by the Fayeds and Holdings (the defendants) to strike out the statement of claim and dismiss the latest action brought against
them by Lonrho by a writ issued on 20 September 1990.
The background to the action is familiar and can be shortly summarised. In October 1984 Lonrho owned 299% of the share
capital of House of Fraser and was subject to an undertaking given by it to the Secretary of State for Trade and Industry in 1981
that it would not acquire more than 30% of its share capital. On 2 November 1984 Lonrho sold all but 1,200 of its shares in
House of Fraser (the shareholding) to Holdings. On 4 March 1985 Holdings made a public offer for the remaining shares in
House of Fraser. Shortly afterwards the Secretary of State released Lonrho from its undertaking. By then, however, it was too
late for 963 Lonrho to bid, since Holdings had acquired further shares in the market and already owned more than 50% of the
shares of House of Fraser. Holdings bid ultimately proved successful, and it became the owner of the entire issued share capital
of House of Fraser.
By the present action Lonrho makes two claims. It seeks (i) rescission of the sale of the shareholding or alternatively
damages for fraudulent misrepresentation, and (ii) a declaration that Holdings holds the entire issued share capital in House of
Fraser in trust for Lonrho. The defendants apply for the statement of claim to be struck out under RSC Ord 18, r 19 or the
inherent jurisdiction of the court on the ground that it discloses no reasonable cause of action or is frivolous, vexatious and an
abuse of the process of the court. I shall deal with the two claims separately.

1. RESCISSION OF THE SALE OF THE SHAREHOLDING

(1) Lonrhos case
Lonrhos case as originally pleaded can be summarised as follows. (1) At the end of October 1984 Lonrho hoped that, by
selling the shareholding, it would be able to secure its release from the undertaking and thereafter buy House of Fraser, and the
Fayeds knew this because Mr Rowland, the chief executive of Lonrho, told them so. (2) Accordingly, Lonrho was willing to sell
the shareholding but only to a purchaser who was neither able nor wished to bid for the remainder of the shares in House of
Fraser and the Fayeds knew this. (3) The Fayeds knew that Lonrho would not sell the shareholding to them if it knew that (as
was the case) they wished to acquire it with a view to bidding for the rest of the shares in House of Fraser. (4) By making four
specific representations pleaded in para 40 of the statement of claim the Fayeds intentionally and dishonestly led Lonrho to hold
the mistaken belief that they had neither the ability nor the wish to make a bid for the whole of the issued share capital of House
of Fraser.
The four pleaded representations are: (a) the Fayeds had only about 50m which they could use to pay towards the purchase
price of the shareholding and could borrow up to about a further 100m for that purpose; (b) they wanted Mr Rowland and Lord
Duncan-Sandys, a director of Lonrho who like Mr Rowland was also a director of House of Fraser, to remain directors of House
of Fraser following the sale of the shareholding and intended not to use any influence arising from their control of the
shareholding to assist in or secure the resignation or other removal of Mr Rowland and Lord Duncan-Sandys as directors of
House of Fraser; (c) they had not had any discussion with, and had no intention of having before the completion of the said sale
and purchase any discussion with, any of the directors of House of Fraser other than Mr Rowland; (d) they had the intention of
buying off the hostility of Professor Smith, a director of House of Fraser, towards Lonrho and ensuring that he was not
antagonistic to Lonrho.
It is right to say at once that the defendants emphatically deny that any such representations were made. No defence has yet
been served, but virtually every allegation in the statement of claim which is capable of being disputed is likely to be in issue by
the defendants. They also contend that the four representations which have been pleaded were not reasonably capable of leading
Lonrho to hold the belief alleged.
Lonrho sought to meet this last objection by amending its statement of claim in the course of the hearing. After one false
move (which by deleting an essential averment would certainly have led to the claim being struck out), Lonrho sought to add a
further para 39A. This alleges in the alternative that the Fayeds knew, as was the case, that Lonrho would not be willing to sell
the shareholding to the Fayeds if Lonrho had thought (a) that they did not want Mr Rowland and Lord 964 Duncan-Sandys to
remain directors of House of Fraser; and/or (b) that they had had, or would before completion of the sale of the shareholding
have, discussions with any of the other directors of House of Fraser; and/or (c) that they were willing to support Professor Smith
in his hostility to Lonrhos attempts to obtain control of House of Fraser; but made each of the false representations pleaded in
sub-paras (b) to (d) of para 40 fraudulently and with the intention that Lonrho should rely upon them, and that Lonrho relied upon
and was induced by the said representations to sell the shareholding.
Lonrho does not need leave to amend the statement of claim, but the defendants object to the proposed amendment and ask
me to disallow it pursuant to RSC Ord 20, r 4. I shall deal with this question later.
(2) The approach of the court
On an application to strike out a statement of claim under Ord 18, r 19(1)(a) on the ground that it discloses no reasonable
cause of action, the truth of the allegations contained in the statement of claim is assumed and evidence to the contrary is
inadmissible. This is because the court is invited to strike out the claim in limine on the ground that it is bound to fail even if all
such allegations are proved. In such a case the courts function is limited to a scrutiny of the statement of claim. It tests the
particulars which have been given of each averment to see whether they support it, and it examines the averments to see whether
they are sufficient to establish the cause of action. It is not the courts function to examine the evidence to see whether the
plaintiff can prove his case, or to assess its prospects of success.
Where, however, the application is made under Ord 18, r 19(1)(b) or (c) or the inherent jurisdiction of the court on the
ground that the claim is vexatious or an abuse of the process of the court, evidence is admissible to show that this is the case.
But the test is a high one. A plaintiff is entitled to pursue a claim in these courts however implausible and however improbable
his chances of success. Unless the defendant can demonstrate shortly and conclusively that the plaintiffs claim is bound to fail
or is otherwise objectionable as an abuse of the process of the court, it must be allowed to proceed to trial. In Lawrance v Lord
Norreys (1890) 15 App Cas 210 at 219, [188690] All ER Rep 858 at 863 Lord Herschell said:

It cannot be doubted that the Court has an inherent jurisdiction to dismiss an action which is an abuse of the process of
the Court. It is a jurisdiction which ought to be very sparingly exercised, and only in very exceptional cases. I do not think
its exercise would be justified merely because the story told in the pleadings was highly improbable, and one which it was
difficult to believe could be proved.

If the defendant assumes the heavy burden of demonstrating that the claim is bound to fail, he will not be allowed to conduct
a mini-trial upon the affidavits. As Danckwerts LJ said in Wenlock v Moloney [1965] 2 All ER 871 at 874, [1965] 1 WLR 1238 at
1244:

this summary jurisdiction of the Court was never intended to be exercised by a minute and protracted examination
of the documents and facts of the case, in order to see whether the plaintiff really has a cause of action. To do that, is to
usurp the position of the trial judge, and to produce a trial of the case in chambers, on affidavits only, without discovery
and without oral evidence tested by cross-examination in the ordinary way. This seems to me to be an abuse of the inherent
power of the court and not a proper exercise of that power.
965

(3) Materiality and inducement

Where a plaintiff brings an action for rescission of a contract or damages for fraudulent misrepresentation, he must allege
and prove, inter alia, both materiality and inducement. These are distinct, though the one is often inferred from the other. The
representation must be material, that is to say it must be of such a nature as to be capable of inducing the representee to enter into
the contract in question. In the absence of special circumstances, it is not material for a vendor to know the identity of the
purchaser or his intentions in regard to the purchased property. But special circumstances may exist which make such facts
material: see, for example, Archer v Stone (1898) 78 LT 34. If so, the representee must allege and prove them.
Inducement has two aspects. The representation must be made both with the intention and with the result of inducing the
representee to enter into the contract. Neither is sufficient without the other. Both must be alleged and proved. Of course, a man
who makes a representation of fact in the course of negotiations for a contract will normally be presumed to intend that it should
be believed by the person to whom it is made. But that is not the same thing as intending it to induce him to enter into the
contract. That would be the case only if the representor knew that it was material.
Accordingly, the representee must allege and prove both (i) that the representation was material and induced him to enter
into the contract and (ii) that the representor knew that the representation was material and intended it to induce the representee to
enter into the contract. But he need not allege or prove that the representor knew why it was material or the precise process of
reasoning which it would generate in the mind of the representee.
(4) No reasonable cause of action; (5) The amendment of the statement of claim; (6) The undisputed evidence
[His Lordship then considered in paras (4) to (6) of his judgment the original pleading and the proposed amendment to the
statement of claim, held that if Lonrho required leave to make the proposed amendment he would have granted it and that in the
event he would refuse the application to disallow it. His Lordship then considered the evidence and continued:]
It is hard to believe that Lonrhos prospects of success are anything but minimal. But the alleged representations were oral,
and spoken words may convey a very different meaning from the same words on the written page. I am not persuaded by the
evidence alone that Lonrhos claim is bound to fail, or that it is so obviously unsustainable that it should be struck out. If the
matter rested there, I should with some reluctance allow the claim to proceed to trial.
(7) Abuse of the process of the court
But the matter does not rest there. I am entitled and bound to have regard, not only to Lonrhos pleaded case and the
evidence available to support it, but also to the history of the dispute.
If Lonrho was in truth deceived by the Fayeds into believing that they had no intention of making a bid, it is not disputed
that it was undeceived within days. Their intention to make a bid was the subject of public comment as early as 5 November
1984, and provoked no protest from Lonrho. During November 1984 Lonrho bought a further 63% of the shares in House of
Fraser in the market. It was still subject to an undertaking to the Secretary of State not to acquire more than 30% of the share
capital of House of Fraser, so it must have regarded the shareholding as having vested indefeasibly in Holdings.
On 4 March 1985 Holdings publicly announced its bid for the entire share capital of House of Fraser not already owned by
Holdings. It must by then, if not 966 before, have been brought home to Lonrho that the Fayeds had both the wish and the ability
to make a bid. Despite this Lonrho made no complaint, whether publicly or privately, that during the negotiations for the sale of
the shareholding the Fayeds had deceived Lonrho into believing that they had no intention of bidding. On the contrary, it stood
by and allowed Holdings to acquire further shares in the belief that it had an unassailable title to the shareholding. On the
morning of 11 March 1985 Lonrho assented its own 63% holding to the bid, and by shortly afterwards on the same day Holdings
had acquired over 50% of the issued share capital of House of Fraser. In these circumstances, rescission is plainly out of the
question.
But it does not stop there. Since April 1985 Lonrho has waged a relentless campaign against the Fayeds and their
acquisition of House of Fraser. In a letter dated 19 April 1985 addressed to the Secretary of State, Sir Edward du Cann, the
chairman of Lonrho, attacked the credibility of the Fayeds and denounced their bid for House of Fraser as nothing less than a
well planned confidence trick. In an enclosure to the letter, Sir Edward set out the reasons for Lonrhos sale of the shareholding,
but made no allegation that Lonrho had been deceived by the Fayeds into believing that they had no intention of bidding for the
whole.
In his evidence to the inspectors appointed by the Secretary of State to inquire into the affairs of House of Fraser who
reported in 1988, Mr Rowland evidently accused the Fayeds of deceit for he satisfied them that they had deceived him about
their plans to hold secret talks with the House of Fraser board and to seek the removal of Mr Rowland and Lord Duncan-Sandys
as directors of House of Fraser. Yet he never accused them of having obtained the shareholding by deceit, or of having
deliberately misled him into believing that they were not intending to bid. In 1987 Lonrho brought an action in the Queens
Bench Division against the defendants charging them with conspiracy to defraud and wrongful interference with Lonrhos
business (see Lonrho plc v Fayed [1988] 3 All ER 464, [1990] 1 QB 490; rvsd [1989] 2 All ER 65, [1990] 2 QB 479, CA; rvsd in
part [1991] 3 All ER 303, [1991] 3 WLR 188, HL). It covers substantially the same ground as the present action; yet the
allegation now made that Lonrho was deceived into selling the shareholding is nowhere pleaded. In 1988 Lonrho published and
circulated a 190page document entitled Hero from Zero, which has been not unjustly described as a comprehensive character
assassination of the Fayeds; yet it too contains no such allegation. It surfaces for the first time in the present action.
For the past six years Mr Rowland has been intent on discrediting the Fayeds by every means open to him. It is
inconceivable that he would have refrained from making the present allegation if it had occurred to him. In Lawrance v Lord
Norreys (1890) 15 App Cas 210, [188690] All ER Rep 858 the House of Lords was convinced, upon a consideration of the
history of the litigation, that the plaintiffs claim was without any solid basis and that the story told in the pleadings was a myth.
It was an exceptional case; but so, in my judgment, is this. I am similarly convinced, upon a consideration of the history of the
campaign which Lonrho has waged against the Fayeds, that the present claim has no foundation in fact and is not made in good
faith and with a genuine belief in its merits, but has been manufactured to provide a vehicle for a further public denunciation of
the Fayeds. I have no doubt that it is an abuse of the process of the court, and I will strike it out accordingly.
(8) Deception of others
This conclusion makes it unnecessary to consider Lonrhos submission that paras 42 to 53 of the statement of claim, which
form the basis of the second or constructive trust claim, should stand in support of the first claim even if the 967 second claim
were struck out. I shall, however, deal with it in case my decision to strike out the first claim is taken further.
The paragraphs in question are concerned with the deception which Lonrho alleges was practised by the Fayeds on other
parties, principally the Secretary of State, after the conclusion of the sale of the shareholding by Lonrho. It is alleged that the
Fayeds resorted to large-scale fraud and deception, this time by overstating their financial resources rather than by understating
them. The allegations have no relevance to Lonrhos claim to rescission of the sale of the shareholding or damages for fraudulent
misrepresentation. Despite this, Lonrho argues that they should stand as part of the pleading of the first claim, either to enable
similar fact evidence to be led, or to support a claim for exemplary damages. In my judgment, neither argument can be
maintained.
As to similar fact evidence, evidence of a subsequent and different fraud practised on a different party has no probative
value in relation to the pleaded claim; it goes to credit only, and as such cannot be led and should not be pleaded. As to
exemplary damages, Lonrho wishes to argue that the Fayeds had cynically calculated that the profit to be made out of acquiring
the share capital of House of Fraser would far exceed the damages at risk. The short answer, in my judgment, is that the pleaded
allegations are not relevant for this purpose. Lonrhos claim to exemplary damages may or may not be advanced by
demonstrating that the acquisition of the shareholding from Lonrho was only the first step in the Fayeds scheme to acquire all the
issued shares of the House of Fraser, but it does not depend on proving that they resorted to fraud in order to obtain them.
Lonrhos wish to retain these paragraphs if at all possible as part of the pleading of the first claim confirms my view that it is
not a genuine claim brought in good faith but is a stick with which to beat the Fayeds. But that is a conclusion which I have
already reached independently.

2. CONSTRUCTIVE TRUST
(1) Lonrhos case
Lonrho claims that not only the original shareholding which it sold in November 1984 but the entire issued share capital of
House of Fraser is now held by Holdings in trust for Lonrho. Its case, shortly summarised, is that Holdings bid succeeded,
assisted by a recommendation from the board of House of Fraser and by the absence of a reference by the Secretary of State to
the Monopolies and Mergers Commission (the commission), that the favourable responses to the bid on the part of the board of
House of Fraser and the Secretary of State were procured by the fraud of the Fayeds, who presented a false picture of their
commercial standing, background and financial position, that in consequence of such fraud and deception, Holdings bid
succeeded and Lonrho was thereby deprived of any opportunity to bid for House of Fraser and that in the premises the entire
share capital of House of Fraser is held by Holdings as constructive trustee in trust for Lonrho.
(2) The claim to a constructive trust
Lonrhos claim obviously faces formidable difficulties of causation. In fact Lonrho lost the opportunity to bid because it
was not released from the undertaking to the Secretary of State until it was too late; but it is not alleged that the fraud of the
Fayeds caused the Secretary of State to release Lonrho from the undertaking later than he would otherwise have done. Moreover,
when Holdings announced its bid, Lonrho held 63% of the shares in House of Fraser, and was free to increase its holding to 30%
by further purchases, but it chose not to do so. 968Instead (and before Holdings acquired control of House of Fraser) Lonrho
sold its shares to Holdings. Lonrho now claims that Holdings acquired these shares in trust for Lonrho, as well as the shares
acquired from third parties who sold to Holdings in the course of the bid and who Lonrho does not allege were deceived by the
Fayeds.
But these are relatively minor obstacles. The fundamental objection to the claim is that the conclusion does not follow from
the premises.
It is, as Lonrho submits, the independent jurisdiction of equity, as a court of conscience, to grant relief for every species of
fraud and other unconscionable conduct. When appropriate, the court will grant a proprietary remedy to restore to the plaintiff
property of which he has been wrongly deprived, or to prevent the defendant from retaining a benefit which he has obtained by
his own wrong. It is not possible, and it would not be desirable, to attempt an exhaustive classification of the situations in which
it will do so. Equity must retain what has been called its inherent flexibility and capacity to adjust to new situations by reference
to mainsprings of the equitable jurisdiction: see Meagher, Gummow and Lehane Equity: Doctrines and Remedies (2nd edn,
1984) para 1207. All courts of justice proceed by analogy, but a court of equity must never be deterred by the absence of a
precise analogy, provided that the principle invoked is sound. As long ago as 1838 Lord Cottenham LC remarked in Taylor v
Salmon 4 My & Cr 134 at 141142, 41 ER 53 at 56:

I have before taken occasion to observe that I thought it the duty of this Court to adapt its practice and course of
proceeding as far as possible to the existing state of society, and to apply its jurisdiction to all those new cases which, from
the progress daily making in the affairs of men, must continually arise, and not, from too strict an adherence to forms and
rules established under very different circumstances, decline to administer justice, and to enforce rights for which there is
no other remedy.

The same attitude should still inform the approach of equity today. But its intervention must be based on principle; there
must be some relationship between the relief granted and the circumstances which give rise to it.
 The present claim is not concerned with an alleged misappropriation by the defendants of an asset previously belonging to
Lonrho. In the restitutionary language of unjust enrichment, Lonrhos claim does not have a proprietary base. Most of the shares
were acquired from third parties. The fact that some were acquired from Lonrho itself either forms the subject of the claim to
rescission or is an embarrassment. To some extent, this is artfully obscured by the pleading, which alleges fraudulent deprivation
of Lonrhos opportunity to bid. But Holdings did not exploit Lonrhos opportunity to bid but its own; if anything, it took
advantage of Lonrhos inability to bid by reason of the undertaking which it had given to the Secretary of State. The alleged
fraud may have enabled Holdings bid to succeed; it did not deprive Lonrho of its own opportunity to bid.
The present claim, therefore, is concerned with a different class of case, in which the plaintiffs claim is to an asset acquired
from other sources which should have been acquired for the plaintiff. Equity will intervene by way of constructive trust, not only
to compel the defendant to restore the plaintiffs property to him, but also to require the defendant to disgorge property which he
should have acquired, if at all, for the plaintiff. In the latter category of case, the defendants wrong lies not in the acquisition of
the property, which may or may not have been lawful, but in his subsequent denial of the plaintiffs beneficial interest. For such
to be the case, however, the defendant must either have acquired property 969 which but for his wrongdoing would have
belonged to the plaintiff, or he must have acquired property in circumstances in which he cannot conscientiously retain it as
against the plaintiff.
In Pallant v Morgan [1952] 2 All ER 951, [1953] Ch 43 a parcel of land was put up for sale by auction. The agents of two
neighbouring landowners arranged that only one would bid and that if he was successful he would then divide the parcel between
them. The defendants bid succeeded, but he refused to divide the land with the plaintiff. The court held that the property
belonged in equity to the two parties jointly. The plaintiffs claim rested on the fact that his agent had been kept out of the
bidding by the arrangement which the defendant later repudiated. Since it was too late to restore the plaintiff to his former
position, the defendant was held to the arrangement he had made. No such situation exists in the present case. Lonrho was kept
out of the bidding, but not by the defendants; there was no secret arrangement or understanding between Lonrho and the Fayeds
(or at least none is alleged) to which effect could be given by requiring Holdings to hold the shares in House of Fraser in trust for
Lonrho.
In Homeward Bound Gold Mining Co v McPherson (1896) 17 NSW Eq 281 the plaintiff held a mining lease from the
Crown. It inadvertently failed to make a payment of rent, whereupon the defendants by fraudulent misrepresentations to the
relevant minister brought about the forfeiture of the lease and a grant of a new lease to themselves. The court declared that the
defendants held the new lease in trust for the plaintiff. The decision was based on the finding that, but for the fraud, the land
would still have remained the property of the plaintiff. The principle on which the court proceeded was that equity will not
permit any person to hold a benefit which he derives in consequence of the fraud of another person as against the person
who, but for the fraud, would be entitled (see 17 NSW Eq 281 at 319; my emphasis.)
In Walker v Webb (1845) Res & Eq Jud 19 the defendant assigned a lease to the plaintiff. The lease carried with it the right
to apply to the commissioners of the court of claims for the grant of the freehold by the Crown. Concealing the assignment, and
fraudulently representing himself to be the person entitled to apply, the defendant obtained a favourable decision from the
commissioners and in due course received a grant to the land. The court declared that he held the land in trust for the plaintiff.
The decision is in accordance with principle. The defendant did not in fact hold himself out as seeking a grant for and on behalf
of the plaintiff, but that was the only basis upon which he could properly obtain a grant. As against the plaintiff, therefore, he
could not be heard to deny that that was the basis upon which he had obtained it. It is a straightforward if unusual example of a
case in which the defendant has been held to be a constructive trustee of property which he was bound to acquire (if at all) for the
plaintiff.
The two last-mentioned cases are examples of a fraud which was practised on the plaintiff even though it consisted of
falsehoods told to a third party. In each case the plaintiff succeeded because he was the victim, and he recovered property which,
but for the fraud, would have belonged to him or which, if the defendant had acted honestly, would have been acquired for him.
No such case is pleaded by Lonrho.
In Reading v A-G [1951] 1 All ER 617, [1951] AC 507 a former army sergeant was held accountable to the Crown for illicit
profits he had obtained by exploiting his uniform and military status. In answer to the argument that by claiming the money the
Crown would be affirming the criminal acts of its servant, Lord Porter denied that this was the case; it would only be saying that
as between it and its servant the servant could not set up his own wrong as a defence. But that was not 970 the basis on which the
Crowns claim succeeded; so far as it was based on any equitable principle, it was the principle referred to by Lord Oaksey that
an agent is accountable for profits made in the course of his agency without the knowledge and consent of his principal and no
less accountable if the profits arise out of corrupt transactions (see [1951] 1 All ER 617 at 621, [1951] AC 507 at 517) . In so far
as the claim succeeded in equity, the wrong which induced equity to intervene was not the unlawful means by which the profits
were earned by the agent, but his subsequent refusal to account for them to his principal. Similarly in the present case; the fact
that the defendants acquired the shares by means of a fraud practised on other parties would not afford them a defence to a claim
by Lonrho if it had any basis for one, but it could not by itself found such a claim.
In English v Dedham Vale Properties Ltd [1978] 1 All ER 382, [1978] 1 WLR 93 the parties were negotiating for the sale
and purchase of land. In the course of those negotiations the proposed purchaser in the name of and purportedly as agent for the
vendor but without the vendors knowledge or consent applied for and obtained planning permission for the property. The court
held that the purchaser was under a duty to account to the vendor for the profit attributable to the planning permission. That is
not a case where, but for the wrong, the profit in question would have belonged to the vendor; but it is a case where the purchaser
could not conscientiously assert a beneficial title in himself. He had obtained the relevant planning permission only by holding
himself out to be the agent of the vendor; accordingly, as between himself and the vendor, he could not insist that he had obtained
it for his own account.
The falsehoods allegedly told to third parties are plainly not enough to sustain Lonrhos claim. They may demonstrate that
the Fayeds acquired House of Fraser by unlawful means, as Sergeant Reading made his ill-gotten gains, but that is all. They do
not demonstrate what needs to be established, namely that it would be unconscionable for the defendants to deny Lonrhos
beneficial interest. Lonrho sought to demonstrate this by an argument which attempted to link its claim to relief to the fraud
alleged to have been practised on it. The argument is to the following effect. The defendants obtained the shareholding from
Lonrho by fraud, with the result that Lonrho is entitled to rescind the sale. Accordingly, so the argument runs, Holdings has held
the shareholding in trust for Lonrho from the start; and as a constructive trustee it was subject to all the fiduciary obligations and
disabilities of an express trustee. In particular, it was bound to abstain from placing itself in a position where its interest
conflicted with its duty. Given that it held the shareholding in trust for Lonrho, it was bound to refrain from using the trust
shareholding in order to mount a bid on its own account for the remaining shares, especially since it knew that Lonrho still
wanted to bid for them itself.
In my judgment, the argument is misconceived. A contract obtained by fraudulent misrepresentation is voidable, not void,
even in equity. The representee may elect to avoid it, but until he does so the representor is not a constructive trustee of the
property transferred pursuant to the contract, and no fiduciary relationship exists between him and the representee: see Daly v
Sydney Stock Exchange Ltd (1986) 160 CLR 371 at 387390 per Brennan J. It may well be that if the representee elects to avoid
the contract and set aside a transfer of property made pursuant to it the beneficial interest in the property will be treated as having
remained vested in him throughout, at least to the extent necessary to support any tracing claim. But the representees election
cannot retrospectively subject the representor to fiduciary obligations of the kind alleged. It is a mistake to suppose that in every
situation in which a constructive trust arises the legal owner 971 is necessarily subject to all the fiduciary obligations and
disabilities of an express trustee. Even after the representee has elected to avoid the contract and reclaim the property, the
obligations of the representor would in my judgment be analogous to those of a vendor of property contracted to be sold, and
would not extend beyond the property actually obtained by the contract and liable to be returned.
But even if this were not the case, there is on the facts of this case a short and complete answer to Lonrhos claim. In March
1985 and with full knowledge of the fraud alleged to have been practised on it, Lonrho stood by without protest and allowed
Holdings to bid for the outstanding shares in House of Fraser in the belief that it was acquiring them for its own benefit. As I
have already observed, that puts rescission of the sale of the shareholding out of the question. But, even if it did not, it would
plainly be unconscionable for Lonrho afterwards to assert a beneficial interest in the remaining shares. To accede to such a claim
would not be consonant with the fundamental principles on which a court of equity acts. It would convert the constructive trust
into an instrument of fraud.
If Lonrho feels aggrieved, it has only itself to blame. If at the time of the sale of the shareholding it had exacted a
contractual undertaking from the Fayeds that they would not bid for House of Fraser, Lonrho could have obtained an injunction
to restrain the bid. It did not do so. But even if it had it would not have been enough to entitle it to the relief now claimed. For
that purpose, Lonrho would have to establish an arrangement or undertaking with the Fayeds of a quite different kind. In my
judgment, Lonrho has asserted a claim to a beneficial interest in the shares, and has not pleaded the facts necessary to support it.
(3) Divestment
In the alternative, Lonrho submits that, if a proprietary remedy is inappropriate, the court should at least order the defendants
to divest themselves of House of Fraser. This would have the merit of tailoring the remedy to the wrong. But it would not meet
the real problem, which is that Lonrho was not the victim of the alleged fraud. The principal victim was the Secretary of State,
representing the public interest. Lonrho does not allege that shareholders who sold their shares to Holdings were deceived. Its
case is that, but for the fraud, the Secretary of State would (or might) have referred the bid to the commission, which would (or
might) have reported unfavourably and recommended divestment, and the Secretary of State would (or might) have acted upon
the recommendation. I am willing to accept, at least for the sake of argument, that in such circumstances, and even in the absence
of a specific statutory power to do so, the court might have ordered divestment at the suit of the Secretary of State. In doing so, it
would take cognisance of the fact that it appeared to the Secretary of State that the public interest required such an order. But in
my judgment the court would not be justified in making such an order at the instance of a private subject in an action not brought
or supported by the Secretary of State.
There is, however, more to it than a technical objection. The facts of the present case do not support an order of divestment.
The only purpose to be gained by the making of such an order would be to restore to the Secretary of State the opportunity, of
which he is alleged to have been fraudulently deprived, of referring the defendants bid to the commission with a view to
determining in the light of the true facts whether it is in the public interest to require divestment. But the Secretary of State has
had such an opportunity. He learnt the truth when he received a copy of the inspectors report in 1988. He then had six months
in which he could have referred the matter to the commission. He decided not to 972 do so. Lonrho challenged his decision in
proceedings for judicial review, and failed (see Lonrho plc v Secretary of State for Trade and Industry [1989] 2 All ER 609,
[1989] 1 WLR 525). That must be an end of the matter.

3. CONCLUSION
I shall strike out the whole of the amended statement of claim and dismiss the action.

Amended statement of claim struck out. Action dismissed.

Solicitors: Herbert Smith; Denton Hall Burgin & Warrens.

Jacqueline Metcalfe Barrister.

[1991] 4 All ER 973

Lonrho plc v Tebbit and another

TORTS; Negligence

CHANCERY DIVISION
SIR NICOLAS BROWNE-WILKINSON V-C
15, 16, 17 APRIL, 26 JULY 1991

Negligence Duty to take care Statutory powers Exercise of discretionary power conferred by statute Secretary of State
obtaining undertaking from plaintiff not to acquire more than 30% of companys share capital Monopolies and Mergers
Commission subsequently reporting that plaintiffs take-over of company not against public interest Rival making take-over bid
for company Secretary of State releasing plaintiff from undertaking after rival had acquired control of company Whether
Secretary of State and department negligent in failing to release undertaking in due time Whether timing of release of
undertaking a policy or operational decision Whether Secretary of State and department in breach of duty of care owed to
plaintiff Whether no breach of duty if only loss was economic loss Whether public law nature of claim requiring plaintiff to
seek judicial review rather than proceed by action.

In 1979 the plaintiff, which then owned 299% of the share capital of a public company, made a bid for the company which was
referred by the Secretary of State for Trade and Industry to the Monopolies and Mergers Commission, which reported that the
proposed merger of the plaintiff and the target company might be expected to operate against the public interest. Following the
commissions report the plaintiff gave an undertaking to the Secretary of State in 1981 that it would not acquire more than 30%
of the companys share capital. On 2 November 1984 the plaintiff sold the majority of its shareholding in the company to H Ltd.
On 14 February 1985 following a second reference the commission reported that a takeover of the target company by the plaintiff
was not contrary to the public interest. On 4 March H Ltd made a public offer for the remaining shares in the company. Shortly
afterwards the Secretary of State released the plaintiff from its undertaking but by then H Ltd had acquired more than 50% of the
shares of the company and it was too late for the plaintiff to bid for it. H Ltds bid ultimately proved successful and it became the
owner of the entire issued share capital of the company. The plaintiff brought an action against the Secretary of State and the
Department of Trade and Industry claiming damages for breach of a duty of care owed to the plaintiff by the defendants in
failing, until after H Ltd had acquired control of the target company, to release the plaintiff from its undertaking not to 973
acquire more than 30% of the share capital in the company despite the commissions report that a takeover by the plaintiff would
not be contrary to the public interest. The plaintiff contended that the defendants negligent failure to exercise the power or
discretion vested in the Secretary of State to release it from its undertaking in due time to allow it to bid for the target company
was a breach of a private law duty of care which had caused the plaintiff economic loss. The defendants applied to strike out the
claim on the grounds that it disclosed no reasonable cause of action or was an abuse of the process of the court, contending (i)
that the claim based on negligence in the exercise of discretionary powers under statute was not justiciable because it raised
matters of state policy and the defendants owed no duty of care to the plaintiff regarding their exercise of those powers, (ii) that
there did not exist between the plaintiff and the defendants the special relationship necessary to found a claim in negligence for
pure economic loss and (iii) that the claims related to public duties and should therefore have been brought by way of judicial
review.

Held The application to strike out would be dismissed for the following reasons
(1) In a striking-out application it was normally inappropriate to decide a point of law, which arose in a new and developing
field of law since such a point was better decided at trial on the basis of the true facts (see p 979 f, post).
(2) Although the exercise of a statutory discretion involving policy matters and the weighing of competing public interests
was not justiciable the exercise of operational statutory powers involving the carrying out of policy decisions could give rise to a
private law duty of care. Since the timing of the release of the plaintiffs undertaking may have been an operational rather than a
policy decision it could give rise to a private law duty of care and therefore be justiciable (see p 981 a b h, post); Rowling v
Takaro Properties Ltd [1988] 1 All ER 163 applied.
(3) Since the Secretary of State came under a duty to reconsider the release of the plaintiffs undertaking once the
commissions report to the effect that a takeover of the target company by the plaintiff was no longer contrary to the public
interest and since such reconsideration could only lead to one conclusion, namely that the undertaking should be released, the
condition precedent to its extraction having disappeared, the Secretary of State could be under a private law duty to exercise
reasonable care in the prompt discharge of such duty since, given that the plaintiff and the defendants were parties to a specific
undertaking between them individually, there might be the necessary proximity and the damage to the plaintiff through the failure
to release the undertaking was plainly foreseeable. Whether such a duty of care in fact existed would depend on the facts
determined at the trial, and since it was impossible on the pleadings to determine the considerations relevant to the exercise by
the Secretary of State of his statutory power it was not appropriate on a striking-out application to decide whether the exercise of
the power did not give rise to a duty of care (see p 981 e and p 983 h to p 984 b j to p 985 d g, post); dicta of Lord Wilberforce in
Anns v Merton London Borough [1977] 2 All ER 492 at 500, of Lord Keith in Rowling v Takaro Properties Ltd [1988] 1 All ER
163 at 172 and of Lord Bridge in Caparo Industries plc v Dickman [1990] 1 All ER 568 at 573574 considered.
(4) If the circumstances otherwise justified the imposition of a duty of care in the exercise of statutory powers, the fact that
the damage suffered was purely economic would not necessarily exclude liability since the relationship between the plaintiff and
the defendant could be sufficiently proximate to constitute the special relationship required to give rise to a duty of care to
prevent economic 974 loss, but whether that relationship in fact existed would depend on the facts determined at the trial. If the
defendants were held to be under a duty of care it was strongly arguable that the relationship between the plaintiff and the
defendant was sufficiently proximate to give rise to a duty of care to prevent economic loss (see p 985 j to p 986 h, post); dicta of
Lord Bridge and Lord Oliver in Murphy v Brentwood DC [1990] 2 All ER 908 at 930, 933934 applied.
(5) Since the essence of the claim was for breach of a private law right, namely a claim in negligence, the validity of the
Secretary of States decision in public law was a matter which was only collateral to the claim and therefore it was not an abuse
of process for the plaintiff to proceed by action rather than seeking judicial review (see p 987 f g j, post); OReilly v Mackman
[1982] 3 All ER 1124 and Cocks v Thanet DC [1982] 3 All ER 1135 considered.

Notes
For negligence in relation to statutory functions, see 34 Halsburys Laws (4th edn) para 4.

Cases referred to in judgment

Anns v Merton London Borough [1977] 2 All ER 492, [1978] AC 728, [1977] 2 WLR 1024, HL.
Bourgoin SA v Ministry of Agriculture Fisheries and Food [1985] 3 All ER 585, [1986] QB 716, [1985] 3 WLR 1027, CA.
Caparo Industries plc v Dickman [1990] 1 All ER 568, [1990] 2 AC 605, [1990] 2 WLR 358, HL.
Cocks v Thanet DC [1982] 3 All ER 1135, [1983] 2 AC 286, [1982] 3 WLR 1121, HL.
Davis v Radcliffe [1990] 2 All ER 536, [1990] 1 WLR 821, PC.
Davy v Spelthorne BC [1983] 3 All ER 278, [1984] AC 262, [1983] 3 WLR 742, HL.
Fellowes v Rother DC [1983] 1 All ER 513.
Hedley Byrne & Co Ltd v Heller & Partners Ltd [1963] 2 All ER 575, [1964] AC 465, [1963] 3 WLR 101, HL.
Home Office v Dorset Yacht Co Ltd [1970] 2 All ER 294, [1970] AC 1004, [1970] 2 WLR 1140, HL.
Lonrho plc v Fayed [1989] 2 All ER 65, [1990] 2 QB 479, [1989] 3 WLR 631, CA; rvsd in part [1991] 3 All ER 303, [1991] 3
WLR 188, HL.
Murphy v Brentwood DC [1990] 2 All ER 908, [1991] 1 AC 398, [1990] 3 WLR 414, HL.
OReilly v Mackman [1982] 3 All ER 1124, [1983] 2 AC 237, [1982] 3 WLR 1096, HL.
Rowling v Takaro Properties Ltd [1988] 1 All ER 163, [1988] AC 473, [1988] 2 WLR 418, PC.
Sutherland Shire Council v Heyman (1985) 60 ALR 1, Aust HC.
Union Carbide Corp v Naturin Ltd [1987] FSR 538, CA.
Williams & Humbert Ltd v W&H Trademarks (Jersey) Ltd [1986] 1 All ER 129, [1986] AC 368, [1986] 2 WLR 24, HL.

Cases also cited

Colne Valley Water Co v National Rivers Authority (20 December 1990, unreported), Ch D.
Gillick v West Norfolk and Wisbech Area Health Authority [1985] 3 All ER 402, [1986] AC 112, HL.
975
Hill v Chief Constable of West Yorkshire [1988] 2 All ER 238, [1989] AC 53, HL.
Investors in Industry Commercial Properties Ltd v South Bedfordshire DC (Ellison & Partners (a firm), third parties) [1986] 1
All ER 787, [1986] QB 1034, CA.
Peabody Donation Fund (Governors) v Sir Lindsay Parkinson & Co Ltd [1984] 3 All ER 529, [1985] AC 210, HL.
Lonrho plc v Secretary of State for Trade and Industry [1989] 2 All ER 609, [1989] 1 WLR 525, HL.

Summons
By summons dated 14 June 1990 the defendants, the Rt Hon Norman Beresford Tebbit MP and the Department of Trade and
Industry, applied to strike out the statement of claim indorsed on the writ issued by the plaintiff, Lonrho plc, claiming damages
for negligence, on the ground that the statement of claim disclosed no reasonable cause of action or was otherwise an abuse of the
process of the court. The summons was heard in chambers but judgment was given in open court. The facts are set out in the
judgment.

John Beveridge QC, Sir William Wade QC and David Pannick for Lonrho.
John Laws and Laurence Rabinowitz for the defendants.

Cur adv vult

26 July 1991. The following judgment was delivered.

SIR NICOLAS BROWNE-WILKINSON V-C. This is another action arising from the long-running battle for the control of
Harrods. In this action Lonrho plc is suing the Rt Hon Norman Tebbit MP (who at the material times was Secretary of State for
Trade and Industry) and the Department of Trade and Industry (the DTI) for damages for alleged negligence in failing, until after
the Al-Fayeds had made a successful bid, to release Lonrho from an undertaking not to bid for the House of Fraser. The
defendants apply to strike out the claim on the grounds that it discloses no cause of action or is an abuse of the process of the
court.
Since this is a striking-out claim, the facts must be taken to be as alleged in the statement of claim. Lonrho alleges that in
March 1979 it held 299% of the issued ordinary shares of House of Fraser plc. It made a bid for all the shares in House of
Fraser. The Secretary of State referred the matter to the Monopolies and Mergers Committee (the MMC). The MMC having
reported that the proposed merger of Lonrho and House of Fraser might be expected to operate against the public interest, on 15
December 1981 the DTI, acting under s 88(1) and (2) of the Fair Trading Act 1973, obtained from Lonrho an undertaking (the
undertaking) not to acquire 30% or more of the equity share capital of House of Fraser.
Rather more than two years later, on 31 May 1984, the Secretary of State again referred to the MMC the question of a
merger between Lonrho and House of Fraser. In a report dated 14 February 1985 the MMC reported on the second reference that
a takeover of House of Fraser by Lonrho would not operate contrary to the public interest. It is alleged that the defendants
received this report on or about 14 February 1985.
In the meantime, the Al-Fayed brothers had come on to the scene. On 2 November 1984 Lonrho sold the majority of its
shareholding in House of Fraser 976 to the Al-Fayed company, now called House of Fraser Holdings Ltd (Holdings). It was
anticipated that Holdings might make a bid for House of Fraser. On 5 and 11 February 1985 Lonrho made representations to the
DTI that it should be released from the undertaking not to bid. On 4 March 1985 Holdings made a bid for House of Fraser. On 5,
7 and 8 March Lonrho renewed its applications to the defendants to be released as a matter of urgency from the undertaking not
to bid. The MMC report was published on 7 March. By 11 March 1985 Holdings had acquired more than 50% of the shares in
House of Fraser. On 14 March the DTI did release Lonrho from the undertaking but by then Holdings had acquired control.
The defendants determined not to refer the Holdings bid to the MMC in reliance on statements made and assurances given
by Holdings. It is alleged that those statements or assurances were fraudulent and untrue and that Lonrho drew their falsity to the
attention of the defendants.
Paragraph 37 of the statement of claim alleges that by reason of those circumstances the defendants owed to Lonrho a duty
to exercise their duties and powers, in particular with regard to the Undertaking, with reasonable care. In para 38 it is alleged
that, in breach of that duty of care, the defendants acted without reasonable care by failing or refusing to release the plaintiff from
the undertaking until 14 March 1985. Particulars are then given of such breach: (a) that an undertaking can only be sought
where there is power to make an order under the 1973 Act, ie when there is an adverse report from the MMC; (b) that once the
MMC reported on 14 February that a takeover by Lonrho was not contrary to the public interest, the defendants had no lawful or
proper reason to hold Lonrho to the undertaking; (c) that Lonrho should have been immediately released; (d) that the reasons
given for not immediately releasing Lonrho (viz that the Office of Fair Trading had advised that it would be fairest to announce
Lonrhos release at the same time as the decision whether or not to refer Holdings bid, and legal advice that the defendants
should entertain representations from the board of House of Fraser) were manifestly bad reasons; and (e) that the defendants
relied on misrepresentations made by Holdings which they had failed to check adequately.
In para 39 Lonrho alleges that the failure to release the undertaking was ultra vires the power of the defendants in that they
were continuing the undertaking for a purpose other than that for which it could have been sought under the 1973 Act, by
reference to no relevant considerations and by reference to irrelevant considerations.
The only claim for damages is for economic loss flowing from the inability to bid (it is said successfully) for House of
Fraser.

THE STATUTORY FRAMEWORK

It is common ground that the Secretary of State had power under s 64 of the Fair Trading Act 1973 to make both the
references to the MMC relating to any merger of Lonrho and House of Fraser. On a merger reference under s 64 the MMC has to
investigate and report whether such merger operates or may be expected to operate against the public interest: see s 69(1). Under
s 73(1), if a report of the MMC includes a conclusion that the merger situation (operate[s] or may be expected to operate against
the public interest, the provisions of s 73 come into operation. Under s 73(2) the Secretary of State may by order made by
statutory instrument exercise the powers specified in Sch 8 to the 1973 Act: those powers include the power to prohibit the
acquisition by one company of a controlling interest in another so as to become interconnected bodies corporate.
977
The report of the MMC has to be sent to the Director General of Fair Trading: see s 86. Section 88 provides, so far as
relevant, as follows:

(1) Where a report of the Commission on a merger reference as laid before Parliament ( b) in the case of a
merger reference, sets out such conclusions as are mentioned in section 73(1) of this Act, and a copy of the report is
transmitted to the Director under section 86 of this Act, it shall be the duty of the Director, if requested by the appropriate
Minister or Ministers to do so, to consult the relevant parties with a view to obtaining from them undertakings to take
action indicated in the request made to the Director as being action requisite, in the opinion of the appropriate Minister or
Ministers, for the purpose of remedying or preventing the adverse effects specified in the report.
(2) The Director shall report to the appropriate Minister or Ministers the outcome of his consultations under the
preceding subsection; and if any undertaking is given by any of the relevant parties to take action indicated in the request
made to the Director as mentioned in that subsection (in this section referred to as an appropriate undertaking) the
Minister to whom the undertaking is given shall furnish particulars of it to the Director
(4) Where the Director has made a report under subsection (2) of this section, and particulars of an undertaking given
by any of the relevant parties have been furnished to the Director in accordance with that subsection, it shall be the duty of
the Director(a) to keep under review the carrying out of that undertaking, and from time to time to consider whether, by
reason of any change of circumstances, it needs to be varied or to be superseded by a new undertaking, and (b) if it appears
to him that it has not been or is not being fulfilled, or needs to be varied or superseded, to give such advice to the
appropriate Minister or Ministers as he may think proper in the circumstances

Under these provisions, therefore, unless there is a report by the MMC concluding that a merger operates or may be
expected to operate against the public interest, the Secretary of State has no power either to make an order under s 73 or to
request the director to consult with a view to obtaining undertakings. Therefore, once the MMC had made its second report dated
14 February 1985 that a merger of Lonrho and House of Fraser would not be contrary to the public interest, the Secretary of State
had no power by any new order or undertaking to restrict Lonrhos ability to bid for House of Fraser. But the 1973 Act is
completely silent as to what, if anything, is to happen to any existing undertaking in a case such as the present where there is a
fresh report from the MMC concluding that a merger which an existing undertaking precludes is not contrary to the public
interest.
 Mr Laws for the defendants accepted that in such circumstances there must be an implied obligation on the Secretary of
State to consider whether the undertaking should be released. But he submitted that such implied obligation is a public law
obligation, not giving rise to any rights under private law. On the other side, Mr Beveridge QC for Lonrho submits that, since the
necessary precondition for the extraction of the undertaking has gone, there must be an implied obligation to release an
undertaking which is no longer justified, and that gives rise to a duty of care under private law owed by the Secretary of State to
Lonrho. The uncertainty as to the nature of this implied obligation lies at the heart of this case.
Finally, I should notice that at the relevant time there was no statutory provision indicating how any undertaking given under
s 88 is to be enforced (the position 978 is now covered by a new s 93A inserted by s 148 of the Companies Act 1989). There are
three possibilities. The first is that the undertaking is not directly enforceable at all, the only sanction for a breach being the
making of an order under s 73. The second is that there is an implied statutory right to enforce. The third is that the undertaking
is enforceable by the Secretary of State in contract, the undertaking being given in consideration of the Secretary of State
refraining from making an order under s 73. This third possibility, that the undertaking is a contract, has given rise to an
application to amend the statement of claim to which I will have to return.

THE GROUNDS OF APPLICATION

The defendants applied to strike out the claim under RSC Ord 18, r 19(1) on the grounds that the statement of claim
discloses no reasonable cause of action or is an abuse of the process of the court.
Mr Laws puts his case in three ways. (1) The claim does not lie against the defendants since they were exercising
discretionary powers and duties vested in them by statute. The court will not entertain a claim based on negligence in the
exercise of such powers because (a) the issue is not justiciable since it raises matters of state policy; or (b) the powers in the
present case gave rise to no duty of care owed by the defendants to Lonrho. (2) Lonrho are claiming damages for economic loss
alone. The relationship between the defendants and Lonrho was not such as to give rise to the special relationship necessary to
found a claim in negligence for pure economic loss. (3) The proceedings are an abuse of the process of the court since, if
otherwise maintainable, the claims relate to public law duties and should be brought by way of judicial review: see OReilly v
Mackman [1982] 3 All ER 1124, [1983] 2 AC 237. Before considering these contentions, I must first say something on the
correct approach to striking-out applications.

STRIKING OUT
A claim should only be struck out in a plain and obvious case. The difficulty arises where, as in the present case, a claim to
strike out depends upon the decision of one or more difficult points of law. In such a case, the judge should normally refuse to
entertain such a claim to strike out. But, if in a particular case the judge is satisfied that the decision of the point of law at that
stage will either avoid the necessity for trial altogether or render the trial substantially easier and cheaper, he can properly
determine such difficult point of law on the striking-out application: see Williams & Humbert Ltd v W & H Trademarks (Jersey)
Ltd [1986] 1 All ER 129 at 139, 143, [1986] AC 368 at 435436, 441 per Lord Templeman and Lord Mackay.
In considering whether or not to decide the difficult question of law, the judge can and should take into account whether the
point of law is of such a kind that it can properly be determined on the bare facts pleaded or whether it would not be better
determined at the trial in the light of the actual facts of the case. The methodology of English law is to decide cases not by a
process of a priori reasoning from general principle but by deciding each case on a case-by-case basis from which, in due course,
principles may emerge. Therefore, in a new and developing field of law it is often inappropriate to determine points of law on the
assumed, and scanty, facts pleaded in the statement of claim. Thus in Union Carbide Corp v Naturin Ltd [1987] FSR 538 at 544
Slade LJ said:

There is at least one good reason why in particular, in my judgment, the court hearing a striking out application should
be slow to commit itself to stating principles of law which are not clearly covered by previous authority.
979
Ex hypothesi it has to deal with the application on assumed facts. General statements of legal principle made on
assumed facts are, in my experience, a perilous exercise, since they may well require addition or qualification when applied
to the facts as actually found on the evidence in a particular case.

In Lonrho plc v Fayed [1989] 2 All ER 65 at 70, [1990] 2 QB 479 at 489 in the Court of Appeal, Dillon LJ (in dealing with
the developing tort of unlawful interference with business) said:

Here the existence of this tort is recognised, but the detailed limits of it have to be refined. I regard it as right and,
indeed, essential that this should be done on the actual facts as they emerge at the trial rather than on a set of hypotheses,
more or less wide

The decision of the Court of Appeal has been affirmed by the House of Lords on 27 June 1991 (see [1991] 3 All ER 303,
[1991] 3 WLR 188). The House of Lords reaffirmed the inappropriateness of striking out in such cases.
This is a case in which it would be desirable to decide even difficult questions of law on a striking-out application if that can
properly be done. If the case goes to trial both discovery and oral evidence will involve complicated and sensitive areas of public
interest which would be avoided if it were now decided that Lonrho has no case in law. But, as will appear, both the principal
points relied on by Mr Laws are in developing fields of law involving new and uncertain principles of law and public policy. It is
this fact which has caused me the greatest difficulty in deciding this case.

NEGLIGENCE IN THE EXERCISE OF STATUTORY POWERS

It is important to emphasise that Lonrhos case is based solely on negligence. The improper exercise of statutory powers
does not, by itself, give rise to any civil liability in English law: see Bourgoin SA v Ministry of Agriculture Fisheries and Food
[1985] 3 All ER 585, [1986] QB 716. Liability in private law for the improper exercise of such powers can only arise (a) if the
defendant acted knowingly in excess of such powers or maliciously, (b) if the statute was passed for the protection of a specific
class of the public to which the plaintiff belongs or (c) the power has been exercised negligently in breach of a private law duty of
care to the plaintiff. Lonrho does not claim under either (a) or (b); apart from the amendment, its sole claim is that the defendants
were negligent in failing to release the undertaking in due time in breach of a duty of care owed to Lonrho by the combined effect
of the statutory provisions and the undertaking.
Mr Laws contends that there can be no such duty of care for two reasons: first, that Parliament has conferred the discretion
how to exercise such powers on the Secretary of State and, as a matter of policy, the exercise of such powers by the Secretary of
State is not justiciable by the courts; second, that the operation of the machinery of the 1973 Act cannot in any event give rise to a
private law duty of care to Lonrho.
(a) Justiciability
It is clear that the fact that the allegedly negligent act was done in the course of exercising statutory powers is not by itself
fatal to a claim in negligence: see Home Office v Dorset Yacht Co Ltd [1970] 2 All ER 294, [1970] AC 1004. It is equally clear
that in some cases the exercise of statutory powers does not give rise to a private law duty of care: see Davis v Radcliffe [1990] 2
All ER 536, [1990] 1 WLR 821. The difficulty is to define in what circumstances a private law duty of care will be held to arise.
 980
In my judgment, it is well established that in cases where the exercise of a statutory discretion involves the weighing of
competing public interests, particularly financial or economic interests, no private law duty of care arises because the matter is
not justiciable by the courts. It is for the body to whom Parliament has committed that discretion to weigh the competing public
interest factors: the courts cannot undertake that task: see Anns v Merton London Borough [1977] 2 All ER 492 at 500, [1978]
AC 728 at 754 per Lord Wilberforce and Rowling v Takaro Properties Ltd [1988] 1 All ER 163, [1988] AC 473. A distinction is
drawn between such policy discretions on the one hand and operational powers on the other. Broadly, operational powers
involve the carrying out of policy decisions. The exercise of operational statutory powers can, but not necessarily will, give rise
to a private law duty of care: see the Takaro case.
The first question in the present case, therefore, is whether the power or discretion vested in the Secretary of State to release
Lonrho from its undertaking falls within the category of policy discretion, in which case Lonrhos claim must fail. In the
Takaro case it was recognised that the distinction between the policy and operational areas was not easy to make. In the present
case the difficulty is exacerbated by the fact that the discretion or power in question is not express but implied. Parliament has
not spelt out what the Secretary of State is to do when the public interest, which was the precondition for the extraction of the
undertaking, ceases to be a public interest. But Mr Laws accepted that, by reason of the new MMC report, the Secretary of State
did come under a duty, albeit a public duty, to reconsider the matter. In my judgment such reconsideration could only lead to one
conclusion, viz that the undertaking should be released. The Secretary of State could not properly have treated other public
interests as justifying the retention of undertakings which could not then have been extracted for the first time.
But the relevant question in this case is not whether the undertaking should have been released (it was) but whether it should
have been released earlier. The question is whether the timing of the release is a policy, rather than an operational, decision. In
my judgment it has not been demonstrated at this stage that the decision when to release the undertaking is clearly a policy
decision. The two reasons for postponing the release which apparently the defendants are going to advance are that they were
advised to postpone the release until the announcement of the decision whether to refer the Al-Fayed bid, and legal advice that
the defendants ought to hear representations from the board of House of Fraser. Lonrho does not accept that these were the
reasons: therefore the claim could not be struck out on the basis of those alleged reasons being the true reasons. Further, even if
they were the true reasons for the decision to postpone the release, in my judgment they are not manifestly policy reasons in the
sense in which those words were used in the Anns and Takaro cases. The timing of the release did not involve the allocation of
resources or the distribution of risks. Nor has it been demonstrated that the timing of the release involved any other public policy
considerations. In my judgment, therefore, the action cannot be struck out on the grounds that the issue is not justiciable by the
court.
I am supported in this view by the views expressed, obiter, in the Takaro case. That case concerned a decision made by a
minister of the New Zealand government to refuse consent to the issue of shares to a foreign company. The minister, having
consulted a cabinet committee, decided that the proposed issue was contrary to the national interest and refused consent. That
decision was quashed on the grounds that one of the factors taken into account by the minister was irrelevant. Before the
minister could decide the matter afresh, the proposed share purchase by the foreign company fell through and the plaintiff
claimed damages for 981 negligence against the minister. The decision of the minister in that case had many policy features. Yet
the Privy Council indicated that the matter was justiciable as falling within the operational category (see [1988] 1 All ER 163 at
172, [1988] AC 473 at 501). There was a far stronger case in that case than in the present for holding the decision to be of a
policy nature, and therefore not justiciable.
Before leaving this aspect of the case I must shortly mention an allied point. In the Dorset Yacht case Lord Reid and Lord
Diplock analysed the problem of justiciability by reference to the doctrine of ultra vires (see [1970] 2 All ER 294 at 301, 332,
[1970] AC 1004 at 1031, 10671068). Unless the acts done under the statutory discretion were ultra vires that discretion, there
could be no cause of action in negligence. The same analysis was adopted by Robert Goff J, following the Dorset Yacht case, in
Fellowes v Rother DC [1983] 1 All ER 513. I find some difficulty in understanding the link between vires and negligence and
the ultra vires test has not been referred to in later authorities. But in my judgment I am bound by the decision in the Dorset
Yacht case to hold that it is a prerequisite of liability in negligence that the acts complained of were ultra vires. Quite apart from
the weight to be attached to the views of Lord Reid and Lord Diplock, this appears also to have formed part of the reasoning of
Lord Morris (see [1970] 2 All ER 294 at 306, [1970] AC 1004 at 1037). However, the point raises no difficulty at this stage since
Lonrho alleges in para 39 of the statement of claim that the defendants failure to release the undertaking was ultra vires, and it is
impossible to determine whether that allegation is correct without evidence.
(b) Duty of care in private law
The dicta in the Takaro case clearly show that, even if the case falls within the operational and not the discretionary
category, that is not the end of the matter (see [1988] 1 All ER 163 at 172, [1988] AC 473 at 501). The question remains: are the
circumstances of the case such as to render it appropriate to impose a duty of care? Although the cases were decided in reverse
order, the dicta in the Takaro case were harbingers of the revised approach to the law of negligence subsequently laid down in
Caparo Industries plc v Dickman [1990] 1 All ER 568, [1990] 2 AC 605 and Murphy v Brentwood DC [1990] 2 All ER 908,
[1991] 1 AC 398. In the Caparo case [1990] 1 All ER 568 at 573574, [1990] 2 AC 605 at 617618) Lord Bridge said:

What emerges is that, in addition to the foreseeability of damage, necessary ingredients in any situation giving rise to a
duty of care are that there should exist between the party owing the duty and the party to whom it is owed a relationship
characterised by the law as one of proximity or neighbourhood and that the situation should be one in which the court
considers it fair, just and reasonable that the law should impose a duty of a given scope on the one party for the benefit of
the other. But it is implicit in the passages referred to that the concepts of proximity and fairness embodied in these
additional ingredients are not susceptible of any such precise definition as would be necessary to give them utility as
practical tests, but amount in effect to little more than convenient labels to attach to the features of different specific
situations which, on a detailed examination of all the circumstances, the law recognises pragmatically as giving rise to a
duty of care of a given scope. Whilst recognising, of course, the importance of the underlying general principles common
to the whole field of negligence, I think the law has now moved in the direction of attached greater significance to the more
982 traditional categorisation of distinct and recognisable situations as guides to the existence, the scope and the limits of
the varied duties of care which the law imposes. We must now, I think recognise the wisdom of the words of Brennan J in
the High Court of Australia in Sutherland Shire Council v Heyman (1985) 60 ALR 1 at 4344, where he said: It is
preferable in my view, that the law should develop novel categories of negligence incrementally and by analogy with
established categories, rather than by a massive extension of a prima facie duty of care restrained only by indefinable
considerations which ought to negative, or to reduce or limit the scope of the duty or the class of person to whom it is
owed.

This approach is pre-echoed in the dicta in the Takaro case ([1988] 1 All ER 163 at 172, [1988] AC 473 at 501) where Lord
Keith said:

classification of the relevant decision as a policy or planning decision in this sense may exclude liability; but a
conclusion that it does not fall within that category does not, in their Lordships opinion, mean that a duty of care will
necessarily exist. It is at this stage that it is necessary, before concluding that a duty of care should be imposed, to consider
all the relevant circumstances. One of the considerations underlying certain recent decisions of the House of Lords is
 the fear that a too literal application of the well-known observation of Lord Wilberforce in Anns v Merton London Borough
[1977] 2 All ER 492 at 498, [1978] AC 728 at 751752 may be productive of a failure to have regard to, and to analyse and
weigh, all the relevant considerations in considering whether it is appropriate that a duty of care should be imposed. Their
Lordships consider that question to be of an intensely pragmatic character, well suited for gradual development but
requiring most careful analysis.

He then went on to point out certain factors which, in that case, militated against the imposition of liability. Most of those
factors were related to the nature of the claim made in that particular case, viz negligence in construing the statute. But one of the
factors is of immediate application to the present case: overkill. The question is whether, as a matter of public policy, the
imposition of liability in negligence on a public officer will make him so cautious in the exercise of his statutory functions as to
lead to unnecessary delay in the discharge of those functions contrary to the public interest.
Against that background, I turn to consider the only relevant question on this striking-out application, viz have the
defendants shown that they were clearly under no private law duty of care to Lonrho in relation to the timing of the release of the
undertaking which they had extracted from Lonrho?
The first question is to identify what was the duty of the defendants, at least in public law. Even though the statutory
provisions are silent as to the circumstances and manner in which the undertaking is to be released, in my judgment it is manifest
that when the MMC reported that a take-over by Lonrho was no longer contrary to the public interest there must have been an
implied duty at least in public law beyond a mere duty to consider the position. In my judgment there arose a clear duty to
release the undertaking, the condition precedent to its extraction having disappeared. Where Parliament has conferred powers on
the executive to interfere with individual freedoms (whether personal or economic) but only in certain defined circumstances, in
my judgment once those defined circumstances no longer exist the executive is bound as a matter of public law to cease such
interference. For example, if in the present case Lonrho had known 983 the full facts in time to apply by way of judicial review
for an order directing the Secretary of State to release the undertaking promptly, in my view such application would have been
bound to succeed.
If that is the public duty owed by the Secretary of State, the question is whether the Secretary of State is also under a private
law duty to exercise reasonable care in the prompt discharge of such duty. Most of the badges of a duty of care are plainly
present. The damage to Lonrho through the failure to release the undertaking was plainly foreseeable. Given that the plaintiff
and the defendants were parties to a specific undertaking between them individually, the requirement of proximity is surely
satisfied. The critical question is whether, in Lord Bridges words, it is fair, just and reasonable to impose a private law duty of
care in such a case.
Apart from the question of liability for purely economic loss (which I deal with separately below) this question throws one
back on the public policy matters I have already mentioned. Is this one of the cases where public policy dictates that there should
not be a private law duty of care? This is a point which has given me acute difficulty and on which my views have varied. On
the one side it can be said that Parliament has conferred public functions on a minister responsible for the public interest in an
important economic field. It is a real question whether the courts will not be going beyond their proper role if they seek to attach
private liabilities to the discharge of such public functions. Moreover the risk of overkill is a real one. Although the
circumstances of this particular case are unlikely to be repeated, the regulation of unfair trading as a whole may be affected by the
decision in this case. If those responsible for such regulation start looking over their shoulders because of the risk of liability in
negligence, the administration of this branch of economic regulation may be adversely affected.
On the other side it can legitimately be said that this is a one-off case, having no impact outside its own facts. The Secretary
of State in deciding when to release the undertaking could not have regard to other public interests, since the condition precedent
to the maintenance of the undertaking (a finding by the MMC that a takeover was contrary to the public interest) no longer
existed. The question was one of timing alone. Prima facie the delay that occurred in releasing the undertaking was a very long
one in the circumstances known to the Secretary of State and the court can perfectly well adjudicate on the question whether to
delay for the reasons so far given (if true) do provide a non-negligent reason for the delay. What public interest is there in
excluding liability in these circumstances?
I have reached the conclusion that arguments couched in such general terms are incapable of resolution by any rule of law
that I can properly formulate. As Lord Keith said in the passage that I have quoted from the Takaro case, the question whether or
not to impose a private law duty of care is of an intensely pragmatic character, well suited for gradual development but requiring
most careful analysis. In Anns v Merton London Borough [1977] 2 All ER 492 at 500, [1978] AC 728 at 754 Lord Wilberforce
said: the more operational a power or duty may be, the easier it is to superimpose on it a common law duty of care. This
must be because the more that general policy factors have to be taken into account in making the decision the less suitable is the
case for adjudication by the courts.
In the present case I know nothing of the circumstances in which the delay occurred. The statement of claim does not
particularise the actual omissions which are alleged to have been negligent beyond the bare assumption, first, that the defendants
(as they knew or ought to have known) were under a duty to 984 release the undertaking and that in the circumstances the release
was urgent, and second, an allegation that the defendants were wrongly influenced by the Al-Fayeds alleged misrepresentations.
The first allegation of negligence appears to be almost an allegation of res ipsa loquitur. Yet the defendants have not sought to
strike out the claim on the basis of want of particularity in the allegations of breach of duty. Therefore, far from being able to
perform the necessary analysis of all the facts and circumstances, I am asked to decide the question of the existence of a private
law duty of care in the absence of even detailed factual allegations, let alone knowledge of the facts themselves. I know nothing
of the factors which the defendants either did take into account or should have taken into account. For all I know, the reason for
the delay in releasing the undertaking was a purely administrative blunder (eg the papers being wrongly filed), involving no
considerations of policy at all.
It follows that, unless the law is that a minister can never be held liable for a negligent decision in the exercise of a statutory
power even if the making of that decision involved no considerations of competing public interest, this claim to strike out cannot
succeed. I am not prepared to hold, in ignorance of the true facts and in an area of law well suited for gradual development, that
the law confers such a wide exemption from liability.
I find considerable support for the view that such a case is not suitable for striking out not only in the passage that I have
already quoted but also from the fact that in the Dorset Yacht case Lord Diplock expressed the view that it was regrettable that the
question of liability for negligence in the exercise of statutory powers arose for decision on a preliminary question of law (see
[1970] 2 All ER 294 at 323, [1970] AC 1004 at 1057). Robert Goff J in Fellowes v Rother DC [1983] 1 All ER 513 at 523 also
deplored having to decide whether there was a cause of action for negligence in the exercise of statutory powers on a preliminary
question of law. There are cases of this kind which can be satisfactorily dealt with on a striking-out. Thus in Davis v Radcliffe
[1990] 2 All ER 536, [1990] 1 WLR 821 the Privy Council struck out a claim in negligence against certain organs of the Isle of
Man government on the grounds that they owed no duty of care. But in that case it was manifest that the powers in question
necessarily involved the weighing of competing policy interests and the only duty alleged was a duty owed to the public at large.
It was a case where the performance of the alleged duty was on its face one which primarily involved policy decisions for the
benefit of the public at large. In my judgment where, as in the present case, it is impossible on the pleaded facts to determine the
ambit of the considerations relevant to the exercise by the defendants of the statutory powers, it is not appropriate to determine on
a striking-out the question whether the exercise of the powers gives rise to a private law duty of care. The facts should be
determined at trial and the law laid down by reference to the particular facts so found.
ECONOMIC LOSS
Lonrhos claim is for economic loss only. The defendants contend that English law does not recognise that there can ever be
a duty of care owed by someone exercising statutory powers not to cause economic loss to those affected by the exercise of such
powers, or, alternatively, in the circumstances of this case no such duty was owed.
In my judgment the wider contention is unsustainable. If it is held that the circumstances otherwise justify the imposition of
a duty of care in the exercise of these statutory powers, the fact that the damage suffered is purely economic will not, by itself,
exclude liability. In most cases involving the negligent exercise of 985 statutory powers the loss suffered by the plaintiff will be
purely economic. In many cases where the duty is alleged to be owed to a wide section of the public, potentially open-ended
liability for economic loss will result if a duty of care is held to exist. In such cases, that factor will be a most material
consideration to be taken into account, with the other factors, in deciding whether it is right to impose a duty of care at all in
those particular circumstances. But the fact that the damage claimed is purely economic is not, by itself, decisive so as to
preclude an action for negligence which would otherwise be appropriate. I note that in the Takaro case the Privy Council did not
expressly refer to the fact that the claim was one for purely economic loss.
If then there may be circumstances in which a minister is liable for purely economic loss, the question is whether applying
the ordinary law it is clear that in the circumstances of this case no duty of care to protect from economic loss should be imposed.
The law on this point also is in a state of flux. It is clear that negligent misstatements causing purely economic loss can be
actionable: see Hedley Byrne & Co Ltd v Heller & Partners Ltd [1963] 2 All ER 575, [1964] AC 465. It is not as yet firmly
established by authority that purely economic loss is recoverable where, as in the present case, the negligence consists of doing
something other than making a statement. But there are weighty dicta in Murphy v Brentwood DC [1990] 2 All ER 908 at 933
934, 930, [1990] 1 AC 398 at 485486, 481 to the effect that there may be cases, other than cases of negligent misstatement, in
which negligence causing purely economic loss will be held to be actionable: see per Lord Oliver (with whom Lord Ackner
concurred) and per Lord Bridge (with whom Lord Ackner and Lord Jauncey agreed). The question in each case is whether the
circumstances are such that it is right to impose on the defendant a duty of care to guard against causing economic loss to the
plaintiff. Mr Laws formulated the question, in my judgment correctly, as follows: is the relationship between the plaintiff and
the defendant sufficiently proximate to constitute the special relationship required to give rise to a duty of care to prevent
economic loss?
I do not think it appropriate at this stage to give a final answer to that question. It will be better decided by the trial judge in
the light of all the circumstances he will then know. But in my judgment it is strongly arguable that, if the defendants are under a
private law duty of care at all, the relationship in the present case is sufficiently proximate to give rise to a duty to prevent
economic loss. On any basis the private law duty alleged is not a duty owed to the public at large or even to a wide section
thereof; it is a duty owed to one person only, Lonrho, arising from the defendants requirement that Lonrho, by giving the
undertaking to the defendants, should enter into a special relationship with the defendants. Damage to Lonrho flowing from
negligence in the course of that relationship was foreseeable. Moreover, the only such foreseeable damage was economic loss.
In those circumstances it seems to me manifestly arguable that, in the present case, there was such a special relationship of
proximity as to give rise to a duty of care to protect Lonrho against economic loss if any duty of care exists at all.

ABUSE OF THE PROCESS OF THE COURT

The defendants contend, in reliance on OReilly v Mackman [1982] 3 All ER 1124, [1983] 2 AC 237, that it is an abuse of
the process of the court for this case to be brought by way of action in the ordinary courts since Lonrhos claim raises questions
of public law which can only be properly raised in proceedings by way of judicial review. As I understood Mr Lawss reply, he
accepted that Davy v 986 Spelthorne BC [1983] 3 All ER 278, [1984] AC 262 establishes that the OReilly v Mackman principle
does not in general extend to cases where claims in negligence are brought in the ordinary courts even though those claims
collaterally raise questions as to the validity of acts done by public authorities. Mr Laws concentrated on the point that,
following the decision of the House of Lords in the Dorset Yacht case, in order to succeed Lonrho are bound to allege (as it has in
para 39 of the statement of claim) that the defendants actions were ultra vires. This public law issue, says Mr Laws, is not a
collateral matter but an essential ingredient of Lonrhos cause of action.
As I have said, although I do not myself follow the reasoning whereby Lord Diplock reached the conclusion that no claim in
negligence could arise out of the intra vires exercise of statutory powers, I am bound by the Dorset Yacht decision so to hold. But
in my judgment OReilly v Mackman does not establish that in every action where the validity of the exercise of the statutory
power is challenged it is an abuse of the process of the court not to proceed by way of judicial review. In OReilly v Mackman
[1982] 3 All ER 1124 at 1134, [1983] 2 AC 237 at 285 Lord Diplock made it clear that the House was not laying down categories
of cases in which it would always be an abuse of process. Moreover Lord Diplock expressly refers to possible exceptions in
cases where the invalidity of the decision arises as a collateral issue in a claim for infringement of a right of the plaintiff arising
under private law. In Cocks v Thanet DC [1982] 3 All ER 1135, [1983] 2 AC 286 the House held that the OReilly v Mackman
principle in general applied where the plaintiffs cause of action for breach of one statutory duty depended upon the plaintiff first
setting aside an earlier decision made under statutory powers. But Lord Bridge again drew attention to the exceptional case
where the validity of a decision in public law may come into question collaterally in an ordinary action (see [1982] 3 All ER 1135
at 1140, [1983] 2 AC 286 at 295).
The question therefore is whether this action falls within the general principle or within the exception to the principle. In my
judgment it falls within the exception. The essence of the claim is for breach of a private law right, ie a claim in negligence. The
requirement to show that the negligent act complained of was ultra vires is not purely collateral, but it is only one ingredient in
the cause of action. For the rest, the case is wholly appropriate for decision in the ordinary courts and not in the Crown Office
list. If it were to be held that the defendants actions were ultra vires, that decision would not have any general retrospective
effect on the public administrationa factor of great importance in requiring that public law matters should in general be
ventilated by way of the speedy process of judicial review with its tight timetable. Moreover, to strike out the claim on this
ground and require the case to be brought by way of judicial review would in all probability lock out Lonrho from the remedy in
damages it seeks. Lonrho is long out of time to bring proceedings under RSC Ord 53. Such proceedings could not now be
brought without leave and unless leave were given the power to award damages under Ord 53, r 7 would not be exercisable. This
is a point which weighed with the House of Lords in Davy v Spelthorne DC [1983] 3 All ER 278 at 284, 286, [1984) AC 262 at
274, 277 per Lord Fraser and Lord Wilberforce. Moreover, Lonrho says it was not aware of the facts on which it seeks to found
its present claim until long after the time for bringing proceedings by way of judicial review had expired.
In all the circumstances I reach the conclusion that it would not be right to characterise the bringing of these proceedings in
the ordinary courts as an abuse of the process of the court and I decline to strike out the claim on this ground also.
987

LEAVE TO AMEND
During the course of the argument Lonrho applied for leave to amend so as to found its cause of action in the alternative on
a duty of care arising from an alleged contractual relationship between Lonrho and the defendants arising from the undertaking
itself. The proposed amendment reads as follows:

40A. Further or in the alternative 1. The agreement of the plaintiff to offer and of the defendants to accept the
undertaking stated in paragraph 7 was a binding contract between the parties. 2. It was an implied term of the said contract
that the defendants would release the plaintiff from the said undertaking if and when, in the judgment of the MMC, an
 acquisition by the plaintiff of House of Fraser would not operate contrary to the public interest. 3. In breach of the said
implied term, the defendants failed or refused to release the plaintiff from the said undertaking until 14th March 1985.

This amendment, if allowed, would have a dual impact on the case. First, it would enable Lonrho to argue that the
defendants owed a duty of care in contract, regardless of the statutory background under which the contract was entered into.
Second, Lonrho might be able to avoid the difficulties attendant on a claim in negligence for purely economic loss by founding
such claim in contract.
Lonrho needs leave to amend since the amendment adds a new cause of action: see RSC Ord 20, r 1(3). Moreover, since
the cause of action in contract arose, at the latest, in March 1985, such claim was statute-barred when the application to amend
was made. Therefore, prima facie leave to amend should not be given.
But under Ord 20, r 5(2) and (5) leave can be given if

the new cause of action arises out of the same facts or substantially the same facts as a cause of action in respect of
which relief has already been claimed in the action by the party applying for leave to make the amendment.

Mr Laws submitted that, even though the amendment arises out of substantially the same facts as the existing claims based
on breach of statutory duty, I should not now give leave to amend to raise the allegation of contractual duty if the claim based on
statutory duty should otherwise be struck out; that would be to allow a statute-barred claim to be the sole cause of action relied
on. I agree with Mr Lawss submission and would not have allowed the amendment had I reached the conclusion that the
existing claim should be struck out. However, since I have not struck out the existing claim based on breach of statutory duty, I
will give leave to amend.

Application dismissed. Leave to amend statement of claim granted.

Solicitors: Denton Hall Burgin & Warrens; Treasury Solicitor.

Celia Fox Barrister.

988
[1991] 4 All ER 989

Cheah v Equiticorp Finance Group Ltd and another

LAND; Mortgages

PRIVY COUNCIL
LORD KEITH OF KINKEL, LORD GRIFFITHS, LORD ACKNER, LORD BROWNE-WILKINSON, SIR MICHAEL KERR
16 OCTOBER, 13 NOVEMBER 1991

Mortgage Priority Two successive mortgages of same property Whether mortgagees can alter priority of mortgages
Whether consent of mortgagor required to alteration of priority.

The appellant charged shares in a company by two separate mortgages. Subsequently the two mortgages became vested in the
first respondent, which obtained judgment against the appellant in respect of sums secured by the first mortgage. The first
respondent, having waived its priority under the first mortgage, then exercised its power of sale under the second mortgage over,
inter alia, the shares and applied the proceeds of sale towards discharging the debts secured by the second mortgage. The
appellant claimed that he was entitled to insist on the proceeds of sale of the shares being applied in the order laid down by the
original mortgages, in which case the judgment against him would have been fully satisfied, and he applied to the High Court of
New Zealand for an order that the judgment had been fully satisfied. The judge granted the order sought but on appeal by the
respondents the Court of Appeal reversed his decision. The appellant appealed to the Privy Council.

Held Where there were two mortgages of the same property the mortgagees could agree to alter the priority of their mortgages
without the consent of the mortgagor because in the ordinary case the mortgagor was not affected by the order in which his debts
were satisfied as he was bound to satisfy all his secured debts before he could recover the property. Furthermore, a mortgagor
had no right to insist on the mortgagee pursuing one remedy rather than another since a mortgagee was entitled to pursue his
various remedies alternatively and cumulatively and could therefore enforce a personal covenant for repayment without first
realising his security. Accordingly, the appellant was not entitled to insist that the proceeds of sale of the shares be applied in
satisfaction of the first mortgage in priority to the second mortgage because, although the charge in the first mortgage was
described as being a first charge, that was merely a description of the nature of the security which the debtor had given and it did
not confer on the debtor a contractual right to insist on the satisfaction of his debts in any particular order. The appeal would
therefore be dismissed (see p 991 e f h to p 992 a d e g, post).
Palmer v Hendrie (1859) 27 Beav 349 distinguished.
Per curiam. Where a mortgagor has a genuine interest in ensuring that his debts are satisfied in a particular order, eg where
there are different rates of interest, he should insist on a specific contractual provision precluding the alteration of the priorities
(see p 992 f, post).

Notes
For priority of mortgages generally, see 32 Halsburys Laws (4th edn) paras 544558, and for cases on the subject, see 35 Digest
(Reissue) 308-328, 2625-2796.
989

Cases referred to in judgment

Ellis & Cos Trustee v Dixon-Johnson [1925] AC 489, [1925] All ER Rep 715, HL.
Equiticorp Finance Group Ltd v Cheah (1989) 3 NZLR 1, NZ CA and PC.
Palmer v Hendrie (1859) 27 Beav 349, 54 ER 136.
Putnam v Broten (1930) 60 ND 97, N Dak SC.

Appeal
Cheah Theam Swee appealed to the Privy Council with final leave to appeal granted by the Court of Appeal of New Zealand
(Cooke P, Casey, Hardie Boys and Thorp JJ) on 4 March 1991 from the decision of that court (Richardson, Somers and Hardie
Boys JJ) ([1991] 1 NZLR 299) on 31 October 1990 and the order dated 13 November 1990 allowing the appeal of the
respondents, Equiticorp Finance Group Ltd and Equiticorp Nominees Ltd, from the judgment of Wylie J on 2 July 1990 in the
High Court of New Zealand at Auckland granting the appellants application for an order under r 544 of the High Court Rules for
entry of satisfaction of the judgment of Master Towle dated 17 December 1987 whereby summary judgment was entered against
the appellant for $7,556,44247 in favour of the respondents. The facts are set out in the judgment of the Board.

D F Dugdale for the appellant.

R J Craddock QC and M E Parker for the respondents.

13 November 1991. The following judgment was delivered.

LORD BROWNE-WILKINSON. This appeal from the Court of Appeal of New Zealand ([1991] 1 NZLR 299) raises a short
question of principle: where there are two mortgages of the same property, can the mortgagees effectively agree to alter the
priorities of the mortgages without the consent of the debtor?
The factual background is complicated, but for the present purposes the salient facts can be shortly stated. By a mortgage
deed (mortgage 1) the appellant (the debtor) convenanted to pay certain sums of money to a company, Equiticorp Securities Ltd,
and as security for such payment charged 14m shares in London Pacific Ltd by way of fixed first charge. By a further mortgage
deed (mortgage 2) the debtor covenanted to pay certain further sums to Capitalcorp Investments Ltd and as security for such
payment charged, inter alia, the same 14m shares in London Pacific Ltd by way of second fixed charge. By a series of
transactions both the mortgages became vested in the respondent Equiticorp Finance Group Ltd. In December 1987 the
respondent obtained judgment against the debtor for the sum of $7,556,44247, being moneys the payment of which was secured
by mortgage 1 (see Equiticorp Finance Group Ltd v Cheah [1989] 3 NZLR 1, CA and PC).
The respondent then exercised its power of sale under mortgage 2 over, inter alia, the 14m shares in London Pacific Ltd.
Apparently it was overlooked that those shares were subject to a first charge under mortgage 1. The shares were not sold subject
to mortgage 1. The proceeds of sale of the shares were applied by the respondent, not in satisfying the moneys due under
mortgage 1 (being the judgment debt), but in or towards discharging the debts secured by mortgage 2. The Court of Appeal
treated the respondent as having waived its priority under mortgage 1 and this was not challenged before their Lordships Board.
The debtor took the view that he was entitled to insist that the proceeds of sale should have been applied in the order laid
down by the original mortgages, in 990 which case the judgment against him would have been fully satisfied. He therefore
applied to the High Court under r 544 of the High Court Rules for an order that the judgment had been fully satisfied.
The case came before Wylie J who decided in the debtors favour. The Court of Appeal reversed that decision and held that
the respondent, as the holder of both mortgages, could unilaterally decide whether to apply the proceeds of sale of the London
Pacific Ltd shares in satisfaction of mortgage 1 or mortgage 2. It is from that decision that this appeal is brought.
The following extract from the judgment of Wylie J shows the grounds on which he held in the debtors favour:

Every mortgage is a contract, albeit one with special characteristics by reason of the charge it creates. In the case of
successive mortgages each of them the first mortgagee and the second mortgagee has a contractual relationship with the
mortgagor. Each has, by lending on the security of, and accepting the mortgage, created and accepted rights and duties
between the mortgagor and the mortgagee. But there is no contract between the two mortgagees, and no arrangement
between them can by unilateral act by each as against the mortgagor alter the terms of his contract with the mortgagor. By
giving a first mortgage to the one and a second to the other the mortgagor has defined the rights of each in relationship to
himself. While either mortgagee may deal with his mortgage, eg sell it, or sub-mortgage it, he cannot unilaterally alter his
contract with the mortgagor and the mortgagor cannot be affected by any such dealing. If two successive mortgagees agree
amongst themselves to deal with the proceeds of sale on a mortgagees sale that may be a valid and enforceable transaction
as between themselves but they cannot do so to the prejudice of the mortgagor.

In contrast, the Court of Appeal emphasised the right of a mortgagee to pursue his various remedies alternatively and
cumulatively: if a mortgagee chooses to enforce a personal covenant for repayment, he is entitled to do so and is not bound first
to realise his security. Moreover, by choosing to waive his priority a first mortgagee is not varying or prejudicing the mortgagors
right to redeem. In no circumstances can the mortgagor recover the mortgaged property until all the debts secured on it have
been satisfied. Therefore there is no need for a mortgagor to consent to any variation in the priorities.
Their Lordships would have been content to adopt the reasoning of the Court of Appeal. But, in deference to the arguments
of counsel and because there is no Commonwealth decision on a point which is of practical importance in relation to the
subordination of debts, the Board think it desirable to state shortly their own reasons.
The question must be approached on the basis that mortgage 1 and mortgage 2 had remained vested in two separate
mortgagees. The respondent, as holder of both mortgages, cannot be in a better position than the original mortgagees. The
question therefore is whether two mortgagees can, without the consent of the mortgagor, agree to vary the priority of their
mortgages. In the ordinary case, the mortgagor is not affected by the order in which his debts are satisfied. The mortgagor is
bound to satisfy all his secured debts before he can recover the mortgaged property. In the ordinary case priority of mortgages
affects only the rights of the mortgagees inter se, in particular where the security is inadequate to pay all the secured debts in full.
Moreover, the mortgagor has no right to insist on the mortgagee pursuing one of his remedies rather than another. It is for
the mortgagee to decide whether to rely on the personal covenant for payment, or to sell the security or to take 991 possession of
the mortgaged property. So, in the present case, mortgagee 1 was fully entitled to sue the debtor on his personal covenant and
rely on that alone. Mortgage 1 could, if he chose, abandon or waive his security to the benefit of both mortgagee 2 and the
debtor: the debtor had no right to insist that mortgagee 1 enforce his debt against the security.
The one matter that the mortgagor can insist upon is that, on redemption by payment, he gets back his security. That is the
explanation of the principle in Palmer v Hendrie (1859) 27 Beav 349, 54 ER 136 that a mortgagee cannot sue on the mortgagors
personal covenant of payment if the mortgagee has put it out of his power to restore the mortgaged property on repayment of the
debt: see also Ellis & Cos Trustee v Dixon-Johnson [1925] AC 489 at 491, [1925] All ER Rep 715 at 718.
Mr Dugdale for the debtor sought to rely on that principle in the present case. He submitted that, by reason of mortgagee 1
agreeing to waive or postpone its priority, the debtor was precluded from recovering the mortgaged property on paying the sum
secured by mortgage 1: mortgagee 1, by permitting mortgagee 2 to apply the proceeds of sale in satisfaction of the debt secured
by mortgage 2, had prevented mortgage 1 from returning the security to the debtor. Their Lordships do not accept this argument.
Even if there had been no alteration in the priorities and the debtor had paid the sums secured by mortgage 1, the debtor would
not have been entitled to recover the mortgaged property until the debt secured by mortgage 2 had been paid. The alteration in
priorities did not adversely affect the debtors right to recover his security.
For these reasons, in the ordinary case a mortgagor has no right to insist on the order in which successive mortgaged debts
are satisfied. This is the answer to the otherwise compelling reasoning of Wylie J. The provisions in mortgage 1 describing the
charge as a first charge are merely a description of the nature of the security which the debtor was giving: it did not confer on
the debtor a contractual right to insist on the satisfaction of his debts in any particular order. There may be cases (for example
where the successive mortgages carry differing rates of interest) where the mortgagor has a genuine interest in ensuring that the
debts are satisfied in a particular order. In such a case it will be for the mortgagor to insist upon a specific contractual provision
precluding the alteration of the priorities of the mortgages.
Their Lordships conclusions accord both with what they understand to be the generally accepted view of the law affecting
subordination of debts and the law of the United States: see 59 Corpus Juris Secundum 218; Putnam v Broten (1930) 60 ND
97. It is manifestly desirable that the law on this subject should be same in all common law jurisdictions.
Their Lordships will accordingly humbly advise Her Majesty that the appeal ought to be dismissed. The appellant must pay
the respondents costs before their Lordships Board.

Appeal dismissed.

Solicitors: D J Freeman & Co; Alan Taylor & Co.

Mary Rose Plummer Barrister.

All ER 1991 Volume 4

[1991] 4 All ER 1

Tudor Grange Holdings Ltd and Others v Citibank NA and Another

COMPANY INSOLVENCY: CONTRACT

CHANCERY DIVISION
SIR NICOLAS BROWNE-WILKINSON VC
17, 18, 19, 22, 23, 24 APRIL 1991

Company Receiver Appointment Effect on companys power to bring action Receivers appointed by bank Company
commencing action against bank for misrepresentation Action commenced by directors of company without receivers consent
Action prejudicing receivers position Whether company having power to commence action.

Contract Unfair terms Exemption clauses Evasion of liability by means of secondary contract Compromise or settlement
of existing dispute Contract to settle earlier disputes between plaintiffs and defendants Whether restriction on exemption
clauses extending to compromises of accrued claims or settlement of existing dispute Whether comprises subject to statutory
requirement of reasonableness Unfair Contract Terms Act 1977, ss 2(2), 10.

The two plaintiff groups of companies were engaged in scrap metal disposal and property ventures. C, who controlled both
groups, and his family were the sole shareholders in the first group and substantial shareholders in the second. The companies
embarked on an ambitious expansion programme which required long-term financing and entered into certain commitments
allegedly in reliance upon representations made by the defendant banks as to the banks preparedness to grant a substantial loan
facility and to fund the companies projects through to completion. C and his family guaranteed the liabilities of both groups of
companies. The companies projects did not prosper and they defaulted in repaying the interest on the loans. However, the
companies were in urgent need of further finance and the banks agreed to make further advances provided all claims against them
were released and the companies agreed to cross-collateralisation of all loans so that the banks would have security for all debts
of the companies against all the assets of the companies. On 13 March 1989 a deed of release was executed providing for the
release of all claims by the companies and their shareholders against the banks and in April 1989 a document, termed Heads of
Agreement, was executed which had the effect of producing full cross-collateralisation. The companies became insolvent and
the lead bank, the first defendant, appointed administrative receivers of the companies in September 1989. The companies and C
brought an action against the banks claiming, inter alia, damages for misrepresenttion and that the deed of release and the heads
of agreement had been procured by duress and, relying on ss 2(2) a and 10b of the 1 Unfair Contract Terms Act 1977, which
provided that a person was not bound by any contract term taking away his rights under another contract so far as those rights
extended to the enforcement of anothers liability which the Act prevented that other person from excluding or restricting unless
the exclusion of liability was reasonable, contended that the release was not binding on the plaintiffs because it was unreasonable.
Notwithstanding the prior appointment of administrative receivers of the companies, the action was brought without the
receivers consent, pursuant to resolutions passed by the board of directors of each of the companies. The banks counterclaimed
for repayment of principal and interest of the various loans and applied to strike out the plaintiffs claim, contending (i) that the
plaintiffs had no locus standi to bring the proceedings, (ii) that the matters relied upon in the statement of claim, based on facts
occurring prior to the release of 13 March 1989, were barred by the terms of the release and (iii) that the allegation of duress was
so improbable and the pleading and evidence in support of it so vague and unsatisfactory that the court should strike it out.
________________________________________
a Section 2(2) provides: In the case of other loss or damage [ie other than death or personal injury resulting from negligence], a person
cannot so exclude or restrict his liability for negligence except in so far as the term or notice satisfies the requirement of reasonableness.
b Section 10 is set out at p 12 d e, post

Held The statement of claim would be struck out and the action dismissed for the following reasons
(1) It was very difficult to see how it could be alleged that the defendants owed a duty of care to C personally as opposed to
the companies in which he was involved, and he could have no cause of action against the defendants, whether for breach of
contractual or tortious duty of care, innocent or fraudulent misrepresentation or any other head, unless he could allege and prove
damage suffered by him. Since all the damage pleaded in the statement of claim was damage suffered by the companies, and it
was accepted that as a shareholder C could not recover as damage suffered by him personally damage done to the company
resulting in a reduction in the value of his shareholding, the only claim that C could put forward was one for fees incurred by him
in respect of financial advice to the companies in respect of the loans, but in the absence of any evidence of his having paid such
fees there was no maintainable claim by C personally on the cause of action pleaded. It followed that C would be struck out as a
plaintiff in any event (see page 9 g to 10 c, post).
(2) Although it was established that in certain circumstances company directors had power to bring proceedings on behalf of
the company even after the appointment of a receiver who had power to bring proceedings on the companys behalf, they had no
power to do so where the receivers position would be prejudiced by their decision to bring proceedings. Since the action
commenced by the directors of the plaintiff companies in the plaintiff companies name could directly impinge on the property
subject to the receivers powers because the directors held no indemnity against the liability of the companies assets to satisfy a
hostile order for costs made against the companies, it followed that the directors had had no power to start the proceedings.
However, since there was a possibility of such an indemnity being forthcoming the action would not be struck out on that ground
alone (see p 10 e and p 11 a to c, post); Newhart Developments Ltd v Co-op Commercial Bank Ltd [1978] 2 All ER 896
distinguished.
(3) Since the purpose of the 1977 Act was to invalidate exemption clauses in the strict sense, ie clauses in a contract which
modified prospective liability and did not affect retrospective compromises of existing claims, s 10 of the Act on its true
construction did not apply to a contract to settle disputes which had arisen concerning the performance of an earlier contract.
Furthermore, s 10 did not apply where the parties to both contracts were the same. Accordingly, s 10 did not apply to the release
of 13 March 1989, which was binding on the plaintiffs and had the effect of providing a complete answer to all claims against the
banks 2 based on facts or matters occurring before the date on which it was signed (see p 12 c j, p 13 b d e h j and p 14 b f, post).
(4) On the facts, the plaintiffs could not show that they had entered into the deed of release or heads of agreement in reliance
on a misrepresentation that the banks would continue to finance the plaintiffs projects. Although the allegation of duress could
not be struck out purely on the grounds of improbability, it was, having regard to all the factors in the case, vexatious for the
plaintiffs to pursue that one matter on its own (see p 14 h j, p 16 c to e and p 17 a f to j, post).
Quaere. Whether the directors of a company in receivership and the receivers, who may have widely differing views and
interests, can both have power to bring proceedings on the same cause of action (see p 10 h, post); Newhart Developments Ltd v
Co-op Commercial Bank Ltd [1978] 2 All ER 896 doubted.

Notes
For the effect of the appointment of a receiver, see 7(2) Halsburys Laws (4th edn reissue) para 1159, and for cases on the subject,
see 10(1) Digest (2nd reissue) 203204, 77307731.
For exclusion clauses, see 9 Halsburys Laws (4th edn) paras 363364.
For the Unfair Contract Terms Act 1977, ss 2, 10, see 11 Halsburys Statutes (4th edn) (1991 reissue) 223, 228.

Cases referred to in judgment

Newhart Developments Ltd v Co-op Commercial Bank Ltd [1978] 2 All ER 896, [1978] QB 814, [1978] 2 WLR 636, CA.
Ramsay v Hartley [1977] 2 All ER 673, [1977] 1 WLR 686, CA.
Smith v Eric S Bush (a firm) [1989] 2 All ER 514, [1990] AC 831, [1989] 2 WLR 790, HL.
Stephens v Cuckfield RDC [1960] 2 All ER 716, [1960] 2 QB 373, [1960] 3 WLR 248, CA.

Cases also cited

Lawrance v Norreys (1890) 15 App Cas 210, [188690] All ER Rep 858, HL.
Newtherapeutics Ltd v Katz [1991] 2 All ER 151, [1991] Ch 226.
Pao On v Lau Yiu [1979] 3 All ER 65, [1980] AC 614, PC.
Pearson v Naydler [1977] 3 All ER 531, [1977] 1 WLR 899.
Riches v DPP [1973] 2 All ER 935, [1973] 1 WLR 1019, CA.
Trendtex Trading Corp v Credit Suisse [1981] 3 All ER 520, [1982] AC 679, HL; affg [1980] 3 All ER 721, [1980] QB 629, CA.
Watts v Midland Bank plc [1986] BCLC 15.

Summonses
By summons dated 25 October 1990 the first defendant, Citibank NA, a bank carrying on business in London and elsewhere,
applied to strike out the statement of claim indorsed on the writ issued by the plaintiffs, Tudor Grange Holdings Ltd, London Iron
and Steel Co Ltd, London Iron and Steel Co (BMD) Ltd, Lionhope Ltd and Donald Roy Crawley, claiming, inter alia, damages
for misrepresentation and that a deed of release and head of agreement signed by the plaintiffs were procured by duress, on the
ground that the statement of claim disclosed no reasonable cause of action or was scandalous, frivolous or vexatious or was
otherwise an abuse of the process of the court. The second defendant, Den Danske Bank A/S, a bank carrying on business in
London and elsewhere, issued a summons in similar terms. The summonses were heard in chambers but 3 judgment was given
by Sir Nicolas Browne-Wilkinson V-C in open court. The facts are set out in the judgment.

Peter Goldsmith QC and Ali Malek for the first defendant.

Peter Irvin for the second defendant.
Peter Sheridan QC and Paul Lowenstein for the plaintiffs.

24 April 1991. The following judgment was delivered.

SIR NICOLAS BROWNE-WILKINSON VC. This is an application by the defendants to strike out claims in an action,
alternatively for security for costs to be given by the plaintiffs. I heard argument in chambers but, since the issues raise at least
one point of law of general importance, I am giving judgment in open court.
There are five plaintiffs. The first, Tudor Grange Holdings Ltd (TGH), is the holding company of the second and third
plaintiffs, London Iron and Steel Co Ltd and London Iron and Steel Co (BMD) Ltd. Those are companies in the Tudor Grange
group (or TGG). The Tudor Grange group was engaged in scrap metal disposal and property ventures. The fourth plaintiff,
Lionhope Ltd, was engaged exclusively in the property market. The fifth plaintiff, Donald Roy Crawley, is the moving spirit
behind both groups of companies. He and his family are the sole shareholders in the Tudor Grange group. They are also
substantial shareholders, though I think not the sole shareholders even now, in the Lionhope group. Mr Crawley and his family
and other shareholders have guaranteed the liabilities of both the Tudor Grange group and also Lionhope. The defendants are two
banks: the first, Citibank NA, the second, Den Danske Bank A/S (formerly Copenhagen Handelsbank A/S (CHB)) (the Danish
bank).
The background to the case is this. The Tudor Grange group embarked on ambitious expansion programmes. They were
introduced to Citibank and the Danish bank. In fact the Danish bank had been financing them before Citibank came onto the
scene. As a result, a number of advances were made to the Tudor Grange group for specific projects. Each advance was the
subject matter of a separate facility letter; each facility letter provided a date for repayment.
Mr Crawley and the plaintiffs allege that in discussions with Citibank it was necessary that the individual projects should be
viewed together and what was needed was long-term finance. It is alleged that Citibank told Mr Crawley and the plaintiffs that
Citibank would grant a substantial facility and would fund all the long-term Tudor Grange group projects through to completion.
In the statement of claim it is pleaded that, subject to certain conditions:

Citibank would provide long-term finance for all the projects in the TGG Business Plan. Such facilities would be
in a total sum substantially greater than that currently enjoyed by TGG.
It is said that the Danish bank was part of a bank syndicate of which the lead bank is Citibank and, as such, was aware of what
was going on.
At present the total sum outstanding to the two banks is in the region of 40m together with interest.
The plaintiffs, putting the matter very broadly at this stage, allege that, in reliance upon the representations made by the
banks as to their preparedness to finance the projects of the plaintiffs, they entered into certain commitments. The projects that
they entered into have not in the event prospered. The plaintiffs 4 were in default in repaying interest on the principal as early as
October 1988 so far as Citibank was concerned and by December 1988 to the Danish bank.
At the end of December 1988 and in early January 1989 the plaintiffs made certain general allegations that they had claims
against Citibank, though, when asked, they refused to specify what those claims were. At the same time the plaintiff companies
were in urgent need of further finance. Initially at least, they approached Citibank and the Danish bank for such finance. In the
event, the proposal changed: what was put forward was that in return for the banks holding their hand in enforcing the existing
indebtedness and agreeing to the sale of a half share in a development in Kent (the Keel development) over which the banks
enjoyed security, for the sum of 55m or thereabouts, the plaintiffs and their shareholders would agree to a cross-collateralisation
on which the banks were insisting. The cross-collateralisation arose from this fact. The sums advanced to Lionhope were
secured on the assets of Lionhope and other guarantees; the sums advanced to the Tudor Grange group were secured on,
primarily, Tudor Grange assets. There was a limited degree of interaction between the securities. What the bank was insisting
upon in early 1989 was full cross-collateralisation so that the banks would enjoy security for all the debts of both Lionhope and
the Tudor Grange group against all the assets of both groups.
The unparticularised claims against Citibank led to Citibank insisting that all such claims should be either specified or
released. In fact a release was executed on 13 March 1989. It provided:

In consideration of the sum of 1 and of Citibank not making immediate demand of certain indebtedness due from
TGH to Citibank each Releasor hereby releases the Releasees from all claims, demands and causes of action whether or not
presently known or suspected (the Claims) that such Releasor ever had, may now have, or hereafter can, shall or may
have against the Releasees or any of them based upon, arising out of or related to any and all acts or omissions of the Bank
or any other person prior to the date hereof. Each of the Releasors understands and agrees that the nature, extent and result
of the Claims hereby released may not now all be known or anticipated and declares that it nevertheless desires and hereby
agrees to settle compromise and release in full all possible claims against the Releasees arising from any and all acts or
omissions of any Releasee or other person or entity prior to the date hereof.

The releasors were defined as meaning Tudor Grange Holdings and the shareholders and each of them. The shareholders, as I
say, were broadly the members of the Crawley family and others.
Finally, the release provided:

4. In furtherance of the purposes of this Release the Releasors hereby agree jointly and severally to indemnify the
Releasees and hold each of them harmless from and against any and all claims asserted against any Releasee in any manner
by any Releasor or any past, present or future Affiliate of a Releasor and for this purpose Lionhope Limited and its
subsidiaries shall be Affiliates of TGH.

By cl 1 of the release:

Affiliate as applied to any person or entity shall mean any other person that, directly or indirectly, through one or
more intermediaries controls or is controlled by or is under common control with that person or entity.
5

The result is that TGH and the shareholders who signed the release have released all claims. Other members of the TGH
group and the Lionhope did not themselves execute the release, but Tudor Grange Holdings must indemnify Citibank against any
claims brought against Citibank. That is the first crucial document in this case.
The banks, as I have said, were further insisting on the complete cross-collateralisation of all the loans. In consequence, a
document was executed called the Heads of Agreement, which had the effect of producing full cross-collateralisation. It had
many other terms. That document bears a date of 20 April 1989. It is not clear on what date it was actually executed. Under the
heads of agreement, the banks agreed that the group would not be treated as in default until 30 June 1989. They consented to the
sale of the half share in the Keel development for 55m (which was then projected though not finally agreed). The document
contains detailed provisions as to how the 55m shall be applied, substantial sums out of it going in reduction of the borrowing
from Citibank and the Danish bank. The heads of agreement also provided for a further advance of 300,000 for specified and
limited purposes.
As I have said, the plaintiff companies projects did not prosper and they became insolvent. Citibank appointed
administrative receivers of the plaintiff companies at the beginning of September 1989. The banks also started proceedings in the
Queens Bench Division against the various shareholders in the group under their personal guarantees. The Danish bank
proceeded by way of RSC Ord 14 and were successful before the master in obtaining judgment against the guarantors. However,
the guarantors appealed. Between the decision of the master and the hearing before the judge of the Queens Bench proceedings,
this action was started. The judge in the Queens Bench Division gave leave to defend. Lionhope was put into compulsory
liquidation on 21 November 1989; the Official Receiver is the liquidator. Recently, Mr Crawley personally has proposed a
scheme of arrangement under the Insolvency Act 1986; orders were made restraining the presentation of any bankruptcy petition
against him or indeed any other proceedings which are still in force. There has been a meeting of creditors from which the
defendant banks and others were excluded. There is a hearing pending in the bankruptcy court relating to that matter.
This action was started without earlier warning by writ dated 20 August 1990. Notwithstanding the prior appointment of
administrative receivers of the four plaintiff companies, the action was brought pursuant to resolutions passed by the board of
directors of each of the companies. The actions have been brought without the consent of the receivers of each of the companies.
The directors who passed those resolutions consist of members of the Crawley family.
Before the start of the proceedings, Mr Crawley procured that the first four plaintiff companies would not be liable for their
costs of this action. The plaintiff companies bills are to be rendered and settled by Mr Crawley or his associates personally and
the solicitor acting has agreed not to charge the companies for those costs. However, the arrangements made do not include any
indemnity to the plaintiff companies against any order for costs that may be made in favour of the banks against the plaintiff
companies.
Following the winding up of Lionhope in November of last year, the Official Receiver became the liquidator. He was
apparently not prepared to continue with this action. By an assignment made by deed, dated as recently as 15 April of this year,
the Official Receiver, in consideration of the sum of 1, purported to assign the cause of action of Lionhope in these proceedings
to Mr Crawley personally.
I turn now to the claims made by the plaintiffs in the action so far as they appear from the pleadings. In the course of the
hearing before me, Mr Sheridan 6QC for the plaintiffs has sought leave to make substantial amendments to the allegations in the
statement of claim. I propose to refer to the statement of claim as it would stand if those amendments were permitted, pointing
out, where relevant, the difference between the proposed amendments and the claim as originally formulated.
 The statement of claim starts by setting out the background that I have sought shortly to summarise: the proposed
expansion, the projects that were in mind, the business plan that Tudor Group had prepared. It then alleges that Citibank was told
that Tudor Grange would be unable to generate sufficient cash flow prior to the maturity of the projects to see the projects
through to a successful conclusion, that Tudor Grange group would require long-term capital investment to allow it to proceed
with the projects and would require long-term financing in order to meet its cash flow requirements pending the realisation of
profits. Further, it is alleged in para 10 that Citibank was told that it would be pointless for Citibank to advance sums for
particular projects contained within the various business plans and not for the whole.
In para 12 it is alleged that Citibank agreed to act as bankers and financial advisers for the plaintiffs and thereafter owed
them a duty of care and/or there were implied terms of the agreement that Citibank would act with all due care, skill and
diligence, would not knowingly or recklessly take steps such as to prejudice the business plan and would act towards the
plaintiffs and each of them in good faith and honestly.
In para 13 it is alleged that Citibank told the plaintiffs that, after providing temporary loan facilities, Citibank intended to
replace that loan with a substantial facility, which Citibank assured Mr Crawley would fund all the long-term Tudor Grange
group projects and expansion programmes to completion.
In para 14, as I have mentioned, it is alleged that Citibank represented to the plaintiffs that it would provide long-term
finance for all the projects in the TGG business plan.
Those are the representations which are central to the plaintiffs case, namely representations that Citibank would provide
the necessary finance to put in hand and carry through to completion the projects which were included in the TGG business plan.
The original statement of claim pleaded no reliance on those representations. However, the proposed amended para 14A
alleges that, in reliance on those representations and induced thereby, the plaintiffs entered into certain agreements with Citibank
that caused the plaintiffs to enter into certain agreements and transactions with Citibank including the deed of release and the
cross-collateralisation agreement. There is therefore the pleading that the two crucial documents, the deed of release and the
cross-collateralisation agreement, were induced by misrepresentation.
As against the Danish bank, it is pleaded that there was an agreement for a syndicated loan, that throughout Citibank acted
as agent for the Danish bank and that the Danish bank is to be taken to have had knowledge of everything Citibank did in that
capacity.
In para 33 it is alleged that as late as August 1988 representatives of Citibank represented to Lionhope, the fourth plaintiff,
that Citibank was committed to provide full financial support for the acquisition by Lionhope of a particular site. In para 33A it
is pleaded that the plaintiffs entered into, amongst other things, the release and the cross-collateralisation agreement in reliance
on that representation made in relation to Lionhopes acquisition.
In para 33C it is alleged that the representations that I have referred to were of a continuing nature or, alternatively, by
implication were repeated on the occasion 7 of each transaction entered into by the plaintiffs and each of them with Citibank. It
is alleged in para 33D that the representations, or some of them, became false to the knowledge of Citibank and thereby
fraudulent. Two matters are relied on in support of that fraudulent misrepresentation. One is a failure to provide a comfort letter
on which, in the event, Mr Sheridan has not relied. The second and serious one is an allegation that on or about 20 December
1988 Citibank determined to get rid of the plaintiffs and Mr Crawley as a client of Citibank. That is supported by a memorandum
prepared by a gentleman on the staff of Citibank on 20 December, which records that alleged decision.
It is alleged in para 33E that Citibank failed to disclose its change of mind and that the continuing representations became
false and therefore fraudulent. Alternatively, in para 33F it is alleged that there were breaches of Citibanks contractual duties of
care which I have referred to.
Pausing there, the allegation is: that there was a representation of an intention to provide the necessary financial support,
which was true at the time it was made; that it was impliedly repeated or, alternatively, a continuing representation, which
representation became false in December 1988 when the bank no longer intended to support the plaintiffs; and that thereafter the
continuing misrepresentation relied upon became fraudulent.
When one comes to the cross-collateralisation agreement, it is pleaded in para 45 that the cross-collateralisation agreement
was entered into in reliance on the innocent or fraudulent misrepresentation which I have sought to identify. In addition, it is
alleged that it was procured by duress. The pleading in para 45 is this:

On 20th April 1989, Fabi and Kelsall on behalf of the Defendants told Crawley that unless he agreed to the cross-
collateralisation by Lionhope the Defendants would ruin him and each of his family members and would take whatever
action was necessary to bring about the financial downfall of TGG/Lionhope. The Defendants thereby represented that
they intended if such security were given to continue to support TGG/Lionhope.

That is the sole allegation of duress.

It is alleged that the cross-collateralisation agreement is, as a result, void or ought to be avoided for duress and/or undue
influence and/or by virtue of misrepresentation.
In para 52 the damage suffered is set out. It is unnecessary for me to go into it in any detail, except to notice that in para
52(vi) it is alleged:

The Plaintiffs and each of them have thrown away fees and interest payments in respect of the various Citibank and
CHB loans.

All other heads of damage claimed relate to damage which must be damage suffered by the companies, not by Mr Crawley
personally.
The statement of claim as originally delivered made no reference whatsoever to the deed of release. Citibank delivered a
defence and counterclaim which raised the release as a defence. In addition, Citibank counterclaimed against the plaintiff
companies for repayment of principal and interest of the various advances. It also asked for a declaration of the liability of TGG
and Mr Crawely to indemnify it against any claims by the other plaintiffs. The Danish bank similarly served a defence and
counterclaim.
In the reply and defence to counterclaim (which appears to have been settled and served by the directors of the plaintiff
companies without reference to the receiver or to the liquidator) the plaintiff companies plead in para 22:
8

the Release is void alternatively ought to be avoided by reason of the breaches of implied terms, fraudulent and
non-fraudulent misrepresentation, breaches of duty of care and/or instances of duress and/or undue influence and each of
them referred to in the Statement of Claim and in paragraph 15 above.

I do not think anything turns on the allegation in para 15 of the reply.

The banks make their application to strike out both under RSC Ord 18, r 19 and under the inherent jurisdiction. Mr Sheridan
on behalf of the plaintiffs submitted that I should not entertain this application as it involved a lengthy consideration of a
complicated story inappropriate for consideration on a striking out since striking out can only take place when the position is
clear. At that stage he had not raised the major submission which I will come to on the effect of the Unfair Contract Terms Act
1977.
 I reject the submission that this is not a suitable case. Although the facts fundamentally at issue in the action, if it ever goes
for trial, are complex, the matters which Mr Goldsmith QC and Mr Irvin on behalf of the defendants are relying on to strike out
are essentially in a fairly narrow compass. It is a case in which complicated claims, very expensive to defend, are being brought
which, on the submissions made to me, are hopeless. It seems to me an appropriate case to go into.
However, I do accept that it is not appropriate for me to go into a detailed analysis of much conflicting evidence or
documentation, save where it can be shown that the documentation all points one way.
The banks found their claim to strike out under three heads. First, they say that the plaintiffs have no locus standi to bring
these proceedings. Second, they claim that all the matters relied upon in the statement of claim, based on facts occurring prior to
the release of 13 March 1989, are barred by the release. Thirdly, if they are right on that, the only remaining claim is the claim to
set aside the heads of agreement on the grounds of duress, that such claim is so improbable and the pleading and evidence in
support of it so vague and unsatisfactory that the court should strike it out. I will consider each of those bases of claim to strike
out in turn.

THE LOCUS STANDI OF THE PLAINTIFFS

Mr Crawley
The position here is not strictly one of locus standi. What is said is that the pleading as delivered discloses no cause of
action so far as Mr Crawley is concerned. I find it very obscure how it can be alleged that the banks came under a duty of care to
Mr Crawley personally as opposed to the companies in which he was involved. However, I will assume that such a case can be
made out. Even so, Mr Crawley can have no cause of action against the banks whether for breach of contractual or tortious duty
of care, innocent misrepresentation, fraudulent misrepresentation or any other head unless he can allege and prove damage
suffered by him. As I have said, all the damage pleaded in the statement of claim is damage suffered by the company. Mr
Sheridan has accepted, quite correctly, that Mr Crawley as shareholder cannot recover as damage suffered by him personally
damage done to the company resulting in a reduction in the value of his shareholding.
Accordingly, the only possible allegation founding Mr Crawleys claim is that which I have read from para 52(iv) of the
amended statement of claim. The claim for interest payments plainly is not a claim that he can put forward: it is a claim 9 by the
companies only. That leaves the claim for fees thrown awayfees incurred by Mr Crawley. I gave Mr Crawley an opportunity
to put in an affidavit showing how it came about that he had incurred such fees. An affidavit was produced. It contained no
evidence of Mr Crawley having paid such fees. The affidavit repeated the unmaintainable claim that he was entitled to recover
damages, being the diminution in the value of his shares resulting from the wrongs done to the company. It also put forward a
wholly new claim based on breach of contract by Citibank to advise him in respect of his own personal wealth and the wealth of
his family. There was not and is not, even in the amended claim, a trace of the factual allegations necessary to found such a
claim. There is no application to amend to plead them. Accordingly, there is no maintainable claim by Mr Crawley personally on
the cause of action pleaded, and I propose to strike him out as a plaintiff in any event.

The Tudor Grange group

It is common ground that the causes of action alleged by these plaintiffs, being property of the companies, are the subject
matter of charges to the banks. The causes of action are therefore part of the property subject to the rights of the receiver
appointed by the banks. Further, although I have not seen the charges themselves, it is, I think, common ground that the receivers
have the right to bring proceedings based on those causes of action: see the powers conferred by the Insolvency Act 1986, s 42
and Sch 1, para 5.
It is therefore surprising if the directors of the first three plaintiffs also have power to bring proceedings to enforce such
cause of action. However, it appears to be established by authority that company directors do in certain circumstances have
power to bring proceedings even after the appointment of a receiver having power to conduct legal proceedings on the companys
behalf (see Newhart Developments Ltd v Co-Op Commercial Bank Ltd [1978] 2 All ER 896, [1978] QB 814). In that case
directors were held to have residual powers to bring proceedings against the debenture holder who had appointed the receiver. In
that case the Court of Appeal was very impressed by two matters. First, the fact that the company had been indemnified by
outside sources against all liability not only for its own costs but also for costs which the company might be ordered to pay to the
other party. Therefore the bringing of proceedings by the directors in the companys name could not in any circumstances
prejudice the property for which the receiver was responsible. The court was also impressed by the fact that the receiver was in
the invidious position in deciding whether or not to take proceedings by reason of the fact that he was being invited to sue those
who had appointed him.
I have substantial doubts whether the Newhart case was correctly decided in any event. That may have to be looked at again
in the future. The decision seems to ignore the difficulty which arises if two different sets of people, the directors and the
receivers, who may have widely differing views and interests, both have power to bring proceedings on the same cause of action.
The position is exacerbated where, as here, the persons who have been sued by the directors bring a counterclaim against the
company. Who is to have the conduct of that counterclaim which directly attacks the property of the company? Further, the
Court of Appeal in the Newhart case does not seem to have had its attention drawn to the fact that the embarrassment of the
receiver in deciding whether or not to sue can be met by an application to the court for directions as to what course should be
taken, an application now envisaged in s 35 of the Insolvency Act 1986.
However, whatever may be the fate of the Newhart decision in the future, I am undoubtedly bound by it now and must
follow it where it exactly covers the 10 point in issue. It does not directly cover the present case. Unlike the position in the
Newhart case, when the directors of the plaintiff companies decided to start proceedings in the name of the company they were
starting proceedings which could directly impinge on the property subject to the receivers powers in that they held no indemnity
against the liability of the companies assets to satisfy a hostile order for costs made against the companies. That brings this case
outside both the decision and the reasoning in the Newhart case since, unlike the Newhart case, the receivers position was
prejudiced by the decision taken. In my judgment, the directors had no power to start the proceedings in those circumstances.
When this was pointed out, Mr Sheridan took instructions and has obtained instructions that it may be possible within 28
days to provide an indemnity against all liability of the companies in costs to the defendants to the sum of 200,000. Given the
possibility of such an indemnity now being forthcoming, if the case is otherwise appropriate to go on, I would not strike out on
this ground alone, but wait to see whether this 200,000 was available and the terms offered at that stage.

Lionhope
The proceedings by Lionhope were started in the same way as by the other three plaintiff companies, that is to say by the
directors, notwithstanding the receivership. After the liquidation of Lionhope, the cause of action was assigned by the liquidator
to Mr Crawley by deed in consideration of 1. Mr Goldsmith and Mr Irvin for the banks have submitted that this was an
astonishing act for the Official Receiver as liquidator to be party to. The payment of 1 nominal consideration provides no
benefit to the company of which the Official Receiver is the custodian. The Official Receiver has chosen to assign to an assignee
who is insolvent and is putting forward a proposal to his creditors. The result appears to be, says Mr Goldsmith, that the rights to
sue on this cause of action have been transferred by the Official Receiver to a man of straw who is in a position then to proceed
with the case. Although Ramsay v Hartley [1977] 2 All ER 673, [1977] 1 WLR 686 establishes that in the case of individual
insolvency the trustee can assign the cause of action to the bankrupt for valuable considerable, it has never been decided and was
left open in that case whether a trustee in bankruptcy or a liquidator could assign otherwise than for value received by the estate
of which he is the trustee. Mr Goldsmith also contended that the assignment was champertous.
As at present advised, I share Mr Goldsmiths surprise at what has been done. But the Official Receiver has not had an
opportunity to explain his actions. I certainly cannot hold the assignment void in his absence. However, if the action is otherwise
to proceed, I would grant a stay of proceedings by Lionhope until the defendant banks have had an opportunity to apply to the
Companies Court for an order under s 168(5) of the Insolvency Act 1986, so that the matter can be properly investigated with the
Official Receiver having an opportunity to be heard on it. If the assignment is found to be improper or ultra vires, the Companies
Court would have power to set it aside.

THE RELEASE OF 13 MARCH 1989

Mr Sheridan concedes that if the release takes effect according to its tenor it provides a complete answer to all claims against
Citibank based on facts or matters occurring before 13 March 1989, including the claim based in fraud. Therefore the release
provides a complete answer to claims other than the heads of agreement claim.
Mr Sheridan further accepts, for the purposes of this hearing only, that the 11 release also provides the Danish bank with a
complete answer to those claims. The plaintiffs claim against Danish bank arises only through the alleged responsibility of the
Danish bank for the acts and omissions of Citibank. It is accepted that if Citibank is released from liability the claim cannot lie
against the Danish bank.
The only question therefore is the validity and effect of the release itself. Mr Sheridan alleges that the plaintiffs have an
arguable case that the release does not take effect according to its tenor. He founds that on two bases. (1) Under s 10 of the
Unfair Contract Terms Act 1977 the release is not binding on the plaintiffs since it was not reasonable. (2) The release was itself
induced by the fraudulent or innocent misrepresentations made by the defendants.

THE UNFAIR CONTRACT TERMS ACT 1977

Mr Sheridan accepts that the 1977 Act is normally regarded as applying to exemption clauses in the strict sense, namely
clauses in a contract exempting prospectively against a future liability. However, he submits that s 10 of the Act according to its
plain meaning operates so as to make subsequent compromises and waivers of accrued claims subject to the tests of
reasonableness introduced by the 1977 Act. Section 10 reads as follows:

A person is not bound by any contract term prejudicing or taking away rights of his which arise under, or in connection
with the performance of another contract, so far as those rights extend to the enforcement of anothers liability which this
Part of this Act prevents that other from excluding or restricting.

Mr Sheridan puts his case in this way. He says what the banks were under contractual duties of care to the plaintiffs under
the banking contracts. The release purports to take away the plaintiffs rights to complain of breaches of the banking contracts
and the duty of care contained in it. Therefore, says Mr Sheridan, the case comes directly within the words of the section.
Reading the section with the interpolation of the characters in this case, he said it would read like this:

A person [ie the plaintiffs] is not bound by any contract term [ie the release] taking away rights of [the plaintiffs]
which arise under another contract [ie the banking contracts], so far as those rights [ie the rights under the banking
contracts] extend to the enforcement of anothers [ie the banks] liability which this Part of this Act prevents that other [ie
the bank] from excluding or restricting.

He submits, in my view correctly, that under s 2(2) of the Act, the bank could not itself by contract exclude or restrict its
liability for breach of its contractual duty of care unless such exclusion or restriction was reasonable. Therefore, he says, the
release is only binding if it satisfies the requirement of reasonableness, a matter which requires full investigation of all the facts
and cannot be the subject matter of a striking-out application.
This argument that s 10 of the Act may apply to compromises or settlement of existing disputes has been foreseen by a
number of textbook writers as an unfortunate possibility. They are unanimous in their hope that the courts will be robust in
resisting it. If Mr Sheridans construction is correct, the impact will be very considerable. The 1977 Act is normally regarded as
being aimed at exemption clauses in the strict sense, that is to say clauses in a contract which aim to cut down prospective
liability arising in the course of the performance of the contract in which the exemption clause is contained. If Mr Sheridans
argument is correct, the Act will apply to all compromises or waivers of existing claims arising from past actions. Any
subsequent agreement to compromise contractual 12 disputes falling within s 2 or s 3 of the Act will itself be capable of being put
in question on the grounds that the compromise or waiver is not reasonable. Even an action settled at the door of the court on the
advice of solicitors and counsel could be reopened on the grounds that the settlement was not reasonable within the meaning of
the Act.
If I am forced to that conclusion by the words of s 10 properly construed, so be it. But, in my judgment, it is improbable that
Parliament intended that result: it would be an end to finality in seeking to resolve disputes.
The starting point in construing s 10 is, in my judgment, to determine the mischief aimed at by the Act itself. For this
purpose, it is legitimate to look at the second report of the Law Commission on Exemption Clauses (Law Com no 69) (see per
Lord Griffiths in Smith v Eric S Bush (a firm) [1989] 2 All ER 514 at 530, [1990] AC 831 at 857). This report was the genesis of
the 1977 Act. The report is wholly concerned with remedying injustices which are caused by exemption clauses in the strict
sense. So far as I can see, the report makes no reference of any kind to any mischief relating to agreements to settle disputes.
Next, the marginal note to s 10 reads as follows: Evasion by means of secondary contract. Although the marginal note to a
section cannot control the language used in the section, it is permissible to have regard to it in considering what is the general
purpose of the section and the mischief at which it is aimed: see Stephens v Cuckfield RDC [1960] 2 All R 716, [1960] 2 QB
372. This sidenote clearly indicates that it is aimed at devices intended to evade the provisions of Pt 1 of the 1977 Act by the use
of another contract. In my judgment, a contract to settle disputes which have arisen concerning the performance of an earlier
contract cannot be described as an evasion of the provisions in the Act regulating exemption clauses in the earlier contract. Nor is
the compromise contract secondary to the earlier contract.
The textbooks, to my mind correctly, identify at least one case which s 10 is designed to cover. Under contract 1, the
supplier (S) contracts to supply a customer (C) with a product. Contract 1 contains no exemption clause. However, C enters into
a servicing contract, contract 2, with another party (X). Under contract 2, C is precluded from exercising certain of his rights
against S under contract 1. In such a case s 10 operates to preclude X from enforcing contract 2 against C so as to prevent C
enforcing his rights against S under contract 1. The extent of the operation of s 10 in such circumstances may be doubtful (see
Treitel Law of Contract (7th edn, 1987) p 206). But there is no doubt that such a case falls squarely within the terms of s 10.
In the case that I have just postulated, the references in s 10 to anothers liability and that other are references to someone
other than X, ie to the original supplier, S. On Mr Sheridans construction the words another and that other are taken as
referring to someone other than C, the customer whose rights are restricted, so as to make the section apply to a case such as the
present where there is no third party, X. Although as a matter of language the words of the section are capable of referring to
anyone other than C, in my judgment, read in context and having regard to the purpose both of the Act and of the section itself,
the reference to another plainly means someone other than X, that is to say someone other than the party to the secondary
contract. In my judgment, s 10 does not apply where the parties to both contracts are the same.
 This view is reinforced by a further factor. If the Act were intended to apply to terms in subsequent compromise agreements
between the same parties as the original contract, s 10 would be quite unnecessary. Under ss 2 and 3 there is no express
requirement that the contract term excluding or restricting Ss liability to C has to be contained in the same contract as that giving
rise to Ss liability to C. If S and C enter into two contracts, it makes no difference if the exemption clause 13 is contained in a
different contract from that under which the goods are supplied. Sections 2 and 3 by themselves will impose the test of
reasonableness. Why then should Parliament have thought that in s 10 there was some possibility of evasion in such
circumstances?
In my judgment, the 1977 Act is dealing solely with exemption clauses in the strict sense (ie clauses in a contract modifying
prospective liability) and does not affect retrospective compromises of existing claims. Section 10 is dealing only with attempts
to evade the Acts provisions by the introduction of such an exemption clause into a contract with a third party. This view does
not in any way conflict with the construction of s 23 of the Act, which has similar application to Scottish law.
My only doubt is raised by Sch 1, para 5. Schedule 1 provides that ss 2 to 4 of the Act are not to extend to various matters.
Paragraph 5 reads as follows:

Section 2(1) does not affect the validity of any discharge and indemnity given by a person, on or in connection with an
award to him of compensation for pneumoconiosis attributable to employment in the coal industry, in respect of any further
claim arising from his contracting that disease.

At first site, the express exclusion from the operation of the Act of one category of compromise agreement suggests that other
compromise agreements are within the Act. However, I am not persuaded of this. Paragraph 5 shows all the signs of a provisions
inserted at the insistence of one lobby, the coal industry, out of an abundance of caution. Why should Parliament have intended
to exclude only one type of latent damage, pneumoconiosis, but leave all compromises involving other types of latent damage
subject to the test of reasonableness? Moreover, para 5 only excludes from the test of reasonableness the provision barring future
claims. On Mr Sheridans construction, this would leave the other terms of settlement in the pneumoconiosis claim subject to the
test of reasonableness imposed by the Act. That is not a conclusion that I think Parliament can have intended.
Accordingly, for those reasons, s 10 cannot apply to the release of 13 March 1989.

MISREPRESENTATION
The claim faces considerable difficulties at the outset. The alleged representation is that Citibank would provide long-term
finance for all the products in the TGG business plan. That is either a representation as to future conduct or a representation as to
the then intention of Citibank. A representation as to future conduct has no effect unless it constitutes a contract. Therefore the
only legally effective representation is a representation of existing fact, namely that at the date of the representation it was the
intention of Citibank to provide the finance. In those circumstances, I find it difficult to see how the allegation of a continuing
representation to that effect is of any avail. The continuing representation would be that it was Citibanks intention back in 1988,
a matter of irrelevance in 1989.
However, I will assume that factor in favour of the plaintiffs since, when one turns to the facts, it is in my judgment
impossible for this claim to succeed. The plaintiffs have got to show that they entered into the deed of release on 13 March 1989
in reliance on a misrepresentation by the banks that the banks would continue to finance the plaintiff companies projects. By the
end of 1988 both banks had declared the plaintiffs in default on their existing borrowings. The plaintiff companies were very
short of finance and needed more. Vague allegations had been made that the plaintiffs had some claims against the banks but no
details had been supplied.
The chief executive of the plaintiff group at that time was a Mr Moir. At the 14 end of January he wrote to Citibank
concerning the suggestion of cross-collateralisation and the release of the claims. The letter includes this passage:

We have not discussed with them [that is to say the shareholders] the question of full cross-collateralisations. If this
were to be effected we would be relying very heavily on your assurance that the object of the exercise is to justify a
refinancing and not just an effort whereby a small additional advance of capital created such a surplus of security as to
enable the bank to withdraw quickly and speedily by way of forced sales.

On 31 January Mr Moir wrote again, saying that the plaintiff group had an urgent need for an immediate cash facility of
2m, failing which the group would have to cease to trade. Citibank was asked to advance that money. The bank responded that
it would not advance that simply as asked but it was prepared to consider lending some additional money as an interim measure.
Apparently in consequence of the lack of cash, Mr Moir ceased to be chief executive at that time and Mr Crawley took over. At a
late stage in the course of the hearing Mr Moir put in an affidavit saying that he had received the assurance of continued support,
referring to that correspondence. He also went on to say that that assurance was continued. However, he did not explain how he
could have known about that after he ceased to be chief executive. Indeed, it seems to me regrettable that his affidavit does not
mention the fact that he had ceased to be chief executive.
When one looks at the correspondence as it continues between Mr Crawley and Citibank, it is in my view transparently
obvious that the bank is not in any sense saying that it is going to provide anything other than interim finance. What was under
discussion was a refinancing of the plaintiff groups by different banks, not by the defendant banks. The proposal was that the
refinancing or the sale of the half share in the Keel development would provide funds out of which the defendant banks could be
paid off. The refinancing was not being discussed as being a refinancing by these banks.
There are references to refinancing them throughout the correspondence. By way of example, Mr Sealey, a partner in a firm
of solicitors called Keeble Hawson, writing on behalf of the plaintiffs on 28 February 1989, says this:

I would like to discuss with you how best to deal with the remaining Tudor Grange defaults in order that the
Greenwich Reach loan can be processed as soon as possible. I understand that the valuations will be available this week.
Assuming they are satisfactory we will then be in a position to agree with Charterhouse the terms of the loan and determine
the period required to drawdown.

Later in the same letter:

So far as the refinancing of Lionhope is concerned we are able to demonstrate that Lionhope can be refinanced, solve
Citibanks liability, debts in total will be repaid.

So there is a clear statement that the refinancing on one side was to be by Charterhouse and on the Lionhope side the debts to the
defendant banks were to be repaid.
On 1 March there was limited agreement called Heads of Terms, para 6 of which reads:

Citibank recognise that Lionhope intends to raise finance from a third party and to use that finance, inter alia, to repay
the existing loan from Citibank to Lionhope of 155 million plus fees (total now approximately 194 million) as soon
as possible.
15
Paragraph 8 records:

Pending the putting in place of the above mentioned security Citibank intend to commence legal action in respect of
the sum of 1 million owed to Citibank by Mr.D R Crawley. If the security mentioned above is put in place by Wednesday
8 March those proceedings will be held in abeyance until 30 June 1989 when the sum of 1 million is to be paid.

That is an express agreement to hold off pending repayment, an agreement totally inconsistent with a continuing representation
that the defendant banks are going to go on financing a group which was obviously in very great financial difficulty.
In the light of the correspondence from which I have quoted, in my judgment it is impossible that the plaintiffs could show
any continuing representation by the defendant banks that they would support the plaintiff groups beyond what in fact they
agreed to do in the heads of agreement. I am therefore satisfied that there is no way in which the plaintiffs can succeed in setting
aside the release on the grounds of misrepresentation.
Accordingly, the release provides a complete answer to all claims other than the claims relating to the heads of agreement.
The claims, other than the claims relating to the heads of agreement, should be struck out even if the amendments proposed in the
statement of claim were permitted.

The heads of agreement

This is the agreement that contained the terms for full cross-collateralisation. The plaintiffs claim is based on two heads.
First, they say that the heads of agreement were induced by the same misrepresentation as induced the release. That claim is
hopeless for the reasons that I have already given in relation to the release.
Second, they allege that it was procured by duress. I have already read the extract from para 45 of the statement of claim
alleging the duress. On any footing, in my judgment, that is a grossly inadequate pleading of a claim in duress. It should be most
carefully pleaded where, when and by whom the duress was exercised and the gist of the words used. The claim based on duress
is supported by a series of affidavits by Mr Crawley. Broadly, he speaks of an occasion when Mr Fabi and Mr Kelsall insisted on
seeing him alone when there were legal advisers available, at which he was subjected to excessive pressure, threatening, as it is
said, the ruin of himself and members of his family, as a result of which he came into an acute state of shock and was left in a
state of collapse when it was most inappropriate for him to be required to sign documents. He also says that they insisted that he
should not speak to his solicitor, Mr Sealey, who was there. He also relies on the fact that his brothers funeral was on 21 April
and that he was very upset about that.
His account, I am bound to say, is extremely confused. In his first affidavit he says that all this took place on 27 April. The
document itself bears the date 20 April. As I think I understand his latest evidence, it is that the threatening interview took place
on 20 April but the document was not signed by him until 21 April. His evidence received some support from an affidavit by Mr
Sealey, who was present. The document in question was held in escrow until 27 April. Company meetings were held in the
interim, during which the necessary consequential documents were approved by meetings at which Mr Crawley was himself
present. Yet, despite the delay of a week, the documents were handed over. No allegation of duress was made at the time nor
indeed until very many months later. All this has to be viewed against the background of proceedings which were only started
after the banks had sued Mr Crawley and his family on their personal guarantees.
16
My own view is that this is a very thin case indeed and one most unlikely to succeed. However, I am here only to strike out
cases which cannot succeed, not ones that I do not feel are likely to succeed. Mr Crawley has gone on oath, so has Mr Sealey, as
to conduct about which, if the judge is satisfied it occurred, could in my judgment constitute duress. I do not think that, apart
from other factors, I could strike out this aspect of the case purely on the grounds of its improbability.
I therefore stand back and look at all these many factors that exist in this case. The only claim left on any footing is the
claim by the plaintiff companies to set aside the cross-collateralisation agreement on the grounds of duress. The proceedings, in
my judgment, have been wrongly brought by the directors of the plaintiff companies, an impropriety which could possibly be
cured by the provision of 200,000 security offered. The claim by the fourth plaintiff, Lionhope, is not maintainable in this
action unless the assignment to Mr Crawley is good, a matter surrounded by doubt, and one which the defendant banks are fully
entitled to challenge in the Companies Court.
There is a counterclaim by each of the banks in the actions. The person entitled to conduct the defence of those
counterclaims is obscure. If it is the receivers who ought to be conducting it, it will produce the bizarre result that one has a
claim being conducted by one set of people, the directors, and a counterclaim being defended by a different set of people, that is
to say the receivers. The chaos is likely to be considerable.
What is left in the action are simply questions of the respective rights of the banks on the one hand and the plaintiff
companies creditors and shareholders on the other in the various properties subject to security. If the collateralisation agreement
stands, then the creditors and shareholders of all the companies will all be liable to the banks for the full indebtedness. If it is set
aside, the incidence will be different. There will be questions arising therefore between the creditors and shareholders of each of
the plaintiff companies, inter se. The determination of this question affects not simply the companies themselves but their
creditors and shareholders, who are not parties to this action.
In all the circumstances, in my judgment, the present proceedings are entirely inappropriate for the determination of the
validity of the heads of agreement. The questions will affect the rights of the creditors of Lionhope, who are not and will not be
bound by any outcome in this action. If the shareholders and Mr Crawley wish to pursue their claim, that is perfectly possible by
claims raised in the liquidation and receivership of the plaintiff companies, which would determine the issues between all persons
affected. The conduct of the proceedings will be in the hands of those who are undoubtedly the right people. Mr Crawley will
have locus standi to put forward his own case on his own behalf. In my judgment, it is vexatious for the banks to be pursued by
this separate action which will not settle the questions between all parties by plaintiffs of doubtful locus standi, in order to decide
a case which is primarily one of the incidence of the liabilities as between various groups of people.
In no sense would the striking out of this case be driving the plaintiff companies or Mr Crawley from the judgment seat. It
is that factor which leads the court to be so careful in striking out. A man is entitled to have his day in court on anything other
than a vexatious piece of litigation. Mr Crawley and those of like mind can have their day in court in properly constituted
proceedings in the Companies Court. It is vexatious, in my judgment, to pursue this one matter on its own in these proceedings.
I therefore propose to strike out all the claims in the action.

Statement of claim struck out. Action dismissed.

Solicitors: Wilde Sapte; Wedlake Bell; William Stockler & Co.

Celia Fox Barrister.

17
[1991] 4 All ER 18
 Director of Public Prosecutions v Vivier
TRANSPORT; Road

QUEENS BENCH DIVISION

MANN LJ AND SIMON BROWN J
14 FEBRUARY, 11 MARCH 1991

Road traffic Road Caravan park Public access Admittance to caravan park restricted to persons registering at reception
area and obtaining vehicle pass Admittance granted to any person satisfying conditions for admission Admittance not
restricted to persons having characteristics personal to themselves Whether users of park constituting special class distinct
from members of general public Whether caravan park a public place Road Traffic Act 1988, s 5(1)(a).

The respondent, after being involved in a traffic accident in a caravan park, was charged with driving a motor vehicle on a road
or other public place while the proportion of alcohol in his breath was above the prescribed limit, contrary to s 5(1)( a) of the
Road Traffic Act 1988. The caravan park was a privately owned caravan site of about 80 acres with facilities for about 1,000
caravans. At any given time there were between 800 and 3,500 people at the park. There were three to four miles of road on the
site, the entrance to which was guarded by a security firm. Members of the public could gain access to the park by registering at
the reception area by the site entrance and obtaining a vehicle pass which allowed them to go to and from the site. The justices
acquitted the respondent on the ground that the caravan park was not a public place for the purposes of the Road Traffic Acts.
The prosecutor appealed, contending that the justices were not entitled as a matter of law to reach the conclusion that the users of
the park constituted a special class distinct from members of the general public.

Held Where persons seeking entry to a place to which the public had access did so for their own rather than the occupiers
purposes and were screened to ensure that they satisfied the conditions for admission, the test to be applied in order to determine
whether the screening process operated to make those passing through it part of a special class distinct from members of the
general public was whether those admitted passed through the screening process for a reason or on account of some characteristic
personal to themselves or whether they were merely members of the public who were being admitted as such and processed
simply to make them subject to payment and to whatever other conditions the occupier or owner of the land chose to impose.
Since those entering the caravan park were not selected for admission because of any characteristic personal to themselves but
merely because they wished to enter and were prepared to accept the modest conditions imposed for entry, there was no sufficient
segregation or selection of campers and caravanners passing through the control system operated at the caravan park to cause
them to cease to be members of the general public and to become a special class. It followed that the justices had not been
entitled to reach the conclusion that the caravan park was not open to the general public or that the respondent was part of a
special class distinct from members of the general public. The caravan park was therefore a public place for the purposes of s
5(1)(a) of the 1988 Act and the prosecutors appeal would accordingly be allowed (see p 24 e f j to p 25 c, post).
Dicta of Lord MacDermott in Montgomery v Loney [1959] NI 171 at 177 and of Lord Parker CJ in Panama (Piccadilly) Ltd
v Newberry [1962] 1 All ER 769 at 772 applied.
18

Notes
For what constitutes a public place for the purposes of traffic regulation, see 40 Halsburys Laws (4th edn) para 481, and for
cases on the subject, see 39(1) Digest (Reissue) 485486, 36383643.
For the Road Traffic Act 1988, s 5, see 38 Halsburys Statutes (4th edn) 836.

Cases referred to in judgments

Bowman v DPP [1990] Crim LR 600, DC.
Buchanan v Motor Insurers Bureau [1955] 1 All ER 607, [1955] 1 WLR 488.
Cawley v Frost [1976] 3 All ER 743, [1976] 1 WLR 1207, DC.
Cox v White [1976] RTR 248, DC.
Deacon v AT (a minor) [1976] RTR 244, DC.
Harrison v Hill 1932 JC 13, HC of Just.
Montgomery v Loney [1959] NI 171, NI CA.
OBrien v Trafalgar Insurance Co Ltd (1945) 61 TLR 225, CA.
Panama (Piccadilly) Ltd v Newberry [1962] 1 All ER 769, [1962] 1 WLR 610, DC.
Paterson v Ogilvy 1957 JC 42, HC of Just.
R v Beaumont [1964] Crim LR 665, CCA.
R v Waters (1963) 47 Cr App R 149, CCA.

Case stated
The Director of Public Prosecutions appealed by way of a case stated by the magistrates sitting at Burnham-on-Sea Magistrates
Court in respect of their adjudication on 16 November 1989 whereby they acquitted the respondent, Jonathan Vivier, of driving a
motor vehicle in a public place, namely Unity Farm Caravan Park, Brean, having consumed alcohol in such quantity that the
proportion thereof in his breath exceeded the prescribed limit, contrary to s 5(1)(a) of the Road Traffic Act 1988 and s 9 of and
Sch 2 to the Road Traffic Offenders Act 1988. The question for the High Court was whether the justices were correct in finding
that Unity Farm Caravan Park when open for business between 24 March and 26 October was not a public place for the purposes
of the Road Traffic Acts. The facts are set out in the judgment of Simon Brown J.

Ian Glen for the Director of Public Prosecutions.

Simon Morgan for the respondent.

Cur adv vult

11 March 1991. The following judgments were delivered.

SIMON BROWN J (giving the first judgment at the invitation of Mann LJ). This is a prosecutors appeal by way of case stated
from the adjudication on 16 November 1989 of justices for the county of Somerset acting in and for the petty sessional division
of Sedgemoor sitting as a magistrates court at Burnham-on-Sea. By their adjudication the justices acquitted the respondent of
the charge of driving a motor vehicle in a public place, namely Unity Farm Caravan Park, Brean, Somerset, on 23 July 1989
having consumed alcohol in such a quantity that the proportion thereof in his breath exceeded the prescribed limit, contrary to s
5(1)(a) of the Road Traffic Act 1988.
Section 5(1)(a) applies only to those driving on a road or other public place. By s 192(1) of the 1988 Act road is defined
to mean any highway or any other road to which the public has access. It is well established on the authorities that for the 19
purposes of s 5 other public place falls to be construed ejusdem generis with road and accordingly has to be read as meaning a
place to which the public has access.
The respondent had been involved in a traffic accident shortly after midnight. He admitted before the justices that at the
material time he had consumed excess alcohol. Thus the only point at issue was whether Unity Farm Caravan Park was a road
or other public place within the meaning of the section. (It is unclear, and immaterial, whether the respondent was driving upon
one of the roads or at some other place within the caravan park.)
The facts found by the justices were these:

(b) Unity Farm Caravan Park is a privately owned camp site. The site covers an area of approximately 80 acres and
has 3 to 4 miles of road. There is provision on the site for 450 static owner occupied caravans and pitches for a further 600
touring caravans. The site is open from a week before Easter until the end of October and depending on the time of year
there are between 800 and 3,500 people present. (c) Unity Farm site is surrounded by a ditch. There are field gates that are
kept padlocked. The main entrance [consists of] two wide gates with a pillar in the middle. One gate is open the majority
of the time. Even when shut the gate is not locked in order to allow access by emergency vehicles. There is an automatic
barrier in use at times. This barrier is put down after 1 a.m. There is a bridleway running through the site. There is a
seasonal full Justices on-licence on the site, allowing sales of intoxicating liquor to persons residing in caravans or tents
situated within Unit Farm Caravan Park or bona fide guests of such persons. (d) The owners of Unity Farm Caravan Site
had had a problem a few years before with car loads of youths driving around the site without permission. As a result a
security firm had been employed. There had been no further problems for two or three years. Although someone slips in
every now and again, 90% had been stopped. (e) There is a reception area by the site entrance and anyone staying on the
site must register. Visitors to the site must have a car pass. Casual people wanting to stay are asked by sign to report to
reception where they are then allocated an area on payment of a fee. On Fridays and Saturdays reception closes at about
ten oclock but may be open until midnight depending on the season. People booking in late would be required to give
their name and registration number and pay the next day. There is no curfew. (f) Two security firms are employed on site.
There is a camera surveillance system with traffic movements recorded on video tape. A night security guard is on duty
from 6 p.m. to 6 a.m. From 1800 to 2100 hours his main priority is around the gate. Vehicles are stopped and a vehicle
without a pass would not be allowed in. From 2100 to 0600 hours the guard is on general patrol, is on call on the radio and
checks back to the gate every 2030 minutes. The guard puts the barrier down at 1.00 a.m. After 9.00 p.m. there would be
nothing to prevent someone driving in and around the site and then out again.

Having been referred to a number of authorities and heard the rival contentions of the parties the justices expressed their
opinion as follows:

(a) The owners of the site had taken steps to reduce the small numbers of persons that used to enter without consent.
There was no evidence to show that even this very small number were present by the tolerance of the owner. (b) At the
material time Unity Farm was open to the public, but it was not open to the general public, but only to a special class of
members of the public. (c) The fact that this special class of members contained a large number of persons did not make
Unity Farm a public place.
20

The question posed for the opinion of this court is:

Whether the Justices were correct in finding that Unity Farm Holiday Centre when open for business between 24th
March and 26th October was not a public place for the purposes of the Road Traffic Acts.

Given, as many of the decided cases observe, that the question whether a place is public or private is largely a matter of fact
and degree, this court ought more appropriately to be asked whether on the facts found the justices were entitled to come to their
conclusion. That question properly is one of law, as was said by Lord MacDermott LCJ in the Northern Ireland Court of Appeal
in Montgomery v Loney [1959] NI 171 at 186:

Generally, the decision will be a matter of fact and degree, but whether the material for consideration suffices to
support one view or the other is a matter of law.

We turn at once to the decided cases in this far from straightforward area of law. What principles emerge as to the correct
approach to follow not merely here but in the very many different factual situations and analogous statutory contexts in which the
same question arises?
We take as our starting point the oft-cited decision of the Scottish High Court of Justiciary in Harrison v Hill 1932 JC 13.
The road there in question was an ordinary farm road forming the access to a farm from a public highway. Although in no sense
a public road it was found that members of the public not having business at the farm frequently walked upon it. The question
arising was, as always, whether the road was one to which the public had access. The Lord Justice General (Clyde) said (at 16):

I think that, when the statute speaks of the public in this connexion, what is meant is the public generally, and not the
special class of members of the public who have occasion for business or social purposes to go to the farmhouse or to any
part of the farm itself; were it otherwise, the definition might just as well have included all private roads as well as all
public highways. I think also that, when the statute speaks of the public having access to the road, what is meant is
neither (at one extreme) that the public has a positive right of its own to access, nor (at the other extreme) that there exists
no physical obstruction, of greater or less impenetrability, against physical access by the public; but that the public actually
and legally enjoys access to it. It is, I think, a certain state of use or possession that is pointed to. There must be, as matter
of fact, walking or driving by the public on the road, and such walking or driving must be lawfully performedthat is to
say, must be permitted or allowed, either expressly or implicitly, by the person or persons to whom the road belongs.

Lord Sands said (at 17):

In my view, any road may be regarded as a road to which the public have access upon which members of the public
are to be found who have not obtained access either by overcoming a physical obstruction or in defiance of prohibition
express or implied.
 That farm road was found to be one to which the public had access, not on account of the special class of members of the
public who have occasion for business or social purposes to go to the farmhouse or any part of the farm itself, but rather because
the public generally did have access to the private road in question without objection.
In Cox v White [1976] RTR 248 at 251 Lord Widgery CJ in this court cited that short passage from Lord Sandss judgment
and said:
21

I think that in 99 cases out of 100 that direction is all that the justices need to decide whether a road is a road for
current purposes.

Alas, this seems to us the one hundredth case. Certainly, we find Lord Sandss approach an insufficient touchstone by which
to decide the present appeal. Let us explain. What Lord Sands, and indeed Lord Clyde, say in Harrison v Hill can really be
summarised thus. A road is one to which the public have access if (a) it is in fact used by members of the public and (b) such use
is expressly or implicitly allowedor, putting it the other way round, not achieved by overcoming physical obstruction or
defying express or implied prohibition.
Factor (b) presents no problem. But factor (a) does. In particular, as it seems to us, (a) essentially begs rather than answers
the other crucial question whether those who use the road are members of the public. Take our case. We have not the least
hesitation in accepting that the only material use of this caravan park was by those who had complied with the various site
requirements and been properly admitted, in short those who had been expressly or implicitly allowed into the caravan park,
either as caravanners or campers or as their bona fide guests. We think it right to ignore both the few trespassers who escaped the
security controls and also the users of the bridleway (which in any event could not affect the character of the park as a whole).
And, indeed, we do not understand Mr Glen for the prosecutor to contend otherwise.
What that leaves outstanding, however, is the critical question: are the caravanners, campers and guests to be regarded,
within the park, still as members of the general public or are they instead, as the justices found, at that stage a special class of
members of the public?
Upon that question, Harrison v Hill helps but little: there is simply Lord Clydes reference to the special class of members
of the public who have occasion for business or social purposes to use the farm road.
This point was examined further in Montgomery v Loney [1959] NI 171, the Northern Ireland case, concerning a filling
station forecourt. Lord MacDermott LCJ, turning to consider the private carriageway or drive which only tradesmen and friends
and relations of the owner or occupier are permitted to use, said (at 177):

The invitees and licensees who use such carriageways are, it is true, members of the public. But permission to enter is
not given to them as such, but because there is some reason personal to them for their admittance. They may come as
guests or to deliver the mail or to read the meters: whatever their particular purpose, they form a class which is distinct
from that composed of those who are invited or permitted to enter as members of the public.

Later in his judgment he said (at 187):

those who are allowed to enter private property, not as members of the public, but for reasons in some way
personal to the individuals admitted, will not be regarded as the general public or a substantial section thereof, and their
admission will not constitute the giving of access to the public for the purposes of the definition. Pass holders entering a
dock area, or employees going to work along a factory road, for example, do not bring the definition into play because they
obtain access, not as members of the public, but on the strength of a relationship between the individual and the owner or
occupier concerned. So, too, with those who visited the farm in Harrison v. Hill (1932 JC 13) for social or business
purposes. Apart from any question as to whether, as a class, they could be reckoned a significant section of the public, the
invitation or permission under which they entered was in no 22 sense addressed or given to the public. This decision marks
the clear distinction existing between these visitors and those allowed to walk on the road. The latter gained access as
members of the public.

It is time to look at one or two of the English authorities although we confess to finding little in them to illuminate the
problem.
Lord MacDermott LCJs illustration of the factory road was, perhaps, based upon OBrien v Trafalgar Insurance Co Ltd
(1945) 61 TLR 225, in which the Court of Appeal approved this from the judgment of Stable J (at 226):

Public meant something more than a lot of individuals; indeed, the quantity test was not the right one. The class of
persons allowed in the area on business, though very numerous and constituting a wide category, did not come within the
definition of the word public in the Act.

Lord MacDermott LCJs reference to a dock area likewise no doubt had in mind Buchanan v Motor Insurers Bureau [1955]
1 All ER 607, [1955] 1 WLR 488, where it was held that roads within the premises of the Port of London Authority were not ones
to which the general public, in contradistinction to pass-holders, had access.
In R v Waters (1963) 47 Cr App R 149 at 154 the Court of Criminal Appeal said:

If only a restricted class of person is permitted to have access or invited to have access, then clearly the case would fall
on the side of the line of it being a private place. If, on the other hand, only a restricted class is excluded, then it would fall
on the other side of the line and be a public place.

That case, however, was one of many concerned with public house car parks and provides little assistance in deciding just what is
encompassed within the concept of a restricted class of person.
A decision heavily relied upon by Mr Morgan for the respondent is R v Beaumont [1964] Crim LR 665, in which the Court
of Criminal Appeal was unable to accept the contention that where a particular class of persons uses a road the number of
persons in the class makes the road one to which the public has access. In respect of an occupation road leading to a farm, to
land (also owned by the farmer) occupied by 200 to 250 caravans, and to a river where anglers went by leave of the farmer, the
court held that there was no evidence that the general public used the road.
The final case relied upon by Mr Morgan is Deacon v AT (a minor) [1976] RTR 244, in which this court dismissed a
prosecutors appeal against the justices finding that a road on a council housing estate was not one to which the public had
access. Lord Widgery CJ regarded the residents and their visitors, the only proved users of the estate, as a special class of
members of the public within the meaning of that phrase in Lord Clydes judgment in Harrison v Hill 1932 JC 13 at 16.
For the appellant prosecutor in the present case Mr Glen relied more upon the sort of premises found in various of the cases
to constitute public places than on the precise language of the judgments given. He prays in aid, for instance, Cawley v Frost
[1976] 3 All ER 743, [1976] 1 WLR 1207, where this court held the whole premises of Halifax Town Football Club to be a public
place, Bowman v DPP [1990] Crim LR 600, where this court upheld the justices view, arrived at in light of their own local
knowledge, that a multi-storey car park was a public place, the various decisions in which public house car parks have been held
to be public places, and Paterson v Ogilvy 1957 JC 42, referred to in Montgomery v Loney [1959] NI 171,in which the High
Court of Justiciary reversed the sheriff-substitutes decision and found that a field used (on payment) as the official parking
ground 23 for the Royal Highland show was a public place. In Paterson v Ogilvy 1957 JC 42 at 45 Lord Mackintosh said:

It is really a false distinction to draw between the public in general and the more or less selective class of the public
who were entitled to use this field, namely, those who were motorists and were attending the Show and were ready to pay
the necessary fee.

The justices here, submits Mr Glen, in regarding the caravanners and campers using Unity Farm Caravan Park as a special
class, drew the same false distinction between them and the public in general.
How then, in cases where some particular road or place is used by an identifiable category of people, should justices decide
whether that category is special or restricted or particular such as to distinguish it from the public at large? What, in short, is
the touchstone by which to recognise a special class of people from members of the general public?
Some light is thrown upon the problem by the passage already cited from Lord MacDermott LCJs judgment in Montgomery
v Loney [1959] NI 171 at 177: one asks whether there is about those who obtain permission to enter some reason personal to
them for their admittance. If people come to a private house as guests, postmen or meter readers, they come for reasons personal
to themselves, to serve the purposes of the occupier.
But what of the rather different type of case such as the present where those seeking entry are doing so for their own (rather
than the occupiers) purposes and yet are screened in the sense of having to satisfy certain conditions for admission. Does the
screening process operate to endow those passing through with some special characteristic whereby they lose their identity as
members of the general public and become instead a special class?
Our approach would be as follows. By the same token that one asks in the earlier type of case whether permission is being
granted for a reason personal to the user, in these screening cases one must ask: do those admitted pass through the screening
process for a reason, or on account of some characteristic, personal to themselves? Or are they in truth merely members of the
public who are being admitted as such and processed simply so as to make them subject to payment and whatever other
conditions the landowner chooses to impose.
In approaching the matter in this way we have, we confess, been influenced by the decided cases on closely analogous
language in the law of public entertainment. Panama (Piccadilly) Ltd v Newbury [1962] 1 All ER 769, [1962] 1 WLR 610 raised
the question whether club membership as a precondition to admission to a strip show would preclude its being held a public
entertainment. No, said Lord Parker CJ

there being no evidence whatsoever of any selective process, and, indeed, a rule which enables [election of] members
without knowing anything about them no sufficient segregation has occurred which would prevent the members from
continuing to be members of the public.

(See [1962] 1 All ER 769 at 772, [1962] 1 WLR 610 at 616.)

Turning now with that approach in mind to the facts of the present appeal, we conclude that there was similarly no sufficient
segregation or selection of the caravanners and campers passing through the control system operated at Unity Farm to cause them
to cease to be members of the general public and to become instead a special class. They passed through the gate, not for any
reason or characteristic personal to themselves, not because they were in any way selected, but rather because they wished to
enter and were prepared to satisfy the modest conditions imposed upon them. In our judgment a mere fondness for camping 24
and caravanning cannot constitute a peculiarity sufficient to distinguish those who display it from their fellow citizens. Up to the
boundary of this caravan site those seeking entry are unarguably members of the general public pure and simple. In our judgment
it is quite unreal to suggest that at the gate some transformation occurs whereby they alter their legal character, shed their identity
as members of the general public and take on instead a different status as caravanners and campers.
It follows that in our judgment the justices here were not entitled as a matter of law to reach the conclusion that the users of
this park constituted a special class distinct from members of the general public. On the contrary, applying to the facts as found
what we believe to be the correct approach in law, they had no alternative but to find that the general public does indeed have
access to the park. Accordingly we would answer the question posed No, and remit the case to the justices for the respondent to
be duly convicted in conformity with the law.

MANN LJ. The appeal is allowed, the question is answered No and the case is remitted with a direction to convict.

Appeal allowed. Case remitted with direction to convict.

Solicitors: Crown Prosecution Service, Taunton; Hawks & Scofield, Burnham-on-Sea.

Dilys Tausz Barrister.

[1991] 4 All ER 25

Simmons v Dobson and another

LAND; Property Rights

COURT OF APPEAL, CIVIL DIVISION

FOX, MCCOWAN AND BELDAM LJJ
12, 13 FEBRUARY, 27 MARCH 1991

Easement Right of way Prescription Lost modern grant Leasehold interest Easement claimed by leaseholder over land
occupied by another leaseholder Both leaseholders holding under same landlord Whether right of way can be acquired by
leaseholder under doctrine of lost modern grant.

In 1953 the plaintiff purchased a leasehold property and in 1983 the defendants purchased the adjoining leasehold property. The
fee simple of both properties was vested in the same landlord. In 1989 the plaintiff brought proceedings against the defendant
claiming that he was entitled to a right of way for all purposes and at all times over and along a passageway on the defendants
premises. The judge held that the plaintiff was entitled to the right of way by virtue of an implied grant in an indenture made in
1925 between the landlord of both properties and the former lessees whereby it had been agreed that all rights to light, flow of
water, drainage, way and other easements or quasi-easements should be held to remain as they had hitherto existed and also under
the doctrine of lost modern grant. On appeal by the defendants the issue arose whether the plaintiff could succeed on the basis of
lost modern grant, since he conceded that there was no real evidence to justify the conclusion that the right of way had been
established by implied grant.

Held A person with a leasehold interest in land could not acquire an easement under the doctrine of lost modern grant against
another leaseholder holding under the same landlord since the doctrine of lost modern grant was merely a form of common law
prescription and was therefore subject to the fundamental 25 principle of common law prescription that stipulated that the user
had to be by or on behalf the owner of a fee simple interest in land against another fee simple owner. It followed that there could
be no lost modern grant by or to a person who owned a lesser estate in land than a fee simple. Accordingly, the plaintiff was not
entitled to a right of way over the defendants premises by virtue of the doctrine of lost modern grant. The appeal would
therefore be allowed (see p 28 g h and p 29 f to j, post).
Kilgour v Gaddes [19047] All ER Rep 679 and dictum of P O Lawrence J in Cory v Davies [1923] 2 Ch 95 at 107108
applied.

Notes
For prescription under the doctrine of lost modern grant, see 14 Halsburys Laws (4th edn) paras 8996, and for cases on the
subject, see 19 Digest (Reissue) 7884, 509545.

Cases referred to in judgments

Cory v Davies [1923] 2 Ch 95.
Dalton v Henry Angus & Co (1881) 6 App Cas 740, [18815] All ER Rep 1, HL.
Derry v Saunders [1919] 1 KB 223, CA.
Flynn v Harte [1913] 2 IR 322, Ir KBD.
Kilgour v Gaddes [1904] 1 KB 457, [19047] All ER Rep 679, CA.
Tallon v Ennis [1937] IR 549, Ir HC.
Wheaton v Maple & Co [1893] 3 Ch 48, CA.
Wheeldon v Burrows (1879) 12 Ch D 31, [187480] All ER Rep 669, CA.

Appeal
The defendants, Christopher Dobson and Yvonne Dobson, appealed from the decision of Miss Elizabeth Steel sitting as an
assistant recorder on 5 July 1989 at Leigh County Court upholding the claim of the plaintiff, John Charles Simmons, to be
entitled to a right of way for all purposes and at all times over and along a pathway on the defendants premises at 151
Smallbrook Lane, Leigh. The facts are set out in the judgment of Fox LJ.

Mark Halliwell for the defendants.

Guy Vickers for the plaintiff.

Cur adv vult

27 March 1991. The following judgments were delivered.

FOX LJ. This is an appeal by the defendants from a decision of Miss Elizabeth Steel sitting as an assistant recorder at the Leigh
County Court.
The plaintiff is the owner of the leasehold property 153 Smallbrook Lane, Leigh. The defendants are the owners of 151
Smallbrook Lane, which is also a leasehold.
The plaintiff claims a right of way for all purposes and at all times over and along a passageway on the defendants
premises.
The particulars of claim plead that the plaintiff is entitled to the right of way by virtue of an indenture of 7 September 1925
and made between the Tyldesley Permanent Building Society of the first part, Hannah Scott of the second part and Joseph Moule
of the third part by which Hannah Scott declared and agreed with Joseph Moule that as between the premises known as 153
Smallbrook Lane thereby assigned and the premises known as 151 Smallbrook Lane (which were retained by Hannah Scott) all
rights to light, flow of water, drainage, way and 26 other easements or quasi-easements shall be held to remain as they had
hitherto existed.
The devolution of the title to the two properties so far as material was as follows:

7 October 1891
Lease (which included both properties) to Israel Clegg.
30 September 1926
Assignment of lease by personal representatives of Israel Clegg to W J Scott.
7 September 1925
The pleaded indenture transferred 153 to Joseph Moule.
6 November 1928
Assent by personal representatives of Joseph Moule to vesting of 153 in Eleanor Moule.
26 April 1953
Lease of 153 assigned to the plaintiff.
22 February 1983
Lease of 151 assigned to the defendants.

The plaintiffs case is put in two ways: first, as the basis of the rule in Wheeldon v Burrows (1879) 12 Ch D 31, [187480]
All ER Rep 669 and, secondly, on the basis of lost modern grant. The assistant recorder, who gave a very full judgment, decided
in favour of the plaintiff on both bases.
Wheeldon v Burrows decided that on the grant of part of a tenement there passes to the grantee, as easements, all quasi-
easements over the retained land which (a) were continuous and apparent and (b) had been and were at the time of the grant used
by the grantor for the benefit of the part granted.
Mr Vickers for the plaintiff accepts that there was no evidence before the assistant recorder which could justify her
conclusion that a right of way was established under Wheeldon v Burrows (1879) 12 Ch D 31, [187480] All ER Rep 669. He
does not, therefore, seek to sustain the holding.
I come then to the contention that the plaintiff succeeds on the basis of lost modern grant.
That doctrine arises from the inadequacies of common law prescription. At common law, acquisition of a prescriptive right
depended upon the claimant establishing (amongst other things) the requisite period of user. Thus, common law prescription was
based upon a presumed grant. The grant would be presumed only where the appropriate user had continued from time
immemorial. That was fixed as the year 1189; that date originated in a medieval statute. It was usually impossible to satisfy that
test. Accordingly, the courts held that if user as of right for 20 years or more was established, continued user since 1189 would
be presumed. That was satisfactory as far as it went, but there were gaps. In particular the presumption of immemorial user
could be rebutted by showing that, at some time since 1189, the right did not exist. For example, an easement of light could not
be claimed in respect of a house built after 1189.
It was because of the unsatisfactory nature of common law prescription that the doctrine of lost modern grant was
introduced. It was judge made. The doctrine presumed from long usage that an easement had, in fact, been granted since 1189
but the grant had got lost.
The form which the doctrine took was, initially, that juries were told that from user during living memory, or even during 20
years, they could presume a lost grant. After a time the jury were recommended to make that finding and finally they were
directed to do so. Nobody believed that there ever was a grant. But it was a convenient and workable fiction. The doctrine was
ultimately approved by the House of Lords in Dalton v Henry Angus & Co (1881) 6 App Cas 740, [18815] All ER Rep 1.
Now, in relation to common law prescription generally, user had to be by or on behalf of a fee simple owner against a fee
simple owner. An easement can be granted expressly by a tenant for life or tenant for years so as to bind their respective limited
interests, but such rights cannot be acquired by prescription 27(see Wheaton v Maple & Co [1893] 3 Ch 48 and Kilgour v
Gaddes [1904] 1 KB 457, [19047] All ER Rep 679). Thus Lindley LJ in the former case said ([1893] 3 Ch 48 at 63):

The whole theory of prescription at common law is against presuming any grant or covenant not to interrupt, by or
with any one except an owner in fee. A right claimed by prescription must be claimed as appendant or appurtenant to land,
and not as annexed to it for a term of years.

In Kilgour v Gaddes [1904] 1 KB 457 at 465, [19047] All ER Rep 679 at 683 that was cited with approval by Collins MR.
Mathew LJ said ([1904] 1 KB 457 at 467, [19047] All ER Rep 679 at 684):

I agree. In this case the fee simple of the supposed dominant and servient tenements belonged to the same person. It
is clear that, under such circumstances, an easement like a right of way could not have been created by prescription at
common law. Such an easement can only be acquired by prescription at common law where the dominant and servient
tenements respectively belong to different owners in fee, the essential nature of such an easement being that it is a right
acquired by the owner in fee of the dominant tenement against the owner in fee of the servient tenement. If authorities
were necessary for that proposition, the case of Wheaton v. Maple & Co. and 2 Wms. Saunders, 175(f), (i), would suffice.

In Derry v Saunders [1919] 1 KB 223 at 237 Scrutton LJ said:

It is established by decisions binding on this Court that one tenant cannot acquire an easement of way by prescription
against another tenant holding of the same landlord: Kilgour v. Gaddes ([1904] 1 KB 457, [19047] All ER Rep 679).
This has the result that in parts of the country where lands are let for 99 or even 999 years, no right of way can be acquired
between two tenements where they have the same owner in fee simple.

In Cory v Davies [1923] 2 Ch 95 at 107108 P O Lawrence J said:

It is well settled that a lessee cannot acquire a right of way over the land of another lessee under the same lessor, either
by prescription at common law or under the doctrine of a lost grant or by prescription under the Prescription Act, 1832

It is common ground that all material times the fee simple of numbers 151 and 153 has been vested in the same person.
Against that background I take the view that, as a matter of authority, it is established that one tenant cannot acquire an
easement by prescription at common law against another tenant holding under the same landlord. The position is, I think, the
same in relation to s 2 of the Prescription Act 1832. The purpose of that section is to shorten the period required by common law
prescription to 20 years prior to the bringing of the action. In Dalton v Henry Angus & Co (1881) 6 App Cas 740 at 800, [1881
5] All ER Rep 1 at 11 Lord Selborne LC said:

The effect of [s 2], as I understand it, is to apply the law of prescription, properly so called, to an easement enjoyed as
of right for twenty years, subject to all defences to which a claim by prescription would previously have been open, except
that of shewing a commencement within time of legal memory.

What we are concerned with here is neither common law prescription strictly so called nor a claim under the Prescription
Act 1832 but a claim based on the lost modern grant doctrine. The question is whether the restrictive rule as to prescription by
and against leaseholders applies to cases of lost modern grant.
28
In terms of practicalities, it is difficult to see if one were starting from scratch that there is serious objection to leaseholders
prescribing against each other for the duration of their limited interests (but it has to be said that to introduce such a rule
retrospectively now could affect what were hitherto bought and sold as clear titles). And, as Mr Vickers says, in a modern urban
situation it is hard to see why two householders on one side of the street should be able to prescribe for easements against each
others land because each holds in fee simple while on the other side of the street one leaseholder under the residue of a 999year
lease can for 20 years or more walk along a path at the back of his neighbours garden (also held on a long lease) without
acquiring any rights in respect thereof. That, however, is the way the law has gone in England. The point about long leaseholds
held of the same landlord was recognised by Scrutton LJ in the passage in Derry v Sanders [1919] 1 KB 223 to which I have
referred where he regarded the law as clear.
In Wheaton v Maple & Co [1893] 3 Ch 48 at 63 Lindley LJ said:

I am not aware of any authority for presuming, as a matter of law, a lost grant by a lessee for years in the case of
ordinary easements, or a lost covenant by such a person not to interrupt in the case of light, and I am certainly not prepared
to introduce another fiction to support a claim to a novel prescriptive right.

He then continued with the passage as to the theory of the common law prescription to which I have already referred.
The statements of Scrutton LJ and P O Lawrence J to which I have referred are wholly in line with Lindley LJs view.
Moreover, Collins MR in Kilgour v Gaddes [1904] 1 KB 457 at 465, [19047] All ER Rep 679 at 683 plainly agreed with
Lindley LJs exposition of the law in Wheaton v Maple & Co [1893] 3 Ch 48 and the tenor of the judgments of Romer and
Mathew LJJ in Kilgour v Gaddes is that they agree with it also.
While, therefore, there appears to be no case which directly decides that there can be no lost modern grant by or to a person
who owns a lesser estate than the fee, the dicta are to the contrary and are very strong and of long standing. I take them to
represent settled law. I should mention for completeness that the law in Ireland has gone the other way: see Flynn v Harte
[1913] 2 IR 322 and Tallon v Ennis [1937] IR 549.
 As to any departure from that state of the law, there are, I think, difficulties of principle. It is clear that common law
prescription and prescription under the 1832 Act are, as a matter of decision, not available by or to owners of less estates than the
fee. Lost modern grant is merely a form of common law prescription. It is based upon a fiction which was designed to meet, and
did meet, a particular problem. It would, I think, be anomalous to extend the fiction further by departure, in relation to lost
modern grant, from the fundamental principle of common law prescription referred to by Lindley LJ.
I would allow the appeal.

McCOWAN LJ. I agree.

BELDAM LJ. I also agree.

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

Solicitors: Widdows, Leigh; Stephensons, Leigh).

Frances Rustin Barrister.

29
[1991] 4 All ER 30

Howe and others v David Brown Tractors (Retail) Ltd (Rustons Engineering
Co Ltd, third party)
CIVIL PROCEDURE

COURT OF APPEAL (CIVIL DIVISION)

NICHOLLS, STUART-SMITH LJJ
23 APRIL, 14 MAY 1991

Limitation of action Period of limitation Personal injury claim Writ claiming damages for negligence and/or breach of
statutory duty Statement of claim alleging breach of implied term or warranty that agricultural machinery supplied by
defendant would be fit for purpose and of merchantable quality Plaintiffs claim outside three-year limitation period Order
made disapplying three-year limitation period Plaintiff thereafter seeking to amend writ by adding second plaintiff and claim
by himself and father in partnership Partnership claiming in contract and tort under proposed amendment Whether limitation
period three years or six years in respect of firms claim Whether damages claimed by firm for negligence and breach of
contractual duty consisting of and including damages in respect of personal injuries Limitation Act 1980, s 11 (1) RSC Ord
15, r 6(5).

Practice Parties Adding plaintiff Amendment of writ Application to disapply limitation period Personal injuries action
Whether leave to amend may be given after application to disapply limitation period granted Whether application for leave to
amend to add additional plaintiff should be made before or at same time as application to disapply limitation period Limitation
Act 1980, s 33(1) RSC Ord 15, r 6(5), Ord 20, r 5(5).

The plaintiff and his father were farmers trading under a firm name. In August 1982 the firm bought a tractor with a recotiller
attached to it from the defendant, a supplier of agricultural machinery. On 23 January 1985 the plaintiff was standing on the
recotiller when the guard gave away with the result that his leg was injured and had to be amputated. The primary period of
limitation in respect of any claim by the plaintiff in respect of his injuries expired on 22 January 1988. On 8 July 1988 the
plaintiff issued a generally indorsed writ claiming damages for personal injuries sustained as a result of the accident arising out of
the defendants negligence and/or breach of statutory duty. In his statement of claim he claimed that as suppliers of the machine
the defendant owed him a duty of care and was in breach of an implied condition, term or warranty that the machine would be fit
for its purpose and of merchantable quality. The defendant denied negligence, breach of contract and causation, pleading that the
machine was supplied to the firm and not to the plaintiff, that the plaintiff was not entitled to advance a claim for breach of
contract since such a claim was not indorsed on the writ and that the plaintiffs claim was statute-barred. On 19 December 1988
the district registrar made an order by consent disapplying s 11 a of the Limitation Act 1980, which imposed a three-year
limitation period where the damages claimed by the plaintiff consisted of or included damages in respect of personal injuries. On
14 November 1989 the plaintiff applied to join the firm as second plaintiff for leave to amend the writ and statement of claim to
include a claim by the firm for damages for breach of contract by the sale to the firm of goods which were not safe and also a
claim in negligence. The damages claim was also amended to enable the plaintiffs claim for special damage and continuing loss
30 to be quantified on the basis that he was entitled to 50% of the profits of the partnership and that those profits had been
substantially diminished as a result of his incapacity. The firms claim for loss and damage covered the whole of the loss of
profit. The district registrar gave leave to amend and the judge affirmed his decision. The defendant appealed, contending that
the firms claim fell within s 11 of the 1980 Act because the plaintiffs injuries had been caused by the breach of duty in contract
and therefore the relevant period was three years from the cause of action or date of knowledge, that since the relevant period was
not current at the date of the commencement of the proceedings within RSC Ord 15, r 6(5)( a)b the claim was statute-barred under
Ord 15, r 6(5)(b), which provided, inter alia, that no person could be added as a party after the expiry of the relevant limitation
period where the relevant period arose under, inter alia, s 11, in the absence of a direction by the court under s 33(1) c of the 1980
Act that the section was not to apply to the action by the new party. The questions arose (i) whether the damages claimed by the
firm for negligence or breach of contractual duty consisted of or included damages in respect of personal injuries to the plaintiff
and therefore fell within s 11 of the 1980 Act and (ii) whether an application had to be made and granted under s 33 of the 1980
Act disapplying the relevant limitation period before leave to add the additional plaintiff could be given under Ord 15, r 6(5)( b)
or whether an application under s 33(1) could be made after leave to add the additional plaintiff had been granted.
________________________________________
a Section 11, so far as material, is set out at p 35 a b, post
b Rule 6(5), so far as material, is set out at p 34 f g, post
c Section 33(1), so far as material, provides: If it appears to the court that it would be equitable to allow an action to proceed having regard to
the degree to which(a) the provisions of section 11 of this Act prejudice the plaintiff or any person whom he represents; and (b) any
 decision of the court under this subsection would prejudice the defendant or any person whom he represents; the court may direct that those
provisions shall not apply to the action, or shall not apply to any specified cause of action to which the action relates.

Held (1) Although the defendants breach of duty in supplying a dangerous machine to the firm only caused financial loss of
profit to the firm by reason of the loss resulting from the plaintiffs injury, the firms claim nevertheless consisted of or included
damages in respect of personal injuries to the plaintiff or any other person within s 11(1) of the 1980 Act. Accordingly, s 11
applied to the claim and since the relevant period was not current at the date of the commencement of the proceedings under RSC
Ord 15, r 6(5)(a) the application fell to be considered under Ord 15, r 6(5)(b) and was statute-barred unless an order was made
under s 33(1) of the 1980 Act disapplying the limitation period (see p 36 c to g and p 42 j to p 43 c, post), Ackbar v CF Green &
Co Ltd [1975] 2 All ER 65 considered.
(2) Where it was sought to add an additional party to the proceedings in circumstances where RSC Ord 15, r 6(5)( b) applied
it was necessary for an application to be made under s 33(1) of the 1980 Act disapplying the limitation period applicable to the
claim before or at the same time as the application for leave to amend the writ was made. Accordingly, the order for the addition
of the firm as an additional plaintiff was premature and the defendants appeal would be allowed on that ground (see p 38 a b, p
40 b, p 43 h j and p 45 d j to p 46 a, post); Kennett v Brown [1988] 2 All ER 600 distinguished.
(3) However, although there was no valid claim for breach of contract on the pleadings because the original writ did not
expressly refer to the cause of action in contract and the facts giving rise to the cause of action in tort pleaded by the plaintiff
were not the same as or did not include or form part of the plaintiffs claim in contract, which in any event was misconceived, the
court had power under RSC Ord 20, r 5(5)d to give leave to amend the writ to add such a claim 31 despite the expiry of the three-
year limitation period because the effect of the amendment would be to add a new cause of action which arose out of
substantially the same facts as the existing claim in negligence. Accordingly, it would be open to the plaintiff and his father to
make a fresh application under s 33(1) of the 1980 Act disapplying the limitation period applicable to the claim and at the same
time apply for leave to amend the writ (see p 38 g, p 39 g to j, p 45 h j and p 46 c, post); Brickfield Properties Ltd v Newton
[1971] 3 All ER 328 applied.
________________________________________
d Rule 5(5) is set out at p 38 j, post

Notes
For time limits in personal injury actions, see 28 Halsburys Laws (4th edn) paras 691694, and for cases on the subject, see 32
Digest (Reissue) 486, 37343736.
For amendments of a writ after expiry of the limitation period, see 36 Halsburys Laws (4th edn) para 69 and 37 Halsburys
Laws (4th edn) paras 274, 277, and for cases on the subject, see 37(1) Digest (Reissue) 264265, 17321737.
For the Limitation Act 1980, ss 11, 33, see 24 Halsburys Statutes (4th edn, 1989 reissue) 657, 686.

Cases referred to in judgments

Ackbar v CF Green & Co Ltd [1975] 2 All ER 65, [1975] QB 582, [1975] 2 WLR 773.
Brickfield Properties Ltd v Newton [1971] 3 All ER 328, [1971] 1 WLR 862, CA.
Hill v Luton Corp [1951] 1 All ER 1028, [1951] 2 KB 387.
Kennett v Brown [1988] 2 All ER 600, [1988] 1 WLR 582, CA.
Letang v Cooper [1964] 2 All ER 929, [1965] 1 QB 232, [1964] 3 WLR 573, CA.
McGahie v Union of Shop Distributive and Allied Workers 1966 SLT 74, Ct of Sess.
Pontin v Wood [1962] 1 All ER 294, [1962] 1 QB 594, [1962] 2 WLR 258.

Cases also cited

Batting v London Passenger Transport Board [1941] 1 All ER 228, CA.
Graff Bros Estates Ltd v Rimrose Brook Joint Sewerage Board [1953] 2 All ER 631, [1953] 2 QB 318, CA.
Grounsell v Cuthell [1952] 2 All ER 135, [1952] 2 QB 673.
Johnson v Palmer (1879) 4 CPD 258.
Large v Large [1877] WN 198.
Marshall v London Passenger Transport Board [1936] 3 All ER 83, CA.
Paterson v Chadwick [1974] 2 All ER 772, [1974] 1 WLR 890.

Interlocutory appeal
The defendant, David Brown Tractors (Retail) Ltd, appealed with the leave of the Court of Appeal given on 14 May 1990 from
the order of Evans J dated 15 March 1990 whereby he dismissed the defendants appeal from the order of Mr District Registrar
Dixon made on 11 January 1990 granting the first plaintiff, Neville Keith Howe, leave to amend the writ and statement of claim
in the action by joining as second plaintiff, Neville Keith Howe and Ronald Howe, trading as W & J Howe (a firm), and
including in the writ and statement of claim a joint claim by the plaintiffs in partnership for breach of contract and negligence.
The third party, Rustons Engineering Co Ltd, took no part in the proceedings. The facts are set out in the judgment of Stuart-
Smith LJ.

Bernard Livesey QC for the defendant.

Iain McLeod for the first plaintiff.

Cur adv vult

32

14 May 1991. The following judgments were delivered.

STUART-SMITH LJ. This is an appeal brought with the leave of this court from a judgment of Evans J given on 15 March
1990 in which he dismissed the defendants appeal from the decision of Mr District Registrar Dixon giving leave to the first
plaintiff to amend the writ and statement of claim by adding Ronald Howe as a second plaintiff and including in the writ and
statement of claim a joint claim by the two plaintiffs in partnership for breach of contract and negligence. I shall refer to Neville
Keith Howe as the plaintiff, Ronald Howe as the father and the firm as the firm.
The facts are these. The plaintiff and his father are farmers trading under the name W & J Howe (a firm). The defendant
supplies agricultural machinery. On 10 August 1982 the firm bought from the defendant a tractor and a recotiller, which is a
machine attached to and driven by the power of the tractor and designed to produce a smooth seed bed. On 23 January 1985 the
plaintiff was standing on the recotiller when the guard gave way and his leg came into contact with the machinery which was in
motion. As a result of his injuries the leg had to be amputated.
 The primary limitation period in respect of any claim by the plaintiff in respect of his injuries expired on 22 January 1988,
three years after the accident.
On 8 July 1988 the plaintiff issued a generally indorsed writ. It was in these terms:

The Plaintiffs claim is for personal injuries sustained and losses and expenses incurred as a result of an accident
which occurred on or about the 23rd January 1985 at the Plaintiffs premises at Mill Grange, Ely Road, Prickwillow,
Cambridgeshire arising out of the negligence and/or breach of statutory duty of the Defendants their servants or agents.

It was a claim in tort.

On 16 July 1988 a statement of claim was served. After reciting the plaintiffs business as a partner of the firm and the
circumstances of the accident the statement of claim alleged:

3. The Defendants supplied the said machine to the Plaintiff on or about the 10th August 1982 and as suppliers of the
machine the Defendants owed a duty of care to the Plaintiff.
4. Further or in the alternative there was an implied term or warranty that the said machine would be fit for its said
purpose and of merchantable quality.
5. In breach of the said implied condition, term and warranty hereinbefore pleaded the said machine was not of
merchantable quality or fit for the purpose in that the said guard platform collapsed.

Particulars of negligence
There then follow allegations of negligence, which I need not rehearse, and particulars of the injury. By its defence, in
addition to denying negligence, breach of contract and causation, the defendant pleaded: (1) that the machine was supplied to the
firm and not the plaintiff; (2) that the plaintiff was not entitled to advance a claim for breach of contract since such a claim was
not indorsed on the writ; and (3) that the plaintiffs claim was statute-barred.
Thereafter the plaintiff took out a summons seeking an order of the court pursuant to s 33 of the Limitation Act 1980
disapplying the provisions of s 11 of that Act, which imposed the three-year limitation period in respect of the plaintiffs claim.
On 19 December 1988, by consent, the district registrar made such an order.
33
On 14 November 1989 the plaintiff applied by summons to add the father and/or the firm as second plaintiff in the action
and leave to amend the writ and statement of claim. In substance the amendment to the writ was to include a claim by the firm as
follows:

The Second Plaintiffs claim is for damages for breach of contract of sale made on the 10th day of August 1982
between the Second Plaintiff and the Defendants, their servants or agents and/or as a result of their negligence.

The proposed amendment to the statement of claim made it clear that the only claim advanced on behalf of the plaintiff was
in negligence. The firms claim was for damages for breach of the implied terms in the contract as to fitness for the purpose and
merchantability. It was also alleged that the defendant was negligent and in breach of duty to the firm (a claim in tort). The
damage claim was also amended. So far as the plaintiff is concerned, apart from a claim for general damages for the serious
injury to his leg and a claim for loss of earning capacity, his claim for special damage and continuing loss is quantified on the
basis that he is entitled to 50% of the profits of the partnership and that these profits have been substantially diminished as a
result of his incapacity. Additional machinery has had to be obtained; outside contractors and additional help employed to work
the farm, all matters which have caused loss to date and will contribute to lower profits in future.
The claim for loss and damage alleged to have been sustained by the firm covers much of the same ground as that by the
plaintiff but is for the whole, as opposed to 50% of the loss of profit. Certain matters of additional expenditure on machinery,
labour and outside contractors are itemised and there is a claim for loss of profit in future years.
The defendant opposed the application for leave to amend but, as I have indicated, the district registrar granted leave and
Evans J dismissed the defendants appeal.
The provision which is at the heart of this appeal is RSC Ord 15, r 6(5), which provides:

No person shall be added or substituted as a party after the expiry of any relevant period of limitation unless either
(a) the relevant period was current at the date when proceedings were commenced and it is necessary for the determination
of the action that the new party should be added, or substituted; or (b) the relevant period arises under the provisions of
section 11 or 12 of the Limitation Act 1980 and the Court directs that those provisions should not apply to the action by or
against the new party. In this paragraph any relevant period of limitation means a time limit under the Limitation Act
1980

Before I turn to the consideration of this rule it is necessary to decide what is the relevant period of limitation in respect of
the firms claim. Mr Livesey QC for the defendant submits that the firms claim falls within s 11 of the Limitation Act 1980; the
relevant period is therefore three years from the cause of action or the date of knowledge (s 11(4)). Accordingly the relevant
period was not current at the date of the commencement of the proceedings within Ord 15, r 6(5)( a) and the matter falls to be
considered under Ord 15, r 6(5)(b).
Mr McLeod, on the other hand, contends that the firms claim (as opposed to the plaintiffs) does not fall within s 11 and the
relevant period of limitation is six years from the breach of contract so far as the contractual claim and six years from the accident
so far as the claim in negligence is concerned.
Section 11(1) of the Limitation Act 1980 provides:
34

This section applies to any action for damages for negligence, nuisance or breach of duty (whether the duty exists by
virtue of a contract or of provision made by or under a statute or independently of any contract or any such provision)
where the damages claimed by the plaintiff for the negligence, nuisance or breach of duty consist of or include damages in
respect of personal injuries to the plaintiff or any other person.

The question is whether the damages claimed by the firm for negligence or breach of contractual duty (to provide a machine
that was fit for the purpose and/or of merchantable quality) consist of or include damages in respect of personal injuries to the
plaintiff.
There is only one reported English authority on the meaning of this section, namely Ackbar v CF Green & Co Ltd [1975] 2
All ER 65, [1975] QB 582. The plaintiff, who had been injured in an accident while travelling as a passenger in his own lorry,
discovered that the defendants, his insurance brokers, had failed to carry out his instructions to obtain passenger liability
insurance for the lorry. Being unable to recover his losses from the insurers of the vehicles concerned he sued the defendants for
breach of contract. The proceedings were issued more than three years but less than six years after the accident. The defendants
contended that the claim was statute-barred because the three-year period applied under s 2(1) of the Limitation Act 1939(as
amended), which is effectively in the same terms as s 11(1) of the 1980 Act. Croom-Johnson J rejected the defendants argument
and held that the relevant period of limitation was six years from the breach of contract. The learned judge said ([1975] 2 All ER
65 at 68, [1975] QB 582 at 587588):

The proper test in my view in the present case is to ask what is the action all about? The plaintiffs answer to that
question is that this action is all about breach of contract which resulted in damage to the plaintiff. The compensation for
that damage is an award of money called damages, the assessment of which is to be measured by the award which he
would have got against the tortfeasor, the negligent driver. This action, says the plaintiff, is not one where damages in
respect of personal injuries within the wording of the proviso [to s 2(1) of the 1939 Act] are sought, because to fulfil that
wording the personal injuries must have been sustained by the same breach of duty as gives rise to the action. For that
reason it is said that it does not matter whether the instant action is framed in contract, as it is, or in tort In the end if
one asks the question here What is this action all about? one gets the answer that it is about an alleged breach of contract
by the defendants, as a result of which the plaintiff lost the chance or right to recover his loss either from the driver or from
his own insurers. I do not think that the damages sought in this action consist of or include damages in respect of personal
injuries. Those damages, which might have been recovered heretofore, are only the measure of the damages now claimed.

In McGahie Union of Shop Distributive and Allied Workers 1966 SLT 74 Lord Fraser was contemplating a similar provision
in the relevant Scottish statute. He said (at 75):

There is, in my opinion, only one item of loss in the damages claimed in this action, that item being the loss caused by
the lapse of the pursuers right to sue her employers. The lapse of that right did not cause her any personal injury. The
matter was put correctly thus:The expression damages in respect of personal injuries may be paraphrased as
compensation for a wrong consisting of personal injuries; but the pursuer in this action seeks 35 compensation for a wrong
consisting of allowing her right of action against her employers to lapse without having been exercised. Therefore, said
senior counsel [for the pursuer], the damages are not in respect of personal injuries. No doubt this action will necessitate
inquiry into the nature and extent of the personal injuries sustained by the pursuer, but that is, in my opinion, only for the
purpose of evaluating the right that she has lost or (what is the same thing) of quantifying her loss.

Mr Livesey submits that the firms claim is within the section because the breach of duty in contract caused the plaintiffs
injuries; he also submits that it would be anomalous if the plaintiffs claim was within the section but the firms was not. If one
asks the question: What is the firms action all about? the answer is that it is a claim for damages consisting of loss of profit
caused by breach of contract or negligence on the part of the defendant, resulting from the personal injury to the plaintiff. The
essential distinction between the present case and Ackbars case is that the same facts which give rise to the personal injury and
breach of duty to the plaintiff give rise to the breach of duty, albeit a different duty, owed to the firm. It is the supply of a
dangerous machine which constitutes the breach of duty in tort to the plaintiff and causes his personal injury and pecuniary loss
resulting from such injury. It is the supply of the dangerous machine which constitutes the breach of contractual duty owed to the
firm to supply a machine of merchantable quality and fit for its purpose; this breach of duty only causes financial loss to the firm
because of the loss resulting from the personal injury to the plaintiff. In my judgment the words in respect of are wide enough
to embrace such a claim and I find nothing inconsistent in this result with the reasoning of Croom-Johnson J in Ackbars case.
A typical case is where a plaintiff workman is injured by defective machinery provided for his use by his employer. He can
sue the employer in tort under the Employers Liability (Defective Equipment) Act 1969 and perhaps also for negligence.
Section 11 of the Limitation Act 1980 applies. The employer can sue in contract the supplier of the machinery; the measure of
damages is an indemnity in respect of the workmans claim. Such a claim in my judgment also plainly falls within s 11. If the
employer adds a claim in respect of his own losses resulting from the plaintiffs injury (assuming such a claim will lie in law) the
nature of the claim is not so different as to take it outside the section. Effectively this is what the firms claim is here, though of
course it is not coupled with any claim for indemnity against a claim of the plaintiff. The final words of the section in respect of
personal injuries to the plaintiff or any other person, in my judgment, add point to this construction. Accordingly the application
falls to be considered under Ord 15, r 6(5)(b).
The next question that falls to be determined is whether under this rule leave to amend to add the party should be given, it
then being for the defendant to take the limitation defence, whereupon an application under s 33 of the 1980 Act must be made,
or whether such application must be made and granted before leave to add the additional plaintiff can be given. The learned
judge, who did not find it necessary to decide whether the relevant limitation period was three or six years, held, on the
assumption that it was three, that the application under s 33 could be made subsequently to the addition of the second plaintiff. In
so doing he purported to follow the decision of this court in Kennett v Brown [1988] 2 All ER 600, [1988] 1 WLR 582. In that
case the plaintiff suffered personal injuries in a road accident and brought an action against the first defendant claiming damages.
Subsequently the second defendant was joined as a party. Shortly after the expiry of three years from the accident the first
defendant served a contribution notice on the second defendant. He claimed an indemnity in respect of any liability he 36 might
incur to the plaintiff and damages for personal injury. The first defendant applied for directions, and the district registrar held that
there could be no claim by the first defendant in respect of his own injuries until he had applied under s 33 of the Limitation Act
1980 to disapply the provisions of s 11. He stood the application over.
On appeal to the judge in chambers by the first defendant it was held that it was for the second defendant to raise the
limitation defence in the contribution proceedings and, if and when he did so, for the first defendant to apply under s 33. The
appeal to the Court of Appeal was dismissed. It is important to appreciate that that case turned solely on the construction of s 35
of the 1980 Act. There was no question of the addition of a party to the proceedings, since the second defendant was already
properly joined as a party in the contribution proceedings. The claim in respect of the first defendants personal injury was a new
claim within the meaning of s 35(1)(b). Section 35(3) is in the following terms:

Except as provided by section 33 of this Act or by rules of court, neither the High Court nor any county court shall
allow a new claim within subsection (1)(b) above, other than an original set-off or counterclaim, to be made in the course
of any action after the expiry of any time limit under this Act which would affect a new action to enforce that claim. For
the purposes of this subsection, a claim is an original set-off or an original counterclaim if it is a claim made by way of set-
off or (as the case may be) by way of counterclaim by a party who has not previously made any claim in the action.

The Court of Appeal held that the subsection did not prevent the bringing of a new claim but merely operated as a
procedural bar which the defendant to such a claim could raise if he wished. Lord Donaldson MR said ([1988] 2 All ER 600 at
602603, [1988] 1 WLR 582 at 585):

So I look at the wording of the subsection. Parliament must be deemed to have been aware of the way in which,
subject to special provisions made in rules of court, the Limitation Acts have always been applied, namely as procedural
bars which a defendant to a particular claim could raise if he wished, but which he was not obliged to raise if he did not
wish. If the view of the statute which is put forward by counsel for Mr Teagle is accepted, it would be necessary in every
case where a new claim falling within s 35(1)(b) was raised after the expiry of the limitation period for the person raising
the claim to make an application under s 33 to have the Limitation Act 1980 disapplied. I can see no reason of policy why
 that should be the case and why Parliament should ever have intended it, and so I approach the words in s 35(3), neither
the High Court nor any county court shall allow a new claim to be made in the course of any action, without feeling
that I am in any way bound by the literal meaning of those words. In s 11 and the various other sections the wording of the
1980 Act is An action shall not be brought. We know that Parliament does not mean by that that no action shall be
brought; it means that no action shall succeed. I see no reason why the words here, neither the High Court nor any county
court shall allow a new claim to be made, should receive any other construction.

But s 35(3) contains the crucial words Except as provided by section 33 of this Act or by rules of court. It is plain
therefore that rules of court may present an additional bar or hurdle. It has always been the position that unlike an initiating
action which can be started without leave even if apparently statute-barred, leave is required to amend (except under certain
limited cases: see Ord 20, r 1), and will 37 not be granted where the existing plaintiffs new claim or the new plaintiffs claim is
statute-barred, except again in certain limited cases. In my judgment the words of Ord 15, r 6(5), are clear and unambiguous; no
person shall be added as plaintiff. To adopt a similar approach to construction as that adopted by the Court of Appeal in
Kennetts case would be to go contrary to the principle which has pertained for many years in relation to amendments and
addition of parties. The relevant words cannot be construed as such a person can be added, but a claim cannot be allowed to
succeed against him. In my judgment Kennets case is distinguishable and has no application where Ord 15, r 6(5) applies.
Accordingly it is necessary where it is sought to add a plaintiff in circumstances where Ord 15, r 6(5)( b) applies for the plaintiff
to make an application under s 33 of the 1980 Act before or at the same time as the application for leave to amend. If the only
question was whether or not a new party should be added, then it would in my opinion be open to the plaintiff to reapply for leave
to amend to add a party accompanied by an application under s 33 of the 1980 Act. But this assumes that before the plaintiff
sought to amend there was then a valid claim for breach of contract on the pleadings.
Mr McLeod submits that this is so and the learned judge accepted the argument. The argument is this: the original writ did
not expressly refer to the cause of action in contract; in this respect it was not a nullity but was defective inasmuch that it failed to
identify the contract, breach of which gave rise to the negligence; the defect was however cured by the statement of claim.
Reliance was placed on Hill v Luton Corp [1951] 1 All ER 1028, [1951] 2 KB 387 and Pontin v Wood [1962] 1 All ER 294,
[1962] 1 QB 594. The difficulty with this argument, in my judgment, lies in Ord 18, r 15(2), which was introduced for the first
time in 1964 after the decision in those two authorities. That rule provides:

A statement of claim must not contain any allegation or claim in respect of a cause of action unless that cause of action
is mentioned in the writ or arises from facts which are the same as, or include or form part of, facts giving rise to a cause of
action so mentioned; but, subject to that, a plaintiff may in his statement of claim alter, modify or extend any claim made
by him in the indorsement of the writ without amending the indorsement.

It is plain, in my judgment, that the cause of action in contract was not mentioned in the writ and that it did not arise from
facts which were the same as or formed part of the facts giving rise to the cause of action so mentioned. For the cause of action
in contract it was necessary to allege further facts than those which give rise to the claim in negligence; and the expression forms
part of postulates that only some of the facts giving rise to the cause of action alleged in the writ will suffice to ground the new
claim. Difficulty, however, is presented by the word include. This rule was considered by the Court of Appeal in Brickfield
Properties Ltd v Newton [1971] 3 All ER 328, [1971] 1 WLR 862, a case which was not drawn to the judges attention. That was
a claim against architects for breach of contract. The writ alleged negligence in relation to supervision only; but the statement of
claim alleged negligent, supervision and design.
Each member of the court pointed out that Ord 18, r 5(2) was in substantially narrower terms than Ord 20, r 5(5), which
provides:

An amendment may be allowed under paragraph (2) notwithstanding that the effect of the amendment will be to add or
substitute a new cause of action if the new cause of action arises out of the same facts or substantially the same facts as a
cause of action in respect of which relief has already been claimed in the action by the party applying for leave to make the
amendment.
38

In relation to Ord 18, r 15(2) Sachs LJ said ([1971] 3 All ER 328 at 333, [1971] 1 WLR 862 at 870):

Without wishing to lay down any general formula as to how the sub-rule should be applied, it seems that in general it
is meant to relate to cases in which some part of the facts necessary to establish the claim made in the writ would suffice to
establish some other, perhaps narrower, cause of action. It has somewhat the same effect as the rule in criminal cases that
one may include in an indictment any count which is supported by evidence disclosed in the depositions but none which
requires the proof of additional facts.

Edmund Davies LJ said ([1971] 3 All ER 328 at 339, [1971] 1 WLR 862 at 876):

I agree with Sachs LJ, and for the reason which he has given, that, in the light of the restricted form of endorsement on
the writs, it was impermissible for the plaintiffs to add in their statement of claim the further allegation relating to negligent
design, thereby contravening RSC Ord 18, r 15(2). If no objection had been taken, however, the matter would have cured
itself and the proceedings been regularised without the necessity for amending the writ.

So too in the present case the defendant could have waived the irregularity, in which case it would have been cured. But it did
not do so; it took the point in its defence.
Cross LJ said ([1971] 3 All ER 328 at 342, [1971] 1 WLR 862 at 880):

So far as I can judge, the facts out of which the new cause of action for negligent design alleged in the statement of
claim arises will include many but not all of the facts out of which the cause of action for negligent supervision alleged in
the writ arises and will also include further facts which are not relevant to the claim in the writ. If this be so, then, as I read
RSC Ord 18, r 15(2) the plaintiffs cannot raise the new cause of action without amending their writ. When the rule speaks
of facts which are the same as, or include or form part of, facts giving rise to a cause of action mentioned in the writ, the
word the is, I think, to be implied before the second occurrence of the word facts. It is not enough for a plaintiff to
show that there is some overlapsubstantial or insubstantialbetween the two sets of facts.

Mr McLeod points out that both Sachs and Edmund Davies LJJ qualified their opinion with the words Without wishing to
lay down any general formula and the use of the words in general. But in my judgment all three members of the court gave a
restricted interpretation to the rule. Adopting this approach I have no hesitation in holding that the facts giving rise to the cause
of action in tort pleaded by the plaintiff were not the same as or included or formed part of the plaintiffs claim in contract, which
was in any event misconceived.
 While, however, as Mr McLeod conceded, the plaintiff could not have applied to amend the writ under Ord 20, r 5(5) to
include a claim in contract by him alone because he accepted that the contract was made by the firm, it may well be that if and
when the court disapplies s 11 of the Limitation Act 1980 pursuant to an application made by the father and/or the firm under s 33
of that Act, the court will also permit the writ to be amended under Ord 20, r 5(5) to include a claim in contract by the firm. This
is because the new cause of action arises out of substantially the same facts as the original claim in negligence.
I have not dealt in any detail with the judges judgment. That is not out of any disrespect for him; although his judgment
was ex tempore it was very careful and full. But, as both counsel accept, the arguments presented to this court have 39 differed
substantially from those presented to the judge. In particular before him the defendant had not nailed its colours to the mast on
the limitation point and even appeared to accept that the plaintiffs claim in contract was subject to a six-year limitation period,
which in my view is clearly wrong. His attention was not drawn to the Brickfield case or the fact that Ord 18, r 15(5) was
introduced after the decisions in Hill v Luton Corp [1951] 1 All ER 1028, [1951] 2 KB 387 and Pontin v Wood [1962] 1 All ER
294, [1962] QB 594.
I would allow the appeal.

NICHOLLS LJ. The dreadful accident which occurred to Mr Neville Howe on 23 January 1985 caused loss not only to him.
Mr Howe was farming in partnership with his father, and his father also suffered financial loss as a result of the severe injuries
sustained by Mr Howe junior in the accident. So in November 1989 the son applied to join his father as an additional plaintiff in
the action to enable them to advance a claim for damages for breach of contract. He applied to join his father, because it was the
partnership which had purchased the rotary harrow in August 1982 from the defendant, David Brown Tractors (Retail) Ltd. All
the sons financial loss was already embraced in his existing personal claim for damages for negligence. Adding the contract
claim would be of no advantage to him. But the claim in contract would enable Mr Howe senior to claim the financial loss which
he had suffered if, indeed, as he and his son claim but the defendant denies, the harrow was unsafe and not fit for its purpose or of
merchantable quality.
The first question which has to be considered is whether the limitation period applicable to this new claim is three years or
six years. The application to amend was made more than three years after the date of the accident. Furthermore, over six years
had elapsed since the harrow had been purchased, and it was at the date of purchase of the harrow that the breach of contract
asserted in the new claim occurred. On either basis, therefore, the limitation period had already run against the new claim. But
there is an important difference between the two periods. In the case of a three-year limitation period under s 11 of the Limitation
Act 1980, the court has power to disapply the time limit. The court has no such power in respect of the ordinary six-year
limitation period applied by s 5 to actions for breach of contract.

The limitation period

I turn therefore to consider whether the proposed new claim by the partnership falls within s 11. Section 11(1) provides:

This section applies to any action for damages for negligence, nuisance or breach of duty (whether the duty exists by
virtue of a contract or of provision made by or under a statute or independently of any contract or any such provision)
where the damages claimed by the plaintiff for the negligence, nuisance or breach of duty consist of or include damages in
respect of personal injuries to the plaintiff or any other person.

It is helpful to approach by stages the question posed in the present case. Take first the simple case of a patient who is
treated privately by a doctor or a dentist. The doctor and the dentist owe to him a duty to exercise reasonable skill and care in
their treatment of him. There is an implied term to that effect in the contract between the patient and the doctor or dentist: see s 3
of the Supply of Goods and Services Act 1982. There is also a duty to that effect quite apart from the contract. If the patient
suffers physical injury as a result of negligent treatment by his doctor or dentist, he may bring an action in negligence or for
breach of contract. The damages recoverable will include general damages in respect of the physical 40 injury and pain and
suffering. They will also include damages for financial loss resulting from the physical injury, such as loss of future earnings. In
such a case the claim for financial loss is as much a claim for damages in respect of personal injuries as is the claim for damages
in respect of the physical injury itself. The plaintiff could not step outside the three-year limitation period prescribed by s 11 by
abandoning any claim for damages in respect of the physical injury and claiming only damages in respect of his loss of earnings.
Take next the case of a plaintiff who buys from a retailer a defective product which subsequently injures him. He brings an
action claiming damages for breach of implied terms as to merchantable quality and fitness for purpose. Is such an action for
breach of contract within s 11? In Letang v Cooper [1964] 2 All ER 929 at 936, [1965] 1 QB 232 at 245 Diplock LJ observed
that in their ordinary meaning the words breach of duty in the predecessor section to s 11 are wide enough to cover any cause of
action which gives rise to a claim for damages for personal injuries. He considered that there was no reason for giving those
words any different meaning. He said ([1964] 2 All ER 929 at 936, [1965] 1 QB 232 at 246):

The mischief against which all limitation Acts are directed is delay in commencing legal proceedings; for delay may
lead to injustice, particularly where the ascertainment of the relevant facts depends upon oral testimony. This mischief, the
only mischief against which the section is directed, is the same in all actions in which damages are claimed in respect of
personal injuries. It is independent of any category into which the cause of action which gives rise to such a claim falls

Those observations were made in a case where the contention was that a claim formulated as damages for trespass to the
person, when a car accidentally ran over the plaintiffs legs, was outside what is now s 11. The court was not addressing a case
where the claim was for breach of contract. As to that, the phrase breach of duty does seem to me to be an unusual way to refer
to a breach of contract consisting of breaches of implied terms as to merchantable quality and fitness for purpose. Despite this,
the words in parentheses in sub-s (1) seem to me to leave no room for doubt. The section applies to any action for damages for
breach of duty (whether the duty exists by virtue of a contract or independently of any contract ). I do not think it is
possible to say that s 11 applies to an action for breach of contract where the terms breached is to exercise reasonable skill and
care, but that s 11 does not apply to an action for breach of contract where the term breached is one as to merchantable quality or
fitness for purpose. The phrase breach of duty must apply in both cases or neither. In my view, and the contrary was not argued
before us, it applies in both cases.
My third example is of a case where P buys a defective product from D and in consequence Ps employee is injured while
using it in the course of his employment. The employee recovers damages from his employer P for breach of statutory duty or
negligence. P then brings proceedings against D, by way of third party proceedings in the employees action or by way of a
separate action. P seeks to recover from D as damages for breach of contract an indemnity in respect of Ps liability in damages
to his employee. In my view Ps claim in contract against D falls within s 11. The crucial feature is that the breach of contract
upon which P founds his action caused the personal injuries in respect of which the damages claim arises. P is claiming damages
to compensate him for the loss suffered by him as a result of a breach of contract which caused personal injuries. The
consequence of Ds supply of the defective tool or whatever was personal injury to the employee. True, in this example, the
personal injuries were sustained 41 by Ps employee and not by P himself. But s 11 expressly caters for this possibility when
providing that the damages claimed consist of or include damages in respect of personal injuries to the plaintiff or any other
person.
 My third example is to be contrasted with a case where, although the recoverable damages fall to be measured or assessed
by reference to the loss flowing from personal injuries, the personal injuries were not caused by the negligence or breach of duty
which is the subject of the action. If a solicitor negligently fails to launch a personal injuries action on behalf of his client within
the three-year period, the client may bring an action in negligence against the solicitor. The damages recoverable will fall to be
assessed by reference to the damages which the client could be expected to have recovered in the action, making any appropriate
discount to reflect the chances that the action might not have succeeded. In such a case, the action against the solicitor for
damages for professional negligence is not within s 11, because the damages claimed do not consist of or include damages in
respect of personal injuries. The damages claimed comprise damages in respect of the solicitors failure to issue a writ in time.
That failure did not cause any personal injuries. Thus, in McGahie v Union of Shop Distributive and Allied Workers 1966 SLT 74
a member of a trade union sued the union for damages in respect of the unions failure to pursue a claim on her behalf against her
employers concerning an injury she had sustained in their employment. Lord Fraser, sitting in the Outer House of the Court of
Session, held that the limitation provision in Scotland corresponding to what is now s 11 of the 1980 Act did not apply to that
action. He said (at 75):

There is, in my opinion, only one item of loss in the damages claimed in this action, that item being the loss caused by
the lapse of the pursuers right to sue her employers. The lapse of that right did not cause her any personal injury. The
matter was put correctly, I think, by senior counsel for the pursuer, thusThe expression damages in respect of personal
injuries may be paraphrased as compensation for a wrong consisting of personal injuries; but the pursuer in this action
seeks compensation for a wrong consisting of allowing her right of action against her employers to lapse without having
been exercised. Therefore, said senior counsel, the damages are not in respect of personal injuries. No doubt this action
will necessitate inquiry into the nature and extent of the personal injuries sustained by the pursuer, but that is, in my
opinion, only for the purpose of evaluating the right that she has lost or (what is the same thing) of quantifying her loss.

Likewise, some years later in England, in Ackbar v CF Green & Co Ltd [1975] 2 All ER 65, [1975] QB 582. There the plaintiff
sued his insurance brokers for negligently failing to carry out his instructions to obtain passenger liability insurance for his lorry.
He was injured while a passenger in the lorry when it was involved in a road accident. The plaintiff was unable to recover
damages from any other insurer. Croom-Johnson J held that the action was not within the predecessor section to s 11 (see [1975]
2 All ER 65 at 68, [1975] QB 582 at 588). The action was for a breach of contract by the defendants as a result of which the
plaintiff lost the chance or right to recover his loss from insurers.
If those principles are applied in the present case, the answer is clear. The new claim is for damages for breach of contract
by the sale to the partnership of goods which, so it is alleged, were not safe to use. The guard platform was defective. That
breach of contract resulted in personal injuries to Mr Howe junior. Damages are claimed in respect of the loss suffered by him
and his father by reason of that breach. In the third of my three examples the employers claim against the supplier of the
defective product for an indemnity (ie damages) in respect of the 42 damages claimed by the injured employee was within s 11. I
can see no material distinction between that example and the partnerships claim in the present case. In each instance the claim is
to make good financial loss flowing to the contracting party by reason of personal injury to another sustained as a result of using
the goods which, in breach of contract, were defective. Here the partnership claim is for expenses and losses incurred as a direct
result of Mr Neville Howes injury: the cost of buying an additional automatic car for use by him, and a tractor with a flat floor
in its cab, and additional crop irrigation equipment, the cost of engaging contractors to carry out crop-spraying in 1986 when he
was unable to do so, and loss of profits. Those are expenses and losses claimed as damage arising from the very breach of
contract which is the foundation of the claim the partnership seeks to pursue against the defendant. The breach of contract caused
the personal injuries. In my view this claim falls within s 11.
I should add this. The partnership also seeks to advance, but very much as a secondary claim, a claim for damages for
negligence. Whether such a claim in tort by the partnership is maintainable in law was not a point argued before us. But to this
claim also the three-year period would be applicable, for reasons which will be apparent from what I have already said regarding
the claim for damages for breach of contract.
Adding a new party after expiry of the three-year period
On that footing the application to amend the writ by adding Mr Ronald Howe as an additional plaintiff, which is the effect of
adding the partnership as second plaintiff, comes within RSC Ord 15, r 6(2)(b)(i) and (5)(b). The courts power, under r 6(2), to
make an order that Mr Howe senior be added as a party is applicable here, because he is a person whose presence before the court
is necessary to ensure that all matters in dispute in the cause or matter may be effectually and completely determined and
adjudicated upon (sub-para (b)(i)). However, bounds are set to that power by r 6(5):

No person shall be added or substituted as a party after the expiry of any relevant period of limitation unless either-( a)
the relevant period was current at the date when proceedings were commenced and it is necessary for the determination of
the action that the new party should be added, or substituted, or ( b) the relevant period arises under the provisions of
section 11 or 12 of the Limitation Act 1980 and the Court directs that those provisions should not apply to the action by or
against the new party. In this paragraph any relevant period of limitation means a time limit under the Limitation Act
1980

The present case, in accordance with the view I have already expressed, falls within sub-para (b). I consider that the natural,
indeed the inescapable, meaning of para (5) is that the courts discretionary power to make an order adding or substituting a
person as a party after the expiry of any relevant period of limitation is not to be exercised unless the requirements stated in sub-
para (a) or (b) are fulfilled: No person shall be added as a party unless either ( a) or (b) Thus, in the case of sub-
para (a), the court needs to be satisfied that it is necessary for the determination of the action that the new party should be added
or substituted before exercising its power to make an order adding or substituting that person as a party. Under sub-para (b), the
new party is not to be brought in unless the court gives a direction disapplying the provisions of s 11 or s 12 so far as the new
party is concerned. Until such a direction is given the new party is not to be added.
The effect of this reading of para (5)(b) is to draw a distinction between a case 43 where a person is sought to be added as a
new party in an existing action on the one hand and a case where the claim by or against the new party is made in a new action.
In the latter case the action would be started, limitation would be pleaded by way of defence, and in the normal way it would be
thereafter that the s 33 application would be made. I do not find this distinction surprising. I can see good reason why, in the
ordinary way, the convenient course in most cases will be for a fresh action to be started rather than an application made to
amend the existing action and add a new plaintiff or defendant. The s 33 issue would then be decided in due time in the course of
the fresh action. But if, instead of starting a new action, an amendment application is made, the court is being asked to exercise a
discretionary power. It is not surprising that when an application seeks the exercise of such a power in his favour after the expiry
of a period of limitation under s 11 or s 12, the court should be required at that stage to consider and decide whether or not the
limitation provisions should be disapplied, and only if it has directed that they should be disapplied should the court be able to
order that the new party may be added. By his own application the appellant has brought the matter before the court. There is a
certain degree of sense and convenience in the court considering that application and the s 33 issues at one and the same time.
Mr McLeod submitted otherwise. He submitted that the registrar and, on appeal, the judge were correct in making the order
adding the partnership as a new party, and leaving the question of whether or not the limitation provisions should be disapplied
until a future date. I cannot reconcile this course with the clear language of para (5). Mr McLeod prayed in aid the decision of
this court in Kennett v Brown [1988] 2 All ER 600, [1988] 1 WLR 582. I do not think that decision provides an answer to the
point arising in the present case. There one defendant served a contribution notice on another defendant in a personal injuries
action more than three years after the accident occurred. That constituted a new claim within the meaning of s 35 of the
Limitation Act 1980. Section 35(3) provides that, except as provided by s 33 or by rules of the court, the court shall not allow a
new claim to be made in the course of an action after the expiry of any time limit under the Act which would affect a new action
to enforce that claim. This court held that this provision, like other provisions in limitation Acts, raised a procedural bar which a
defendant to a particular claim could raise if he so wished. The provision did not preclude new claims being brought. What it did
was to provide a defence for a defendant, against whom a new claim had been brought, if he chose to raise this as a defence and a
successful application under s 33 was not made.
Kennett v Brown does assist Mr McLeod to a limited extent. A new claim is defined in s 35(2) as including a claim which
involves the addition of a new party. Thus the decision in Kennett v Brown on the proper interpretation of s 35(3) applies as
much to a claim which involves the addition of a new party as it does to a claim which involves the addition of a new cause of
action. But this does not take Mr McLeod far enough. Section 35(4) envisages that rules of court may impose further restrictions
on the circumstances in which new claims may be allowed. In Kennett v Brown the court was not concerned to address or
consider the interpretation of Ord 15, r 6(5). Further, that case was not one in which the new claim could be got on foot only with
the leave of the court. Leave was not needed for the service of the contribution notice. In contrast, the present case concerns the
construction of a rule which itself prescribes limits on the circumstances in which the discretionary power the applicant is
invoking may be exercised in his favour. He needs the leave of the court before he can even institute his new claim. This is an
altogether different situation. I can see nothing in the Kennett v Brown 44decision which requires the language of Ord 15, r 6(5)
to be given a meaning different from its natural meaning.
Mr McLeod also submitted that there was a further difficulty with this construction of para (5). A direction under s 33
disapplying the provisions of s 11 or s 12 is an order which binds the parties to an action. But a person ordered to be added as a
party under r 6 does not become a party until the writ has been amended in relation to him and, if he is a defendant, has been
served on him (Ord 15, r 8(4)). Thus a s 33 direction cannot be given in regard to the new party as envisaged by r 6(5) until a
later stage than the courts decision on whether or not to order the addition of the new party. I cannot accept this. Persons who
are not parties to an action may come before the court on many matters, including applications under Ord 15, r 6. Rule 6(3)
expressly provides for one example of this. The person sought to be joined may himself be the applicant. I see no procedural
difficulty here. The proposed additional plaintiff or defendant can be heard on the question whether he ought to be added, and
whether a s 33 direction should be made, even before he has become a party.
In the present case the question whether or not a direction under s 33 should be made in relation to the partnerships
proposed breach of contract claim has not yet been considered by the court. No evidence or arguments were produced or
advanced to the registrar of the judge. Accordingly an order for the addition of the partnership as an additional plaintiff was
premature. The order should not have been made. The necessary precondition to the making of such an order under para (5)( b)
was not fulfilled.

Adding a new cause of action after expiry of the threeyear period

The amendments which are sought are not confined to the addition of a new party. The indorsement on the writ was for
personal injuries sustained and losses and expenses incurred as a result of an accident, which was then identified, arising out of
the negligence and/or breach of statutory duty of the defendants, their servants or agents. No mention was made of any claim for
breach of contract. The amendment seeks to add a claim by the partnership for damages for breach of contract and in negligence.
I can deal with this point very shortly. Argument was advanced to the effect that the proposed amendment to the writ did not
involve adding a new cause of action, because a claim for damages for breach of contract was made in the statement of claim, and
this operated to introduce such a claim effectually into the action, either pursuant to Ord 18, r 15(2) or otherwise. I need not go
further into the rival arguments on this point, for this reason. Let me assume, in favour of the defendant, that before amendment
the action did not include an effectual claim for breach of contract because no such claim was mentioned in the writ. Even so the
court would still have power to give leave to amend the writ to add such a claim, despite the expiry of the three-year limitation
period, under Ord 20, r 5. It was common ground before us that the effect of the amendment would be to add a new cause of
action which arises out of substantially the same facts as the existing claim in negligence. Thus the requirements of Ord 20, r
5(5) are satisfied. The court has a discretion. Not surprisingly, it was not suggested to us that if hereafter the court were to
consider that this is a case for a direction under s 33 in respect of the claims by the partnership, the court should not exercise its
discretion under Ord 20, r 5 in favour of carrying back into the indorsement on the writ a claim for breach of contract which has
been set out in the statement of claim ever since it was served in July 1988, eight days after the issue of the writ.
Thus I see no difficulty under this head. However, the appeal must be allowed, and the judges order set aside, because of
the failure to comply with the 45 requirements of Ord 15, r 6(5). This will leave the plaintiff and his father at liberty, if they wish,
to make a fresh application which this time will also seek the necessary direction under s 33.

Appeal allowed.

Solicitors: Hextall Erksine & Co; Roythorne & Co, Spalding.

Mary Rose Plummer Barrister.

[1991] 4 All ER 46

Proetta v Times Newspapers Ltd

CIVIL PROCEDURE

COURT OF APPEAL, CIVIL DIVISION

NEILL, RUSSELL AND FARQUHARSON LJJ
12, 13, 15 NOVEMBER 1990

Practice Payment into court Acceptance Time for acceptance Extension of time Whether court should extend time for
acceptance where risks have changed appreciably Whether change of plea amounting to appreciable change in risks RSC
Ord 22, rr 3(1)(a), 5.

In the same way that the court should not, more than 21 days after a defendant has paid money into court in satisfaction of the
plaintiffs claim, make an order under RSC Ord 22, r 5 a for the payment out to the plaintiff if there has been a substantial change
in the risks, so also the court should not grant the plaintiff an extension of time for accepting, under Ord 22, r 3(1)(a)b, money
paid in if there has been a substantial change in the risks. Although a mere change of plea may not alter the risks to any
appreciable extent, the introduction into an action for libel of a plea of justification instead of or in addition to a plea of fair
comment will probably be an appreciable change in the risks such that an extension of time for acceptance of money paid into
court should not be allowed (see p 48 b c h j and p 49 g, post).
________________________________________
a Rule 5 is set out at p 48 g, post
b Rule 3(1), so far as material, is set out at p 48 e f, post

Gaskins v British Aluminium Co Ltd [1976] 1 All ER 208 applied.

Notes
For acceptance of money paid into court in satisfaction of a plaintiffs claim, see 37 Halsburys Laws (4th edn) paras 290291,
and for cases on the subject, see 37(2) Digest (Reissue) 427428, 26082613.
For the distinction in libel cases between fair comment and justification, see 28 Halsburys Laws (4th edn) para 144, and for
cases on the subject, see 32 Digest (Reissue) 272273, 22442245.

Cases referred to in judgments

Ford (an infant) v Lewis [1971] 2 All ER 983, [1971] 1 WLR 623, CA.
Gaskins v British Aluminium Co Ltd [1976] 1 All ER 208, [1976] QB 524, [1976] 2 WLR 6, CA.
Morris v Stratford-upon-Avon RDC [1973] 3 All ER 263, [1973] 1 WLR 1059, CA.

Interlocutory appeal
By a writ dated 26 January 1989 and served on 28 January the plaintiff, Carmen Proetta, claimed as against the defendants, Times
Newspapers Ltd, the publishers 46 of the Sunday Times, damages for libel and an injunction in respect of an article entitled The
SAS in the Dock published in the Sunday Times dated 1 May 1988 concerning the shooting by the Special Air Service on 6
March 1988 in Gibraltar of three members of the Irish Republican Army. By para 4 of her statement of claim served on 1 March
1989 the plaintiff set out what she claimed were the ordinary and natural meaning of the words complained of, namely that the
plaintiff had lied in an interview broadcast by Thames Television in a programme about the shooting entitled Death on the
Rock, being motivated by antiBritish feeling, and that she earned her living by running, in partnership with known British
criminals, an escort agency in Spain for rich Arabs. On 7 April the defendants served a defence denying that the words were
defamatory and, by para 5, raising a defence of fair comment. On 9 June Master Creightmore made an order for discovery and
for setting down, the length of the trial being estimated at three days. On 15 June the defendants made a payment into court, on
24 July the action was set down for trial and on 1 August the defendants made a further payment into court. On 1 September, on
an application by the plaintiff to strike out para 5 of the defence and particulars thereunder, Brooke J struck out, inter alia, those
parts of the defence referring to the escort agency and criminal associates of the plaintiff. On 20 September Brooke J allowed in
part an application by the defendants to amend their defence to plead justification in lieu of fair comment. On 2 March 1990 on
an application by the plaintiffs Michael Davies J ordered the defendant to give security for costs in the sum of 85,000 but gave
the defendants liberty to apply to vary that sum if the Court of Appeal allowed an appeal by the defendants from the decision of
Brooke J on 20 September 1989. On 21 March 1990 the Court of Appeal substantially allowed the defendants appeal and on 22
March the defendants served an amended defence which included particulars relating to an alleged link between the plaintiff and
an escort agency and between her and certain named criminals. On 10 May Michael Davies J gave the defendants leave to
reamend their defence and further security was ordered. On 27 June Michael Davies J granted the defendants an extension of
time to serve certain notices under the Civil Evidence Act 1968 and the plaintiff an extension of time for accepting the money
paid into court. The plaintiff and the defendants appealed to the Court of Appeal. The case is reported only with respect to the
defendants appeal from the judges decision granting the plaintiff an extension of time for accepting the money paid into court.

Richard L Hartley QC and Thomas Shields for the plaintiff.

Michael Burton QC and B Clive Freedman for the defendants.

Cur adv vult

15 November 1990. The following judgments were delivered.

NEILL LJ. In this action the plaintiff claims damages for libel alleged to have been contained in an article entitled The SAS in
the Dock published in the issue of the Sunday Times dated 1 May 1988. The defendants are the publishers of the Sunday Times.
[His Lordship, having outlined the facts of the case and the course of the proceedings, dealt first with the plaintiffs appeal,
referring to Ford (an infant) v Lewis [1971] 2 All ER 983, [1971] 1 WLR 623 and Morris v Stratford-upon-Avon RDC [1973] 3
All ER 263, [1973] 1 WLR 1059. His Lordship said that the 47 extension of time for serving notices under the Civil Evidence
Act 1968 was a matter for the judge and that he could see no reason to interfere with the judges exercise of his discretion. His
Lordship continued:]
I turn now to the appeal by the defendants.
It is submitted that payment into court is a procedure whereby the defendants can provide an opportunity to the plaintiff to
dispose of the action by acceptance of the sum paid in. But the sum is paid in in the light of the defendants perception of the
case at the time of payment in. Accordingly, the court should not extend the time laid down in the rules for acceptance if the risks
of the case change adversely to the plaintiff. Moreover, it is said, there is binding authority for the proposition that, if there is a
substantial change in the risk, the court cannot, or at any rate should not, extend the time.
On the facts of this case I, for my part, see no answer to this submission. I read RSC Ord 22, insofar as it is relevant. Rule
1(1) provides:

In any action for a debt or damages any defendant may at any time pay into court a sum of money in satisfaction of the
cause of action in respect of which the plaintiff claims or, where two or more causes of action are joined in the action, a
sum or sums of money in satisfaction of any or all of those causes of action.

Rule 3 is in these terms, so far as material:

(1) Where money is paid into court under rule 1, then subject to paragraph (2) within 21 days after receipt of the notice
of payment or, where more than one payment has been made or the notice has been amended, within 21 days after receipt
of the notice of the last payment or the amended notice but, in any case, before the trial or hearing of the action begins, the
plaintiff may(a) where the money was paid in respect of the cause of action or all the causes of action in respect of which
he claims, accept the money in satisfaction of that cause of action or those causes of action by giving notice [in a
prescribed form] to every defendant to the action
If that does not happen, then r 5 comes into operation as to money remaining in court. That provides:

If any money paid into court in an action is not accepted in accordance with rule 3, the money remaining in court shall
not be paid out except in pursuance of an order of the Court which may be made at any time before, at or after the trial or
hearing of the action; and where such an order is made before the trial or hearing the money shall not be paid out except in
satisfaction of the cause or causes of action in respect of which it was paid in.

Where a plaintiff accepts money paid into court he is entitled to his costs of the action incurred up to the time of giving notice of
acceptance: see Ord 62, r 5(4).
In my judgment in this case there was a substantial alteration of the risks in this case once a plea of justification was
allowed. The defence of fair comment in its original form was unsatisfactory. It was criticised by Brooke J and indeed it was
criticised from the start by the plaintiffs solicitor. In many cases I accept that a mere change of plea may not alter the risks to
any appreciable extent, but in this case it seems to me that the introduction of a plea of justification was an important factor. A
fortiori the risks were again substantially altered when the Court of Appeal allowed the further amendment and then again when
the notices under the Civil Evidence Act 1968 were allowed out of time.
Once there is a substantial alteration in the risks, the time for acceptance should not be extended. This was laid down in
Gaskins v British Aluminium Co Ltd [1976] 481 All ER 208, [1976] QB 524 in the Court of Appeal, a decision which, in my
judgment, is binding on this court. In that case Lord Denning MR said ([1976] 1 All ER 208 at 211, [1976] QB 524 at 530531):

I think a distinction must be drawn between an application made before the trial, and one made at or after it. When the
application is made before the trial, it will usually be made to the master. He can make an order allowing it. If the chances
of success or failureor of greater or less damagesare substantially the same as they were at the time of the payment
into court, the master may allow the payment out to the plaintiff, but he will usually allow it only on the terms that the
plaintiff pays all the costs from the date of the payment into court. If the chances have substantially altered, then the master
should not allow the plaintiff to take the payment out: for the simple reason that it would be unfair to hold the defendant to
a sum which he offered in different circumstances. He can say: Non haec in foedera veni. I think the defendant should
indicate to the master the circumstances which have altered the position, such as a decision of the courts which has changed
the way in which damages are to be assessed, or the discovery of further evidence or information affecting the chances
(Lord Denning MRs emphasis.)

It has been said that the machinery for payment into court is not comparable with a settlement, but nevertheless it seems to me
that those words of Lord Denning MR cover the present situation.
I have considered carefully whether the position is different because the extension was granted not on an application made
for that purpose but as a condition of the extension granted to the defendants. At one time we were told that that might provide
an acceptable basis for distinguishing Gaskinss case, and other cases, to the same effect. But I can see no difference in principle.
I can understand why the learned judge, with his great experience, trying to do justice between the parties made the order which
he did make, but I am bound to say that I think he was wrong to do so. In my view the decision of this court in Gaskinss case
was indistinguishable and in any event I do not think it is appropriate to grant an extension of time for acceptance as a condition
for extending the time for notices to be served under Ord 38.
For these reasons I would dismiss the appeal by the plaintiff and allow the appeal by the defendant.

RUSSELL LJ. I agree. There is nothing that I can usefully add.

FARQUHARSON LJ. I agree.

Plaintiffs appeal dismissed. Defendants appeal allowed.

Solicitors: Wright Webb Syrett; Alastair J Brett.

Raina Levy Barrister.

49
[1991] 4 All ER 50

Re 14 White Row Cottages, Bewerley

LAND; Property Rights

CHANCERY DIVISION
MUMMERY J
21, 23 MAY 1991

Commons Registration Town or village green Register Rectification of register Land on which dwelling house situated
Dwelling house Uninhabited and dilapidated cottage Cottage not occupied for 20 years Whether dwelling house Common
Land (Rectification of Registers) Act 1989, s 1.

In 1972 four derelict and uninhabited stone cottages which were over 100 years old were, at the instigation of the parish council
and without dispute, included in the registration of a village green in the register of town and village greens maintained by the
county council under the Commons Registration Act 1965. Under that Act registration was conclusive evidence of the matters
registered. In 1970 the cottages had been condemned as unfit for human habitation and they had not been occupied since 1972.
In 1990 the person claiming title to the cottages lodged an objection under s 1 a of the Common Land (Rectification of Registers)
Act 1989, which provided for the rectification of registers of common land and town and village greens if land on which a
dwelling house had been situated since 5 August 1945 was included in the register. The commons commissioner held that the
cottages were not dwellinghouses because they had been condemned as unfit for human habitation and had not been occupied
for some 20 years and dismissed the objection. The objector appealed.
________________________________________
a Section 1, so far as material, is set out at p 52 a to c, post

Held In the absence of any express definition of the term dwellinghouse in the 1989 Act that term was to be construed
according to its ordinary meaning and so construed the cottages remained dwellinghouses after they became uninhabited and
dilapidated and did not cease to be dwelling houses merely because they were not dwelt in, since although empty and neglected
they retained their physical structure and character. The appeal would therefore be allowed (see p 53 f to p 54 b j to p 55 a, post).

Notes
For amendment of registers of common land and town and village greens, see 6 Halsburys Laws (4th edn reissue) para 682.
For the Commons Registration Act 1965, see 6 Halsburys Statutes (4th edn) 1116.

Cases referred to in judgment

Ford v Barnes (1885) 55 LJQB 24.
Morleys (Birmingham) Ltd v Slater [1950] 1 All ER 331, [1950] 1 KB 506, CA.

Case stated
Richard Henry Piers, seventeenth Viscount Mountgarrett, being the person claiming title to 14 White Row Cottages, Bewerley,
appealed by way of a case stated by the commons commissioner, Mr Martin Roth, in respect of his decision to disallow the
objection lodged by Viscount Mountgarrett under s 1 of the Common Land (Rectification of Registers) Act 1989 to the inclusion
of 14 White Row Cottages and certain land at the front and rear of the cottages in the 50 registration of Greenhow Village Green
in the register of town and village greens maintained by the North Yorkshire County Council. The question of law for the
decision of the court is set out at p 53 a, post. The facts are set out in the judgment.

Martin O Rodger for Viscount Mountgarrett.

Cur adv vult

23 May 1991. The following judgment was delivered.

MUMMERY J. On Greenhow Village Green at Bewerley in North Yorkshire there are four stone-built cottages. They are well
over 100 years old. They have never had any running water or indoor sanitation. There had been a communal stone built privy
about 25 yards away, but that collapsed some time ago and the stone has been removed. The cottages are in a derelict state. The
stone structure and stone tile roofs are largely intact, but there are no windows or secure outer doors. The cottage at the north-
east end of the row once had a two storey extension at the rear; that has collapsed and some of the stone tiles have recently been
removed.
The cottages have not been occupied for the last 20 years or so. Four notices dated 2 February 1970 were given under the
Housing Act 1957 condemning the cottages as unfit for human habitation and incapable of being made fit at reasonable cost.
Two of the cottages had already been vacated by then. The other two had ceased to be occupied by 1972.
In recent years numerous inquiries have been made by people interested in restoring the cottages for occupation. The
obstacle to sale and renovation of the buildings is the existence of the registration of them and of land on which they stand as
forming part of Greenhow Village Green. Registration is in the land section of the register unit number VG104 in the register of
town and village greens maintained by the North Yorkshire County Council under the Commons Registration Act 1965. In s
22(1) of the 1965 Act a town or village green is defined as follows:

town or village green means land which has been allotted by or under any Act for the exercise or recreation of the
inhabitants of any locality or on which the inhabitants of any locality have a customary right to indulge in lawful sports and
pasttimes or on which the inhabitants of any locality have indulged in such sports and pasttimes as of right for not less than
twenty years.

The relevant period of 20 years referred to is the period immediately prior to the passing of the 1965 Act. That Act was passed on
5 August 1965 so that the immediately preceding period of 20 years takes one back to 5 August 1945.
The buildings and land, along with the rest of the village green were registered on the application of the parish council. In
the ownership section of the register the parish council is registered as owner of the whole of the land comprised in the register
unit. The registration was not disputed at the time. Registration became final on 1 August 1972 and became conclusive evidence
of the matters registered (see ss 7 and 10 of the 1965 Act). Under the 1965 Act there are no grounds available in this case either
for amending the register under s 13 or for rectifying it under s 14 so as to exclude the four cottages or the land on which they
stand from the register.
On 21 July 1989 the Common Land (Rectification of Registers) Act 1989 came into force. It is a short Act. I need only
refer to the first section of it. Section 1 provides, so far as material:
51

(1) Within three years of the passing of this Act any person may, by notice in writing given to the registration authority
maintaining a register of common land and of town and village greens under the Commons Registration Act 1965, object to
the inclusion on either of the registers of the whole or part of any land in respect of which the requirements specified in
subsection (2) below are satisfied.

(2) Those requirements are(a) that(i) there is a dwellinghouse on the land and, if and so far as the land is not the
site of that dwellinghouse, it is ancillary to that dwellinghouse; or (ii) the land is ancillary to a dwellinghouse which is not
on the land; and (b) that the requirements of paragraph (a) above have been satisfied at all times since 5 August 1945.
(3) For the purposes of subsection (2) above land ancillary to a dwellinghouse means a garden, private garage or
outbuildings used and enjoyed with the dwellinghouse; and in that subsection dwellinghouse includes a building
consisting of two or more separate dwellings

It is not necessary for me to refer to the remainder of that section or to the other two sections of the Act.
The procedure under the 1989 Act, as set out in the Act and as prescribed in the Common Land (Rectification of Registers)
Regulations 1990, SI 1990/311, made under it which came into force in March 1990, was set in motion on 5 July 1990 when
notice of objection was given by Viscount Mountgarrett to the inclusion of 1 to 4 White Row Cottages in the register. On 7
September 1990 the objection was referred by the North Yorkshire County Council to a commons commissioner who held an
inquiry at Harrogate on 5 December 1990. At the inquiry he heard representations from counsel on behalf of Lord Mountgarrett
and from representatives of the parish council. There was also before the commons commissioner, Mr Martin Roth, a letter from
the Open Spaces Society making representations against the notice of objection. The commons commissioner inspected the
properties.
 On 14 December he gave his written decision in which he set out in lucid detail the background and procedural history of
the matter, his findings of fact, the relevant statutory provisions and a summary of the submissions which had been made to him.
He stated his conclusion in these terms:

I reach the conclusion that the word dwellinghouse in the 1989 Act means a building which is actually dwelt in or is
at least capable of being dwelt in. I have no hesitation in deciding that the building which was occupied as four dwellings
until some 20 years ago but which was then condemned as unfit for human habitation and has since remained unoccupied
does not satisfy the requirements of the 1989 Act.

He went on to make observations about the shortcomings of the 1989 Act. He stated that, in his view, the result was
unsatisfactory as it meant that the cottages would remain derelict. Both Lord Mountgarrett and the parish council wanted to see
the cottages restored, but the properties had been rendered sterile by the existence of the registration. The council had even
expressed the fear that the properties might be occupied by squatters.
It was therefore decided to take the matter further. On 15 January 1991 a request was made on behalf of Lord Mountgarrett
to the commons commissioner to state a case on a point of law for the decision of the High Court. A case was stated on 27
February 1991 in which the point of law was formulated by the commons commissioner in these terms:
52

The question of law for the decision of this Honourable Court is whether on the facts found by me I erred in law in
holding that the requirements specified in section 1(2) of the Act of 1989 were not satisfied in respect of any part of the
land to which this Objection related.

I was informed by counsel that this is in fact the first occasion on which the 1989 Act has come before the High Court on the case
stated procedure.
The point of law stated may be rephrased as follows in respect of each of the four cottages by specific reference to the
relevant statutory requirements in s 1(2): has there been a dwellinghouse on the land in question at all times since 5 August 1945;
are these cottages dwelling houses when there is no one dwelling in any of them?
The commons commissioner considered two authorities in which the meaning of the word dwellinghouse had been
discussed in different statutory contexts: see Morleys (Birmingham) Ltd v Slater [1950] 1 All ER 331, [1950] 1 KB 506, a
decision on the Rent Restriction Acts, and Ford v Barnes (1885) 55 LJQB 24, a case on the Representation of the People Acts.
He also referred to various dictionary definitions and concluded that the word dwellinghouse contemplated the actual use and
enjoyment of the premises in question. On that basis the cottages were dwelling houses during the respective periods of
occupation, but ceased to be dwelling houses when they became empty. They have not been dwelling houses at all times since 5
August 1945 and therefore fall outside the scope of the 1989 Act.
He found support for this construction in the words used and enjoyed in s 1(3) in relation to gardens, private garages and
outbuildings used and enjoyed with the dwelling house. In his view those words meant actual use and enjoyment of the gardens,
private garages and outbuildings in question. It was, therefore

logical to conclude that actual use and enjoyment of the dwellings is also contemplated.

In my judgment, the commons commissioner construed the provisions of s 1 of the 1989 Act too restrictively. In some statutory
contexts and often in ordinary everyday language the word dwellinghouse is indeed used to describe a house in which people
are actually living as a private residence. Actual residential occupancy is not, however, a necessary characteristic of a dwelling
house.
As a matter of ordinary language dwellinghouse is capable of including not only a house which is dwelt in but also a house
which is constructed or adapted for dwelling in although it may at the relevant time be vacant or even not fit and ready for
occupation. For example, a family may be forced out of their dwelling house by fire, flood or other natural disaster. The house
may remain empty for a long period while building works are carried out on it. I do not think it would be a misuse of the English
language to say of such a house that it was at all times, even when empty, a dwelling house.
Turning to the language of the 1989 Act I note three things. (1) There is no statutory definition of dwellinghouse; s 1(3)
says that a dwelling house includes a building consisting of two or more separate dwellings, but it does not define the word. (2)
There is no express statutory requirement in the 1989 Act that the dwelling house in question is resided in or occupied or
inhabited or in actual use as a place of abode for the relevant period. This is to be contrasted with legislation in which such
requirements are sometimes imposed in express terms. (3) In the absence of any statutory definition the word dwellinghouse
should be construed in its ordinary meaning both in the context of the particular statutory provision and of the 1989 Act as a
whole.
53
Adopting that approach I conclude that the 1989 Act operates in the following fashion in this case. 14 White Row Cottages
were dwelling houses at all times during the period from 5 August 1945 to the respective dates on which they were vacated, that
is 1968 in the case of two of the cottages and 1971 and 1972 respectively in the case of the other two. After they were vacated
the cottages did not cease to exist; they were not demolished; they were not converted to other uses, such as use as a shop or
warehouse or office. The physical structure, character and nature of the cottages remained the same, save that they were empty
and neglected and became tumbledown. I do not think that they ceased to be dwelling houses simply because they were not
dwelt in. They became dilapidated dwelling houses, but were still dwelling houses, as distinct from other sorts of houses such as
public houses or warehouses.
In my judgment, this result is more consistent with the object of the 1989 Act than the result which follows from the
decision of the commons commissioner. The provisions of the 1989 Act are designed to provide a procedure for removing from
the registers maintained under the 1965 Act certain land on which there is a dwelling house or land ancillary to a dwelling house.
Such a procedure for rectification of the register is not, as I have already observed, available under the 1965 Act, even in cases
where it transpires that the land in question never was appropriate to be entered on the register but has been entered on the
register in the absence of any objection made at the relevant time.
It is clear, having regard to the definition of town or village green in s 22 of the 1965 Act, that it never was appropriate to
register 14 White Row Cottages as part of Greenhow Village Green. This was so whether the cottages were at the relevant time
dwelt in or were empty I cannot discern any sensible purpose in Parliament seeking to draw a distinction between a house which
is lived in for the whole of the relevant period and a house which is constructed for living in but is not in fact lived in at all times
during the relevant period and I do not think that Parliament did in fact draw any such distinction.
As to the reference in s 1(3) to a garden, private garage or outbuildings used and enjoyed with the dwelling house, I do not
think that these words necessarily connote actual use and enjoyment any more than the word dwellinghouse in this context
necessarily connotes actual residence. Again, as a matter of ordinary English, I do not think that used and enjoyed are
synonymous with being used and enjoyed or actual use and enjoyment.
In the context of s 1(3) the purpose of the expression used and enjoyed is to define the link that must exist between the
garden, the private garage or outbuildings and the relevant dwelling house in order to qualify as ancillary land. Thus, for
example, a garden which is not used and enjoyed in relation to any dwelling house would not qualify as ancillary land within the
meaning of s 1 of the 1989 Act.
In this case the commons commissioner found that there were small front gardens with no walls fronting on to a track which
runs across the village green. They should be removed from the registration along with the cottages. I should add that before me
the claim for removal of ground at the rear of the cottages was not pursued. This was rightly conceded since the commons
commissioner had found as a fact that there was no definable area of garden ground at the rear of the cottages.
For these reasons I decide that on the question of law stated for my decision the commons commissioner erred in law in
holding that the requirements specified in s 1(2) of the 1989 Act were not satisfied in respect of any part of this land to which this
objection related. I hold that those requirements were satisfied 54 in respect of 14 White Row Cottages and the front gardens of
those cottages enclosed by the low walls that separate the gardens from the track across the village green.

Appeal allowed.

Solicitors: May May & Merrimans.

Hazel Hartman Barrister.

[1991] 4 All ER 55

Hudson and another v Elmbridge Borough Council and others

CIVIL PROCEDURE

COURT OF APPEAL (CIVIL DIVISION)

PURCHAS, PARKER AND STUART-SMITH LLJ
15, 16 OCTOBER, 20 NOVEMBER 1990

Costs Payment into court Costs before payment in Two or more causes of action Payment in by defendant in satisfaction
of one cause of action Plaintiff accepting payment in and abandoning other claims Costs of abandoned claims exceeding
costs of claims in respect of which payment is made Whether plaintiff entitled to all costs of action including costs of
abandoned claims RSC Ord 22, r 4(1)(2), Ord 62, r 5(4).

In May 1987 the plaintiffs brought an action against six defendants claiming damages arising out of subsidence and structural
damage to their house. The plaintiffs claim against the third defendants alleged distinct causes of action in contract and tort, the
claim in contract being breach of a contract of insurance to indemnify the plaintiffs for the cost of remedial works and the claim
in tort being breach of a duty of care in supervising the original construction work. On 29 September 1989 the third defendants
made a payment into court of 132,20265 in respect of the claim in contract only. On 20 October 1989 the plaintiffs served
notice of acceptance stating that they were abandoning the other causes of action against the third defendants. On 25 October
1989 the plaintiffs applied by summons for an order for payment out of the money paid into court and payment by the third
defendants of the plaintiffs costs in the action. On the same day the third defendants applied by summons for an order for
payment out to the plaintiffs and (i) for the plaintiffs to be given leave to tax only those costs incurred in relation to the claim in
contract and (ii) for judgment to be entered against the plaintiffs in respect of the claim in negligence or alternatively for the third
defendants to be at liberty to tax their costs in respect of the abandoned claim in negligence up to the date of the service of the
plaintiffs notice of acceptance of payment in. The costs of both parties in relation to the claim in tort were substantial and
greatly exceeded the costs of the claim in contract. The judge granted the plaintiffs application on the ground that RSC Ord 62, r
5(4)a, which provided that where a plaintiff accepted money paid into court in satisfaction of one or more of his causes of action
and gave notice that he abandoned the others he was entitled to his costs of the action incurred up to the time of giving notice of
acceptance, made automatic provision for payment of all the plaintiffs costs in respect of all his causes of action up to the time
of giving notice of acceptance and 55 that there was no discretion in the matter. The third defendants appealed, contending (i)
that since they had been sued jointly with the other defendants the matter fell to be dealt with as a matter of discretion under Ord
22, r 4(1) and (2)b and not under Ord 62, r 5(4) and (ii) the notice of acceptance of the money paid in and abandonment of the
claim in tort was equivalent to a notice of discontinuance or withdrawal of that cause of action and therefore they were entitled to
tax their costs in respect of the claim in tort under Ord 62, r 5(3).
________________________________________
a Rule 5, so far as material, is set out at p 60 f g, post
b Rule 4, so far as material, is set out at p 60 c d, post

Held The appeal would be dismissed for the following reasons-

(1) Although the court had a discretion under RSC Ord 22, r 4(1) to deal with costs where the plaintiff accepted any sum
paid into court by some but not all of the defendants sued jointly or in the alternative by him, the term sued jointly related to a
claim where there was one cause of action but more than one defendant liable thereon jointly with another or others. Since,
however, the third defendants were severally liable with the other defendants, payment of the plaintiffs costs by the third
defendants did not fall to be dealt with as a matter of discretion under Ord 22, r 4(1); (see p 60 j to p 61, b, p 63 j and p 64 e,
post); Townsend v Stone Toms & Partners (a firm) [1981] 2 All ER 690 applied.
(2) Where a plaintiff alleged more than one cause of action against a defendant who subsequently paid money into court in
satisfaction of only one cause of action and the plaintiff served notice accepting the payment in and abandoning the other claims
the plaintiff was entitled under RSC Ord 62, r 5(4) to all his costs of the action, including the costs of the abandoned claims,
notwithstanding that the defendant had denied liability in respect of the abandoned claims or that the costs of the abandoned
claims exceeded the claim in respect of which the payment in had been made. Although it produced an unsatisfactory and unjust
result, it followed that the third defendants were liable for payment of all the plaintiffs costs in respect of all their causes of
action against the third defendants up to the time of giving notice of acceptance (see p 63 c e f h j and p 64 e, post).

Notes
For payment into court, see 37 Halsburys Laws (4th edn) paras 285293, and for cases on the subject, see 37(2) Digest (Reissue)
422427, 25842607.

Cases referred to in judgments

MIlwraith v Green (1884) 14 QBD 766, CA.
Smith v Northleach RDC [1902] 1 Ch 197.
Townsend v Stone Toms & Partners (a firm) [1981] 2 All ER 690, [1981] 1 WLR 1153, CA.

Case also cited

Legal Aid Board v Russell [1990] 3 All ER 18, [1990] 2 QB 607, CA.

Appeal
By writ dated 1 May 1987 the plaintiffs, Ronald and Andrea Hudson, claimed damages for (1) negligence and/or nuisance and/or
breach of statutory or other duty on the part of the defendants, (1) Elmbridge Borough Council, (2) Anda Cribb Ltd, (3) National
House Building Council, (4) David C Cole (a firm), (5) Taylor Whalley & Spyra (a firm) and (6) Castle Eaton Estates Ltd,
resulting in loss, damage and inconvenience suffered as a result of structural damage sustained to their property at Treetops, 2a
The Gardens, Pelhams Walk, Esher, Surrey, in or 56 about 1985 and which was still continuing, (2) breach of a contract (a house
purchasers agreement) made on 28 March 1985 between the plaintiffs and the sixth defendants and (3) breach of a contract (a
house purchasers insurance policy) made between the plaintiffs and the third defendants in 1985. On 29 September 1989 the
third defendants paid into court the sum of 132,20265 in satisfaction of the claim in contract. On 20 October 1989 the plaintiffs
served notice of acceptance accepting the sum and abandoning the other causes of action against the third defendants. On 25
October 1989 the plaintiffs applied by summons for an order that the money in court be paid out to the plaintiffs solicitors and
that the third defendants pay the plaintiffs costs of the action against the third defendants. On the same date the third defendants
applied by summons for an order that there be payment out to the plaintiffs of the money in court and, in addition, (1) that the
plaintiffs have leave to tax only those costs if not agreed incurred in relation to the claim in contract against the third defendants,
such taxed costs to be limited to those incurred in relation to the claim in contract up to 7 November 1987 or in the alternative up
to the date of service of the third defendants notice of payment in, namely 29 September 1989, and (2) that there be judgment
against the plaintiffs in respect of the claims in negligence against the third defendants or, in the alternative, that the third
defendants be at liberty to tax their costs if not agreed in respect of the abandoned claims in negligence, such taxation to relate to
costs incurred up to the date of service of the plaintiffs notice of acceptance of payment in and notice of abandonment, namely
20 October 1989. On 31 October 1989 Judge Fox-Andrews QC hearing official referees business granted the plaintiffs
application and gave leave for payment out of court to the plaintiffs of the 132,20265 paid into court by the third defendants on
29 September 1989 and ordered that the plaintiffs have leave to tax their costs of the action. The third defendants appealed with
leave of the judge against the order for costs. The facts are set out in the judgment of Stuart-Smith LJ.

Nigel Pleming for the third defendants.

John Marrin QC and Ian Pennicott for the plaintiffs.

Cur adv vult

20 November 1990. The following judgments were delivered.

STUART-SMITH LJ (giving the first judgment at the invitation of Purchas LJ). This is an appeal from a judgment of Judge
Fox-Andrews QC hearing official referees business given on 31 October 1989. It relates solely to costs and is brought with the
leave of the judge. It raises an important point as to the parties entitlement to costs where the plaintiff alleges two or more
causes of action, a defendant pays money into court in satisfaction of one only of those causes of action and the plaintiff serves
notice of acceptance in accordance with the rules and abandons those causes of action in respect of which the defendant has
denied liability and made no payment in.
The plaintiffs brought an action against six defendants alleging various causes of action in contract and in tort against them,
in respect of serious subsidence and structural damage occurring to their house in Esher. So far as the third defendants are
concerned the plaintiffs alleged two distinct causes of action. The first related to a contract of insurance under which the
plaintiffs claimed to be indemnified against the costs of certain remedial works (the claim in contract). The second was 57 a
claim in negligence (the claim in tort) by which the plaintiffs claim damages for breach of a duty of care in supervising the
original construction work.
On 29 September 1989 the third defendants made a payment into court in respect of the claim in contract. The notice was in
these terms:

TAKE NOTICE THAT: 1. The Third Defendant, National House Building Council, has paid 132,20265 into court.
The said 132,20265 is in satisfaction of the Plaintiffs cause of action in contract only against the Third Defendants
pursuant to the House Purchasers Insurance Policy dated March 1985 entered into by the Plaintiffs and the Third
Defendants in respect of which the Plaintiffs claim: (a) A declaration that the Third Defendants be liable for all the costs of
the proposed remedial works alternatively such proportion of those costs as may be deemed appropriate pursuant to the
contract of insurance. (b) Interest pursuant to Section 35A of the Supreme Court of Judicature Act 1981

They also explained that the sum paid in included interest and set out how it was calculated.
On 20 October 1989 the plaintiffs served notice of acceptance in the following terms (sic):

TAKE NOTICE that the Plaintiffs accept the sum of 132,20265 paid in by the Third Defendant, National House
Building Council, in satisfaction of the cause of action in respect of which it was paid in and in respect of which it was paid
in and in respect of which the Plaintiffs claim against the Third Defendant and abandon the other causes of action in respect
of which they claim against the Third Defendant in this action.

On 25 October 1989 two applications were made by summonses. One was by the plaintiffs in which they sought an order
for payment out of the money in court and that the third defendants pay the plaintiffs costs of the action against the third
defendants. The second was by the third defendants in which they also sought an order for payment out to the plaintiffs of the
money in court; but in addition sought an order that:

(2) the Plaintiffs have leave to tax only those costs (if not agreed) incurred in relation to the claim in contract against
the Third Defendants as pleaded under Paragraph 8 of the Statement of Claim, such taxed costs to be limited to those
incurred in relation to the claim in contract up to the 7th November 1987 or in the alternative up to the date of service of
the Third Defendants Notice of Payment In, the 29th September 1989; (3) there be judgment against the Plaintiffs in
respect of the claims in negligence against the Third Defendants or, in the alternative, the third Defendants be at liberty to
tax their costs (if not agreed) in respect of the abandoned claims in negligence, pleaded under paragraph 7.6. (a) to (e) of
the Statement of Claim, such taxation to relate to costs incurred up to the date of service of the Plaintiffs Notice of
Acceptance of Payment In and Notice of Abandonment, the 20th October 1989.
It is common ground that the costs of both parties in relation to the claim in tort are very substantial and greatly exceed the costs
in relation to the claim in contract.
The learned judge acceded to the plaintiffs application. He considered that the point was governed by RSC Ord 62, r 5(4)
and that he had no discretion in the matter. It is plain that, if the judge had felt that he had a discretion, he would have made an
order more favourable to the third defendants. And indeed the plaintiffs concede that if the third defendants succeed in
persuading this court 58 that the matter is one for the exercise of discretion it would be proper for this court to make an order for
their costs in relation to the claim in tort as sought in para 3 of their summons.
Mr Pleming makes two submissions in support of the third defendants appeal. First he submits that the judge was wrong in
holding that he had no discretion. He submits that the matter fell to be considered and an order made under Ord 22, r 4 and not
Ord 62, r 5(4). Further, he submits that, if the matter is one of discretion, not only should the third defendants have their costs of
the claim in tort, but the plaintiffs should not have their costs of the claim in contract down to 20 October 1989, the date of the
notice of acceptance of the payment into court, and that some such order as is sought in para 2 of their summons should be made.
Secondly, he submits that, if that submission is wrong, then the notice of acceptance of the money in court and abandonment
of the claim in tort is equivalent to a notice of discontinuance or withdrawal of that cause of action and that the third defendants
are entitled to tax their costs in respect of the claim in tort pursuant to Ord 62, r 5(3) and to have an order of the court to that
effect. Mr Pleming accepts that, if the matter falls to be determined by the provisions of Ord 62, r 5, then the plaintiffs are
entitled to their costs of the claim in contract down to 20 October 1989.
Before considering these submissions I must set out the relevant provisions of the Rules of the Supreme Court. Order 22, r 1
provides:

Payment into Court

(1) In any action for a debt or damages any defendant may at any time pay into Court a sum of money in satisfaction of
the cause of action in respect of which the plaintiff claims or, where two or more causes of action are joined in the action, a
sum or sums of money in satisfaction of any or all of those causes of action
(4) Where two or more causes of action are joined in the action and money is paid into Court under this rule in respect
of all, or some only of, those causes of action, the notice of payment(a) must state that the money is paid in respect of all
those causes of action or, as the case may be, must specify the cause or causes of action in respect of which the payment is
made

Acceptance of money in court is governed by Ord 22, r 3, which provides, so far as is relevant:

(1) Where money is paid into Court under rule 1, then subject to paragraph (2) within 21 days after receipt of the
notice of payment or, where more than one payment has been made or the notice has been amended, within 21 days after
receipt of the notice of the last payment or the amended notice but, in any case, before the trial or hearing of the action
begins, the plaintiff may (b) where the money was paid in respect of some only of the causes of action in respect of
which he claims, accept in satisfaction of any such cause or causes of action the sum specified in respect of that cause or
those causes of action in the notice of payment,by giving notice in Form No. 24 in Appendix A to every defendant to the
action

It will be noted that there is no reference to abandonment of a cause of action in Ord 22, r 3. But this is to be found in Form 24,
which is in the following terms:

Notice of acceptance of money paid into court (O. 22, r. 3)

Take notice that the plaintiff accepts the sum of paid in by the defendant C.D. in satisfaction of the cause[s] of
action in respect of which it was paid in and in respect of which the plaintiff claims [against that 59 defendant] [and
abandons the other causes of action in respect of which he claims in this action]

This was the form of the plaintiffs notice of acceptance. Order 22, r 3(4) provides:

On the plaintiff accepting any money paid into Court all further proceedings in the action or in respect of the specified
cause or causes of action, as the case may be, to which the acceptance relates, both against the defendant making the
payment and against any other defendant sued jointly with or in the alternative to him shall be stayed.

Order 22, r 4 provides:

(1) Where a plaintiff accepts any sum paid into Court and that sum was paid into Court( a) by some but not all of the
defendants sued jointly or in the alternative by him the money in Court shall not be paid out except under paragraph (2)
or in pursuance of an order of the Court, and the order shall deal with the whole costs of the action or of the cause of action
to which the payment relates, as the case may be.
(2) Where an order of the Court is required paragraph (1) by reason only of paragraph (1)( a) then if, either before or
after accepting the money paid into Court by some only of the defendants sued jointly or in the alternative by him, the
plaintiff discontinues the action against all other defendants and those defendants consent in writing to the payment out of
that sum, it may be paid out without an order of the Court

Order 62, r 5 provides:

(1) No order for costs is required in the circumstances mentioned in this rule
(3) Where a party by notice in writing and without leave discontinues an action or counterclaim or withdraws any
particular claim made by him as against any other party, that other party shall be entitled to his costs of the action or
counterclaim or his costs occasioned by the claim withdrawn, as the case may be, incurred to the time of receipt of the
notice of discontinuance or withdrawal.
(4) Where a plaintiff by notice in writing in accordance with Order 22, rule 3(1), accepts money paid into court in
satisfaction of the cause of action or of all the causes of action in respect of which he claims, or accepts money paid in
satisfaction of one or more specified causes of action and gives notice that he abandons the others, he shall be entitled to
his costs of the action incurred up to the time of giving notice of acceptance

Mr Plemings first submission is that the third defendants were sued jointly with one or more of the other five defendants
and that, since there was no notice of discontinuance served by the plaintiffs on those defendants or consent by them as envisaged
by Ord 22, r 4(2), the matter falls to be dealt with as a matter of discretion under Ord 22, r 4(1) and not under Ord 62, r 5(4) at all;
that rule, as Ord 62, r 5(1) indicates, is an automatic provision where no order of the court is made or required. While I agree that
if the matter falls to be dealt with under Ord 22, r 4 the court has a discretion as to costs which is not fettered by Ord 62, r 5(4),
this provision does not, in my judgment, assist the third defendants in this case. Despite the note in The Supreme Court Practice
1991 para 22/4/2, which states that the term sued jointly does not mean the same as joint liability, but only that the defendants
have been joined together in the same action, that is plainly not correct. In Townsend v Stone Toms & Partners (a firm) [1981] 2
All ER 690, [1981] 601 WLR 1153 this court held that the expression sued jointly in RSC Ord 22, r 3(4) related to the case of a
claim made where there was one cause of action but more than one defendant liable thereon jointly with the other or others. The
distinction is between joint and several liability. In my judgment it is impossible to give a different meaning to the same
expression used in Ord 22, r 3(4) from that in Ord 22, r 4. It is not suggested in this case that the third defendants liability was
joint with any other defendant in this sense, nor that it was in the alternative. Accordingly, I would reject Mr Plemings first
submission.
In order to consider the third defendants second submission it is necessary to refer to the history of the relevant provisions
and such authority as there is upon the point.
Under RSC 1883 the relevant rules were as follows. Order 22 provided:

1. Where any action is brought to recover a debt or damages, any defendant may, before or at the time of delivering his
defence, or at any later time by leave of the Court or a Judge, pay into Court a sum of money by way of satisfaction, which
shall be taken to admit the claim or cause of action in respect of which the payment is made; or he may, with a defence
denying liability, (except in actions or counter-claims for libel or slander) pay money into Court which shall be subject to
the provisions of Rule 6
6. When the liability of the defendant, in respect of the claim or cause of action in satisfaction of which the payment
into Court has been made, is denied in the defence, the following rules shall apply:(a) The plaintiff may accept, in
satisfaction of the claim or cause of action in respect of which the payment into Court has been made, the sum so paid in, in
which case he shall be entitled to have the money paid out to him as herein-after provided ( b.) If the plaintiff accepts
the money so paid in, he shall, after service of such notice in the Form No. 4 in Appendix B. as is in Rule 7 mentioned, or
after delivery of a reply accepting the money, be entitled to have the money paid out to himself
7. The plaintiff, when payment into Court is made before delivery of defence, may within four days after the receipt of
notice of such payment, or when such payment is first signified in a defence, may before reply, accept in satisfaction of the
claim or cause of action in respect of which such payment has been made the sum so paid in, in which case he shall give
notice to the defendant in the Form No. 4 in Appendix B., and shall be at liberty, in case the entire claim or cause of action
is thereby satisfied, to tax his costs after the expiration of four days from the service of such notice, unless the Court or a
Judge shall otherwise order

Form 4 was in these terms:

Take notice that the plaintiff accepts the sum of paid by you into Court in satisfaction of the claim in respect
of which it is paid in.

Three points are to be observed about these rules. (1) The circumstances in which the plaintiff is entitled to tax his costs
without an order of the court are strictly limited in r 7 and do not apply where there has been a payment in with denial of liability.
(2) Even where the plaintiff is entitled to tax his costs without an order, it is subject to the proviso unless the Court or a Judge
shall otherwise order. These words were a common feature of all such provisions relating to automatic taxation of costs until the
latest change in the rules introduced in 1986. (3) The form of acceptance made no provision for other causes of action which
were not covered by the payment in. There was no provision for the plaintiff to abandon them.
61
In MIlwraith v Green (1884) 14 QBD 766 the plaintiffs statement of claim alleged two distinct breaches of the same
contract. The defendant denied liability but paid money into court in respect of one breach. The plaintiffs gave notice under Ord
22, r 7 that they accepted the money in full satisfaction of the causes of action in the statement of claim. They did not use Form
4. It was held that the plaintiffs were entitled to their costs only in respect of the breach in respect of which the money had been
paid in. The notice of acceptance was to be considered as a notice of discontinuance or withdrawal of the cause of action in
respect of which no payment in had been made and accordingly the defendant was entitled to his costs on that issue. Brett MR
said (at 768):

What the plaintiffs have done is equivalent to an acceptance of the payment into court in respect of the one breach, and
a discontinuance of the action in respect of the other breach. When the costs are taxed, the plaintiffs must not be paid in
respect of the causes of action which they have abandoned: they must be paid costs only in respect of the breach as to
which they have succeeded; and if the defendants have been put to any unnecessary costs by the course which the plaintiffs
have taken, they must be reimbursed those costs.

That decision was followed in Smith v Northleach RDC [1902] 1 Ch 197.

As the rules then stood there was no machinery by which the plaintiff could accept the payment in in respect of one cause of
action, abandon the rest of his claim and obtain automatic taxation of his costs of the action.
The rules remained the same until 1933. Ord 22 was amended and, so far as is material, was as follows:

1.(1). In any action for a debt or damages or in an an admiralty action the defendant may at any time upon notice to
the plaintiff pay into Court a sum of money in satisfaction of the claim or (where several causes of action are joined in one
action) in satisfaction of one or more of the causes of action; provided that with a defence setting up tender before action
the sum of money alleged to have been tendered must be brought into Court.
(2) Where the money is paid into Court in satisfaction of one or more of several causes of action the notice shall specify
the cause or causes of action in respect of which payment is made and the sum paid in respect of each such cause of action,
unless the Court of a Judge otherwise order
2.(1) Where money is paid into Court under Rule 1, the plaintiff may, within seven days of the receipt of the notice
of payment into Court, accept the whole sum or any one or more of the specified sums in satisfaction of the claim or in
satisfaction of the cause or causes of action to which the specified sum or sums relate, by giving notice to the defendant in
Form 4 in Appendix B.; and thereupon he shall be entitled to receive payment of the accepted sum or sums in satisfaction
as aforesaid.
(2) Payment shall be made to the plaintiff or on his written authority to his solicitor, and thereupon proceedings in the
action or in respect of the specified cause or causes of action (as the case may be) shall be stayed

Form 4 introduced the words and abandons his other claims in this action, as in the present Form 24. Rule 2(3) provided:

If the plaintiff accepts money paid into Court in satisfaction of his claim, or if he accepts a sum or sums paid in respect
of one or more of specified causes of action, and gives notice that he abandons the other cause or causes 62 of action, he
may, after four days from payment-out and unless the Court or a Judge otherwise order, tax his costs incurred to the time of
payment into Court, and forty-eight hours after taxation may sign judgment for his taxed costs.
 Mr Pleming submitted that the introduction of the ability to abandon causes of action introduced by the new Form 4 was to
give effect to the decision in MIlwraiths case. He submits that the abandonments to be treated as a notice of discontinuance or
withdrawal of the other cause of action and the plaintiffs only entitlement to tax his costs is in relation to the cause of action in
respect of which the payment in has been made.
I cannot accept this. In my judgment, the new rule did give effect to MIlwraiths case by producing a form that would meet
what the plaintiff in that case sought to do, without it being construed as a discontinuance or withdrawal. The safeguard for the
defendant on costs is to be found in the words unless the Court or a Judge otherwise order. Plainly under these rules the third
defendants would have been protected.
There was no relevant change in the rules between 1933 and 1986, save that the provision as to taxation of costs in Ord 22, r
2(3) became first r 10 of the Supreme Court Costs Rules 1959, SI 1959/1947, and later Ord 62, r 10(2). In each case the
safeguard remained for the defendant that he could ask for a special order for costs.
I find it impossible to say that the word abandon in Ord 62, r 5(3) has the same meaning as discontinue or withdraw in
Ord 62, r 5(2). If it had been intended to give effect to MIlwraiths case in the way Mr Pleming submits was done, it would have
been perfectly possible to use these words in the terms of acceptance. It is clear in my judgment that the amendment of the rules
in 1933 was intended to introduce machinery by which the plaintiff could accept a payment in in satisfaction of his whole claim if
he so wished, not proceeding with the balance of his claim and proceed to tax his costs automatically, unless the defendant
objected.
I find nothing surprising in this. It is probably only the exceptional case, of which the present is one, where had the matter
proceeded to trial without a payment into court an unsuccessful defendant could expect to get an order for costs in his favour on
the issue in which he had succeeded. Moreover, costs are not usually significantly increased simply because a plaintiff has two or
more different causes of action, at least if the matter is disposed of before trial. What is surprising and undoubtedly involves
injustice in this case to the defendant is that the defendants right to apply to the court for a different order has now been removed
from Ord 62, r 5(4).
Moreover the circumstances in which a plaintiff can discontinue an action or withdraw any particular claim without leave
are strictly limited. It must be done within 14 days of service of the defence: see Ord 21, r 2(1). It is only in these very limited
circumstances that the automatic right to costs arises under Ord 62, r 5(3). And I cannot see how Mr Pleming claims that this rule
entitled him to an automatic taxation of the defendants costs when the notice of abandonment is served many months after close
of proceedings.
I acknowledge that this is an unsatisfactory and unjust result in this case. The solution is the reintroduction into Ord 62, r
5(4) of the words, unless the Court or a Judge otherwise orders.
I would dismiss the appeal.

PARKER LJ.: I agree with both the conclusion and the reasons of Stuart-Smith LJ. The conclusion is forced upon us by the
omission in the present rule of the words unless the Court or a Judge otherwise order.
63
I do not know what the omission was designed to achieve. I suspect that it was for the purpose of preventing unnecessary
applications. I am confident, however, that situations such as the present cannot have been contemplated.
To take an extreme example, suppose a defendant is faced with a claim for 40,000 in contract and 300,000 in fraud. He is
prepared, if he can, to dispose of the contract claim by paying 25,000 into court and paying the costs of that claim. He therefore
pays that sum into court in respect of that claim. At the time of payment in the costs incurred in advancing and defending the
contract claim are only one-tenth of the like costs in respect of the fraud claim. It seems to me grossly unjust to permit the
plaintiff to take the money in court and to recover his costs not only of that claim but also of the fraud claim, and thus to achieve
the same result as if the defendant had paid in the 25,000 in respect of all causes of action instead of in respect of the contract
claim only.
Under Ord 21, r 3(1)(b) he can only take the money out in satisfaction of the cause of action in respect of which it was paid
in. If this is so, the remaining claims should clearly be left in being or discontinued under the rules with the consequences in
costs of such action. To give him the absolute right to abandon them and recover his costs when, had he wished to discontinue
them, he would almost certainly have had to pay the costs as a condition of leave appears to me wholly unjustified. The matter is
one which, in my view, demands the urgent attention of the Rule Committee and an early change in the rules.

PURCHAS LJ.: I agree with considerable reluctance that, for the reasons given in the judgment of Stuart-Smith LJ, this appeal
must be dismissed. I would only wish to add that I also consider that in the circumstances of this case, which are by no means
unique, the omission of the words unless the Court or a judge otherwise order from the current version of Ord 62, r 5(4) has
prevented the court from achieving a fair result as between the parties. I too hope that those responsible will consider an
appropriate amendment to the rules.

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

Solicitors: Masons; Merricks, Ipswich.

Dilys Tausz Barrister.

64
[1991] 4 All ER 65

Minister of Foreign Affairs Trade and Industry v Vehicles and Supplies Ltd
and another
ADMINISTRATIVE

PRIVY COUNCIL
LORD KEITH OF KINKEL, LORD ACKNER, LORD OLIVER OF AYLMERTON, LORD LOWRY AND SIR EDWARD EVELEIGH
22 APRIL, 13 MAY 1991

Jamaica Civil proceedings Proceedings for leave to apply for certiorari to quash ministers allocation of imported motor
vehicles Whether civil proceedings Whether proceedings should be brought against Attorney General rather than minister
Crown Proceedings Act (Jamaica), s 18(2).
Practice Leave Leave on ex parte application Revocation of leave Jurisdiction Whether High Court judge having
jurisdiction to vary or revoke ex parte order made by another High Court judge Judicature (Civil Procedure Code) Law
(Jamaica), s 686 RSC Ord 32, r 6.

Judicial review Application for judicial review Application for leave to apply for judicial review Leave to apply for order of
prohibition or certiorari Stay of proceedings Grant of leave operating as stay of proceedings Whether grant of leave
operating as injunction Whether stay having any effect on executive decision already made.

The applicants, who were retail motor dealers in Jamaica, were aggrieved at a reduction in the allocation of imported motor
vehicles made to them for the year 198889 by the sole importer which was licensed by the Minister of Foreign Affairs, Trade
and Industry to import motor vehicles into Jamaica. The importer was a corporation owned or controlled by the Jamaican
government and the allocation was made at the direction of the minister. The applicants issued a summons for leave to apply for
an order of certiorari to quash the allocations, alternatively an order of prohibition directed to the minister prohibiting him from
implementing the allocation or alternatively an order of mandamus directing the minister to make a fair allocation and further
seeking an order that all allocations be stayed pending final determination of the proceedings. The judge in chambers made an ex
parte order granting the relief sought including the stay of allocations. The applicants threatened to bring contempt proceedings
against the minister if any contract to import vehicles was concluded by the import corporation. The minister applied for the
order to be set aside on the grounds that the allocation had already been made and that well before the order was made by the
judge instructions had been given to the import corporation to order vehicles. At the hearing of the ministers summons by
another judge the stay was lifted. On appeal by the applicants the Court of Appeal of Jamaica allowed the appeal and reimposed
the stay. The minister appealed to the Privy Council. The issues arose (i) whether the proceedings were civil proceedings as
defined by s 18(2)a of the Crown Proceedings Act of Jamaica and ought therefore 65 by virtue of s 13 of that Act to have been
brought against the Attorney General rather than the minister, (ii) whether a judge of the High Court of Jamaica had jurisdiction
to discharge an ex parte order made by another judge and (iii) whether a stay of proceedings which arose when leave was granted
pursuant to s 564B(4)b of the Judicature (Civil Procedure Code) Law of Jamaica to apply for an order of prohibition or certiorari
was in the nature of injunctive relief and, if so, whether injunctive relief could be granted against the Crown and/or officers of the
Crown.
________________________________________
a Section 18(2), so far as material, provides: Subject to the provisions of this section, any reference in this Part to civil proceedings against
the Crown shall be construed as a reference to the following proceedings only(a) proceedings for the enforcement or vindication of any
right or the obtaining of any relief which, if this Act had not been passed, might have been enforced or vindicated or obtained by any such
proceedings as are mentioned in paragraph 2 of Schedule 1; (b) proceedings for the enforcement or vindication of any right or the obtaining
of any relief which, if this Act had not been passed, might have been enforced or vindicated or obtained by an action against the Attorney-
General or any officer of the Crown as such or by proceedings taken by virtue of any of the enactments set out in Schedule 2; and ( c) all
such proceedings as any person is entitled to bring against the Crown by virtue of this Act .
b Section 564B(4), so far as material, is set out at p 71 f, post.

Held (1) On the true construction of s 18(2) of the Crown Proceedings Act proceedings which were instituted for the purpose of
reviewing a ministers exercise of his statutory powers were not civil proceedings and therefore the minister and not the
Attorney General was the proper respondent to such proceedings (see p 70 a b, post).
(2) A judge of the Supreme Court had jurisdiction under RSC Ord 32, r 6 c, as applied to Jamaica by s 686d of the Civil
Procedure Code, to vary or revoke an ex parte order made by another judge, and in the light of the new material put forward by
the minister in support of his application for the order to be set aside the second judge had acted within his discretion in setting
aside the ex parte order made by the first judge (see p 70 j to p 71 b, post).
________________________________________
c Rule 6 is set out at p 70 h, post.
d Section 686, so far as material, is set out at p 70 g, post.

(3) A stay of proceedings was an order which put a stop to the further conduct of proceedings in court or before a tribunal at
the stage then reached, the object being to prevent the hearing or trial taking place. As such it merely meant that any proceedings
taking place while the stay was in force were ineffective and it was not an order enforceable by proceedings for contempt since
by its nature it was not capable of being breached by anyone and thus could have no possible application to an executive decision
which had already been made. Furthermore, a stay could not act as an injunction by a sidewind. The judge when granting the ex
parte stay of allocations had either granted relief which was inappropriate and inapplicable in the circumstances because there
were no proceedings on which a stay could take effect or sought to grant an injunction against the minister by inappropriate
means, but in either case the order was meaningless. The appeal would therefore be allowed and the order staying the allocations
set aside (see p 71 d e g j to p 72 a d, post).

Notes
For the powers of the court when granting leave to apply for judicial review and for judicial review generally, see 37 Halsburys
Laws (4th edn) paras 572, 567583, and for cases on the subject, see 16 Digest (Reissue) 321435, 33624797.
For ex parte applications, see 37 Halsburys Laws (4th edn) para 332337, and for cases on the subject, see 37(2) Digest
(Reissue) 442445, 27032720.

Cases referred to in judgment

Becker v Noel [1971] 2 All ER 1248, [1971] 1 WLR 803, CA.
La Grange v McAndrew (1879) 4 QBD 210.
R v Secretary of State for the Home Dept, ex p Herbage (No 2) [1987] 1 All ER 324, [1987] QB 1077, [1987] 2 WLR 226, CA.
WEA Records Ltd v Visions Channel 4 Ltd [1983] 2 All ER 589, [1983] 1 WLR 721, CA.
66

Cases also cited

Factortame Ltd v Secretary of State for Transport [1989] 2 All ER 692, [1990] 2 AC 85, HL.
R v Licensing Authority, ex p Smith Kline & French Laboratories Ltd (Generics (UK) Ltd intervening) (No 2) [1989] 2 All ER
113, [1990] 1 QB 574, CA.
R v Secretary of State for the Home Dept, ex p Herbage [1986] 3 All ER 209, [1987] QB 872.
R v Secretary of State for the Home Dept, ex p Kirkwoood [1984] 2 All ER 390, [1984] 1 WLR 913.
R v Secretary of State for the Home Dept, ex p Mohammed Yaqoob [1984] 1 WLR 920, CA.

Appeal
The Minister of Foreign Affairs, Trade and Industry of Jamaica appealed with the leave of the Court of Appeal of Jamaica against
the judgment of that court (Rowe P, Carey and Forte JJA) given on 16 June 1989 allowing an appeal by the respondents, Vehicles
and Supplies Ltd and Northern Industrial Garage Ltd, from the order of Ellis J made in chambers on 2 February 1989 in the
Supreme Court of Jamaica, whereby the judge set aside part of the ex parte order of Clarke J made in chambers in the Supreme
Court on 11 January 1989 staying all allocations of quotas and/or proceedings consequent on the allocations made by the Jamaica
Commodity Trading Co on the direction of the minister pending final determination of the respondents application for orders of
certiorari to quash the allocations, alternatively prohibition directed to the minister prohibiting him from implementing the
allocation or alternatively mandamus directing the minister to make a fair allocation. The facts are set out in the judgment of the
Board.

The Solicitor General of Jamaica and The Assistant Attorney General of Jamaica for the minister.
The respondents were not represented.

13 May 1991. The following judgment of the Board was delivered.

LORD OLIVER OF AYLMERTON. This is an appeal from a judgment dated 16 June 1989 of the Court of Appeal of Jamaica
(Rowe P, Carey and Forte JJA), allowing with costs the respondents appeal from an order made by Ellis J in the Supreme Court
of Jamaica on 2 February 1989 and restoring a previous order of Clarke J dated 11 January 1989.
Although events occurring subsequent to the order of Ellis J have rendered the litigation entirely academic so far as the
respondents are concerned and they have not appeared to argue before their Lordships Board, it was considered by the appellant
that the order of the Court of Appeal raised questions of general public importance in Jamaica which it was desirable should be
considered by their Lordships.
The background to the litigation lies in the Trade Act of Jamaica, s 8 of which enables the minister (in this case the Minister
of Foreign Affairs, Trade and Industry) to prohibit the importation of goods and to regulate the distribution, purchase or sale of
goods or any class of goods. In pursuance of this power there was made the Motor Vehicle (Sale and Distribution) Order 1985,
the effect of which was that approved motor vehicles were permitted to be imported into Jamaica only by specified importers for
distribution to dealers whose business is 67 to purchase motor vehicles for resale. An approved motor vehicle is defined as one
imported under credit facilities which are guaranteed by the government of Jamaica. In fact there was at the material time only
one specified importer. This was the Jamaica Commodity Trading Co Ltd (JCTC) which their Lordships have been given to
understand is a registered limited company the issued share capital of which is owned or controlled by the Jamaican government
but which is managed by a board of directors in the ordinary way. It is under government control in the sense that the directors
can be removed and replaced by the government by virtue of its shareholding, but it is not in any relevant sense an agent or organ
of the government. In practice, the way in which the system works is that JCTC issues annual invitations to car retailers to
indicate within specified categories and subject to certain specified maxima the number of vehicles which they require for the
year. Once the retailers requests for allocations are received, they are forwarded to the minister for him to make the allocation.
The retailers are subsequently informed, through JCTC, of the allocation made to them and JCTC is instructed to contract with
the foreign suppliers for the supply of the vehicles allocated.
Regulations 3, 4 and 5 of the 1985 order provide as follows:

3. All approved motor vehicles shall be allocated among dealers in such manner and in such numbers and subject to
such terms and conditions as the Minister may, in his absolute discretion, determine.
4. (1) The Minister shall notify in writing each specified importer of the determination made pursuant to paragraph 3.
(2) The specified importer shall notify in writing all dealers affected by the determination communicated to him by the
Minister.
5. Every specified importer shall give effect to the determination by the Minister and upon receipt of payment from the
dealer of the price of the approved motor vehicle, forthwith deliver or cause to be delivered to the dealer, such motor
vehicle.

It will thus be seen that in making the determination the minister, though no doubt acting within a discretion which must be
properly exercised, performs a purely executive function which is exhausted once the determination has been made. The
responsibility for implementing the determination then devolves upon the specified importer to whom the communication has
been issued.
The respondents are motor dealers carrying on retail businesses in Jamaica. Both applied for allocations of vehicles for the
year 198889. Allocations were made and on 25 November 1988 JCTC was instructed to place orders for vehicles of the types
and in the quantities allocated. On 7 December 1988 JCTC notified the respondents of their allocations, which were for
quantities substantially less than in the previous year. They protested but without result and on 4 January 1989 they issued an ex
parte summons for leave to apply for an order of certiorari to quash the allocations, alternatively for an order of prohibition
directed to the minister prohibiting him from implementing the allocation, alternatively for an order of mandamus directing the
minister to make a fair allocation. Paragraph (ii) of the summons asked that all allocations of quotas and/or proceedings
consequent on the said allocations be stayed pending a final determination of this matter. On 11 January 1989 Clarke J in
chambers made an ex parte order granting the relief sought by the summons, including the stay sought by para (ii). That order
was served on the minister on 13 January 1989 and on 17 January the respondents attorneys wrote threatening proceedings for
contempt if a contract was concluded by JCTC for the importation of motor vehicles. The response to this threatwhich, for
reasons which appear hereafter, their Lordships consider 68 to be entirely misconceivedwas a summons by the appellant for the
ex parte order to be set aside either in whole or in part, the summons being supported by an affidavit deposing to the fact that the
allocation had already been made and that instructions had, well prior to the order, been given for JCTC to order the vehicles
concerned and also adverting to the irreparable damage to the economy which would be caused if the importation were to be
delayed and to the escalation of prices consequent upon any further delay.
Clarke J was absent from Kingston on circuit at the return date for the hearing of the summons and the matter was heard in
chambers by Ellis J who, after hearing both parties, set aside that part of the order of Clarke J which granted a stay but gave leave
to the respondents to appeal. On 16 June 1989 the Court of Appeal reversed the decision of Ellis J and restored the stay
contained in the order of Clarke J, although the court appears to have accepted that the relief was now academic since, in the
interim, the vehicles had been ordered and the allocations affected. The court also dismissed the cross-appeal by the appellant
seeking to have the order of Clarke J granting leave to apply set aside in its entirety.
It was the appellants contention before the Court of Appeal that an application for leave to apply for an order of certiorari or
prohibition in respect of a ministerial decision was a proceeding against the Crown to which the only proper party was the
Attorney General so that the proceedings before Clarke J were, in any event, misconceived. This argument rested upon the
provisions of the Crown Proceedings Act of Jamaica, s 13 of which expressly provides that civil proceedings against the Crown
shall be instituted against the Attorney General. The Act, however, contains, in s 18, a restrictive definition of civil proceedings
and the court was unanimous in holding that the proceedings from which the appeal arises were not civil proceedings within the
Act. There was thus no statutory requirement rendering the Attorney General either a necessary or a proper party. The
appellants primary ground of attack on the order of 11 January 1989, however, was that the stay granted by para (2) of the order
was in fact in the nature of an injunction and that no injunction could be granted against the Crown. Carey and Forte JJA were at
one in concluding that in Jamaica an interim injunction could not be granted against the Crown but that the grant of a stay (which
they seem to have assumed would have the same effect) was permissible by virtue of s 564B(4) of the Judicature (Civil Procedure
Code) Law. Rowe P felt it unnecessary to consider whether injunctive relief could be granted against the Crown in civil
proceedings since this remedy was irrelevant to proceedings on the Crown side for prerogative remedies. There, in his view,
interim relief was always obtainable in Crown side proceedings in that the order nisi acted as a stay in Crown side proceedings.
The principal ground, however, upon which the court concluded that the appeal must be allowed and the stay restored was
that Ellis J had no jurisdiction to discharge an ex parte order made by another judge.
Leave to appeal to Her Majesty in Council was granted by an order made on 21 July 1989 in which it was certified that four
questions ought, by reason of their general or public importance, to be submitted to Her Majesty in Council. These were as
follows: (1) Whether the stay of proceedings granted pursuant to s 564B(4) of the Civil Procedure Code is in the circumstances
of the case in the nature of an injunctive relief? (2) If the answer to question 1 is Yes, then whether any relief which is in the
nature of an injunctive relief can be granted against the Crown and/or its officers in these proceedings having regard to the
provisions of the Crown Proceedings Act and the unavailability of such relief on the Crown side of the Queens Bench Division
or otherwise? (3) Whether or in what circumstances a High Court judge can review and set aside the ex parte order of 69 another
High Court judge made on an application for leave to issue a prerogative order? (4) Should the Attorney General be named as the
respondent in these proceedings instead of the Minister of Foreign Affairs, Trade and Industry?
As regards the last of these questions, their Lordships entertain no doubt whatever that the Court of Appeal was correct in
concluding that the proceedings were not civil proceedings, as defined by the Crown Proceedings Act, and that the appellant
and not the Attorney General was the proper party to proceedings instituted for the purpose of reviewing the exercise of his
statutory powers.
On the principal ground upon which the decision of Ellis J was reversed, however, their Lordships take an entirely contrary
view to that taken by the Court of Appeal. Although the three members of the court were unanimous in their conclusion on this
point, they reached it by rather different routes. Rowe P, whilst acknowledging that in civil proceedings commenced by writ the
ex parte interim order of a judge is reviewable and may be varied or discharged either by the judge who made the order or, in an
appropriate case, by another judge, nevertheless held that in proceedings under s 564B of the Civil Procedure Code the only
method of varying or revoking an ex parte order was by way of appeal to the Court of Appeal except in the case where the order
itself gives a liberty to apply to vary or discharge. Carey JA, with whom Forte JA agreed, accepted that a judge of the Supreme
Court has an inherent jurisdiction to set aside or vary an order made ex parte and even to revoke leave given ex parte, but that this
only applied where new matters are brought to his attention either with respect to the facts or the law. In his view Ellis J did not
have before him any material which enabled him to exercise the jurisdiction.
An ex parte order is, in its nature, provisional only and Carey JA was plainly right in following and adopting what was said
to this effect by Sir John Donaldson MR in WEA Records Ltd v Visions Channel 4 Ltd [1983] 2 All ER 589 at 593, [1983] 1 WLR
721 at 727 and by Lord Denning MR in Becker v Noel [1971] 2 All ER 1248, [1971] 1 WLR 803. Rowe P considered that s
564B, in providing for an appeal to the Full Court against a refusal of leave, impliedly ousted any reconsideration of the matter
either by the same judge or by another judge. This, with respect, is a non sequitur and it would, if correct, produce the absurd
result that, even in a case where an order had been obtained by deliberate concealment of material facts and misleading evidence,
the judge who had been wrongly persuaded to make the order would be incapable of revoking it. All other considerations apart, it
is provided by s 686 that:

Where no other provision is expressly made by law or by Rules of Court the procedure and practice for the time being
of the Supreme Court of Judicature in England shall, so far as applicable, be followed

Neither the Civil Procedure Code nor the rules contain express provisions relating to the discharge of ex parte orders but
RSC Ord 32, r 6 provides in terms: The Court may set aside an order made ex parte. Leave granted to institute proceedings for
judicial review can, in an appropriate case, be revoked by a judge under this rule (see R v Secretary of State for the Home Dept,
ex p Herbage (No 2) [1987] 1 All ER 324 at 335, [1987] 1 QB 1077 at 1092).
Their Lordships entertain no doubt that Ellis J was acting within his jurisdiction in making the order which he made on the
appellants application and they have difficulty in understanding Carey JAs assertion that the judge had before him no new
material justifying his exercise of the jurisdiction. He had in fact most material evidence, adduced before the court for the first
time, first as to the supposed effect of the stay which Clarke J had purported to grant, and secondly that in fact the allocation had
been made already and the instructions given to 70 JCTC which, in so far as the stay could have had any effect, was not bound
by the order and was not even a party to the proceedings. In their Lordships judgment, Ellis J was entitled, on an application
properly made, in his discretion to vary or revoke the ex parte order which had been made by Clarke J and no ground has been
shown for any interference by an appellate court with his exercise of discretion, which seems to their Lordships perfectly proper
on the supposition, which everybody connected with the court seems to have adopted, that the order for a stay had some
inhibiting effect.
This by itself is sufficient to dispose of the appeal but it has to be remarked that, quite apart from the factual material
adduced in support of the appellants application for the variation of the order, and regardless of any question whether the
evidence adduced in support of the respondents application to Clarke J provided even prima facie ground for the grant of the
leave sought, there was every ground for challenging the order for a stay as a matter of law. It seems in fact to have been based
upon a fundamental misunderstanding of the nature of a stay of proceedings. A stay of proceedings is an order which puts a stop
to the further conduct of proceedings in court or before a tribunal at the stage which they have reached, the object being to avoid
the hearing or trial taking place. It is not an order enforceable by proceedings for contempt because it is not, in its nature, capable
of being breached by a party to the proceedings or anyone else. It simply means that the relevant court or tribunal cannot,
whilst the stay endures, effectively entertain any further proceedings except for the purpose of lifting the stay and that, in general,
anything done prior to the lifting of the stay will be ineffective, although such an order would not, if imposed in order to enforce
the performance of a condition by a plaintiff (eg to provide security for costs), prevent a defendant from applying to dismiss the
action if the condition is not fulfilled (see La Grange v McAndrew (1879) 4 QBD 210). Section 564B(4) of the Civil Procedure
Code provides:

the grant of leave under this section to apply for an order of prohibition or an order of certiorari shall, if the judge
so directs, operate as a stay of the proceedings in question until the determination of the application or until the court or
judge otherwise orders.

This makes perfectly good sense in the context of proceedings before an inferior court or tribunal, but it can have no possible
application to an executive decision which has already been made. In the context of an allocation which had already been
decided and was in the course of being implemented by a person who was not a party to the proceedings it was simply
meaningless. If it was desired to inhibit JCTC from implementing the allocation which had been made and communicated to it or
to compel the appellant, assuming this were possible, to revoke the allocation or issue counter-instructions, that was something
which could be achieved only by an injunction, either mandatory or prohibitory, for which an appropriate application would have
had to be made. The appellants apprehension that that was what was intended by the order is readily understandable, but if that
was what the judge intended by ordering a stay, it was an entirely inappropriate way of setting about it. He had not been asked
for an injunction nor does it appear that he considered or was even invited to consider whether he had jurisdiction to grant one.
Certainly none is conferred in terms by s 564B. An injunction cannot be granted, as it were, by a sidewind and if that was the
judges intention it should have been effected by an order specifying in terms what acts were prohibited or commanded. As it
was there were no proceedings in being upon which the stay could take effect. One is left with only two possibilities. Either
Clarke J was granting relief which was entirely inappropriate 71 and inapplicable to the circumstances before him or he was
seeking to enjoin the activities of JCTC, which was not a party to the action, and to do so by wholly inappropriate machinery. In
either event, the order was meaningless.
The answer to the first of the certified questions must, therefore, be in the negative and the second question does not arise.
Their Lordships do not feel called upon to answer what is now an entirely academic question upon the hypothesis that injunctive
relief is what Clarke J may have intended to grant. They can well understand the anxiety of the Solicitor General for Jamaica to
have an authoritative answer to an important question and they are greatly indebted to him for his clear and illuminating
submissions. But the point is far from easy. Attention has been drawn to some of the difficulties in this area of the law in a
recent note by Sir William Wade QC, What has happened to the sovereignty of Parliament (1991) 107 LQR 4, and there are, in
addition, considerations regarding the status of ministers of the Crown which are peculiar to Jamaica. Despite Dr Rattrays most
helpful address, their Lordships do not think it appropriate to express an opinion on what is, in any event, now a hypothetical as
well as an academic question and without having the benefit of a full inter partes argument.
Their Lordships will, accordingly, humbly advise Her Majesty that the appeal should be allowed and the order for costs
made in the Court of Appeal discharged.

Appeal allowed.

Solicitors: Kenneth Rattray QC; Oswald Burchenson; Charles Russell.

Mary Rose Plummer Barrister.

[1991] 4 All ER 72

R v Secretary of State for the Home Department, ex parte Muboyayi

IMMIGRATION

COURT OF APPEAL, CIVIL DIVISION

LORD DONALDSON OF LYMINGTON MR, GLIDEWELL AND TAYLOR LJJ
16, 17, 18, 25 JUNE 1991

Immigration Leave to enter Refugee Asylum Application for asylum refused without consideration of claim Detention
pending removal to safe third country Applicant obtaining writ of habeas corpus Whether writ of habeas corpus appropriate
remedy Whether prior administrative decision refusing leave to enter open to investigation on application for writ of habeas
corpus Whether appropriate remedy judicial review of administrative decision Whether application for leave to move for
judicial review should be granted.

The applicant, a citizen of Zaire, sought leave to enter the United Kingdom with his family on the ground that he had a well-
founded fear that he would be persecuted in Zaire. The Secretary of State refused his application for political asylum and
directed that the applicant and his family be returned to France on the basis that, having spent a day in France on the way from
Zaire to the United Kingdom, they could properly be returned there and that France, being a signatory to the United Nations 1951
Convention and 1961 Protocol relating to the Status of Refugees, would not further remove them to Zaire without first
considering a claim for asylum. The applicant was detained pending such removal pursuant to para 16(2) of Sch 2 to the
Immigration Act 1971. The applicant made representations to the Secretary of State that his application for asylum would not 72
be properly considered by France and when those representations were rejected he applied for the issue of a writ of habeas
corpus. At the hearing of the application, which took place about an hour before the applicant was due to be removed from the
jurisdiction, the judge asked for an undertaking from the Secretary of State that the applicant would not be removed until the
court had decided the application. Counsel for the Secretary of State declined to give the undertaking on the ground that he had
no express authority to do so, with the result that the judge ordered the issue of the writ. The Secretary of State appealed, seeking
to have the writ set aside on the basis that, since the applicants challenge lay not to the jurisdiction to detain under para 16(2) of
Sch 2 to the 1971 Act but to the prior administrative decision refusing him leave to enter, the proper procedure for advancing the
applicants complaint was to seek leave to apply for judicial review of the decision and that unless and until that decision was
quashed the applicants detention was unimpeachable. The applicant contended that on the return of a writ of habeas corpus the
court was not limited to a consideration of errors on the face of the warrant of detention but could and should investigate whether
the warrant was properly issued, which involved considering the justification for refusing leave to enter, and that therefore he had
a choice whether to seek leave to apply for judicial review or to seek a writ of habeas corpus. At the hearing the applicant, on the
invitation of the court, applied for leave to move for judicial review of the Secretary of States refusal to consider his application
for asylum.

Held (1) Where a person who had been lawfully detained pending his removal from the United Kingdom sought to challenge
the underlying administrative decision refusing him leave to enter on the ground that, due to some procedural error, a
misapprehension of the law, a failure to take account of relevant matters or the fundamental unreasonableness of the decision, the
decision should never have been taken, the appropriate means of challenging the decision was by way of an application for
judicial review and not by an application for a writ of habeas corpus, and unless and until the underlying decision was set aside
his detention could not be impugned. In such circumstances a writ of habeas corpus was not an appropriate remedy since, on
return of the writ, the court was limited to examining whether the precedent facts necessary to justify the detention had been
established and the court would not investigate the propriety of the prior administrative decision refusing the applicant leave to
enter nor would it consider any matters urged by the applicant as justifying the court to set aside the decision. Accordingly, the
applicants proper remedy was to apply for judicial review of the decision refusing leave to enter, but that was subject to the
important qualification that the fact that counsel for the Secretary of State had been unable to give the judge an undertaking that
the applicant would not be removed from the jurisdiction before the court had considered his application justified the issue of the
writ of habeas corpus in the particular circumstances, although it should have been coupled with an application for leave to apply
for judicial review. The Secretary of States appeal would therefore be allowed and the writ of habeas corpus would be set aside
on the Secretary of State giving an undertaking that the applicant would not be removed before a given date (see p 78 j to p 79 b,
p 80 g h, p 81 b c, p 82 c, p 85 f, p 88 j, p 89 c and p 90 c to e, post); R v Secretary of State for the Home Dept, ex p Cheblak
[1991] 2 All ER 319 applied; Khawaja v Secretary of State for the Home Dept [1983] 1 All ER 765 distinguished.
 (2) Having regard to the Secretary of States policy regarding the removal of persons seeking asylum to a safe third country
and to evidence that France would comply with its international obligations in considering a persons claim for asylum, it was
clear that the Secretary of States decision to remove the applicant to 73 France, as a safe third country, was unimpeachable.
Accordingly, there were no grounds for granting leave to seek judicial review and the applicants application would therefore be
refused (see p 83 h, p 85 e f, p 88 j, p 89 b and p 90 e f, post).
Per Lord Donaldson MR and Taylor LJ. (1) The court has jurisdiction to stay a decision of the Secretary of State refusing a
would-be immigrant leave to enter the United Kingdom where that person has sought the protection and assistance of the court
and any subsequent order would be less effective (see p 81 d e and p 91 a c, post); R v Secretary of State for Education and
Science, ex p Avon CC [1991] 1 All ER 282 considered.
(2) The removal of a would-be immigrant may be temporarily stayed by the use of the power to issue a writ of habeas corpus
or by the adaptation of the writ ne exeat regno (see p 82 a and p 91 c, post).

Notes
For the power to give or refuse leave to enter the United Kingdom, see 4 Halsburys Laws (4th edn) paras 10031010, and for
cases on the subject, see 2 Digest (Reissue) 203207, 11601176.
For judicial review generally and the writ of habeas corpus ad subjiciendum, see 1(1) Halsburys Laws (4th edn reissue)
paras 6065, 222264, and for cases on the subject, see 16 Digest (Reissue) 280435, 26694797.
For the writ of ne exeat regno, see 16 Halsburys Laws (4th edn) para 1288, and for cases on the subject, see 20 Digest
(Reissue) 663667, 48954938.
For the Immigration Act 1971, Sch 2, para 16, see 31 Halsburys Statutes (4th edn) 96.

Cases referred to in judgments

Associated Provincial Picture Houses Ltd v Wednesbury Corp [1947] 2 All ER 680, [1948] 1 KB 223, CA.
Azam v Secretary of State for the Home Dept [1973] 2 All ER 765, [1974] AC 18, [1973] 2 WLR 1058, HL; affg [1973] 2 All ER
741, [1974] AC 18, [1973] 2 WLR 949, CA.
Chief Adjudication Officer v Foster [1991] 3 All ER 846, CA.
Derby & Co Ltd v Weldon (No 2) [1989] 1 All ER 1002, sub nom Derby & Co Ltd v Weldon (Nos 3 and 4) [1990] Ch 65, [1989]
2 WLR 412, CA.
Factortame Ltd v Secretary of State for Transport [1989] 2 All ER 692, [1990] 2 AC 85, [1989] 2 WLR 997, HL.
Khawaja v Secretary of State for the Home Dept [1983] 1 All ER 765, [1984] AC 74, [1983] 2 WLR 321, HL.
Liversidge v Anderson [1941] 3 All ER 338, [1942] AC 206, HL.
Minister of Foreign Affairs Trade and Industry v Vehicles and Supplies Ltd [1991] 4 All ER 65, [1991] 1 WLR 550, PC.
R v Brixton Prison Governor, ex p Ahson [1969] 2 All ER 347, [1969] 2 QB 222, [1969] 2 WLR 618, DC.
R v Home Secretary, ex p Greene [1941] 3 All ER 104, [1942] 1 KB 87, CA; affd [1941] 3 All ER 388, [1942] AC 284, HL.
R v Secretary of State for Education and Science, ex p Avon CC [1991] 1 All ER 282, [1991] 1 QB 558, [1991] 2 WLR 702, CA.
R v Secretary of State for the Home Dept, ex p Akhtar [1980] 2 All ER 735, [1981] QB 46, [1980] 3 WLR 302, CA.
R v Secretary of State for the Home Dept, ex p Cheblak [1991] 2 All ER 319, [1991] 1 WLR 890, CA.
R v Secretary of State for the Home Dept, ex p Khan [1980] 2 All ER 337, [1980] 1 WLR 569, CA.
74
R v Secretary of State for the Home Dept, ex p Mughal [1973] 1 WLR 1133, DC; affd [1973] 3 All ER 796, [1974] QB 313,
[1973] 3 WLR 647, CA.
R v Secretary of State for the Home Dept, ex p Phansopkar [1975] 3 All ER 497, [1976] QB 606, [1975] 3 WLR 322, DC and
CA.
R v Secretary of State for the Home Dept, ex p Sultan Mahmood [1981] QB 58, [1980] 3 WLR 312, CA.
R v Secretary of State for the Home Dept, ex p Turkoglu [1987] 2 All ER 823, [1988] QB 398, [1987] 3 WLR 992, CA.
Zamir v Secretary of State for the Home Dept [1980] 2 All ER 768, [1980] AC 930, [1980] 3 WLR 249, HL.

Cases also cited or referred to in skeleton judgments

Armah v Government of Ghana [1966] 3 All ER 177, [1968] AC 192, HL.
Board of Education v Rice [1911] AC 179, [191113] All ER Rep 36, HL.
Bugdaycay v Secretary of State for the Home Dept [1987] 1 All ER 940, [1987] AC 514, HL.
Miller v Immigration Appeal Tribunal [1988] Imm AR 358, CA.
Padfield v Minister of Agriculture, Fisheries and Food [1968] 1 All ER 694, [1968] AC 997, HL.
R v Lords Comrs of the Treasury, ex p Lord Bougham and Vaux (Trustee for HM Queen Adelaide) (1851) 16 QB 357, 117 ER
916.
R v Miller [1985] 2 SCR 613, Can SC.
R v Secretary of State for the Environment, ex p Brent London BC [1983] 3 All ER 321, [1982] QB 593, DC.
R v Secretary of State for the Home Dept, ex p Ruddock [1987] 2 All ER 518, [1987] 1 WLR 1482.
R v Superintendent of Chiswick Police Station, ex p Sacksteder [1918] 1 KB 578, CA.
Schtraks v Government of Israel [1962] 3 All ER 529, [1964] AC 556, HL.

Appeal
The Secretary of State for the Home Department appealed from a decision of Brooke J given on 23 May 1991 to issue a writ of
habeas corpus requiring the production before the High Court on 19 June 1991 of the applicant, Bioli Muboyayi, a citizen of
Zaire seeking political asylum, who had been refused leave to enter the United Kingdom and detained pending removal to
France. The facts are set in the judgment of Lord Donaldson MR.
At the conclusion of argument Lord Donaldson MR announced that the appeal would be allowed, that an application for leave to
move for judicial review of the Secretary of States decision made during the hearing at the courts invitation would be refused
and that leave to appeal to the House of Lords would be refused for reasons to be given later.

Robert Jay for the Secretary of State; Michael Shrimpton and Judith Maxwell for the applicant.

25 June 1991. The following judgments were delivered.

LORD DONALDSON OF LYMINGTON MR. Mr Muboyayi (the applicant) is a citizen of Zaire. Accompanied by his wife
and child he left that country on 22 April 1991 arriving in Italy on 16 May. From there they took a train to Paris, where they
arrived on 18 May. On the following day they flew to London Airport. On arrival the applicant claimed that he, his wife and
child, should be given leave to enter on the grounds that he had a well-founded fear of persecution in Zaire for reasons of race,
religion, nationality or membership of a particular social group or political opinion within the meaning of the United Nations
1951 75Convention and 1967 Protocol relating to the Status of Refugees(( Geneva, 28 July 1951; TS 39(1954); (Cmd 9171) and
(New York, 31 January 1967; TS 15(1969); Cmnd 3906)).
 On 22 May after an examination pursuant to para 2 of Sch 2 to the Immigration Act 1971 all three were refused leave to
enter and were given notice of intention to remove them to Paris at 1.30 pm on 23 May. The reasons given were twofold, but
only one is of significance. This was:

Zaire is not the only country to which you can be removed. You arrived from France where you spent 1 day. You
are under paragraph 8(1)(c) of Schedule 2 of the Immigration Act 1971 properly returnable to France and I am satisfied on
the information available that you will be re-admitted there. Moreover France is a signatory to the 1951 UN Convention
Relating to the Status of Refugees and, on the basis of the information available to him about the policies and practice of
France and having considered the individual circumstances of your case, the Secretary of State is satisfied that the French
authorities would not further remove you to Zaire without first considering in accordance with its obligations under the
1951 UN Convention, any application you may make, for asylum in that country. In these circumstances your application
for asylum here has not been considered.

The other reason:

As nationals of Zaire you are required under the Immigration Rules to have a visa in order to enter the United
Kingdom, but you have no visa.

The applicant was then detained pursuant to para 16(2) of Sch 2 to the 1971 Act as being a person in respect of whom
directions might be given under paras 8 to 14, the relevant paragraphs on the facts of this case being para 8 or para 10. His wife
and child were granted temporary admission pursuant to para 21.
Solicitors acting for the applicant then made representations to the Home Office to the effect that France was not properly to
be considered a safe third country in that, as the applicant alleged, his application for political asylum would not be properly
considered by that country and that he would be likely to be returned to Zaire. The officials in the Home Office rejected this
representation, but said that no special assurance had been sought from the French authorities that an application by the applicant
and his family for political asylum would be considered.

The application for a writ of habeas corpus

Application was then made to Brooke J for the issue of a writ of habeas corpus ad subjiciendum. The application was heard
at about noon on 23 May and at about 12.30 pm the judge ordered that such a writ be issued addressed to the Chief Immigration
Officer, Gatwick Airport. It required him

to have the body of [the applicant] before this Court on the 19th day of June 1991 at 10.30 oclock and to make a
return to the said Writ

namely informing the court of the day and cause of his being taken and detained.

The first stage of the appeal

The Secretary of State and the Chief Immigration Officer thereupon immediately appealed to this court seeking to have the
writ set aside. The applicant equally promptly challenged the jurisdiction of this court to entertain such an appeal. This latter
issue was considered as a matter of urgency by Parker, 76Nourse and Nolan LJJ, who on 24 May ruled that the Court of Appeal
had jurisdiction and adjourned further consideration of the appeal.

The second stage of the appeal

Relatively large numbers of would-be immigrants to this country seek leave to enter upon grounds that they are in need of
asylum and some seek judicial review of any refusal of leave to enter. What is highly unusual is for application instead to be
made for the issue of a writ of habeas corpus. There was, however, an unusual background which needs to be explained. On a
recent occasion another citizen of Zaire had applied for leave to seek judicial review of a decision to refuse him leave to enter as
one seeking asylum. His application was dismissed by the High Court and, on renewal, by this court. Thereafter some further
similar application was made to the High Court at or about the time when he was due to be removed from this country. There is
an issue as to whether counsel for the Secretary of State on that occasion gave the court an undertaking that his removal would be
delayed, but in fact it was not so delayed and he was returned to Zaire. I say no more about this, since it is the subject of further
proceedings, but Mr Jay, counsel appearing for the Secretary of State and the Chief Immigration Officer before Brooke J, had that
case in mind and I should be surprised if the same could not have been said of Brooke J.
As I have said, the application for the writ of habeas corpus came before Brooke J within about an hour of the intended time
for the removal of the applicant from this country. The judge asked for an undertaking that the removal would be delayed until
he had had an opportunity of considering the matter. Mr Jay declined to give any such undertaking and let me say at once that he
is not to be criticised in any way for so doing. He had only just been instructed, he had no express authority to give such an
undertaking and he feared that it might not be practicable to prevent the removal of the applicant at that late stage. The judge, for
his part, is equally not to be criticised. He had a very short time in which to decide what to do in order to ensure, so far as
possible, that the court should not be put in a position in which any consideration of the applicants complaint, whatever its
procedural defects, would be rendered academic.

Habeas corpus or judicial review?

The essence of the argument advanced by Mr Jay on behalf of the Secretary of State is that the proper procedure for
advancing the applicants complaint was to seek leave to apply for judicial review of the decision to refuse leave to enter and that,
unless and until leave was granted and that decision was quashed, the applicants detention under the authority of the Chief
Immigration Officer was unimpeachable. The essence of the argument advanced by Mr Shrimpton was that on the return of a
writ of habeas corpus the court is not limited to a consideration of errors on the face of the warrant of detention, but can and will
investigate whether the warrant was properly issued. This, on the facts of this and similar cases, would involve considering the
justification for refusing leave to enter. Accordingly an applicant, such as the present applicant, has a choice whether to seek
leave to apply for judicial review or, as Mr Shrimpton put it, to seek the constitutional high ground of a writ of habeas corpus.
That the habeas corpus route is more attractive to disappointed aspiring immigrants in that traditionally the highest priority is
given to applications for such a writ and that a refusal to issue it is potentially appealable to the House of Lords, whereas a refusal
of leave to apply for judicial review it not, is nothing to the point.
In these circumstances it seemed to us at a very early stage in the argument that 77 the applicants complaints ought to be
considered and determined at the earliest possible moment and that there should be no question of saying to him that he had
embarked on the wrong route and either must now start again or, worse still, could not do so. We therefore invited Mr Shrimpton
to apply to us for leave to seek judicial review, notwithstanding that he had made no previous application to the High Court, that
having been held to be a permissible procedure in Chief Adjudication Officer v Foster [1991] 3 All ER 846. Mr Shrimpton
accepted the invitation without prejudice to his primary submission that the applicant was entitled to proceed by way of habeas
corpus. We are therefore seised both of an appeal and of an application for leave to seek judicial review.
 In a skeleton argument served on behalf of the Secretary of State Mr Jay advanced a number of arguments which
individually or cumulatively were said to support the proposition that Habeas Corpus is not open to the Respondent; the correct
avenue was [RSC] Order 53. I will advert to them as necessary hereafter, but in view of its constitutional importance I must first
refer to para E(ii)(h):

the practical effect of issuing the Writ of Habeas Corpus under RSC Order 54 rule 2 is to enjoin the Crown: this is
contrary to the principles laid down by the House of Lords in [Factortame Ltd v Secretary of State for Transport [1989] 2
All ER 692, [1990] 2 AC 85].

Although Mr Jay in oral argument disavowed any intention of asserting that the Crown and its servants are not subject to a
writ of habeas corpus, the skeleton argument is capable of such a construction and it must be made clear beyond a peradventure
that this is not correct. Magna Carta (1297) (25 Edw 1) provides in c 29:

No freeman shall be taken or imprisoned, or be disseised of his freehold, or liberties, or free customs, or be outlawed,
or exiled, or any other wise destroyed; nor will we not pass upon him, nor condemn him, but by lawful judgment of his
peers, or by the law of the land. We will sell to no man, we will not deny or defer to any man either justice or right.

The duty of the courts is to uphold this classic statement of the rule of law and if, in particular circumstances, a writ of
habeas corpus is the appropriate procedure for doing so, it is wholly immaterial that the practical effect may be the same as
enjoining the Crown. The issue in Factortame Ltd v Secretary of State for Transport was whether there was jurisdiction to grant
injunctions against the Crown in proceedings for judicial review. The House of Lords was not concerned to consider any
argument as to the scope of the writ of habeas corpus.
Mr Jay accepts, and it is clear law, that where the power to detain is dependent upon the existence of a particular state of
affairs (a precedent fact) and the existence of that fact is challenged by or on behalf of the person detained, a challenge to the
detention may be mounted by means of an application for a writ of habeas corpus under RSC Ord 54, even if there are alternative
procedures available. If authority is required for this proposition, it is to be found in the decision of the House of Lords in
Khawaja v Secretary of State for the Home Dept [1983] 1 All ER 765 at 773774, 781, 790, 795, [1984] AC 74 at 101102, 110,
122123 per Lord Wilberforce, Lord Scarman, Lord Bridge and Lord Templeman.
In the present case the right to detain does indeed depend upon a precedent fact or series of facts. They are that (a) the
applicant was a person who might be required to submit to examination under para 2 of Sch 2 to the 1971 Act and he was
detained pending a decision to give or refuse him leave to enter and/or (b) he was a person in respect of whom directions might
be given under paras 8 to 14 and he was detained pending the giving of directions and his removal in 78 pursuance of any
directions given. However, and this is what distinguishes it from Khawajas case, the existence of this precedent fact is not
challenged. What the applicant alleges is something quite different, namely that, although he was liable to be examined and was
examined and although upon the conclusion of that examination he was refused leave to enter and directions were given for his
removal, he should not have been refused leave to enter and no question of his removal should have arisen. In other words there
was no challenge to jurisdiction, but only to a prior underlying administrative decision. This is a quite different challenge and,
unless and until it succeeds, there are no grounds for impugning the legality of his detention.
Put in another way, in the first category an applicant alleges that the detention is and always was unlawful. In the second
category he alleges that it will become unlawful, if and when a court of competent jurisdiction destroys the precedent fact, as
contrasted with finding that it never existed. The issue in this appeal is whether a writ of habeas corpus is an appropriate remedy
in the latter type of case.
In R v Secretary of State for the Home Dept, ex p Turkoglu [1987] 2 All ER 823, [1988] QB 398 this court was concerned
with the powers of the High Court to grant bail in a case in which an application for judicial review of a refusal of leave to enter
had been refused. With the agreement of Croome-Johnson and Bingham LJJ I said, admittedly obiter ([1987] 2 All ER 823 at
824, [1988] QB 398 at 399):

Clearly we could grant bail ancillary to or as part of proceedings for habeas corpus, but there is no way that
proceedings for habeas corpus can be brought in a case of this nature. The power of the Secretary of State to detain under
the 1971 Act is clear and the only issue which would arise is whether, as a matter of public law, his decision to exercise
those powers was a proper one.

In R v Secretary of State for the Home Dept, ex p Cheblak [1991] 2 All ER 319, [1991] 1 WLR 890 the applicant was
arrested and served with notice of intention to deport upon grounds that his deportation would be conducive to the public good.
He sought leave to apply for judicial review and also a writ of habeas corpus. When both were refused, he appealed against the
refusal to issue the writ and renewed his application for leave. This court held that the remedy of habeas corpus was not
available.
I put the matter in this way ([1991] 2 All ER 319 at 322323, [1991] 1 WLR 890 at 894):

Although, as I have said, the two forms of relief which Mr Cheblak seeks are interrelated on the facts of his case, they
are essentially different. A writ of habeas corpus will issue where someone is detained without any authority or the
purported authority is beyond the powers of the person authorising the detention and so is unlawful. The remedy of judicial
review is available where the decision or action sought to be impugned is within the powers of the person taking it but, due
to procedural error, a misappreciation of the law, a failure to take account of relevant matters, a taking account of irrelevant
matters or the fundamental unreasonableness of the decision or action, it should never have been taken. In such a case the
decision or action is lawful, unless and until it is set aside by a court of competent jurisdiction. In the case of detention, if
the warrant, or the underlying decision to deport, were set aside but the detention continued, a writ of habeas corpus would
issue.

Nolan LJ impliedly indorsed this view because, whilst accepting that judicial review was available, although refusing relief upon
the facts, he held that 79 para 18(4) of Sch 2 to the 1971 Act precluded the issue of a writ of habeas corpus, that paragraph
providing that A person shall be deemed to be in legal custody at any time when he is detained under paragraph 16 (see
[1991] 2 All ER 319 at 343, [1991] 1 WLR 890 at 916).
I had similarly relied upon para 18(4) (see [1991] 2 All ER 319 at 327, [1991] 1 WLR 890 at 898899).
Mr Shrimpton attacked my judgment and that of Nolan LJ on the grounds that we had misunderstood the purpose and effect
of para 18(4). He traced its ancestry from para (8) of reg 18B of the Defence (General) Regulations 1939, SR & O 1939/927,
which was considered in R v Home Secretary, ex p Greene [1941] 3 All ER 104, [1942] 1 KB 87. This court then held ([1941] 3
All ER 104 at 122, [1942] 1 KB 87 at 117(per Goddard LJ)):

The object of the paragraph, in my opinion, is to provide that once an order of detention is made, the person named in
the order may be kept in custody anywhere, and not only in a lawful prison, even if the Secretary of State has not specified
in the order a particular place for his internment, which he can do later.
The same point arose in Liversidge v Anderson [1941] 3 All ER 338 at 380, [1942] AC 206 at 273, where Lord Wright said: It is
inserted to settle possible doubts as to prison law and practice.
It is not for me to plead guilty on behalf of Nolan LJ and Beldam LJ fell into no such error (see [1991] 2 All ER 319 at 340,
[1991] 1 WLR 890 at 913). So far as I am concerned, I accept the criticism unreservedly. Whether this vitiates the binding
authority of Cheblaks case is perhaps immaterial, because equally unreservedly I stand by and repeat my statement of the
principle, which I have already quoted. It is supported by a decision of this court in R v Secretary of State for the Home Dept, ex
p Phansopkar [1975] 3 All ER 497, [1976] 1 QB 606. The facts were somewhat different in that the applicant was claiming a
right to enter on the basis that she was the wife of a patrial, but I do not think that this is a material distinction. The court made
an order of mandamus requiring the Home Secretary to consider and determine whether the applicant was indeed the wife of a
patrial, but it held that there were no grounds for the issue of a writ of habeas corpus (see [1975] 3 All ER 497 at 508, 510, [1976]
1 QB 606 at 622, 625 per Lord Denning MR and Lawton LJ).
Subject to one important qualification, I have no doubt that the application which should have been made to Brooke J was
for leave to apply for judicial review of the refusal of leave to enter and not for the issue of a writ of habeas corpus. That
qualification arises out of Mr Jays refusal to give an undertaking that the applicant would not be removed from the jurisdiction
before his complaint had been considered by the court. I have already said, and I repeat, that in the unusual circumstances Mr Jay
is in no way to be criticised. However, this refusal fully justified the issue of the writ, but it should have been coupled with an
application for leave to apply for judicial review, a position which was only reached in this court.
Mr Shrimpton submitted that if the issue of a writ of habeas corpus was justified, there was no need to seek leave to apply
for judicial review since all the issues which would arise on a substantive application for judicial review could be canvassed and
decided upon the return of the writ of habeas corpus. Whilst it is correct that in dim and distant times a writ of habeas corpus
used to be coupled with a writ of certiorari, but as time went on the issues arising in the context of certiorari were considered and
decided upon the return of the writ of habeas 80 corpus (see Sharpe The Law of Habeas Corpus (2nd edn, 1989) pp 5, 4445),
this submission is not I think well founded. Habeas corpus was originally confined to errors of jurisdiction which were patent on
the face of the committal order, certiorari being required to bring up the record on which it was based with a view to quashing the
committal if latent jurisdictional errors emerged. The extension of habeas corpus to include what at that time could also be
considered under certiorari would not have been sufficient to bring in all the considerations which are relevant on an application
for judicial review and, in particular, the matters urged by the applicant as justifying the court in setting aside the refusal of leave
to enter. In any event, the evolution of the new and extended system of judicial review under RSC Ord 53 with its in-built
safeguards would, I think, justify us in confining the ambit of the writ of habeas corpus in the way in which I held that it was
confined in my judgment in Cheblaks case.
As has been said in the context of Mareva injunctions (see Derby & Co Ltd v Weldon (No 2) [1989] 1 All ER 1002 at 1006
1007, [1990] 1 Ch 65 at 76):

within the limits of its powers, no court should permit a defendant to take action designed to ensure that
subsequent orders of the court are rendered less effective than would otherwise be the case.

In this context designed to does not mean intended, but rather having the consequence that. The court should not permit
a would-be immigrant to be compulsorily removed from its jurisdiction if he has sought the protection and assistance of the court
and the result would be to render any subsequent order quashing a decision to refuse leave to enter less effective.
This raises the question of how this should be done. The Factortame case [1989] 2 All ER 692, [1990] 2 AC 85 is authority
for the proposition that an interim injunctive order cannot be made against the Crown. However, this court has held in R v
Secretary of State for Education and Science, ex p Avon CC [1991] 1 All ER 282, [1991] 1 QB 558 that it is within the
jurisdiction of the court to stay a decision of a Secretary of State and Brooke J could therefore have stayed the decision to refuse
leave to enter. This, perhaps only temporarily, would have put the applicant back into the position of someone seeking leave to
enter who could be detained pending a new decision being made. There are only two possible disadvantages to this remedy. The
first is that it has been suggested on the strength of a very recent decision of the Privy Council (see Minister of Foreign Affairs
Trade and Industry v Vehicles and Supplies Ltd [1991] 4 All ER 65, [1991] 1 WLR 550) that, whilst the Avon case is binding
upon this court and upon the High Court, it might not survive an appeal to the House of Lords. As to this I express no opinion.
Second, it is possible that the imposition of a stay might enable the applicant to argue that his examination under para 2 of Sch 2
had long since been concluded and that he was entitled to leave to enter pursuant to para 6. Again I express no opinion as to
whether such an argument would succeed, save to say that it has, so far as I know, never been advanced, let alone succeeded,
when a decision to refuse leave to enter has been quashed with the result that the immigration officer has had to reconsider and
could in theory have reaffirmed his refusal.
Since any compulsory removal from this country necessarily involves some deprivation of the liberty of the person
concerned, a writ of habeas corpus is an obvious alternative remedy. The effect of service of such a writ is to make the gaoler
responsible to the court in place of the authority which ordered the detention, leaving it to the court to determine on the return of
the writ whether the detention should or should not continue. If it be objected, and shown, that 81 the use of a writ of habeas
corpus quia timet is a novelty, so be it. This, the greatest and oldest of all the prerogative writs, is quite capable of adapting itself
to the circumstances of the times. An alternative might be to adapt the writ of ne exeat regno, which was designed to prevent
debtors fleeing the country, to suit a situation in which far from wishing to leave the jurisdiction someone is being compulsorily
removed therefrom.
By the time that the matter came before this court, Mr Jay was in a position to give an undertaking on behalf of the Secretary
of State that the applicant would not be removed from this country on or before Monday, 24 June. He was unable to give a more
extended undertaking, because there was doubt whether France would be prepared to allow the applicant to enter its territory for
the purposes of considering his application for political asylum if further time had elapsed since his flight from Paris to London.
In these circumstances, the rationale for the issue of the writ of habeas corpus has disappeared and, at the conclusion of the
argument, we indicated that the appeal would be allowed and the issue of the writ set aside for reasons to be delivered later. We
also refused leave to appeal to the House of Lords, without prejudice to Mr Shrimptons contention that no such leave was
required, that not being a matter for decision by this court.
In the course of the hearing Mr Jay very helpfully obtained express instructions on the practice of the Home Office in
relation to removal. Although the existence of this practice forms no part of the reasons why I considered that the appeal should
be allowed, it is right that it should be widely known and, of course, not departed from without due notice. That practice is as
follows:

1. Where leave to move is granted the Home Office will not remove the applicant until the case is disposed of in the
High Court either by the dismissal of the application or by the setting aside of the grant of leave.

2. If removal takes place notwithstanding the grant of leave either because the application is made extremely late or
because of a mistake, the Secretary of State will do his best to return the applicant to this jurisdiction.
3. In all cases removal directions are made in advance of removal and notice given to the person to be removed. In
cases where applications for leave to the High Court or the Court of Appeal are pending adequate notice will be given to
enable the necessary application to be made.
Judicial review
This brings me to the application for leave to seek judicial review. The applicants complaint is not that the Secretary of
State has not fully considered his claim to be a refugee within the meaning of the United Nations Convention of 1951 and
Protocol of 1967 relating to the Status of Refugees, but that he has not considered it at all and instead has referred that
consideration to the French authorities. The basis of this complaint is twofold. First Mr Shrimpton submits that such a refusal is
not contemplated by the convention and protocol and, as such, is contrary to paras 21 and 75 of the Immigration Rules (see the
Statement of Changes in Immigration Rules (HC Paper (1990) no 251)). Accordingly he submits that it is unlawful. Second he
submits that the applicant has adduced evidence, namely an affidavit by Mr Davies, a trainee solicitor, on information received
from the applicant and an affidavit from a French advocate, Matre Piquois, which should lead the court to conclude that France
will not, or may not, give proper consideration to the applicants claim to be such a refugee and will summarily remove him to
Zaire.
The policy of the Secretary of State was the subject of a written answer to a 82 parliamentary question in the House of
Commons on 25 July 1990, when the then Home Secretary said (177 HC Official Report (6th series) written answers cols 262
263):

The United Kingdom is committed to its obligations under the 1951 United Nations convention relating to the status of
refugees. In accordance with this convention, no refugee will be moved by the United Kingdom to a territory in which his
life or freedom would be threatened on account of his race, religion, nationality, membership of a particular social group or
political opinion. It is an internationally accepted concept that a person fleeing persecution, who cannot avail himself of
the protection of the authorities of a country of which he is a national, should normally seek refuge in the first safe country
reached. I agree entirely with the concept. The conventions primary function is to give refugees who cannot turn to their
own authorities the protection of the international community. It is an instrument of last resortnot a licence for refugees
to travel the world in search of an ideal place of residence. Where protection issues do not arise, an application should
therefore be dealt with in accordance with normal immigration criteria. Accordingly, an application for asylum from a
passenger who has arrived in the United Kingdom from a country other than the country in which he fears persecution, will
not normally be considered substantively. The passenger will be returned to the country from which he embarked, or to
another country in which he has been since he left the country of feared persecution or, if appropriate, to his country of
nationality, unless I am satisfied that the country is one in which his life or freedom would be threatened on account of his
race, religion, nationality, membership of a particular social group or political opinion, or that it would return him to such a
country. However, in considering any individual case I shall take into account any evidence of substantial links with the
United Kingdom which in my view would make it reasonable for the claim for asylum exceptionally to be considered here.
All western European countries which are signatories to the United Nations Convention operate safe third-country
procedures and the approach is consistent with the convention determining the state responsible for examining applications
for asylum lodged in one of the member states of the European Communities signed in Dublin on 15 June 1990, but not as
yet in force [EC 40(1991); Cm 1623].

Whilst it is true that neither the convention nor the protocol expressly address the problem of which country should consider
granting and, if appropriate, grant asylum, I can see nothing in the Secretary of States statement of policy or in the Dublin
Convention which is in any way inconsistent with their provisions. Nor is there anything in Mr Shrimptons contention that it is
unlawful for the Secretary of State in effect to implement the Dublin Convention, to which France is a signatory, before it comes
into force if France will accept obligations under or consistent with it.
According to Mr Daviess affidavit, the applicant had

direct evidence of Zairean asylum applicants not having their applications considered properly in France and being
returned to Zaire, where they are put in prison. The basis of his belief was conveyed to me in notes I took when
interviewing him at Gatwick.

Mr Davies exhibited those notes.

Matre Piquoiss affidavit shows that the French system for dealing with claims 83 for political asylum is not the same as the
English system, which is not altogether surprising, and that there have been complaints against both the system and the way in
which it is administered, something which is equally true of the English system. The French procedure for dealing with
applications for asylum involves a two-stage process. They are first referred to the Ministry of the Interior for a decision on
whether they merit detailed consideration. At this stage the applicant is held in the international zone or air side to use our
terminology. If they do, the applicant is granted the equivalent of temporary admission whilst such consideration is being
undertaken. If they do not, the applicant is not permitted to proceed beyond the international zone and is removed to another
country, usually that from which he came. Rights of appeal and representation are not usually accorded to those whose
applications are determined summarily and without being granted temporary admission.
In reply to Mr Daviess affidavit, Mr Sprunt, an official in the Home Office Immigration and Nationality Department, swore
an affidavit on 31 May in which he stated:

I refer to the affidavit of Matthew Kennedy Picton Davies sworn on 23rd May 1991 in these proceedings. I refer in
particular to paragraphs 4 and 5 of that affidavit where it is alleged the Applicant informed the Immigration Service he had
strong reasons for believing France would not be a safe third country and he has direct evidence of Zairean asylum
applicants not having their applications considered properly in France. The Home Office through its officials has regular
dealings with the French Authorities in asylum matters. On the basis of that experience France is regarded by the Home
Office as a safe third country which can be relied upon to meet its obligations under the United Nations Convention. This
view is shared by the United Nations High Commissioner for Refugees (UNHCR). Neither the Home Office nor the
UNHCR is aware of any instance of a citizen of Zaire being refouled by France. In this case the French Authorities have
confirmed that they will receive the Applicant should he be returned to France. In view of the delay caused by these
proceedings the United Kingdom immigration authorities have taken the exceptional course of seeking a prior assurance
from the French authorities. It is not the normal practice so to do.

In reply to Matre Piquoiss affidavit, Mr Sprunt swore a second affidavit dated 18 June, in which he stated:

3. Mr. Piquois outlines what he states to be the present procedure for the consideration of claims for asylum in France.
I have described to Peter Wrench, a grade 7 Officer at the Asylum and Special Cases Division of the Home Office, the
procedure for determining claims for asylum in France as outlined by Mr. Piquois in his said affidavit. I have also outlined
this procedure to Antonio Fortin, the Deputy Representative in the United Kingdom for the United Nations High
Commissioner of Refugees. I spoke to both Mr. Wrench and Mr. Fortin on 18th June 1991. Both Mr. Wrench and Mr.
Fortin confirm the procedure to be broadly correct. Mr. Wrench, from his own experience and from his discussions with
the French authorities, informed me that applications for asylum are initially referred to the French Ministry of the Interior.
Applicants whose claims are considered to be manifestly unfounded are not admitted to France. This procedure results in
the great majority of asylum seekers being allowed entry to France in order that their asylum claim is fully considered. Mr.
 Fortin informs me that this 84 is his understanding of the French asylum determination procedure and practice. As a result
both the Secretary of State and the United Nations High Commissioner of Refugees are satisfied that the French authorities
can be relied upon to meet their obligations under the United Nations Convention.

4. Where the Secretary of State proposes to remove an Applicant back to France, in accordance with normal procedure
and accepted international practice, in cases similar to this, and where the Applicant has no legal representation, the United
Kingdom Immigrants Advisory Service (UKIAS) are given an opportunity to make representations to the Secretary of
State on behalf of the Applicant. I am not aware of any instance where UKIAS have objected to a removal to France on the
basis that France does not have a satisfactory procedure for determining claims for asylum in accordance with its
international obligations.
5. At paragraph 8 of Mr Piquois affidavit he refers to three Zairean students whose allegations were originally brought
to the attention of the Secretary of State by the Respondent in his affidavit sworn on 14th June 1991. Mr. Piquos admits to
having no direct knowledge of these three cases. The Secretary of State also has no knowledge of these cases and is
therefore not in a position to comment upon these cases.

Unless it can be said that it is Wednesbury unreasonable (see Associated Provincial Picture Houses Ltd v Wednesbury Corp
[1947] 2 All ER 680, [1948] 1 KB 223) for the Secretary of State in the context of the applicants case to regard France as a safe
third country, his decision to remove the applicant to France is unimpeachable. On the evidence adduced any such contention is
unarguable and there are accordingly no grounds for granting leave to seek judicial review.

GLIDEWELL LJ. I have had the advantage of reading in draft the judgment of Lord Donaldson MR. I agree that the appeal
should be allowed, that the writ of habeas corpus should be set aside, and that the application for leave to move for judicial
review should be refused. As, however, we are discharging the order of Brooke J that the writ of habeas corpus be issued, I think
it right to set out shortly my own reasons for allowing the appeal. I emphasise that the argument that procedure by way of an
application for a writ of habeas corpus was not appropriate in the circumstances of this case was not advanced before Brooke J,
and it is therefore entirely understandable that he made no reference to it.
I gratefully adopt and do not repeat the recital of the facts, and of the earlier stages of the proceedings, in Lord Donaldson
MRs judgment.
It is common ground that Mr Muboyayi, his wife and child, being nationals of Zaire, might not lawfully enter the United
Kingdom unless given leave to do so (see the Immigration Act 1971, s 3(1)). By s 4 of the 1971 Act, the power to give or refuse
such leave is to be exercised by immigration officers, in this case by the Chief Immigration Officer, Gatwick Airport. In relation
to the exercising of that power, and the power to remove persons refused leave, Sch 2 to the 1971 Act applies. The combined
effect of paras 8(1) and 16(2) of Sch 2 is to empower an immigration officer to direct the captain and owners of the aircraft in
which the applicant for leave arrived to remove him from the United Kingdom and transport him to another country, which may
be the country in which he embarked, and to detain him pending his removal. It is common ground that in this case the
immigration officer acted under those powers, and his good faith in so doing is not challenged.
Mr Jay, for the Secretary of State, argues that the admitted fact that the officer 85 is detaining the applicant under the powers
given him by para 16(2) of Sch 2 is a conclusive answer to the writ of habeas corpus, which should therefore be discharged. It
follows, he submits further, that in a case such as this in which an applicant is refused leave to enter the United Kingdom and
thereupon detained pending removal, habeas corpus is an inappropriate remedy.
Mr Shrimpton, for Mr Muboyayi, argues that the fact that the detention under para 16(2) is consequent upon the refusal of
leave to enter is not a conclusive answer to the writ of habeas corpus. He submits that a court asked to issue a writ of habeas
corpus is entitled, and indeed required, to consider not merely the immediate answer, ie that detention under s 16(2) is lawful
because it follows the refusal of leave to enter, but also the underlying justification for the exercise of the power. Thus in this
case the court on the application for the writ is empowered to consider whether the immigration officer acted properly in deciding
to refuse leave to enter. This question the court should answer applying normal principles of administrative law.
Thus the issues are, where leave to enter has been refused and detention follows under para 16(2): (i) are those facts alone a
sufficient answer to a writ of habeas corpus? and if so (ii) is habeas corpus therefore an inappropriate remedy in such a case?
Whatever be the answer to these questions, it is also common ground that the propriety of the immigration officers decision
to refuse leave to enter can properly be challenged by way of judicial review, ie an application for an order of certiorari to quash
that decision. Such an application, of course, may only be made under RSC Ord 53 with the leave of the court. Moreover, Mr
Shrimpton argues that, while an application for leave was pending, the applicant might be removed from the United Kingdom in
accordance with the para 8 direction. To this latter point there are two answers, one in practice, the other in law. In practice, the
risk of this happening after leave to move for judicial review has been granted, or an application for such leave made, is
substantially lessened by the Home Office practice, in accordance with the statement set out in Lord Donaldson MRs judgment.
The answer in law is that the decision of this court in R v Secretary of State for Education and Science, ex p Avon CC [1991] 1
All ER 282, [1991] QB 558 that the court may order a stay of a ministerial decision is binding on this court. Doubt is, however,
cast on the correctness, or the expectation of life, of that authority as a result of the Privy Council decision in Minister of Foreign
Affairs Trade and Industry v Vehicles and Supplies Ltd [1991] 4 All ER 65, [1991] 1 WLR 550.
I return to the main issue we have to decide. It is clear that there are situations in which, on an application for a writ of
habeas corpus, the court has not been content to rely upon the apparent authority of the detainer as a sufficient answer to the writ,
but has considered whether that authority was properly and validly given. This is standard practice in relation to extradition.
Moreover, the courts have entertained such an inquiry in some cases of detention under para 16(2) of Sch 2 to the 1971 Act. All
such decisions of which I am aware, however, were cases in which it was alleged by the Home Office that the applicant for
habeas corpus was an illegal entrant into the United Kingdom in relation to whom directions for removal were given under para 9
of Sch 2, or leave to re-enter a second time was refused under para 8 (see eg Azam v Secretary of State for the Home Dept [1973]
2 All ER 765, [1974] AC 18 and the decisions of this court in R v Secretary of State for the Home Dept, ex p Khan [1980] 2 All
ER 337, [1980] 1 WLR 569, R v Secretary of State for the Home Dept, ex p Sultan Mahmood [1981] QB 58 and R v Secretary of
State for Home Dept, ex p Akhtar [1980] 2 All ER 735, [1981] QB 8646). In Khans case the challenge by habeas corpus
succeeded, and the writ was issued; in the other cases cited the writ was refused. In none of these cases did the court consider
whether habeas corpus was an appropriate remedy.
However, the Divisional Court and this court have considered whether habeas corpus is an appropriate remedy, or bound to
fail, in two cases of detention under para 16(2) of Sch 2. In R v Secretary of State for the Home Dept, ex p Mughal [1973] 1
WLR 1133 at 11351136 Lord Widgery CJ said:

The first question which one has got to consider is what is the proper approach to the issue on the proceedings now
before us, and where does the burden of proof lie, and what has to be established and by whom. To begin with, I would not
regard this as a true habeas corpus case. I say that because where a man is free in this country and going about his ordinary
business, and is arrested by the police and charged with being an illegal immigrant, his proper remedy is habeas corpus,
and the burden in such matters may very well not lie on him. I say deliberately may not lie on him because we have
other cases of the kind to which I have just referred coming before this court shortly where the matter will have to be
specially considered, and it is also to be remembered that in Reg. v. Governor of Pentonville Prison, Ex parte Azam ([1973]
2 All ER 741 at 750751, [1973] 2 WLR 949 at 960961), Lord Denning M.R. in the Court of Appeal emphasised that in a
 true habeas corpus case it was not really open to the court to refuse the writ merely because some other procedure for
disposing of the issue might be more convenient. Also we have been referred today by Mr. Kadri to Reg. v. Governor of
Brixton Prison Governor, Ex parte Ahsan ([1969] 2 All ER 347, [1969] 2 QB 222), where a number of Commonwealth
immigrants who had entered this country and remained in this country for a period were arrested, and who sought relief,
and properly so, by an application for habeas corpus. The issue in that case was whether they had been apprehended within
24 hours of their arrival, and this court held on the application for habeas corpus that it was the duty of the authorities to
establish that they had been in this country for less than that period, and not the duty of the immigrants to show that they
had been in for longer. I find all that quite consistent with a general proposition that a man walking freely in this country
who is arrested under this legislation can properly seek habeas corpus with the sort of consequence to which I have
referred. But this is not in truth a habeas corpus matter at all, because it is quite clear that the immigration officer when
refusing him permission did act within his jurisdiction. Accordingly the answer to the writ of habeas corpus in this case
will at once be the decision to refuse him admission which was given by the immigration officer.

The court refused to issue the writ. The point was not referred to in the judgments in this court, which dismissed the appeal.
R v Secretary of State for the Home Dept, ex p Phansopkar [1975] 3 All ER 497, [1976] QB 606 was a straightforward case
in which leave to enter the United Kingdom was refused to a lady who did not hold a current entry certificate. She applied for
habeas corpus, certiorari and mandamus. Refusing the application, Lord Widgery CJ in the Divisional Court said ([1975] 3 All
ER 497 at 501, [1976] QB 606 at 611):

as has been said more than once in the past, this type of case is not really a habeas corpus case at all.

This court allowed the appeal in relation to mandamus, but not in relation to 87 habeas corpus or certiorari. Lord Denning
MR said ([1975] 3 All ER 497 at 508, [1976] QB 606 at 622):

Nor do I see any ground for habeas corpus. The immigration officer was authorised to detain under paras 2 and 16 of
Sch 2 to the 1971 Act, and to give temporary admission under para 21.

Lawton LJ said ([1975] 3 All ER 497 at 510, [1976] QB 606 at 625):

Both these appellants had their cases considered under s 1(2). They were given notice of refusal of leave to enter
which referred to their lack of current entry certificates, not of certificates of patriality. These notices were issued under
para 6 of Sch 2 to the 1971 Act. They were correct in form. As the appellants were not in possession of certificates of
patriality, they could not prove their right to enter. They could only get in if they could bring themselves under s 1(2)
which they could not do because they had no entry certificates. It follows that the claim to have the notices of refusal
quashed by orders in the nature of certiorari fail as does Mrs Phansopkars claim to habeas corpus. Once she had been
lawfully refused leave to enter, she could be detained under para 16 of Sch 2.

What, then, distinguishes the cases in which, on a refusal of leave to enter the United Kingdom which is challenged by an
application for a writ of habeas corpus, it is a sufficient answer for the immigration officer to say that he was acting under the
powers given him by paras 8 and 16(2) of Sch 2 from those in which the officer must go further and show that he had sound
reasons for his refusal to grant leave to enter? In my view the answer to the question is that, in the first category, the immigration
officer need not be satisfied of any facts other than those which are admitted; in the second category, the officer must have
evidence which establishes, to the required standard, the existence of some precedent facts.
Thus, if a foreign national, who neither has nor claims to have a right of abode in the United Kingdom, seeks leave to enter,
the immigration officer is entitled on those facts to refuse leave to order his removal and to detain him pending removal. There is
no obligation on the officer to be able to prove any other facts. If the would-be entrant has himself sought to prove particular
facts which he claims justify him being granted leave to enter (eg that he is a refugee), and argues that the officer failed to take
them into account, his remedy is judicial review, not habeas corpus.
But if, as in Khawaja v Secretary of State for the Home Dept [1983] 1 All ER 765, [1984] AC 74 and similar cases, a person
has earlier been granted leave to enter the United Kingdom, and the Home Office receives information that he is an illegal entrant
because he obtained that leave by deception, the Home Office must be in a position to prove that precedent fact to the required
standard. If he has left the United Kingdom and, on seeking leave to re-enter, is refused leave on this ground, there is equally an
obligation on the immigration officer to have evidence proving the earlier illegal entry. If then he is detained under para 16(2) the
question whether he did obtain his earlier leave by deception may properly be raised by an application for habeas corpus.
For these reasons, in addition to those contained in the judgment of Lord Donaldson MR, I agree that this appeal should
succeed and the writ of habeas corpus be set aside. I wish to make only two further brief comments.
Firstly, it follows that I agree with the brief passage cited by Lord Donaldson MR from his judgment in R v Secretary of
State for the Home Dept, ex p Turkoglu 88[1987] 2 All ER 823, [1988] QB 398, in relation to the facts of that case. Secondly, in
view of the Home Secretarys undertaking set out in Lord Donaldson MRs judgment, I do not wish to express a view about his
suggestion that the removal of a would-be entrant might be temporarily stayed by the use of the power to issue a writ of habeas
corpus quia timet, or by the adaptation of the old writ of ne exeat regno. A debate on those questions, interesting though it would
be, can be left to a later case.
On the application for leave to apply for judicial review, I agree entirely with Lord Donaldson MRs reasoning, and would
therefore refuse this application.

TAYLOR LJ. The primary point raised on this appeal is whether habeas corpus is available to the applicant as the appropriate
mode of challenging the Secretary of States decision not to permit him entry and not to consider his application for asylum. I
agree with Lord Donaldson MR and Glidewell LJ that it is not.
The applicant was detained pursuant to para 16(2) of Sch 2 to the Immigration Act 1971. He accepts that he was in fact
refused entry. Accordingly there was power to detain him under para 16(2) unless the anterior decision to refuse entry could be
successfully attacked. The applicant does not therefore challenge his detention on grounds of jurisdiction but because he says the
Secretary of State should have admitted him to the United Kingdom, considered his application for political asylum and granted
it. Mr Shrimpton contends that the writ of habeas corpus can be used to challenge not merely the vires or jurisdictional authority
for detention but the reasons for the anterior decision to refuse entry. He seeks by analogy with Khawaja v Secretary of State for
the Home Dept [1983] 1 All ER 765, [1984] AC 74 to argue that the court can in habeas corpus proceedings examine and
determine the precedent facts upon which the decision to detain was based. However, in Khawajas case the precedent fact to be
determined was whether the applicant was an illegal entrant or not. If he had entered the United Kingdom by fraud he was an
illegal entrant and lawfully detained. If not, his detention was unlawful. The House of Lords made it clear that what the court
could consider, beyond the jurisdiction to detain, was whether an objective fact necessary to justify the detention was established.
Thus, Lord Scarman said ([1983] 1 All ER 765 at 781, [1984] AC 74 at 110):

in the common law habeas corpus was itself of limited scope, though a rapid and effective remedy where it
applied. It brought the gaoler and his prisoner into court; but, if the respondents return to the writ was valid on its face,
 that was the end of the matter. The court could not take the case further. The great statute of 1816, Habeas Corpus Act
1816, An Act for more effectually securing the Liberty of the Subject, substantially extended the scope of the process. It
conferred on the judges the power in non-criminal cases to inquire into the truth of the facts contained in the return.
Section 3 is the beginning of the modern jurisprudence, the effect of which is to displace, unless Parliament by plain words
otherwise provides, the Wednesbury principle in cases where liberty is infringed by an act of the executive [see Associated
Provincial Picture Houses Ltd v Wednesbury Corp [1947] 2 All ER 680, [1948] 1 KB 228]. The section deserves
quotation: In all cases provided for by this Act, although the return to any writ of habeas corpus shall be good and
sufficient in law, it shall be lawful for the justice or baron before whom such writ may be returnable, to proceed to examine
into the truth of the facts set forth in such return and to do therein as to justice shall appertain The courts duty is
to examine into the truth of the facts set 89 forth in the return: the section thereby contemplates the possibility of an
investigation by the court so that it may satisfy itself where the truth lies. There is here a principle which the judges, faced
with decisions by statutory authorities which restrict or take away liberty, have accepted as being justly met by the rule, the
existence of which was recognised in Zamir v Secretary of State for the Home Dept [1980] 2 All ER 768, [1980] AC 930
though not applied, that where the exercise of executive power depends upon the precedent establishment of an objective
fact, the courts will decide whether the requirement has been satisfied.

Here, what Mr Shrimpton wishes to attack by habeas corpus is an administrative decision to refuse entry which involves making
a judgment after consideration of a number of circumstances and factors. That is quite different from challenging an objective
precedent fact. I would reject this attempt to extend the principle laid down in Khawajas case to allow habeas corpus to cover
the review of administrative decisions which are properly within the wide scope of judicial review as it has developed in recent
years. Leave is required to move for judicial review of such administrative decisions so that, in the interests of good
administration, cases cannot be brought and fought so as to frustrate administrative action in hopeless circumstances. Whilst I
appreciate that ex hypothesi we are concerned here with cases involving liberty of the subject, I do not consider that applications
for habeas corpus, which require no leave, can be admitted to attack such administrative decisions provided that other effective
means for challenging the basis of the detention are available.
I therefore agree that the right mode of challenge to the Secretary of States refusal of entry and the refusal to consider the
application for asylum here was by judicial review. I also agree that, an application for leave to move for judicial review having
been entertained by this court, there were on the evidence no grounds for granting it for the reasons given by Lord Donaldson
MR.
That is sufficient to decide this case. However, the circumstances in which it came before Brooke J raise grave anxiety as to
the need for machinery to enable judicial review in this class of case to be made an effective procedure. It would be a mockery of
justice if an applicant for asylum, refused entry, threatened with removal and possible return to the country he fears, could be
granted leave for judicial review but be flown out of the country before his case was determined. Should his fears prove well
founded it would be little comfort to his relatives to hear that his application for judicial review had been allowed posthumously.
It is true that in the course of this appeal the Secretary of State has helpfully put forward the statement of policy set out by
Lord Donaldson MR. That policy adopts a humane approach. But, (a) policies may be changed, (b) cases must be considered
individually and exemption from the application of the policy might be thought justified and (c) although para 3 of the policy
provides that notice of removal directions will be adequate to enable an application for judicial review to be made, it raises the
prospect of a race against time which could well produce eleventh hour crises and possible removals through inadvertence or
time running out.
It is therefore essential that the courts should provide against its determinations being made in vain. Two principle
procedures to achieve this end have been suggested. First, the grant of a stay. I adhere to my support for the reasoning of my
Lord, Glidewell LJ, in R v Secretary of State for Education and Science, ex p Avon CC [1991] 1 All ER 282, [1991] 1 QB 558. If
the Secretary of State is willing to give an undertaking not to remove a particular applicant until his proceedings for 90 judicial
review are determined, all well and good. If not, a stay on the administrative proceedings flowing from his removal directions
would seem the simplest and most logical way of preserving the status quo pending the courts determination. It is submitted that
the decision in the Avon case may not be upheld by the House of Lords (a) because it involves enjoining the Crown and (b)
because proceedings should be held to mean judicial proceedings only. In Minister for Foreign Affairs Trade and Industry v
Vehicles and Supplies Ltd [1991] 4 All ER 65, [1991] 1 WLR 550, a Privy Council case, Lord Oliver, giving the advice of the
Board, held that proceedings relates to judicial proceedings not to executive decisions. However, the case was concerned with
the Jamaican Judicature (Civil Procedure Code) Law and s 564B thereof is in different terms from those contained in RSC Ord
53, r 3(10). Further, the Avon case was not cited to the Privy Council.
If a stay cannot be granted, then I see no reason why habeas corpus should not be available to transfer the custody of the
applicant from the control of the immigration authorities to the control of the courts. On this issue I would add only a few
observations to those of Lord Donaldson MR, with which I agree. The basis for the use of habeas corpus in this context would be
that, although the detention was not presently shown to be unlawful, the issue of its legality was before the court on grounds
shown by the grant of leave to be arguable. The court must inherently have the power to prevent its decision from being pre-
empted by administrative action. The great writ of habeas corpus has over the centuries been a flexible remedy adaptable to
changing circumstances. Time was when it was used in conjunction with certiorari in a manner characterised as certiorari in aid
of habeas corpus. I see no reason why, in the changed circumstances of the 1990s and especially in immigration cases involving
applicants entering and being removed from the jurisdiction, the roles of these two remedies should not be reversed so as to
provide habeas corpus in aid of certiorari.

Appeal allowed. Writ of habeas corpus set aside. Leave to apply for judicial review refused. Leave to appeal to the House of
Lords refused.

Solicitors: Treasury Solicitor; Wilson & Co.

Frances Rustin Barrister.

91
[1991] 4 All ER 92

Woolwich Equitable Building Society v Inland Revenue Commissioners

TAXATION; Income Tax: BANKING & FINANCE

HOUSE OF LORDS
LORD KEITH OF KINKEL, LORD BRIGHTMAN, LORD OLIVER OF AYLMERTON, LORD GOFF OF CHIEVELEY AND LORD LOWRY
11, 12, 13, 18, 19, 20, 21 JUNE, 25 OCTOBER 1990
Income tax Building society Interest and dividends paid to depositors Transitional provision in respect of on payments of
interest and dividends in 198586 Transitional provision made by regulations made pursuant to income tax legislation
Regulations charging tax on interest and dividends paid by building societies between end of accounting period ending in 1985
86 and 1 March 1986 Whether regulations ultra vires Income and Corporation Taxes Act 1970, s 343 (1A) Finance Act
1986, s 47(1) Income Tax (Building Societies) Regulations 1986, regs 3, 11.Statutory instrument Validity Part of instrument
invalid Severance of invalid part Effect of severance Validity of remaining part Test Alteration of substance of
remaining part Taxing regulation Invalid part specifying rate of tax Severance of invalid part resulting in remaining part
providing for different rate of tax from that contemplated by taxing authority Whether whole provision invalid Income Tax
(Building Societies) Regulations 1986, reg 11.

Before the tax year 198687 building societies, including the appellant, paid to the Revenue a lump sum representing income tax
on interest and dividends paid to investors in the year of assessment pursuant to voluntary annual arrangements entered into with
the Revenue under s 343(1)a of the Income and Corporation Taxes Act 1970. The amount so paid to the Revenue by a society
was calculated by reference to payments to investors shown in the societys annual accounts and was paid on 1 January of the
year of assessment. In the case of the appellant, whose accounting year ended on 30 September each year, the amount paid for
198586 only took into account payments to investors up to 30 September 1985, with the result that interest paid during the
period from 1 October 1985 to 5 April 1986 (the gap period) was not taken into account in calculating the amount payable to the
Revenue on 1 January 1986. In 1986 the Board of Inland Revenue made the Income Tax (Building Societies) Regulations 1986
under powers conferred by s 343(1A)b of the 1970 Act to make regulations requiring building societies to account for amounts
representing income tax for the year 198687 and subsequent years calculated in part at the basic rate and in part at a reduced
rate. Regulation 3c required building societies to pay tax in respect of payments of dividends or interest made after February
1986. Regulation 7d provided for the payment of tax on a quarterly basis in respect of interest actually paid or credited in the
quarter concerned. Regulation 11 e contained transitional provisions requiring building societies to account for tax in respect of
interest payments made to investors after the end of the last accounting period in 198586 but before 1 March 1986, ie during the
gap period, with the result that sums shown accrued due in the appellants accounts for the year ended 30 September 921985 but
actually paid after the end of the appellants accounting year would be brought into account for the purpose of the regulations
even though account of them had already been taken for the purpose of the arrangements for that year. Regulation 11(4)
purported to charge tax at the 198586 rates in respect of the sum so brought into account. The appellant challenged the validity
of the 1986 regulations by an application for judicial review but before the hearing of the application s 343(1A) f of the 1970 Act
was amended by s 47g of the Finance Act 1986, which provided that s 343(1A) should have effect and be deemed always to
have had effect as providing for regulations to be made requiring building societies to account for sums paid or credited before
the beginning of the year but not previously brought into account. The judge granted the application and declared that reg 11
was void in its entirety and that the 1986 regulations were void in so far as they purported to apply to payments and receipts prior
to 6 April 1986. The Crown appealed, contending that for the purposes of s 343(1A) as amended the omitted sums consisted of
sums paid or credited before the beginning of 198687 but not previously brought into account under s 343(1). The Crown
conceded that reg 11(4) was ultra vires in charging tax at the 198586 rates in respect of the sum so brought into account, but
submitted that the partial invalidity did not invalidate the rest of reg 11. The Court of Appeal allowed the appeal on the ground
that Parliament in enacting s 47 of the 1986 Act had clearly intended retrospectively to put an end to the appellants challenge to
the validity of the regulations and that the admittedly invalid reg 11(4) was severable. The appellant appealed to the House of
Lords.
________________________________________
a Section 343(1), so far as material, is set out at p 96 d e, post.
b Section 343(1A) is set out at p 98 c d, post.
c Regulation 3, so far as material, is set out at p 99 e, post.
d Regulation 7, so far as material, is set out at p 99 g, post.
e Regulation 11 is set out at p 100 a to h, post.
f Section 343(1A), as amended, is set out at p 111 f to h, post.
g Section 47, so far as material, is set out at p 101 j, post.

Held (1) (Lord Lowry dissenting) Section 343(1A) of the 1970 Act as retrospectively amended by s 47 of the 1986 Act, read in
its ordinary and natural meaning, clearly authorised the Revenue to make regulations requiring, in respect of identified years of
assessment, payment of an amount representing income tax on any sums paid before the year in question and not previously
brought into account and therefore authorised the taxation in the 198687 year of assessment of a sum in respect of interest in
fact paid before the commencement of that year. Furthermore, in view of the irresistible conclusion that Parliament intended to
enable the Revenue to take account of and to charge to tax sums which it regarded as otherwise representing windfalls in the
hands of building societies, the presumption against double taxation and the presumption that income tax, being an annual tax,
was only payable on the income of a particular year were clearly rebutted by the express words used in the subsection and the
circumstances surrounding the legislation, and the inevitable inference was that Parliament intended that those presumptions
should not apply (see p 94 j, p 102 g h, p 103 f g, p 104 b c and p 107 g, post).
(2) In determining the effect of the admittedly ultra vires reg 11(4) of the 1986 regulations the test was whether excision of
para (4) would so alter the substance of what would be left that it would become a substantially different provision from what it
was before the excision, and if it did so it could not be assumed that Parliament would have enacted it in its altered form, with the
result that the whole regulation would be invalid. Since the excision of para (4) meant that reg 11 would provide for rates of tax
different from those intended or contemplated by the Revenue, thus making the provision a substantially different one from what
it was before deletion, and since it could not be assumed that reg 11 would have been made in its altered form, the regulation was
invalid in toto. Accordingly, 93the whole of reg 11 and reg 3 so far as it related to sums paid or credited after 28 February and
before 6 April 1986 were void. The appeal would therefore be allowed (see p 94 j, p 104 g h, p 105 j to p 106 b d g, p 107 c to f,
p 108 e to h, p 109 a to f j and p 124 b, post).

Notes
For payment of tax by building societies, see 4 Halsburys Laws (4th edn) para 1512, and for regulations for the deduction of tax,
see 23 Halsburys Laws (4th edn reissue) para 1391.
In relation to tax for the year 198889 and subsequent years of assessment s 343(so far as not spent or otherwise repealed) of
the Income and Corporation Taxes Act 1970 was replaced by s 476 of the Income and Corporation Taxes Act 1988. For s 476 of
the 1988 Act, see 44 Halsburys Statutes (4th edn) 572.
For the Income Tax (Building Societies) Regulations 1986, regs 3, 11, see 19 Halsburys Statutory Instruments 161, 165.

Cases referred to in opinions

DPP v Hutchinson [1990] 2 All ER 836, [1990] 2 AC 783, [1990] 3 WLR 196, HL.
Duckering (Inspector of Taxes) v Gollan [1965] 2 All ER 115, [1965] 1 WLR 680, HL; affg [1964] 3 All ER 95, [1964] 1 WLR
1178, CA; rvsg [1964] 1 All ER 556, [1964] 1 WLR 414.
Partington v A-G (1869) LR 4 HL 100.

Appeal
Woolwich Equitable Building Society (Woolwich) appealed with the leave of the Court of Appeal from the decision of that court
(Sir Nicolas Browne-Wilkinson V-C, Parker LJ and Sir Roualeyn Cumming-Bruce) ([1989] STC 463) on 12 April 1989 allowing
in part an appeal by the Crown from the decision of Nolan J ([1987] STC 654) hearing the Crown Office list on 31 July 1987
granting an application by Woolwich for judicial review of the Income Tax (Building Societies) Regulations 1986, SI 1986/482,
by way of a declaration that reg 11 of those regulations was void in its entirety and that the remainder of those regulations were
void in so far as they purported to apply to sums paid or credited by Woolwich prior to 6 April 1986. The facts are set out in the
opinion of Lord Oliver.

John Gardiner QC, Nicholas Underhill and Jonathan Peacock for Woolwich;.
S A Stamler QC and Alan Moses QC for the Crown.

Their Lordships took time for consideration.25 October 1990. The following opinions were delivered.

25 October 1990. The following opinions were delivered.

LORD KEITH OF KINKEL. My Lords, I have had the opportunity of considering in draft the speech to be delivered by my
noble and learned friend Lord Oliver. I agree with it, and would allow the appeal for the reasons he gives.

LORD BRIGHTMAN. My Lords, I also have considered in draft the speech to be delivered by my noble and learned friend
Lord Oliver, and for the reasons given by him would allow the appeal.
94

LORD OLIVER OF AYLMERTON. My Lords, the appellants in this appeal, to whom it may be convenient to refer simply as
Woolwich, call in question the validity of regulations made pursuant to s 343(1A) of the Income and Corporation Taxes Act
1970, which they claim were ultra vires. The question reduces, in the end, to a short, but by no means simple, question of
construction of the relevant statutory provisions, but in order to understand the problem it is necessary to say something of the
historical background to the section. This has been conveniently and intelligibly set out in the judgment of Nolan J in the High
Court ([1987] STC 654) and to do more than merely to summarise it would be a work of supererogation.
The collection of income tax from the recipients of annual interest and dividends by means of deduction at source, enshrined
at the date of the commencement of these proceedings in ss 52, 53 and 232 of the 1970 Act, is a system which has been
established for many years and would, but for the arrangements described below, have applied to investment income from
building societies in the same way as it applied to other investment income. Under this system, income tax at the basic rate is
accounted for to the Revenue by the paying institution and the recipient is treated, for tax purposes, as having received a grossed-
up amount which, after deduction of tax at the basic rate, is equal to the income actually received by him. If he is a high-rate
taxpayer he pays additional tax on that amount. If his total income is such that he is not liable to pay even basic rate tax, he is
entitled to reclaim the tax deducted or the appropriate proportion of it from the Revenue.
Building societies have traditionally provided a safe and simple form of investment for persons of relatively modest means,
many of whom are not liable to pay basic rate income tax on the whole of their income, a circumstance which would either have
given rise to a very large number of small repayment claims or would have resulted in the Revenue retaining more tax than was
actually due owing to the failure of investors, either from ignorance of the law or inertia, to make claims for repayment.
Accordingly, in the year 1894, the Revenue offered to the building societies two alternative arrangements, A and B, for the
discharge of the tax liability of investors in a way which obviated the necessity for claims for repayment. Under arrangement
B, which was the one elected by Woolwich, the society discharged the liability for income tax payable in the tax year 189495
in respect of interest paid to its investors by paying to the Revenue tax at one-half of the standard rate on the amount of interest
paid and in practice this was, then and thereafter, treated as applying equally to dividends. The purpose of this was to achieve a
position of revenue neutrality, the calculation being that the Revenue would thus receive, as nearly as may be, the same amount
in tax as it would have received under the ordinary system of tax deduction if investors qualified to make repayment claims had
availed themselves of their right to do so.
The basic features of this arrangement have been repeated in each year since 1895 up to and including the tax year 198586,
although there have been refinements. In 1925 a distinction was made between investors who were clearly liable for tax at the
basic rate, such as corporate investors or commercial undertakings, and individual investors. As regards interest or dividends
paid to the former, the societies account for tax at the basic rate, whilst as regards the latter, they accounted for a reduced rate of
tax which was arrived at each year on the basis of statistical evidence and was calculated to produce a position of revenue
neutrality. An important complication in this procedure, which has given rise to the problem raised by this appeal, is that, no
doubt for administrative convenience 95 both to the societies and to the Revenue, the amount payable under each annual
arrangement was calculated not by reference to the payments made in the actual fiscal year for which the tax was due but by
reference to the payments shown as made or accrued in each societys annual accounts. Originally it was calculated by reference
to the accounts of the accounting period ending in the previous year of assessment, but in the year 194041 societies were given
the right to elect, once and for all for that and all subsequent years, that the calculation should be based on the accounts for each
societys accounting year ending in the current year of assessment. Woolwich, whose accounting years end on 30 September in
each year, made that election.
These arrangements, which were entirely voluntary on the part of the societies, were renewed annually and were, up to
1951, entirely extra-statutory. Section 23 of the Finance Act 1951, however, accorded them statutory recognition and from 1970
until the end of the tax year 198586 they were regulated by s 343 of the 1970 Act.
Sections 343(1) provided:

The Board and any building society may, as respects any year of assessment, enter into arrangements whereby( a) on
such sums as may be determined in accordance with the arrangements the society is liable to account for and pay an
amount representing income tax calculated in part at the basic rate and in part at a reduced rate which takes into account the
operation of the subsequent provisions of this section; and (b) provision is made for any incidental or consequential
matters, and any such arrangements shall have effect notwithstanding anything in this Act

There followed a proviso obliging the Board to secure the position of tax neutrality already referred to. It is unnecessary to set it
out here, for, as will be seen, the Finance Act 1984 transferred the function of fixing the reduced rate for the purposes of the
section from the Board to the Treasury and s 26(3) of that Act contained provisions to the same effect, to the terms of which I will
refer a little later. Section 343(2) provided for the deduction of dividends and interest paid for the purposes of the societys
corporation tax and also regulated the treatment for corporation tax purposes of dividends and interest paid by a society to
company investors. The position of investors in and borrowers from a building society are dealt with in sub-ss (3) and (4), which,
so far as material, provide:

(3) Where any arrangements under this section are in force in the case of any society as respects any year of
assessment(a) notwithstanding anything in Part II of this Act, income tax shall not be deducted from any dividends or
interest payable in that year in respect of shares in or deposits with or loans to that society, ( b) subject to subsection (2)(b)
above no repayment of income tax and, subject to paragraph (i) of the proviso below, no assessment to income tax shall be
made in respect of any such dividends or interest on or to the person receiving or entitled to the dividends or interest, ( c)
any amounts paid or credited in respect of any such dividends or interest shall, in computing the total income of an
individual entitled thereto, be treated as income for that year received by him after deduction of income tax from a
corresponding gross amount Provided that(i) paragraph (b) above shall not prevent an assessment in respect of
income tax at a rate other than the basic rate; (ii) for the purpose of determining whether any or what amount of tax is, by
virtue of paragraph (c) above, to be taken into account as having been deducted from a gross amount in the case of an
individual whose total 96 income is reduced by any deductions so much only of that gross amount shall be taken into
account as is part of his total income as so reduced

(4) Where any arrangements under this section are in force in the case of any society as respects any year of assessment
then, notwithstanding anything in Part II of this Act, income tax shall not be deducted upon payment to the society of any
interest on advances, being interest payable in that year.
Thus it will be seen that the payment by a society under an arrangement made under this section in any year of assessment has the
effect of discharging entirely any liability for individual investors for basic rate tax on dividends or interest received by them in
that year of assessment even though, as previously noted, the amount representing income tax is in fact calculated not on the
income actually received in that year but on those sums which have been paid or accrued in the societys accounts for the
accounting period ending in that year. So long, of course, as successive arrangements continue to be made on the same basis,
amounts paid during the period between the end of the societys accounting year and the beginning of the next year of assessment
will be brought into account for the purposes of the computation of the societys liability in that year of assessment. If, however,
the arrangement is discontinuedif, for instance, the society declines to enter into an arrangement for the next year of assessment
and elects to deduct and account for tax on dividends and interest actually paid in that year of assessmentthere will be what has
been referred to as a gap period which will never be brought into account. That is, in effect, what has occurred in this case and
it is this that has given rise to these proceedings.
Just to complete the picture, under s 343 as it originally stood there are two further matters which ought to be mentioned.
Obviously in the case of any building society whose accounting year-end did not coincide with the end of the fiscal year the
amounts on which tax fell to be calculated straddled two financial years in respect of which different rates of tax might be
applicable. Thus from the year 197576 onwards the practice was to apportion dividends and interest paid on a time basis and to
calculate the reduced rate separately for each apportioned part according to the tax rate for the actual year of assessment into
which it fell. Secondly, and no doubt for administrative convenience, it was the universal rule that the tax payable by each
society under the arrangement was paid on 1 January of the year of assessment to which the arrangement related.
The 1984 Act introduced new arrangements with regard to tax on interest payments on bank deposits and, as already
mentioned, transferred to the Treasury the responsibility for fixing the reduced rate in each year for arrangements with buildings
societies under s 343. The proviso to sub-s (1) of that section was repealed and was replaced by s 26(3) of the 1984 Act, which
was in the following terms:

Whenever they exercise their powers under this section the Treasury shall aim at securing that (assuming for the
purposes of this subsection that the amounts payable by building societies under section 343 of the Taxes Act and by
deposit-takers under section 27 of this Act are income tax) the total income tax becoming payable to, and not being
repayable by, the Crown is (when regard is had to the operation of those sections) as nearly as may be the same in the
aggregate as it would have been if those sections had not been enacted.

In his budget statement delivered on 19 March 1985 the Chancellor of the Exchequer indicated that since, on 6 April of that
year, the banks were to move over to the composite rate system for the payment of tax on bank interest (which 97 tax, I observe
in parenthesis, was accounted for quarterly and calculated on payments made or credited during the quarter) it was now necessary
to put the building societies payments onto a similar footing as from the beginning of the following tax year. For reasons which,
I confess, are not entirely clear to me, Parliament determined to effect this, not directly by primary legislation, but by
empowering the Board of Inland Revenue to introduce the new system by regulation. By s 40 of the Finance Act 1985, s 343(1)
of the 1970 Act was amended by adding to the words in respect of any year of assessment the words ending before 6 April
1986, thus terminating, as from that date, the system of annual voluntary arrangements. Two new subsections, numbered
respectively (1A) and (1B), were added in the following terms:

(1A) The Board may by regulations made by statutory instrument make provision with respect to the year 198687
and any subsequent year of assessment requiring building societies, on such sums as may be determined in accordance with
the regulations, to account for and pay an amount representing income tax calculated in part at the basic rate and in part at
the reduced rate determined for the year of assessment concerned under section 26(1)(a) of the Finance Act 1984; and any
such regulations may contain such incidental and consequential provisions as appear to the Board to be appropriate,
including provisions requiring the making of returns.
(1B) A statutory instrument made in the exercise of the power conferred by subsection (1A) above shall be subject to
annulment in pursuance of a resolution of the Commons House of Parliament.

At the same time amendments, to take effect for the year 198687 and subsequent years, were made to sub-ss (2) and (3) to
substitute reference to the regulations under sub-s (1A) for references to arrangements made under sub-s (1).
So matters stood on 25 October 1985 when Woolwich entered into arrangements under the amended s 343(1) for the year of
assessment 198586. Under those arrangements a sum of 138,201,856 became payable in respect of dividends and interest
payable during that year of assessment, such sum being calculated in the usual way on the sums shown as paid or credited in
Woolwichs accounts for the financial year ended 30 September 1985. These arrangements, by virtue of s 343(3), had the effect
of discharging once and for all any liability of investors for basic rate tax on dividends or interest paid to them by the society
during that year of assessment and on 1 January 1985 the sum was duly paid, thus discharging in full the societys liability to the
Revenue under the arrangements.
On 13 March 1986 the Commissioners of Inland Revenue made regulations (the Income Tax (Building Societies)
Regulations 1986, SI 1986/482), the broad effect of which was, as from 6 April 1986, to impose on the building societies a
compulsory system of collection of tax in respect of dividends and interest paid and to require the tax to be accounted for
quarterly and to be calculated in each quarter not, as previously, on the sums shown in the audited accounts ending in the year
then current but on the sums actually paid or credited in the quarter concerned. The quarter days were fixed, presumably as a
matter of administrative convenience, as the last days of February, May, August and November. These regulations were laid
before Parliament on 14 March 1986 and came into operation on 6 April 1986.
It can readily be seen that, in the absence of any further taxing provision, the effect of a changeover from calculating the tax
payable by reference to each societys annual accounts for the year ending in the current year of assessment (198586) to
calculation on the actual payments made during the year of 98 assessment (198687) would have the result that payments made
or credited between the end of the accounting year and 6 April 1986 would never be brought into account for the purposes of
calculating the tax payable, for they related to the year 198586, the tax liability for which had already been discharged by the
arrangements made for that year. On one view of the matter this is an entirely equitable result because, it is argued, if one goes
back through the years, there must have been, when arrangements first came to be made on the basis of the societys annual
accounts, an element of double counting which balances the period falling out of account. Whether that is right or wrong in fact,
the commissioners were clearly of the view that provision was required to prevent sums paid during the gap period from
escaping, as they would put it, liability for tax. It was quite evidently with this in mind that they introduced into the 1986
regulations transitional provisions designed to bring these sums into account. The question is whether, on their true construction,
the provisions of s 343(1A) enabled them to do so.
Turning now to the 1986 regulations, reg 2 contains a number of definitions, the material one for present purposes being
payment, which is defined to include credit, and payment quarter, meaning a period of three months ending with the last
day of February, May, August or November. The obligation on a building society to pay taxthat is the charging provisionis
in reg 3, which, for relevant purposes, provides:

a building society shall pay to the Board on the relevant payment date for each payment quarter or other period to
which Regulation 7 applies, in respect of any payments of dividends or interest made after February 1986, a sum made
up of the reduced rate amount and the basic rate amount for that payment quarter or period.

Regulation 7 (which deals with the collection of amounts in respect of income tax payable) incorporates Sch 20 to the Finance
Act 1972 and applies it to building societies with certain modifications. Broadly that schedule regulates the collection of income
tax from companies, imposes a duty to make returns and provides for payment to be due without assessment. As regards the
obligation to make returns in the case of a building society, reg 7(3)(d) provides that a return shall be made for

(a) each complete payment quarter within the accounting period, beginning with the payment quarter ending 31st May
1986; (b) each part of an accounting period being a part which begins after February 1986 and which is not a complete
payment quarter.

Paragraph 5 of Sch 20 enables a company to set off against its tax liability the tax on payments which it itself has received under
deduction of tax. Regulation 7(3)(e) applies this only in relation to payments received after February 1986. Regulation 4(1)
applies the reduced rate amount to dividends and interest paid (in broad terms) to individuals and reg 5 applies the basic rate
amount (again in broad terms) to payments made to corporate investors beneficially entitled.
It will be seen, therefore, that reg 3 has the effect of charging to tax in 198687 payments which in fact were made between
28 February 1986 and 6 April 1986, that is to say during the year of assessment 198586. This forms one branch of Woolwichs
attack on the validity of the 1986 regulations. The same point, but of greater quantitative importance, arises in relation to reg 11,
which contains transitional provision designed to charge to tax any balance of dividends and interest paid during 198586
between the end of a societys accounting year and 9928 February 1986. It is headed: Transitionalpayments in 198586 not
taken into account under 198586 arrangements and provides:

(1) This Regulation applies with respect to any payment by a building society, after the end of the societys last
accounting period which ends in the year 198586, but before the 1st March 1986(a) made to an investor by way of
dividends or interest in respect of an investment; or (b) which is a section 53 payment.

(2) Subject to the provisions of these Regulations, any such payment shall be treated in all respects as a payment to
which these Regulations apply and as made in the payment quarter to which the payment dates specified in paragraph (3)
below relate.
(3) The accounting periods concerned, the specified payment dates to which paragraph (2) refers, and the amounts in
respect of the sum payable to the Board to which Regulation 3 applies which shall be payable on or before those dates, are
as follows:

Accounting period ending

Payment Date
Amount
In December 1985, January or February 1986
14 March 1987
The Whole
In September, October or November 1985
14 March 1987
14 March 1988
One half
One half
In June , July or August 1985
14 March 1987
One third

14 March 1988
One third

14 March 1989
One third
Before June 1985
14 March 1987
One quarter

14 March 1988
One quarter
14 March 1989
One quarter

14 March 1990
One quarter

(Publishers Note: Refer to printed volume for illustrative material)

(4) Subject to paragraph (5), the sum payable to the Board to which paragraph (3) refers is the sum of the reduced rate
amount arrived at by reference to a rate of 2525 per cent. and the basic rate amount arrived at by reference to a rate of 30
per cent.
(5) Regulation 7(3) shall apply for the purposes of this Regulation with the substitution of the following paragraph for
paragraph (e)(e) as if, for the purposes of paragraph 5 (set off against companys income tax payable), the period
from the end of the societys last accounting period ending in the year 198586 down to the end of February 1986 were an
accounting period.
(The reference in para (1)(b) to a section 53 payment is a reference to payment by building societies of annuities or other annual
payments from which tax is to be deducted at source within the meaning of s 53(1)(a) of the 1970 Act.)
If these regulations stood alone the effect would, of course, be that sums shown as accrued due in a societys accounts for
the year ended in the fiscal year 198586 but actually paid after the end of the societys accounting year would be brought into
account for the purpose of the regulations even though they are already taken account of for the purposes of the arrangements for
that year. That position, however, is catered for by reg 12, which underlines the intention behind reg 11 and is in the following
terms:
100

The above Regulations shall not apply to any payment of dividends or interest in respect of an investment or to any
section 53 payment to the extent that account was taken of any such payment in computing the amounts representing
income tax payable by a building society under the arrangements as respects the year 198586 to which subsection (1) of
section 343 applies.

So far as Woolwich is concerned the effect of these regulations is to subject it over a period of 24 months to tax on 29
months income, with the result that, on the calculations contained in the evidence, the Revenue receives for the fiscal years
198687 and 198788 some 76m more than it would otherwise have received in respect of the dividends and interest paid or
credited during those years. It is, therefore, perhaps not altogether surprising that on 17 June 1986 Woolwich commenced
proceedings for judicial review seeking a declaration that the 1986 regulations were unlawful.
My Lords, for my part I entertain very little doubt that, as the legislation in fact stood at the date when these regulations
were made, Woolwich was entitled to succeed. Income tax, as has been forcefully pointed out in the course of the argument, is an
annual tax which is assessed in respect of a particular year of assessment. Whilst the concept of calculating the amount of tax
payable in respect of that year by reference to the income received during another periodfor instance, the previous year of
assessmentis a familiar one, no precedent exists for charging tax for a particular year on the income of a period of more than a
year. Section 343(1A) enables the Revenue only to make provision with respect to the year 198687 and any subsequent year of
assessment and to require a building society to account for and pay an amount representing income tax. That cannot, clearly,
refer to the societys income tax because the society does not pay income tax. The amount which the society is required to pay
can only sensibly represent income tax which would otherwise be payable by its depositors and it is to be calculated in part at
the basic rate and in part at the reduced rate determined for the year of assessment concerned under section 26(1)( a) of the
Finance Act 1984. That section requires the Treasury to determine the rate individually for each year of assessment and with the
aim of producing a position of tax neutrality for that year of assessment. The words such sums as may be determined cannot, on
any ordinary principles of statutory construction, be read as unrelated to the year of assessment with respect to which the 1986
regulations are made and as unrelated to the income tax which those sums are to represent. On no ordinary analysis could it be
read as embracing a power to make provision for the taxation of sums paid or credited in the year 198586.
The subsection did not, however, remain in the form in which it stood at the date when these proceedings were commenced.
Section 47(1) of the Finance Act 1986, which received the royal assent on 25 July 1986, introduced a deliberately retrospective
amendment. It provides:

In section 343 of the Taxes Act (building societies), subsection (1A) (which was inserted by the Finance Act 1985 and
enables the Board to make regulations requiring societies to account for amounts representing income tax on certain sums)
shall have effect and be deemed always to have had effect with the insertion after the words in accordance with the
regulations of the words (including sums paid or credited before the beginning of the year but not previously brought into
account under subsection (1) above or this subsection).
101

It is the effect of these additional and retrospective words which forms the real issue on this appeal. In the argument on the
application for judicial review before Nolan J they played a relatively insignificant part (see [1987] STC 654). Nolan J could see
nothing in s 343(1A) which authorised the commissioners to go back on the arrangements made with Woolwich for 198586 and
he treated the provisions of reg 11(4), which seek to charge tax at the 198586 rates and which the Crown now accepts are ultra
vires, as a clear indication that the regulations went beyond the power conferred by s 343(1A). On no analysis could Parliament
have intended to delegate to civil servants the power to fix the rate of tax payable for a year of assessment. He found himself
unable to ascribe any sensible meaning to the words added by s 47 of the 1986 Act save, possibly, to authorise what was probably
unnecessary, that is to say the utilisation of sums paid or credited in a previous year as an artificial measure of the tax payable in
the year 198687 in the same way as sums shown in a societys accounts had been used under the previous arrangement as the
measure of the tax payable in respect of the fiscal year in which the accounting period expired. He accordingly made the
declaration sought by Woolwich.
From this decision the Crown appealed to the Court of Appeal, which, on 13 April 1989 unanimously reversed the decision
of Nolan J on the short ground that, whatever might have been the effect if the section had remained unamended, the words
introduced by s 47 of the 1986 Act fairly and squarely covered the interest paid between 30 September 1985 and 5 April 1986.
The pith of the courts decision lies in the following short passage from the judgment of Sir Nicolas Browne-Wilkinson V-C
([1989] STC 463 at 469):

As a matter of ordinary construction, I find the conclusion contended for by counsel for the Crown inescapable. The s
47 words are clear and they cover the present case. Moreover the regulations had been made and their validity challenged
before Parliament had to consider the Finance Bill 1986. It was in those circumstances that Parliament enacted s 47 of the
Finance Act 1986 which introduced the s 47 words. In such circumstances, in the absence of any other reason for
Parliament to have enacted s 47 so as to deem s 343(1A) always to have included the s 47 words, the inference must be that
Parliament intended to put to rest the existing challenge to the validity of the regulations.
 Before your Lordships Woolwich has argued strenuously that this is altogether too simple an approach. For my part, I
confess that I find the conclusion irresistible that Parliament intended by these words to enable the Revenue to take account of
and to charge to tax sums which, rightly or wrongly, it regarded as otherwise representing windfalls in the hands of building
societies. One has only to look at the circumstances. The 1986 regulations had been made and had been objected to. They were
made the subject of a direct challenge in legal proceedings, the evidence in support of which clearly adumbrated the arguments
advanced before the judge and the Court of Appeal. The notion that Parliament should go to the trouble of enacting an expressly
retrospective amendment in order to provide, unnecessarily, for the use of these sums as a measurement of tax liabilitya matter
never remotely in issueis simply fanciful. But that is not, of course, a total answer to the issue raised, for it is said that the
question is ultimately not one of what, subjectively, Parliament may (or must) have intended to do but whether, by the words
which it has used, it has effectively done it.
I hope that I shall not be thought to be lacking in deference to the lengthy, and in many respects, cogent arguments which
have been advanced by Mr Gardiner QC, for Woolwich, if I do not set them out here in extenso. They 102 highlighted a number
of anomalies, not the least of which is that s 343(1) provides in terms that for the year 198586 arrangements entered into shall
have effect notwithstanding anything in this Act. To create in relation to sums paid in that year and therefore covered by that
arrangement a liability to tax in the following year of assessment must involve to some extent going back on that arrangement.
The difficulties are far from unreal but the argument failed on what appears to me to be the salient point, that is to say the
necessity for ascribing some sensible meaning other than that suggested by the Crown to the words which the legislature has
advisedly chosen to use. I confess that I have not found the problems raised as easy of resolution as have the majority of your
Lordships, and I have been oppressed by what appeared to me and still appears to me to be very real difficulties, not altogether
dispelled, for me at any rate, by Mr Stamler QCs robust arguments for the Crown. I console myself that I am not alone in
finding the problem a difficult one. It is rightly said that the application of what is essentially an annual tax on income of a
particular year of assessment to a period in excess of a year is without precedent. I see force in the argument that an intention to
produce what Nolan J, with his long experience in matters of taxation, described as a truly astonishing result (see [1987] STC
654 at 660) should not be ascribed to Parliament without very clear words. Again, it is not easy to see how, on the footing that
sums paid or credited in the gap period are to be brought into account and taxed at the reduced rate in another year of assessment
as an addition to the sums paid or credited in that year, the Treasury is to exercise its powers under s 26 of the 1984 Act, for these
powers have to be exercised in relation to a particular year of assessment, in this case 198687. In exercising its powers the
Treasury has to assume that the sums payable by the society are income taxwhich can only mean income tax for the year of
assessmentand to produce the net result that the total income tax becoming payable to the Revenue (again in that year of
assessment) is no more than it would have been if s 343 (including sub-s (1A)) had not been enacted. In the end, however, I have
been persuaded that the Court of Appeal was right in its conclusion that no other sensible meaning can be given to what were
conveniently referred to as the s 47 words than that they were intended to authorise the taxation in the year 198687 and
subsequent years of assessment of sums paid or credited in the gap period and not previously brought into account.
It is, of course, true that the ultimate test of parliamentary intention is by reference to the words which Parliament has
chosen to use. But here there is no real difficulty in construing Parliaments words. Read in their ordinary natural meaning s
343(1A), as amended, authorises the Revenue to make regulations requiring, in respect of identified years of assessment,
payment of an amount representing income tax on any sums paid before the year in question and not previously brought into
account. On here must I think mean in respect of and, indeed, s 343(2) as amended by s 47 of the 1986 Act says as much. On
the face of it, that clearly authorises, for instance, a requirement to pay in the year of assessment 198687 a sum in respect of
interest in fact paid before the commencement of that year. One then asks: what, as a matter of construction, prevents the
Revenue from requiring such payment in addition to payment of sums in respect of interest paid during that year of assessment?
The suggested inhibition against such cumulative taxation lies not in the words which Parliament has chosen to use but in certain
well-established presumptions or principlesa presumption against double taxation, a presumption that income tax, being an
annual tax, is payable only on the income of a particular year and so on. But these are only presumptions. They are clearly
rebuttable if sufficiently clear express 103 words are used. But they can also be rebutted, as it seems to me, by circumstances
surrounding the enactment of the particular legislation which lead to an inevitable inference that Parliament intended, in using the
words that it did, that these presumptions or principles should not apply. I am bound to say that I think it unfortunate that the
Revenue, through Parliament, should have chosen by secondary rather than primary legislation to take what was, on ordinary
principles, the very unusual course of seeking to tax more than one years income in a single year of assessment, but s 47 of the
1986 Act is, on any analysis, a very unusual provision and I have, in the end, found myself irresistibly driven to the conclusion
that this was what Parliament intended should occur. It may beI do not knowthat the legislature did not appreciate fully that
the effect of the arrangements made in 1985 was to discharge all liability for tax on interest paid in the year of assessment 1985
86, including tax on interest paid after the end of a societys accounting year, and that, accordingly, to tax those sums again in a
subsequent year was, in a sense, to tax them twice. But even making that assumption it amounts to no more than saying that the
legislature should not have intended to do that which it plainly set out to do. I would, for my part, therefore, reject Woolwichs
principal argument.
That is not, however, the end of the matter, for an alternative argument is advanced. This arises out of the Crowns
concessionclearly rightly madethat reg 11(4) is ultra vires. What is said here is that this has the effect of invalidating reg 11
in toto. On the other side, it is argued that the only effect of invalidating reg 11(4) is that it is notionally deleted from the 1986
regulations, so that there is simply no specification of a rate of tax applicable. It would follow that the appropriate rate is simply
that which s 343(1A) prescribes, that is to say the rate for the year of assessment into which the sums are brought. That argument
found favour with the Court of Appeal, which held reg 11 to be valid save to the extent that para (4) purported to fix a rate of tax.
Before your Lordships, Mr Underhill, for Woolwich, has submitted that this case cannot be approached on such a simple blue-
pencil basis. Clearly severance, to use the convenient and conventional expression, by a process of simple deletion is
practicable here without altering the grammatical sense of what is left. But Mr Underhill has submittedand, in my judgment,
rightly submittedthat this does not provide the complete answer. One has to ask also the question whether the deletion of that
which is in excess of the power so alters the substance of what is left that the provision in question is in reality a substantially
different provision from that which it was before deletion. If it is, it cannot be assumed that the legislator would have enacted it
in its altered form and the whole must be declared bad. Your Lordships have been referred to a number of authorities, but I do
not think the principles, at any rate as they apply to this case, are seriously in doubt. The matter is in essence one of reading and
construing the provision in question and if, on a fair reading, the provision shorn of the offensive part is, in substance and effect,
a different provision from that which the legislator, on his own showing, intended to enact then, for my part, I do not see how any
of it can stand.
Turning to the 1986 regulations, the essential scheme adopted is to begin with a charging provision (reg 3), which, in terms,
does not apply to payments made prior to 1 March 1986. Those are brought into charge by reg 11, but they are brought in a very
particular way, that is to say by subjecting them to reg 3, deeming them under that regulation to be paid at times when they were
not in fact paid, and then avoiding, by reg 11(4), the taxation consequences which would otherwise have flowed from this
scheme, that is to say that they would be taxed for the rates appropriate for the periods in which they are deemed to have been
104 paid. If one follows the regulations through and relates reg 11 back to reg 3 it becomes immediately apparent how vitally
important reg 11(4) was to the scheme which the draftsman adopted. The starting assumption was, quite clearly, that the intention
of s 343(1A) was that sums paid prior to the specified years of assessment but not previously brought into account would be
charged to tax at the rate appropriate for the year of assessment in which they were actually paid or credited. There is nothing in
sub-s (1A) which justifies this, but it was clearly assumed to be so. This is borne out by the fact that in respect of the period from
1 March 1986 to 5 April 1986 tax has in fact been levied at the 198586 rate, a course of action which the Crown now admits and
asserts was a mistake. Similarly, reg 11(5) is all of a piece with this scheme, for it authorises the set-off against the sums to be
paid in respect of tax on payments made by the society during the gap period of the tax deducted from those payments made to
the society in the same period which have been paid under deduction tax. Whether this provision was strictly authorised by the
power in s 343(1A) to make regulations with respect to the year 198687 may be open to doubt, but the intention was clearly to
levy tax, albeit payable in a subsequent year, in exactly the same way as if it had become payable for the year of assessment
198586.
In considering the 1986 regulations it may be convenient, by way of shorthand, to refer to interest as including also
dividends. If we go first to reg 3 we see that what the building society is required to pay is a sum in respect of payments of
interest made after February 1986. Nothing else is charged by this regulation and it is the only charging provision. The payment
is to be made on the payment date for each payment quarter to which reg 7 applies and it is a sum made up of the reduced rate
and basic rate amount for that payment quarter. The payment quarters have been defined already by reg 2, to which I have
already referred, and those to which reg 7 applies are, by reg 7(3)(d) each complete payment quarter beginning with the
payment quarter ending 31 May 1986. So far, therefore, there is nothing which charges tax in respect of payments of interest
made in the year 198586 except in so far as those payments were made after February 1986. Regulation 11 then seeks to bring
them into charge. Paragraph (1) defines the payments to which the regulation relates and the charging provision is in para (2).
This has a dual purpose. First, notwithstanding that reg 3 applies only to post-February 1986 payments, it subjects the para (1)
payments to that regulation. If that stood alone it would be self-contradictory, so the second part of the paragraph deems them to
have been paid, not when they were in fact paid, but at dates after February 1986. This is done by treating them in all respects
as if made in the payment quarters which are set out in para 3(3)that is to say, in the case of Woolwich, as if they were made as
to one half in the payment quarter ending on 28 February 1987 and as to the other half in that ending on 28 February 1988. If
then we relate that back to reg 3 we find that the sums which the building society is obliged to pay are to be calculated at the
reduced and basic rates applicable for the years of assessment in which those payment quarters fall. No other rate of tax is
prescribed. But this would contradict the basic assumption on which the 1986 regulations have been framed, namely that the
applicable rate for the sum should be the rate for the year of assessment in which they were actually paid, ie 198586. Thus para
(4) is introduced to correct this.
It thus becomes apparent that the one thing that the draftsman did not intend was that the sums artificially deemed to be paid
in the specified payment quarters in 1987 and 1988 in order to bring them into charge under reg 3 should be taxed at the rate
applicable for those years of assessment. Yet, if para (4) is deleted, as the Crown concedes that it must be, that it exactly what reg
11 now achieves. It 105 seems to me, accordingly, that it is beyond argument that reg 11 without para (4) is in substance quite
different from the regulation which the draftsman actually produced and intended. Whether such a result is one which is strictly
authorised by s 343(1A) may be open to doubt, for it seems extremely unlikely that Parliament can have intended to confer on the
Revenue a discretion to tax the sums paid during the gap period at differential rates according to the adventitious dates on which,
during 198586, individual societies had chosen to close their financial years. But this is in any event immaterial, for the one
thing that is perfectly clear is that this was not the result that the Revenue intended or contemplated.
Counsel for the Crown had really no answer to this save to suggest that a combination of regs 3 and 11(2) produced, by a
process of reasoning that I confess that I was unable to follow, the result that the sums deemed to be paid in 1987 and 1988 fell to
be taxed according to the rates fixed for the year of assessment 198687. That might be possible for the payments falling to be
made on 14 March 1987 but I find it quite impossible to ascribe that result to the regulation in relation to the remaining payment
dates referred to in para (3) and it quite clearly does not accord with the intention to which the Revenue and its draftsman
intended to give effect. The Court of Appeal was prepared to treat the remainder of reg 11 as unaffected by the deletion of para
(4) because, it was said, s 343(1A) itself contained the formula for fixing the rate of tax which could apply in the absence of para
(4) and which, it surmised, the draftsman would have been prepared to allow to operate had he appreciated the invalidity of the
paragraph. I cannot agree that this is a correct approach. The draftsmans hypothetical intention is by no means obvious. If, as
Mr Stamler submitted, the whole purpose of the transitional provision was to compel societies to disgorge to the Revenue tax
which, in fixing their interest rates, they notionally and indirectly deducted from payments to investors in the gap period, there
can be no logic at all in subjecting those payments to rates of tax which bear no relation to, and indeed might well exceed, the tax
notionally deducted. That becomes even clearer when one considers that reg 11(1) applies not only to payments of interest and
dividends but to payments of annuities to which s 53 of the 1970 Act applies and where tax would have been deducted at source
by the society. It cannot rationally have been intended that the society should come under an obligation to account to the
Revenue for tax at a higher rate than that which obtained at the time when the tax was deducted. What form the regulation might
have taken if the invalidity of para (4) had been appreciated is a matter of pure speculation.
Nor does the matter stop simply with reg 11. The same erroneous assumption which produced para (4) of that regulation
appears in a slightly different form also in reg 3. That this is so is demonstrated by the fact that the Revenue, as it is now
admitted mistakenly, applied the tax rates for the year 198586 to payments made in the period from the end of February 1986 to
6 April 1986. It is suggested that this can be rectified simply by a refund of the excess amount of tax demanded. The matter is
not, however, as simple as that. It has to be remembered that what s 343(1A) authorisesand this is all that it authorisesis the
making of regulations requiring societies to pay, on the sums determined, an amount calculated in part at the basic rate and in part
at the reduced rate determined for the year of assessment concerned under s 26(1)(a) of the 1984 Act. The year of assessment
concerned, as a result of the opening words of the section, can only be the year 198687 or some subsequent year. Regulation 3,
however, requires payment on the relevant payment date for each payment quarter of a sum made up of the reduced rate amount
and the basic rate amount for that payment quarter or 106 period. As already mentioned, the regulation applies expressly to
payments made after February 1986 and therefore covers, as the first payment quarter, the period 1 March 1986 to 6 April 1986
(falling in the year of assessment 198586) and the period 7 April 1986 to 31 May 1986 (falling in the year of assessment 1986
87). These payments therefore fall between two stools. There is no single reduced rate amount or basic rate amount for that
quarter. This is the first difficulty. Regulation 7, it is true, contemplates (in para (3)( d)) a period which is not a complete
payment quarter and may be said to enable the references to the basic rate amount and the reduced rate amount to be read plurally
as referring to the amounts applicable to the separate periods of the quarter in question according to whether they fall within the
year 198586 or the year 198687. But that could only have the result of making the amounts for the period 1 March 1986 to 6
April 1986 the amounts determined for the year 198586. Thus the regulation is manifestly ultra vires to this extent because the
section under which it is made does not authorise the application of any rate other than that for the year of assessment
concerned and that, as already explained, has to be either the year 198687 or some subsequent year. Again, this is not a defect
which can be cured by deletion. The whole regulation would have to be rewritten and it is entirely a matter of speculation what
form the rewriting would take if the draftsman had appreciated the error into which he was falling.
Whether it is open to the commissioners now to lay before Parliament new regulations containing different transitional
provisions is not a matter which it is necessary to consider nor, indeed, would it be appropriate to do so. If they can and do, then
the exercise on which Woolwich is engaged may seem a singularly sterile one. Nevertheless, although I am very sensible of the
manifest inconvenience which this will involve, it is, I think, clear on analysis that the admitted invalidity of reg 11(4) infects the
whole of that regulation and I see no alternative to declaring it to be wholly void and ineffective. It follows that, whilst
dismissing the appeal as regards the power to make regulations having the effect of imposing tax on sums paid during the gap
107 period, I would allow the appeal as regards the invalidity of reg 11 and of reg 3 so far as it relates to the period after February
and before 6 April 1986.
LORD GOFF OF CHIEVELEY. My Lords, I have had the advantage of reading in draft the speech of my noble and learned
friend Lord Oliver. I agree with him that Woolwichs principal argument, that the regulations were unlawful in so far as they
purported to require building societies to pay an amount representing income tax in respect of sums paid or credited before 6
April 1986, must fail. On this point, I do not wish to add anything to what has been said in the speech of my noble and learned
friend.
I turn to Woolwichs second argument, which arises from the Crowns concession that reg 11(4) is ultra vires. This is that,
because that paragraph cannot be severed from the remainder of reg 11, no other part of that regulation can be saved.
Since my noble and learned friend has so fully analysed the Income Tax (Building Societies) Regulations 1986, SI
1986/482, in terms with which I am very substantially in agreement, I am relieved from the burden of setting out the terms of the
1986 regulations in extenso or of indulging in a complete analysis of them. I can proceed straight to reg 11, which is described as
a transitional provision, being concerned with certain payments made after the end of the societys last accounting period which
ends in the year 198586 but before 1 March 1986. It is therefore concerned with payments made in the so-called gap period,
but not with those made after 28 February and before 6 April 1986, since those are dealt with directly by reg 3. Paragraph (2) of
reg 11 provides:

Subject to the provisions of these Regulations, any such payment shall be treated in all respects as a payment to
which these Regulations apply and as made in the payment quarter to which the payment dates specified in paragraph (3)
below relate.

So far as Woolwich is concerned, para (3) has the effect that payments made by it during the specified period are thereby treated
as paid in part on 14 March 1987 and in part on 14 March 1988. Paragraph (4) specifies the applicable reduced rate amount and
basic rate amount which together produce the sum payable to the Revenue by the building societies in respect of the relevant
payments. The trouble with para (4) is that the basic rate amount so specified is plainly based on the basic rate of tax applicable
in 198586 (30%), whereas s 343(1A) of the Income and Corporation Taxes Act 1970 provides that the relevant rates shall be
those for the year of assessment into which the omitted sums are broughtwhich, however, cannot be before 198687, when the
basic rate was 29%.
I wish to add that, in my opinion, reg 3 reveals that (as one would expect) a similar mistake was made in so far as the
regulation refers to payments made after February 1986 and before 6 April 1986. Under the regulation, the sum payable by the
building society to the Revenue on the relevant payment date for each payment quarter is to be made up of the reduced rate
amount and the basic rate amount for that payment quarter or period. Those words must be read, in my opinion, as referring to
the reduced rate and the basic rate applicable in the year of assessment in which the relevant payment quarter or period falls. It
follows that, consistently with reg 11(4), the applicable rates for that part of the first payment quarter which fell before 6 April
1986 were the rates for 198586; and so to this extent reg 3 is also ultra vires.
Reverting to reg 11, the contention of the Crown has been that, in these circumstances, the problem can be solved if the
court simply excises para (4). However, as my noble and learned friend has pointed out, the problem cannot be solved as easily
as that, for the simple reason that para (4) forms an integral part of reg 11. Paragraph (2), which is the central paragraph, has
been drafted on the assumption that para (4) will specify the relevant reduced rate amount and basic rate amount; and, if para (4)
is simply excised, this will leave para (2) providing, unqualified, that the payments shall be treated in all respects as made in the
relevant payment quarters specified in para (3), which would lead to the basic rate amount being arrived at not by reference to a
rate of 30%, but in part by reference to the basic rate for 198687, and in part to that for 198788. In any event, the Crowns
contention does not deal with the problem that, for the reasons I have explained, reg 3 is also in part ultra vires.
Now it is true that, so far as severance is concerned, the court no longer has to proceed on the basis of what has been called
the blue pencil test, under which the court can only sever the good from the bad where the bad can be excised by a simple
deletion of words from the instrument in question. It is now open to the court, taking advantage of the remedy of a declaration, to
declare that the instrument in question shall not take effect in so far as the maker of the instrument has acted beyond his powers,
even though verbal severance of the offending provision is not possible on the old blue pencil approach (see DPP v Hutchinson
[1990] 2 All ER 836 at 839, [1990] 2 AC 783 at 804 per Lord Bridge). But the court must nevertheless be satisfied that, in so
proceeding, it is effecting no damage to the substantial purpose and effect of the instrument.
108
However, as I see it, the problem in the present case is that the mistake made by the Revenue in regs 3 and 11(4) cannot be
cured, either by the simple excision of particular words (as proposed by the Crown with regard to reg 11(4)) or by a declaration.
In the case of reg 11, this is because what is left after the excision of reg 11(4) has the effect of providing for rates of tax different
from those intended by the Revenue. What is required in these circumstances is not merely the excision of reg 11(4), but the
introduction of a new provision in its place. The same applies, in my opinion, to reg 3, for there too a new provision is required
in relation to payments made after February 1986 and before 6 April 1986.
The Court of Appeal considered that, in relation to reg 11, the invalidity of reg 11(4) did not leave a complete blank as to the
applicable rate, because s 343(1A) provided that the omitted interest should be brought into account at the rate fixed for the year
of assessment under which it has to be brought in. But the difficulty with reg 11 is that, once para (4) is removed, para (2) is left
free to operate in unqualified terms and specifies the payment quarters in which the relevant payments are treated in all respects
as made; and plainly the Revenue did not intend para (2) to operate to fix the reduced rate amount and basic rate amount
applicable in relation to such payments. So far as reg 3 is concerned, if it is declared ultra vires so far as it relates to payments
made after February 1986 and before 6 April 1986, then there is no provision which identifies the year of assessment under which
such payments have to be brought in. In truth, what is required in relation to the offending parts of both regs 11 and 3 is not
merely that they should be quashed or declared ineffective in so far as they are ultra vires, but that fresh provision should be
made for the appropriate rates of tax in place of those which were unlawfully specified. It is, however, in my opinion, no part of
the courts function to legislate in this way. It is for the Revenue, if it is still able to do so, to amend both regulations to bring
them in accordance with its statutory powers.
For these reasons I would, like my noble and learned friend Lord Oliver, allow the appeal as regards the invalidity of reg 11,
and also allow the appeal as regards the invalidity of reg 3 in so far as it relates to the period after February and before 6 April
1986.

LORD LOWRY. My Lords, in this appeal I have concluded that neither in its original form nor as amended by s 47(1) of the
Finance Act 1986 did s 343(1A) of the Income and Corporation Taxes Act 1970 authorise the collection of additional tax from
Woolwich (amounting to 69m) which was referable to the period from 1 October 1985 to 5 April 1986. For convenience I shall
call it the gap period, but without accepting the implication which might thereby gain credence that this appellation signifies a
gap in the rightful revenues of the Crown, as the Crown would contend.
I gratefully adopt the description which Nolan J has given of the historical background and the scheme of taxation (see
[1987] STC 654 at 655658), and also the summary contained in the speech of my noble and learned friend Lord Oliver, which I
have had the advantage of reading in draft. Therefore I can go straight to the main question.
Not surprisingly, there is much in my noble and learned friends reasoning which I happily accept, including his cogently
expressed opinion that s 343(1A), as first enacted, did not, with regard to the gap period, authorise what the Income Tax
(Building Societies) Regulations 1986, SI 1986/482, purported to achieve. It is only when I come to consider the s 47(1)
amendment that I feel obliged to adopt a different view. I cannot, however, take a short cut by starting there, 109because I think
it is important for me to consider the meaning first of s 343(1), then of the original s 343(1A) and finally of s 343(1A) as
amended. Although these provisions are found in my noble and learned friends speech, it will be convenient to set them out
again, together with s 26 of the Finance Act 1984 and s 47(1) of the 1986 Act. Section 343(3) is, of course, also important but I
can refer to the text of my noble and learned friends speech.
Here are s 343(1) and (1A) as they had effect at the time the 1986 regulations were made on 13 March 1986 to come into
operation on 6 April 1986:

(1) The Board and any building society may, as respects any year of assessment ending before 6th April 1986, enter
into arrangements whereby(a) on such sums as may be determined in accordance with the arrangements the society is
liable to account for and pay an amount representing income tax calculated in part at the basic rate and in part at a reduced
rate and (b) provision is made for any incidental or consequential matters, and any such arrangements shall have effect
notwithstanding anything in this Act
(1A) The Board may by regulations made by statutory instrument make provision with respect to the year 198687 and
any subsequent year of assessment requiring building societies, on such sums as may be determined in accordance with the
regulations, to account for and pay an amount representing income tax calculated in part at the basic rate and in part at the
reduced rate determined for the year of assessment concerned under section 26(1)(a) of the Finance Act 1984; and any such
regulations may contain such incidental and consequential provisions as appear to the Board to be appropriate, including
provisions requiring the making of returns.

To begin with, s 343(1) had ended with a proviso:

Provided that in exercising their powers of entering into arrangements under this section, the Board shall at all times
aim at securing that (if the amount so payable by the society under the arrangements is regarded as income tax for the year
of assessment) the total income tax becoming payable to, and not becoming repayable by, the Crown is, when regard is had
to the operation of the subsequent provisions of this section, as nearly as may be the same in the aggregate as it would have
been if those powers had never been exercised.

This was repealed on the enactment of s 26 of the 1984 Act, which applied to arrangements under s 343(1) for the year of
assessment 198586 and continued to apply to the year 198687 and subsequent years. So far as material, it provides:

(1) In the year 198485 and in every subsequent year of assessment the Treasury shall by order made by statutory
instrument determine a rate which shall, for the following year of assessment, be(a) the reduced rate for the purposes of
section 343 of the Taxes Act (building societies); and (b) the composite rate for the purposes of section 27 of this Act.
(2) The order made under subsection (1) above in each year of assessment shall(a) be made before 31st December in
that year; and (b) be based only on information relating to periods before the end of the year of assessment in which the
order is made.
(3) Whenever they exercise their powers under this section the Treasury shall aim at securing that (assuming for the
purposes of this subsection that the amounts payable by building societies under section 343 of the Taxes Act and by
deposit-takers under section 27 of this Act are income tax) the total income tax becoming payable to, and not being
repayable by, the Crown is 110(when regard is had to the operation of those sections) as nearly as may be the same in the
aggregate as it would have been if those sections had not been enacted.
(4) In relation to the exercise of their powers under this section at any time before the year 198889, the Treasury may
regard subsection (3) above as directed only to amounts payable by building societies under section 343 and to the
operation of that section.
(5) In section 343(1) of the Taxes Act, the proviso and in paragraph (a) the words from which takes to this section
shall cease to have effect as from 6th April 1985

Section 47(1) of the 1986 Act was enacted in July 1986 and provided:

In section 343 of the Taxes Act (building societies), subsection (1A) (which was inserted by the Finance Act 1985 and
enables the Board to make regulations requiring societies to account for amounts representing income tax on certain sums)
shall have effect and be deemed always to have had effect with the insertion after the words in accordance with the
regulations of the words (including sums paid or credited before the beginning of the year but not previously brought into
account under subsection (1) above or this subsection).

(I have emphasised the words which gave the amendment retrospective effect.)
Accordingly, s 343(1) and (1A) must be read for all purposes as follows:

(1) The Board and any building society may, as respects any year of assessment ending before 6th April 1986, enter
into arrangements whereby(a) on such sums as may be determined in accordance with the arrangements the society is
liable to account for and pay an amount representing income tax calculated in part at the basic rate and in part at a reduced
rate; and (b) provision is made for any incidental or consequential matters, and any such arrangements shall have effect
notwithstanding anything in this Act.
(1A) The Board may by regulations made by statutory instrument make provision with respect to the year 198687 and
any subsequent year of assessment requiring building societies, on such sums as may be determined in accordance with the
regulations (including sums paid or credited before the beginning of the year but not previously brought into account under
subsection (1) above or this subsection), to account for and pay an amount representing income tax calculated in part at the
basic rate and in part at the reduced rate determined for the year of assessment concerned under section 26(1)(a) of the
Finance Act 1984; and any such regulations may contain such incidental and consequential provisions as appear to the
Board to be appropriate, including provisions requiring the making of returns.

I shall call the amendment introduced by s 47(1) the s 47 amendment.

I have been impressed by and grateful for the cogent and often persuasive arguments of counsel on either side, but I remain
unimpressed by talk of injustice and inequity on the one hand and by references to lost interest and the gap period on the other.
Nor am I affected by ingenious examples of the strange financial results which could conceivably arise from the adoption of one
construction or the other. If something unforeseen were to happen, it might be dealt with by enactment or regulation, but in
reality such figures as your Lordships have seen tend to show a fairly steady investors income from year to year. But, subject
always to interpreting the words of s 343(1A), Woolwich is entitled to say that it would be surprising and prima facie contrary to
accepted tax principles for the 111 amount representing the investors income tax for the years of assessment 198687 and 1987
88 to be based on the income of two and a half years. As Sir Nicolas Browne-Wilkinson V-C said in the Court of Appeal ([1989]
STC 463 at 470):
 As to counsel for Woolwichs second submission, there is no doubt that in relation to the charging of income to income
tax it is fundamental that in any one tax year the income brought into tax must be the income of a period of one year only.
Tax payable in any one tax year may be measured by the income of some other year; but in all cases the income brought
into tax is the income of one year and no more.

The words I have emphasised show that the Vice-Chancellor was expressing a general view about income tax, which of course
must be subject to the meaning of the relevant provisions in this case, to which I now turn.
Section 343(1) allows the Board of Inland Revenue and a building society as respects any year of assessment ending before
6 April 1986 to enter into arrangements whereby on such sums as may be determined in accordance with the arrangements the
society is liable to account for and pay an amount representing income tax calculated in part at the basic rate and in part at a
reduced rate: as respects any year of assessment refers to the year of assessment of the societys investors (in the instant case
the fiscal year 6 April 1985 to 5 April 1986), the period of charge and all payments and credits of dividends and interest by the
society to investors during that period would, but for the arrangements, be charged by deducting the tax before payment. The
phrase on such sums as may be determined means by reference to such sums as may be determined; in the instant case this is
by reference to the sums paid or credited to investors during the societys accounting year 1 October 1984 to 30 September 1985
(this choice of arrangement having been made by Woolwich in 194041). The building society then becomes liable to account
for and pay to the Revenue an amount representing the investors income tax for the year of assessment 198586. The reduced
rate of income tax was calculated under the arrangements, when the proviso was part of s 343(1), in order to achieve what has
been called revenue neutrality, as described by my noble and learned friend Lord Oliver. My explanation is illustrated by the
arrangements (which were put in evidence) entered into by the Revenue with building societies for the year of assessment 1985
86. The arrangements (giving here only the words needed to illustrate the point) provide:

1. Charge to income tax at composite rates

By virtue of Section 343 the Society shall be liable to account for and pay an amount representing income tax
calculated at the rate of 2525 per cent for 198485 and 2525 per cent for 198586 [the rates by chance coincided but
could have differed] on the total of the following sums: (a) the sum of the dividends and interest payable in the
basis period by the Society to its investors
2. Charge to income tax at basic rates
The Society shall also be liable to account for and pay an amount representing income tax calculated at the basic rates
for 198485 and 198586 on the total of the following sums: (a) the sum of the dividends and interest payable in the basis
period by the Society to its investors
3. Determination of basis period
(1) Subject to the provisions of this paragraph the basis period shall be determined as follows: (a) If an account is made
up for a period of one year to a date in the year of assessment 198586 and is the only account made up to a date in that
year of assessment, that period shall be the basis period. (b) In any 112 other case the Board of Inland Revenue shall
decide what period of 12 months ending in the year of assessment 198586 shall be the basis period. (2) If during the year
of assessment 198586 the Society ceases or unites with another Society to which paragraph (3) below applies, the basis
period shall be that period ending on the date of cessation or union and commencing on 6 April 1985

The words I have italicised above show on what sums it was determined that the building society was liable to account for
and pay an amount representing income tax. Those sums were payable to investors in the basis period, that is the accounting year
of the society ending during the year of assessment.
The word on in s 343(1) and in the arrangements made thereunder is very important. It is a neutral word and, like many
words in the English language, including statutory language, takes its colour, like a chameleon, from its surroundings or, more
literally, its meaning from its context. The societys accounting year, called the basis period in the arrangements (a familiar
concept in relation to the income tax liability of a taxpayer), is the measurement period and the amount representing the investors
income tax in respect of the fiscal year 198586 which the building society is liable to account for and pay is measured by
reference to the sums payable to the investors in the basis period (in the case of Woolwich 1 October 1984 to 30 September
1985). In the context of s 343(1) on means by reference to and not charged on or in respect of. That this must be so is
obvious when one recalls that part of the basis period (1 October 1984 to 5 April 1985) lies outside the year of assessment and is
not part of a chargeable period for the purposes of 198586 income tax. Mr Gardiner QC, for Woolwich, referred your Lordships
to ss 108 and 109 for the use of the phrase in respect of and to ss 115(1), 116(1), 117(2), 118(1), 119 and 120(1) of the 1970 Act
as exemplifying the use of on meaning by reference to and also cited Duckering (Inspector of Taxes) v Gollan [1964] 1 All ER
556, [1964] 1 WLR 414. I need only refer to the case stated (see [1964] 1 All ER 556 at 557558, 560561, [1964] 1 WLR 414
at 415418) and to s 132 of the Income Tax Act 1952 for further examples of on used in this sense.
The grammatical structure of s 343(1) should be noted. The building society is liable to do something, namely account for
and pay. The object of those verbs is an amount representing income tax, and the verbs are modified by the adverbial phrase
on such sums as may be determined, which is not an adjectival phrase qualifying income tax. This is confirmed both by the
position of the phrase in the subsection and by the wording of paras 1 and 2 of the arrangements which I have mentioned above.
Section 343(1A) closely follows s 343(1) in its wording. The difference is that regulations are to take the place of
arrangements and that the regulations, once made, will require building societies to pay. But the difference ends there. The
regulations are to make provision with respect to (s 343(1) said as respects) a year of assessment, starting with 198687. The
building societies obligation will be to account for and pay an amount representing income tax (that is the investors income tax)
calculated in part at the basic rate (so far the words emphasised are the same as in s 343(1)) and in part at the reduced rate
determined for the year of assessment concerned under s 26(1)(a) of the 1984 Act. (The difference in wording here, which does
not alter the effect, is due to s 26 having been enacted before s 343(1A), whereas, apart from repealing the proviso, it was
unnecessary to amend s 343(1) when s 26 was introduced.)
And they were to pay that amount on such sums as may be determined under the regulations (instead of in accordance with
the arrangements).
113
Your Lordships do not know whether the responsible government department had the 1986 regulations in draft or even in
mind when s 343(1A) was enacted. We do know, however, that on 19 March 1985 the Chancellor of the Exchequer had indicated
that, since the banks were to change their system of payment of tax on bank interest on 6 April 1985, the building societies would
be put on a similar footing from 6 April 1986.
The scheme of taxation in s 343(1A), apart from the fact that it would no longer be an optional alternative to the
conventional way of taxing payments to investors, was just the same as that of s 343(1). It dealt with the investors tax liability in
respect of one fiscal year and obliged the building societies to pay an amount representing income tax, that is the investors
income tax for (in the first place) 198687. The duty of the Treasury under s 26(1) and (3) to determine a reduced rate and
achieve revenue neutrality is to be exactly the same as it was with respect to the year 198586. And on such sums still means
by reference to such sums. This rather wearisome analysis makes it easy to see why Mr Stamler QC, for the Crown, would not
admit, even with regard to s 343(1), that the word on in the phrase on such sums as may be determined meant by reference
to, because one can see that it already has the same meaning in s 343(1A). I scarcely need to point out that tax is charged on all
sums paid or credited to investors in the relevant year of assessment. Those sums are readily ascertainable; they do not need to
be determined either in accordance with the arrangements or in accordance with the regulations.
After the enactment of s 343(1A) three events occurred: (1) the 1986 regulations were made and laid and came into
operation on 6 April 1986; (2) Woolwich commenced proceedings for judicial review; and (3) s 47 of the 1986 Act was enacted.
I shall assume that the object of introducing the s 47 amendment was either to make it clear that s 343(1A) was a valid
statutory authority for the making of the impugned regulations or to convert that provision into a valid statutory authority. It
seems highly probable, in so far as it is relevant at all, that one of these explanations is the right one. The ambivalence of my
diagnosis is consistent with the Crowns presentation of their case. Before Nolan J they seem to have relied on s 343(1A) and to
have introduced the s 47 amendment as a make-weight, but in the Court of Appeal the emphasis seems to have been on the effect
of the amendment, while before your Lordships the Crown advanced both arguments with equal vigour. Mr Gardiner, while
conceding that it would be ex abundanti cautela, suggested that the purpose of the s 47 amendment was to make it clear that the
1986 regulations could require building societies to pay amounts by reference to sums which had been paid or credited before 6
April of the relevant year of assessment. It clearly has that effect, in my opinion, assuming that such an effect was ever needed,
and therefore I am inclined to infer that the amendment had a different purpose from that attributed to it by Mr Gardiner. For the
Crown, Mr Stamler when arguing that s 343(1A) as enacted already authorised the 1986 regulations in their entirety (except reg
11(4)), said that the s 47 amendment was on that basis unnecessary. I shall come back to this point, but I take leave of it for the
moment by saying that the purpose of legislation is not the same thing as the intention of Parliament, which may be gathered
only from the actual words of the statute.
Before examining the amendment I will briefly consider one or two things which the 1986 regulations could have done
consistently with s 343(1A) as drafted, and, indeed, with the arrangements under s 343(1). They could have continued the
existing scheme by requiring building societies to account for and pay an amount representing income tax by reference to the
societys accounting year (in 114 the case of Woolwich, 1 October 1985 to 30 September +1986). Or they could have designated
a year commencing on 1 March 1986 and ending on 28 February 1987. Or they could have made the basis period coterminous
with the year of assessment, in which case the sums by reference to which the amounts were to be paid would have precisely
coincided with the sums on which tax was chargeable. The 1986 regulations could have provided for an annual payment on 1
January, as before, or for a different system such as quarterly payment on specified days, as they actually did. The true cause of
complaint is not the Revenues choice of the gap period but the combination of the gap period with the relevant years of
assessment, which results in a basis period of excessive length.
Let me now consider what the s 47 amendment did. I shall set it out again:

(including sums paid or credited before the beginning of the year but not previously brought into account under
subsection (1) above or this subsection).

It is, of course, necessary to incorporate the new words into the syntax of the existing subsection and to keep in mind, as I have
already said, that s 343(1A), of which the amendment is now a part, is modelled on, and now refers to, s 343(1).
Accordingly, as the legislature now tells us, such sums as may be determined in accordance with the regulations include
sums paid or credited before the beginning of the year but not previously brought into account under subsection (1) above or this
subsection. So the s 47 amendment simply defines more specifically (I do not say it extends) the expression such sums as may
be determined in accordance with the regulations. It achieves absolutely nothing else. (I emphasise these words because I
believe they provide the key to the problem.) The consequence is that s 343(1A) as amended continues to authorise precisely the
same regulations as it authorised in its original form, namely regulations requiring building societies to account for and pay an
amount representing income tax (that is representing investors income tax in respect of the relevant year of assessment) and to
pay that amount by reference to such sums (now more exactly defined) as may be determined in accordance with the regulations.
The Treasurys duty to determine the reduced rate and to aim at revenue neutrality, as required by s 26, is unchanged. In fact
nothing has changed.
With all respect to those who may take a different view, I do not consider that s 343(2) as amended by s 47(2) of the 1986
Act places any difficulty in the way of construing the word on as by reference to in s 343(1A) or s 343(1A) as amended. The
original s 343(2), which is concerned with a building societys corporation tax, refers to dividends or interest payable in respect
of shares in, or deposits with or loans to, the society, and para (a) of the subsection speaks of the amount accounted for and paid
by the society in respect thereof as representing income tax, meaning in respect of any such dividends or interest. Dividends
and interest are paid in respect of shares etc and in para (a) the amount accounted for and paid by the society as representing
income tax is paid in respect of the actual dividends and interest paid to investors in the societys accounting period, but it is also
paid on (or by reference to) such sums as may be determined in accordance with the arrangements under s 343(1).
Section 343(2) was the subject of two amendments by s 40(4) of the Finance Act 1985 and s 47(2) of the 1986 Act to have
effect for 198687 and subsequent years and, as amended, provided:

For any year of assessment to which regulations under subsection (1A) above apply, dividends or interest payable in
respect of shares in, or deposits with or loans to, a building society shall be dealt with for the purposes of 115 corporation
tax as follows:(a) in computing for any accounting period ending in the year of assessment the income of the society
from the trade carried on by it there shall be allowed as a deduction the actual amount paid or credited in the accounting
period of any such dividends or interest, together with any amount accounted for and paid by the society in respect thereof
as representing income tax, (b) in computing the income of a company which is paid or credited in the year of assessment
with any such dividends or interest in respect of which the society is required to account for and pay an amount in
accordance with the regulations, the company shall be treated as having received an amount which, after deduction of
income tax, is equal to the amount paid or credited, and shall be entitled to a set-off or repayment of income tax
accordingly, (c) no part of any such dividends or interest paid or credited in the year of assessment shall be treated as a
distribution of the society or as franked investment income of any company resident in the United Kingdom.

Nothing arises before para (b). It is concerned with computing the income of a company which is paid or credited in the year of
assessment [for the present purposes not before 198687] with any such dividends or interest (that is such dividends or interest
as are mentioned in line 2 of sub-s (2). The words introduced by s 47(2) are in respect of which the society is required to
account for and pay an amount in accordance with the regulations. They describe further the dividends or interest referred to.
There is a close parallel with my analysis of sub-s (2)(a): the dividends and interest are paid to the company in the year of
assessment and in respect of those dividends and that interest the building society is required to account for and pay an amount in
accordance with the regulations; by looking again at s 343(1A) it can be seen that the amount is to be paid on such sums as may
be determined in accordance with the regulations, but I can see absolutely no indication that the dividends or interest in respect
of which that amount is to be paid under s 343(1A) are or can be dividends or interest paid to the company in 198586.
In my judgment the only possible means of escape from this conclusion is (1) to assume or pretend that on in the phrase
on such sums as may be determined in s 343(1) and s 343(1A) means and has always meant charged on (because the s 47
amendment did not change the meaning of on) and (2) to say, as the Crown did, that brought into account in the amendment
means brought into account for the purpose of paying tax thereon. As to the first point, I refer to my earlier observations. As to
the second, the words not previously brought into account under subsection (1) above are significant. From an income tax point
of view, the arrangements and s 343(3) have ensured that the sums paid or credited to investors in the whole of the year of
assessment 198586, including the sums paid or credited in the gap period, have already been brought into account in the
Crowns sense of the word, but the sums paid or credited in the gap period have not been brought into account in the way
envisaged by arrangements made under s 343(1). In this respect s 343(1A) has the same effect as s 343(1) and continues to have
that effect after amendment.
The Crowns case depends, in my view, on three fallacies. These are: (1) the theory that the deductions made by the
building societies during the gap period from the dividends and interest which they paid to their investors represent money for
which the building societies ought to account to the Revenue. This view explains the inclusion of the gap period by the 1986
regulations together with the relevant fiscal years and, when advanced in argument, is calculated to predispose a court to accept
the Crowns interpretation; (2) the confusion of the 116 probable purpose of introducing the amendment with the intention of
Parliament as it is to be gathered from the words used in the 1970 Act; (3) the acceptance of the proposition that, if the words of
the s 47 amendment clearly refer to the sums paid or credited in the gap period, they also have the effect contended for by the
Crown. I shall deal with these points in turn.
(1) As respects the year of assessment 198586, the Revenue and Woolwich entered into arrangements whereby the entire
liability of the investors for income tax (except for tax at the higher rate) was discharged, and Woolwich was also discharged
when on 1 January 1986 it paid to the Revenue an amount representing that income tax. Thereafter no income tax or money
representing income tax was due in respect of the fiscal year 198586. Woolwich does not pay income tax in its own right but
has a personal liability for corporation tax with which this case is not concerned. Under proper regulations the investors income
tax liability for the year 198687 and subsequent years of assessment ought to be disposed of on similar principles, using either
the year of assessment itself or some other 12month period as the basis period. If a cessation or merger occurs, special rules will
apply, as also happened under the former arrangements. The legitimate and declared object of the old arrangements and the new
regulations was and is to collect each year from the building societies an amount representing the investors income tax for that
year. When Woolwich and other building societies changed their basis period in 194041 from the accounting year which ended
before the year of assessment to the accounting year which ended during the year of assessment, there was a gap period, but this
did not give rise to legislation to fill the gap. Thus to disregard the 1940 gap was correct in principle. The 1986 regulations
introduced a current year basis of assessment in place of what had been in part a previous year basis. The Crowns proposition
amounts to a spurious charge of unjust enrichment against the building societies and overlooks the point that both s 343(1) and s
343(1A) are not directed to the tax liability of building societies in their own right but are concerned with the liability of building
societies (as an alternative to conventional tax accounting) to pay to the Revenue in respect of each single year of assessment an
amount representing the investors income tax for that year.
(2) Assuming (in all probability rightly) that the purpose of the s 47 amendment was to validate the 1986 regulations by
retrospectively enlarging the authority to make them, it does not follow that the amendment achieved that purpose. One fallacy is
to infer that purpose must be equated with legislative intention as expressed in the words used in the enactment. Another fallacy
is to conclude that, because no other sensible purpose of the amendment can be found, therefore the purpose contended for by the
Crown not only existed (which can be readily enough inferred) but has been achieved (which calls for an examination of the
enacting words in their context). If the purpose of an enactment, including an amending enactment, can be found and if the
words of the statute are on one possible construction apt to achieve the purpose, but not on another construction, then the court
should prefer the construction which achieves the purpose, but, if no reasonable construction of the words used can lead the court
to conclude that the purpose has been achieved, the intention of Parliament as elicited from the words of the statute prevails and
the purpose, however obvious, is defeated. There is no room for a purposive construction if the words to be construed will not
bear the interpretation sought to be put on them and it must always be borne in mind that the art of statutory interpretation can be
applied only when the provision to be interpreted is ambiguous. I refer to Maxwell The Interpretation of Statutes (12th edn,
1969) pp 12, 2829 and also to Bennion Statutory Interpretation (1984) p 237, where the matter is put succinctly:
117

The distinction between the purpose or object of an enactment and the legislative intention governing it is that the
former relates to the mischief to which the enactment is directed and its remedy, while the latter relates to the legal meaning
of the enactment.

(3) The unacceptability of this proposition is obvious.

I turn now to the judgments delivered in the courts below.
The judgment of Nolan J is worthy of careful study and, I suggest to your Lordships, of considerable respect as well. After
describing the effect produced by the 1986 regulations as a truly astonishing result, the judge added ([1987] STC 654 at 660):

Parliament is omnipotent, and if it enacted that income tax for any year should be paid on the income of two years or
the income of twenty years, then that would be the end of the matter; but in none of the Finance Acts of this or of the last
century has it ever sought to levy a years income tax upon the income of more than a year. If it wished to do so one would
expect the clearest terms to be employed. The suggestion that it has implicitly authorised the Revenue to achieve such a
result by way of delegated legislation is one which defies acceptance.

He then said (at 660661):

By claiming further tax (albeit from the taxpayer rather than directly from its members) upon the dividends and
interest received by the members during that period [ie the gap period] the Revenue are, as it seems to me, going back on
that arrangement. I can see nothing in s 343(1A) which authorises them to do so.

Having averted to the preceding year basis of assessment, he continued (at 661662):

The income thus taxed is none the less in law the income of the year of assessment, albeit artificially measured in this
way. As Lord Donovan said in Duckering (Inspector of Taxes) v Gollan [1965] 2 All ER 115 at 120, [1965] 1 WLR 680 at
689, My Lords, it is a truism which the [Crown] does not dispute that United Kingdom income tax for any year of
assessment for which the tax is granted by Parliament is a levy upon the income of that year. It is not a levy upon the
income of a preceding year, nor does it become so by virtue of the fact that this latter income may be used to measure the
amount of tax payable. Precisely the same principle applies, of course, when the income used as a measure is income of a
period ending in the current year of assessment rather than in a preceding year of assessment. That sometimes happens in
the case of income charged under Case VI of Sch D (see s 125 of the Income and Corporation Taxes Act 1970) which it
will be noted expressly incorporates the requirement that the period whose income is used as a measure must not exceed
twelve months. One result of the system of using as the unit of measurement the income of a period which has ended
before or during the year of assessment concerned is that when that system ceases to operate it leaves a gap. It leaves a
period running from the end of the last unit of measurement until the end of the last year of assessment for which the
system is in operation. The actual income of that gap will not be used as a measure of liability unless the legislation
contains special provisions avoiding that result. Various provisions to that effect are set out in the 1970 Act: see, for
example, s 118 dealing with trades and professions. It is not necessary for me to set out these provisions in detail. Their
general purpose 118 is to prevent artificial exploitation of the gap. In every case they do this by providing for the inclusion
 in the measure of liability of income which would otherwise drop out. Equally in every caseand this is the pointfor
each fresh period whose income is brought into the measure another period of equal length is left out, so that in all cases
the assessment for the year remains an assessment upon not more than twelve months income. The inevitable corollary is
that a gap remains. It is just a different gap of the same length. The only way in which it could be avoided would be by
loading more than twelve months income into the measure of liability for a year of assessment, and that is anathema.

The judge reviewed the arguments and found himself unpersuaded by the arguments for the Crown. He then turned to s
47(1), saying (at 662):

The reason why it figures late in my judgment (as it did in the argument of counsel for the Crown) is because of the
difficulty I find in seeing what effect it has, or was intended to have.

Having quoted the subsection he concluded his judgment as follows (at 662663):

If this was intended to mean that the Revenue were authorised to use dividends and interest paid before 6 April 1986
as a measure of liability in 198687 following the same pattern as in previous years it would be intelligible, though I would
have thought it unnecessary. Counsel for the Crown contends, however, although without basing his case upon s 47(1), that
it goes further than that and confirms the validity of the tax imposed by regs 3 and 11 on dividends and interest paid before
6 April 1986. This I cannot accept. Section 47(1) still leaves the power conferred by s 343(1A) as a power exercisable
only with respect to 198687 and subsequent years. It does not purport to legitimise the tax sought to be imposed by reg 11
at the 198586 rates. It does not purport to withdraw the protection of s 343(3)( b) from the taxpayers members for that
year. If s 47(1) has misfired, or has been based upon an erroneous view of the law, it would not be the first piece of fiscal
legislation to do so. The case for the taxpayer was also supported by a comparison with the treatment accorded to bank
interest by s 27 of the Finance Act 1985, and by helpful illustrations in figures of the effects which regs 3 and 11 would
produce. Upon these points too I accept the validity of the arguments put forward by counsel for the taxpayer; but it would
do nothing to improve an already over long judgment if I set them out in full. It is enough to say that for the reasons given
I consider the regulations to be ultra vires in so far as they purport to levy tax upon dividends and interest paid by building
societies in 198586.

My Lords, I derive comfort, if little satisfaction, from those words of a judge who is thoroughly experienced in tax matters:
If s 47(1) has misfired, or has been based upon an erroneous view of the law, it would not be the first piece of fiscal legislation to
do so. I think that that is what has happened here and I feel that what might otherwise be an improbable conclusion on my part is
fortified by the presence of the admittedly ultra vires reg 11(4), by the Crowns admission (or assertion) during the hearing of this
appeal that they were wrong to charge 198586 rates of reduced tax in relation to the period 1 March to 5 April 1986 and by the
fact that the Crowns primary case before Nolan J involved the contention that the original s 343(1A) was itself effective to
authorise the impugned portions of the regulations. Against that background, it would not be at all surprising if s 47(1) had
missed its mark.
119
My Lords, I now come to the judgment of Sir Nicolas Browne-Wilkinson V-C, with which the other members of the Court
of Appeal concurred (see [1989] STC 463). The Vice-Chancellors first observation was that the case for the Crown before
Nolan J was fundamentally different from that presented to the Court of Appeal because, having earlier relied to a very minor
extent on s 47, they now contended that Woolwich is not accountable for the tax payable by the investors and that the whole
case turns on the s 47 words which retrospectively validate the regulations (at 469; my emphasis). He then said that counsel
for the Crowns argument was very straightforward, to the effect that the omitted interest

falls fairly and squarely within the express terms of the s 47 words, ie the omitted interest consists of sums paid or
credited before the beginning of the year but not previously brought into account under [s 343(1) or (1A)] . It follows,
says counsel for the Crown, that the regulations cannot be ultra vires in requiring payments to be made in respect of the
omitted interest.

The Vice-Chancellor expresses a tentative conclusion (at 469470):

As a matter of ordinary construction, I find the conclusion contended for by counsel for the Crown inescapable. The s
47 words are clear and they cover the present case. Moreover the regulations had been made and their validity challenged
before Parliament had to consider the Finance Bill 1986. It was in those circumstances that Parliament enacted s 47 of the
Finance Act 1986 which introduced the s 47 words. In such circumstances, in the absence of any other reason for
Parliament to have enacted s 47 so as to deem s 343(1A) always to have included the s 47 words, the inference must be that
Parliament intended to put to rest the existing challenge to the validity of the regulations. What, then, is the contrary
argument? Counsel for Woolwich relied on the cumulative effect of three submissions to persuade us that the s 47 words
should not be given their apparent meaning: first, that s 47 was retrospective in its effect and should be narrowly
construed; second, that the effect of reg 11 was to charge to tax in one year the income of a period of more than one year
and this was an impossible concept under our tax lawit was anathema; third, that the Crowns argument, if right, involves
an element of double taxation against which the court should always lean. I will deal with these submissions in turn.

In fairness to Mr Gardiner, who has appeared for Woolwich at every stage of these proceedings, it should be acknowledged
that in your Lordships House he did not at all concede that the s 47 words, according to their apparent meaning, authorised the
regulations complained of. What he said here, rightly in my opinion, was that, although those words clearly referred to the sums
paid or credited in the gap period, they did not authorise the exaction of tax, or an amount representing tax on those sums as well
as on the sums paid or credited in the relevant years of assessment, namely 198687 and 198788.
The next passage in the Vice-Chancellors judgment is crucial (at 470):

It was principally the anathema argument that led the judge to the conclusion that reg 11 was ultra vires. But he was
proceeding on the basis, urged before him by the Revenue, that Woolwich was accounting for the tax payable by its
investors. In this court the Revenue changed its stance and submitted that the liability of Woolwich under s 343 is not a
liability to account for the income tax payable by its investors but a liability sui generis, ie a liability to make a composition
payment representing, and calculated by reference to, what would otherwise have been the net tax liabilities of the 120
investors as a body as opposed to accounting for each investors tax deducted by Woolwich. Therefore, argues the
Revenue, the anathema argument has little, if any, relevance to the present case. In my judgment the revised Revenue
stance is correct. Under s 343(3) interest is payable to investors without deduction of tax and the investor is not liable to
basic rate tax on such interest. Therefore the building society in making the lump sum payment is not accounting to the
Revenue for the tax liability of anybody. Nor is the lump sum payable by the society calculated by reference to what
would, apart from s 343(3), have been the tax liability of each individual investor. The lump sum is a sum calculated on a
statistical basis seeking to reflect the net take for the Revenue from all investors in all building societies. The nature of
 the payment to be made by the building society is a composition payment calculated by reference to the aggregate net tax
liability of all investors but is not a payment of income tax as such.

Here the Court of Appeal accepted the Crowns contention that the liability under s 343 was not a liability to account for the
income tax payable by its investors but a liability sui generis. I need not repeat every word of the sentence which I have just
quoted above. The anathema, it will be recalled, is the idea of computing a years tax liability by reference to a period of more
than one year, and the court has accepted the Crowns submissionthat the anathema argument has no relevance because the
amount to be paid is not income tax but merely represents income tax. Therefore, said the Vice-Chancellor, the building society
in making the lump sum payment is not accounting to the Revenue for the tax liability of anybody. He then aptly summarised the
effect of s 26(3), but disregarded the fact that inextricable from the anathema argument is the point that the Treasury simply
cannot achieve revenue neutrality by determining a reduced rate of tax if the area of the net take measures two and a half years
when the periods with respect to which provision is made by the 1986 regulations add up to two years. Indeed, to put it this way
is a concession to the Revenue because under s 26(1) and (3) the Treasury must look to the year of assessment 198687 while tax
at the basic rate and the reduced rate is collected on the immediately preceding six months but payment thereof is spread over two
years. The fact that what has to be paid is an amount representing income tax and not the tax itself is quite irrelevant.
The Vice-Chancellor continues on the same tack (at 471):

For these reasons the arrangements affecting the lump sum liability of building societies are a unique form of statutory
impost to which ordinary principles of tax law do not necessarily apply. Since the composition payment is designed to put
the Revenue in the position it would have been in had interest been payable under deduction of tax, there is nothing
inherently contrary to principle in bringing into the computation of such composition payment sums which would normally
have suffered deduction of tax (if there had been no arrangement) and which, due to the change in the system introduced by
the 1985 Act, would otherwise have dropped out of account. Given the special nature of the lump sum payment, to my
mind the anathema argument has little force.

This statement, with great respect, completely disregards the wording of s 343(1) and (1A) and the arrangements made in
the past and even the general drift of the 1986 regulations, so far as they are not impugned. It would be strange if ordinary
principles of tax law did not apply, when one considers that the 121 purpose of s 343 was not to abandon those principles but,
with the help of s 26, to find a practical way of applying them.
After discussing the arguments on double taxation the Vice-Chancellor concluded the main part of his judgment (at 471):

For these reasons I do not find any compelling reason to depart from the plain meaning of the s 47 words. Even if the
factors relied on by Woolwich had more substance, it would still be necessary to give the s 47 words some effect: they
cannot have been specifically inserted for no reason at all. Counsel for Woolwich suggested that they were inserted ex
abundanti cautela to make it clear that there was no objection to the regulation providing that liability should be measured
by reference to interest paid before the commencement of the tax year 198687. But, in my judgment, this does not fully
explain the introduction of the s 47 words. Section 47 is directed to a case in which two requirements are satisfied, viz,
first, that the interest had been paid or credited before the beginning of the year and, second, that such interest had not
previously been brought into account. No suggestion has been put forward for the presence in s 47 of words referring to
monies not previously brought into account save that relied on by the Revenue, ie that the words were included to authorise
the taxing, in the years 198687 and thereafter, of monies not previously brought into account under the old arrangements.
I am therefore satisfied that the regulations are not ultra vires apart from reg 11(4) which the Revenue accepts is invalid.
(The Vice-Chancellors emphasis.)

I again have to make the point that it is not only the plain meaning of the s 47 words but their effect which has to be
considered. The rest of the passage quoted is, I hope, adequately covered by what I have said already.
And now, my Lords, before I finish, I wish to pull together some loose ends and then to comment on the way in which the
Crown put their case to your Lordships.
Like my noble and learned friend, I am impressed by the argument that an intention (using that word in its proper sense) to
produce what Nolan J described as a truly astonishing result should not be ascribed to Parliament without very clear words. As
Mr Gardiner put it, reg 3, shorn of its transitional feature, exhausts the power conferred by s 343(1A) by charging the entire
dividends and interest for the year of assessment 198687 and the s 47 amendment does not increase or expand the liability to
charge. He also submitted that an amount paid by Woolwich in respect of the gap period dividends and interest discharged no
liability of the investors and could not be called an amount representing their income tax of any year of assessment.
Another approach for Woolwich is to ask: does s 343(1A) in its original form or as amended authorise the Revenue to adopt
a different principle from that allowed by s 343(1)? On the analysis which I have made, I suggest that the answer must be No. It
would, moreover, be strange if the Revenue has been given the power to decide what sums should be charged to tax, as distinct
from being used as the measure of the investors tax. In this connection reg 11(2) is an interesting artificial provision:

Subject to the provisions of these Regulations, any such payment shall be treated in all respects as a payment to which
these Regulations apply and as made in the payment quarter to which the payment dates specified in paragraph (3) below
relate.
122

Against the background that no precedent exists for charging tax for a particular year on the income of a period of more than
a year, both s 343(1A) and s 26 are directed towards one year of assessment, in the present instance 198687. What has to be
paid is an amount representing income tax and that can only be the tax chargeable against the investors with respect to 198687.
Having come this length, I would adopt what my noble and learned friend Lord Oliver, has said about s 26(p 103, ante):

In exercising its powers the Treasury has to assume that the sums payable by the society are income taxwhich can
only mean income tax for the year of assessmentand to produce the net result that the total income tax becoming payable
to the Revenue (again in that year of assessment) is no more than it would have been if s 343(including sub-s (1A)) had not
been enacted.

Finally I come to the Crowns presentation of their case which, thanks to the ability of Mr Stamler, lacked nothing in
thoroughness, ingenuity or force. For the first time he will be unable to answer back. So I must be careful with my comments.
(1) Mr Stamler would not concede that on meant by reference to in s 343(1) or s 343(1A). I formed the view that the
position he took up was necessary to his case but untenable.
(2) He ruthlessly disregarded s 26 in the interpretation of s 343(1A). Again he had to do so.
(3) He described Woolwich as an accounting party in respect of its gap period deductions, but both the investors and
Woolwich have fully accounted for the investors 198586 income tax. The fact that Woolwich has made deductions from the
gap period payments does not oblige it to pay the deductions to the Revenue because, while Woolwich has to account for and pay
all deductions made in 198687, it cannot credibly be argued that the gap period deductions represent investors income tax of
either 198586 or 198687. The forbidden choice of 198586 rates by the Revenue in reg 11(4) illustrates by accident the
Revenues vulnerability.
(4) Mr Stamler said, Admittedly, you cannot tax the investors again in respect of the gap period, but you can tax Woolwich.
He made the point that Woolwich paid no tax in respect of the gap period (except, presumably, such corporation tax as was due).
With respect, that means nothing unless it can be correctly equated with failing to pay an amount representing income tax of the
depositors, a point I have covered already.
(5) It seems to me that the Crowns argument on these lines depends not on the meaning of s 343(1A) but on the supposed
absurdity of Woolwichs getting away with non-payment of tax (which was not lawfully due).
(6) Mr Stamler argued that there was no reason for symmetry between the period in respect of which the investors liability
for income tax has been discharged and the period in respect of which the liability of Woolwich to account for an amount
representing income tax has to be discharged. He also said that the concept of measurement was irrelevant to the situation of
Woolwich and that for an amount representing income tax in s 343(1A) (and presumably also in s 343(1)) one might as well
substitute an amount instead of income tax. These propositions, with respect, are further examples of the complete
abandonment of s 343(1A) and s 26 in favour of saying, Woolwich made deductions in the gap period and must pay them to us.
The only authority I will mention is Partington v A-G (1869) LR 4 HL 100 at 122, in which Lord Cairns said:
123

If the person sought to be taxed comes within the letter of the law he must be taxed, however great the hardship
may appear to the judicial mind to be. On the other hand, if the Crown, seeking to recover the tax, cannot bring the subject
within the letter of the law, the subject is free, however apparently within the spirit of the law the case might otherwise
appear to be. In other words, if there be admissible, in any statute, what is called an equitable construction, certainly such a
construction is not admissible in a taxing statute, where you can simply adhere to the words of the statute.

My Lords, I have not seen in the Crowns printed case or heard in argument any reasoned statement which shows how s
343(1A) or s 47(1) achieves the result contended for by the Crown. Accordingly, I would allow this appeal.

Appeal allowed.

Solicitors: Clifford Chance; Solicitor of Inland Revenue.

Mary Rose Plummer Barrister.

[1991] 4 All ER 124

Re West Pennard Churchyard

ECCLESIASTICAL

BATH AND WELLS CONSISTORY COURT

CHANCELLOR GH, NEWSOM QC
8 FEBRUARY 1991

Ecclesiastical law Churchyard Right of burial in churchyard Parishioner Petition for faculty reserving grave space
Single woman with no close relatives, with father living in parish and with deceased mother buried in churchyard seeking
reservation of grave space for herself in churchyard Extent of incumbents power to oppose burial of person having right of
burial Extent of incumbents power to consent to burial of remains of persons having no legal right of burial in churchyard--
Courts discretion to grant faculty Whether parochial church council entitled to oppose all petitions for faculties reserving
grave spaces Whether churchwardens concerned in matter Church of England (Miscellaneous Provisions) Measure 1976, s
6(2)Ecclesiastical law Churchyard Closure When churchyard is ripe for closure.

The petitioner, who was a single woman aged 36, sought a faculty for the reservation of a grave space for herself in the
churchyard of the parish in which she lived. The remains of her late mother were already buried in the churchyard and her father
lived in the parish. The incumbent and the parochial church council, which had earlier agreed that it should not be possible to
buy burial plots in the churchyard and had resolved that burials in the churchyard should continue to be allowed at the discretion
of the vicar and the churchwardens, opposed the petition.

Held (1) The right at common law of every parishioner to be buried in the churchyard of the parish unless it was closed by due
legal process was a legal right in the exercise of which the parochial church council was not in any way concerned. Furthermore,
although the incumbent had power at common law to prescribe in what position in the churchyard any burial was to take place,
that was the extent of his power in respect of cases where the deceased had a right of burial. If a person with a legal right of
burial wished in his lifetime to assure his personal representatives of a right to bury his remains in a particular place in a 124
churchyard he was required to apply to the consistory court for a faculty to reserve that grave space, but whether such a faculty
would be granted rested wholly in the judicial discretion of the court; to that extent such a faculty deprived the incumbent of his
right to prescribe the position where a burial was to take place (see p 126 g j to p 127 b, post).
(2) A parochial church council was entitled, as a matter of its internal practice, to decide that it would always oppose
petitions for the reservation of grave spaces, but such a policy was in no way binding on the court and, like any other litigant, a
parochial church council litigated at its own risk as to court fees and costs (see page 127 j, post).
Since the parochial church councils policy appeared to have been framed on the illegitimate basis that no one had a legal
burial right, that burial plots could be bought, which was and had always been impossible, and that the churchwardens had some
concern in the matter, which they did not, and since the petitioner was alone in the world, her widowed father, who was her only
close relative, lived in the parish and her mothers remains were already buried in the churchyard, there were no grounds for
denying the petitioner her wish and the faculty she sought would accordingly be granted (see page 127 h and p 128 d to f, post).
Per curiam. (1) As freeholder of the churchyard the incumbent is entitled to grant consent to the burial in the churchyard of
the remains of a person who has no legal right of burial, but to the extent that he does so he ousts those who have existing
prospective rights, although he is required by s 6(2) a of the Church of England (Miscellaneous Provisions) Measure 1976 to have
regard to any general guidance given by the parochial church council with respect to the matter. Furthermore, a faculty for the
reservation of a grave space can, with the concurrence of the incumbent, be applied for by a person who does not have a legal
right of burial. Amongst the various grounds on which such a faculty will be granted are the association of the petitioner with the
church or parish, or the presence in the churchyard of the remains of relatives of the petitioner. However, no interment of a
person not having a legal right of burial can take place at all, and no faculty for such a burial ought to be granted, unless the
incumbent has signified his concurrence (see page 126 h j and p 127 c e, post); dictum of the Chancellor in The Perivale Faculty,
De Romana v Roberts [1906] P 332 at 336 explained.
________________________________________
a Section 6(2), so far as material, is set out at p 126 h j and p 127 c e, post)

(2) The consistory court is usually disposed to grant a faculty reserving a grave space to a petitioner who has a legal right of
burial. Such a case may be strengthened if the remains of one or more of the petitioners relatives are buried nearby or may be
weakened if the churchyard is on the point of being full (see page 128 a, post).
(3) No churchyard is full and ripe for closure until all the parts of it in which reburial is possible have been buried over again
at least once (see page 128 b, post).

Notes
For the right of burial in a churchyard, see 10 Halsburys Laws (4th edn) paras 11181121 and 14 Halsburys Laws (4th edn) para
562, and for cases on the subject, see 7 Digest (Reissue) 546, 30873094.
For faculties for the reservation of grave spaces, see 10 Halsburys Laws (4th edn) paras 11221125, and for cases on the
subject, see 7 Digest (Reissue) 547548, 31033115.
For a closure of burial grounds, see 10 Halsburys Laws (4th edn) paras 12071208, and for a case on the subject, see 7
Digest (Reissue) 570, 3287.
125
For the Church of England (Miscellaneous Provisions) Measure 1976, s 6, see 14 Halsburys Statutes (4th edn) 444.

Cases referred to in judgment

Perivale Faculty, The, De Romana v Roberts [1906] P 332, Con Ct.
St Lukes, Holbeach Hurn, Re, Watson v Howard [1990] 2 All ER 749, [1991] 1 WLR 16, Con Ct.
St Nicholass, Baddesley Ensor, Re [1982] 2 All ER 351, [1983] Fam 1, [1982] 3 WLR 631, Con Ct.

Petition for faculty

By a petition dated 28 September 1989 Miss Mariea Barton sought a faculty for the reservation of a single depth grave space in
the churchyard of the church of St Nicholas, West Pennard in the diocese of Bath and Wells for the exclusive burial therein of the
petitioner in due course. The petition was opposed by the incumbent of the parish, the Rev Prebendary P Riley, and the secretary
to the parochial church council, Mrs P Creed. With the agreement of the parties the Chancellor ordered pursuant to r 6A of the
Faculty Jurisdiction Rules 1967, SI 1967/1002 (as amended by SI 1987/2266), that the proceedings be determined upon
consideration of written representations instead of by a hearing in court. The facts are set out in the judgment.

8 February 1991. The following judgments were delivered.

THE CHANCELLOR: The petitioner, Mariea Barton, is a parishioner of West Pennard. She asks for the reservation of a grave
space for herself in the churchyard. The remains of her late mother, Jocelyn Gladys Barton, are already interred in the
churchyard. Her father lives in the village. The incumbent and the parochial church council have entered appearance in
opposition. All parties have agreed that I shall determine this case on written representations under r 6A of the Faculty
Jurisdiction Rules 1967, SI 1967/1002 (as amended by SI 1987/2266).
At common law, every parishioner has a right of burial in the churchyard of the parish (unless it is closed by due legal
process). The common law right extends also to all persons dying in the parish, whether or not they are parishioners. By statute
a similar right is enjoyed by all persons whose names are on the electoral roll of the parish (see Church of England
(Miscellaneous Provisions) Measure 1976, s 6(1)). These are legal rights and the parochial church council is not concerned in
any way with their exercise. The incumbent has power at common law to prescribe in what position in the churchyard any burial
is to take place; but that is the extent of his power in respect of cases where the deceased had a legal right of burial. However, as
freeholder of the churchyard, the incumbent is also entitled to grant consent to the burial in the churchyard of the remains of a
person who has no legal right of burial; in doing so he is to that extent ousting those who have existing prospective rights. In
deciding whether to give consent in such a case, he is therefore required by statute to have regard to any general guidance given
by the parochial church council of the parish with respect to the matter: see s 6(2) of the 1976 Measure.
These common law and statutory rights crystallise only when the person in question dies. If a person with a legal right of
burial wishes in his lifetime to assure his personal representatives of a right to bury his remains in a particular place in the
churchyard, he must apply to this court for a faculty to reserve that grave space. Whether such a faculty shall be granted rests
wholly in the judicial 126 discretion of the court. If there is plenty of room in the churchyard it is freely granted to a petitioner
who has a legal right of burial. What such a faculty does is to protect the petitioner against the hazard of losing his legal right in
his lifetime (eg by ceasing to live in the parish), and to require whoever is the incumbent when the petitioner dies to allow his
remains to be buried in the position in the churchyard defined in the faculty. To this extent, therefore, the faculty deprives the
incumbent of his right to prescribe the position where a burial is to take place; and it deprives the parishioners generally of the
space becoming available if the petitioner moves away.
Such a faculty can also be applied for, with the concurrence of the incumbent, by a person who does not have a legal right of
burial. The grounds on which such a faculty is granted vary; among them are the association of the petitioner with the church or
with the parish, or the presence in the churchyard of the remains of relatives of the petitioner. In the past some incumbents added
substantially to their stipends by selling rights of this kind: thus in The Perivale Faculty, De Romana v Roberts [1906] P 332 at
337 the incumbent had charged for a grave space capable of burying two persons the sum of 22 guineas. In our present money
that was something like ___750. This practice was not then techically irregular, but the court discouraged it in that case and it has
since become obsolete. However, even then the grant was not binding on the successors of the incumbent unless confirmed by a
faculty; in the Perivale case the faculty was granted.
But, as I understand it, no interment of a person not having a legal right of burial can take place at all, and no faculty for
such a burial ought to be granted, unless the incumbent has signified his concurrence. In such a case he appears to me to have a
veto. I think that this conclusion is implicit in the remarks of the Chancellor, Dr Tristram KC, in the Perivale case (at 336). For a
recent discussion of the subject as a whole see also Re St Nicholass, Baddesley Ensor [1982] 2 All ER 351, [1983] Fam 1.
I have thought it right to set out the law thus fully because there is evidently considerable misunderstanding of it at West
Pennard. There is before me a copy of the resolution of the parochial church council dated 22 July 1987 in the following terms:

It was agreed that it should definitely not be possible to buy burial plots. What criteria should be met to allow people
to be buried in the churchyard was discussed. It was very difficult to lay down exact rules so it was proposed and seconded
that it should continue to be at the Vicars and Churchwardens discretion but that they should be a little stricter.

In this resolution, the first sentence deals with buying burial plots, which of course is and always has been impossible.
Further, the churchwardens are not concerned at all. However, the parochial church council cannot interfere with the powers of
the consistory court to grant reservations of grave spaces. Its only right is to enter appearance when the citation for the desired
faculty is published and seek to persuade the court by reasonable argument not to grant it. The rest of the resolution appears to
have been framed on the basis that no one has a legal burial right. As I have explained, a good many people do have such a right.
Further, the resolution falls short of giving the general guidance to the incumbent in allowing the burial of the remains of people
not having a legal right to burial as is permitted to the parochial church council by the statute which I have quoted. The parochial
church council is, of course, entitled, as a matter of its internal practice, to decide that it always will oppose petitions for the
reservation of grave spaces. But that is in no way binding on the court; and, like any other litigant, the parochial church council
will litigate at its own risk as to court fees and costs.
127
The court is usually disposed to grant the reservation petition of a person who has a legal right of burial. Such a case may
further be strengthened if the remains of one or more of the petitioners relatives are buried nearby, as is the case here. Or it may
be weakened if the churchyard is on the point of being full. Here there are said to be about 8 burials a year and some 24 spaces
left in the churchyard. This latter statement presumably refers to spaces which have never previously been used. But I should
point out that no churchyard is full and ripe for closure until all the parts of it in which reburial is possible have been buried over
again at least once. And, until closure, all legal burial rights continue. Over the centuries churchyards have been buried in
several times over and it cannot be said that a churchyard is nearly full by considering only the areas which have never been used
for burials. When there are no unused spaces, parishes sometimes seek to apply for closure in order to pass the expense of
running the churchyard to the local authority. It is the standard practice in this diocese, and has been so for at least the last ten
years, to advise parishes that the Department of the Environment will not allow the closure of a churchyard except after careful
inquiry as to how far areas already used for burial can be used again. Nothing has been said in this case about that matter, and on
the evidence before me I am not prepared to treat this churchyard as being full or anything like it.
It is said by the parties opponent that the application of the petitioner should not be granted, partly because of the alleged
policy that no grave spaces shall be reserved and partly because the petitioner is only 36 years of age. I have already dealt with
the illegitimacy of the alleged policy. As to the petitioners age, which is the only real point in this case, her submission is that
she is alone in the world, that her widowed father lives in West Pennard, that he is her only close relative and that in this
churchyard her mothers remains are already buried. She says, therefore, that it should be her natural resting place and that she
wishes to have the peace of mind which the assurance of the proposed reserved space will, she says, give to her. I see no ground
for denying her that wish. The petition therefore succeeds. The registrar will give directions as to marking the reserved space on
the ground so that there may be no such mistakes in future as occurred in Re St Lukes, Holbeach Hurn, Watson v Howard [1990]
2 All ER 749, [1991] 1 WLR 16.
Under the ordinary practice of the court, the petitioner, who sets the court in motion, is primarily responsible to the court for
the court fees. I therefore order the registrar to assess them and the petitioner to pay them (including a correspondence fee of
___25 for the registrar which I fix under the current fees order (the Ecclesiastical Judges and Legal Officers (Fees) Order 1989,
SI 1989/1242)). But since the court fees have been increased by the unsuccessful opposition to the petition, I give the petitioner
leave to apply in writing within 28 days from today for an order requiring the parties opponent to recoup to her all or some of the
court fees over and above the initial lodgment fees, which would have had to be paid on an unopposed petition. Further, I give to
all parties leave to apply in writing within 28 days for his or their costs of the proceedings to be taxed by the registrar and to be
paid by some other party than themselves.

Petition granted.

N P Metcalfe Esq Barrister.

128
[1991] 4 All ER 129

Baytur SA v Finagro Holding SA

ADMINISTRATION OF JUSTICE; Arbitration

COURT OF APPEAL, CIVIL DIVISION

LLOYD, FARQUHARSON AND NOLAN LJJ
20, 21, 22, 23 MAY, 13 JUNE 1991

Arbitration Claim Assignment of claim Effect of assignment Whether assignee becoming party to arbitration Whether
assignee must give notice to other side and submit to jurisdiction of arbitrator Whether award a nullity if assignee fails to give
notice to other side and submit to jurisdiction of arbitrator.

An equitable assignee of a claim under a pending arbitration does not automatically become a party to the arbitration on the
assignment taking effect in equity: the assignee must first give notice to the other side and submit to the jurisdiction of the
arbitrator. If he does not do so, and if the assignor, being a corporation, is dissolved in the meantime, the arbitration and any
award made in it lapses and becomes a nullity since an arbitration requires two or more parties and there cannot be a valid award
when one of the two parties has ceased to exist (see page 131 h to p 132 a j, p 133 e f and p 135 h, post).

Notes
For assignees being parties to an arbitration agreement, see 2 Halsburys Laws (4th edn reissue) para 610.

Cases referred to in judgments

Brandts (William) Sons & Co v Dunlop Rubber Co Ltd [1905] AC 454, [19047] All ER Rep 345, HL.
Foster Yates & Thom Ltd v HW Edgehill Equipment Ltd (1978) 122 SJ 860, CA.
Getreide-Import-Gesellschaft mbH v Contimar SA, Cia Industrial Commercial y-Maritima [1953] 2 All ER 223, [1953] 1 WLR
793, CA.
London Steamship Owners Mutual Insurance Association Ltd v Bombay Trading Co Ltd, The Felicie [1990] 2 Lloyds Rep 21.
Mercer Alloys Corp v Rolls Royce Ltd [1972] 1 All ER 211, [1971] 1 WLR 1520, CA.
Montedipe SpA v JTP-RO Jugotanker, The Jordan Nicolov [1990] 2 Lloyds Rep 11.
Morris v Harris [1927] AC 252, HL.
National Bank of Greece and Athens SA v Metliss [1957] 3 All ER 608, [1958] AC 509, [1957] 3 WLR 1056, HL.
Sardinia Sulcis, The, The Al Tawwab [1991] 1 Lloyds Rep 201, CA.
Shayler v Woolf [1946] 2 All ER 54, [1946] Ch 320, CA.
Tito v Waddell (No 2), Tito v A-G [1977] 3 All ER 129, [1977] Ch 106, [1977] 2 WLR 496.
Weddell v JA Pearce & Major (a firm) [1987] 3 All ER 624, [1988] Ch 26, [1987] 3 WLR 592.

Cases also cited

Bank of Boston Connecticut v European Grain and Shipping Ltd, The Dominique [1989] 1 All ER 545, [1989] AC 1056, HL.
Central Insurance Co Ltd v Seacalf Shipping Corp, The Aiolos [1983] 2 Lloyds Rep 25, CA.
Cia Colombiana de Seguros v Pacific Steam Navigation Co [1964] 1 All ER 216, [1965] 1 QB 101.
129
Damon Cia Naviera SA v Hapag-Lloyd International SA, The Blankenstein, The Bartenstein, The Birkenstein [1985] 1 All ER
475, [1985] 1 WLR 435, CA.
Fisher v Yardleys London and Provincial Stores Ltd [1953] 2 All ER 713, [1953] 2 QB 266, CA.
Provimi Hellas AE v Warinco AG [1978] 1 Lloyds Rep 373, CA.
Salgaoncar (VM) e Irmaos Ltda v Goulandris Bros Ltd [1954] 1 Lloyds Rep 56.
Tyerman v Smith (1856) 6 E & B 719, 119 ER 1033.

Interlocutory appeal
The defendants, Finagro Holding SA of Annoeullin, appealed from the judgment of Kenneth Rokison QC sitting as a deputy
judge of the High Court in the Queens Bench Division on 17 July 1990 whereby he declared that the award in the arbitration
dated 12 April 1989 between the plaintiffs, Baytur SA of Geneva, and defendants and the award of the board of appeal of the
Grain and Feed Trade Association dated 20 December 1989, directing the plaintiffs to pay damage of $US1,338,175 to the
defendants, were nullities. The facts are set out in the judgment of Lloyd LJ.

Nicholas Legh-Jones QC for the plaintiffs

Nicholas Merriman QC for the defendants.

Cur adv vult

13 June 1991. The following judgments were delivered.

LLOYD LJ. The principal question in the present case, as to which there is little if any authority, is whether the equitable
assignee of a cause of action can become party to a pending arbitration, and if so how. Mr Merriman QC for the defendants
submits that the assignee becomes a party to the arbitration automatically, at the moment the assignment becomes effective in
equity, without the need for any notice to the arbitrator, or to the other party to the arbitration. Mr Legh-Jones QC, for the
plaintiffs, submits that something more is required. At the very least the assignee must give notice, and submit to the jurisdiction
of the arbitrator. Mr Rokison QC, sitting as a deputy judge of the High Court, has decided the point, together with a number of
other points in favour of the plaintiffs. There is now an appeal to this court.
The facts are fully and clearly set out in the judgment below. In brief the plaintiffs, Baytur SA, of Geneva, Switzerland,
agreed to sell to a French company Ets Claeys Luck SA, a quantity of Turkish vetches c & f Sete for shipment from Mersin or
Samsun. The contract was dated 24 July 1985. The sellers failed to ship any goods of the contract description. By letter dated
14 April 1986 the buyers claimed damages based on the difference between contract price and market price. The dispute was
referred to arbitration pursuant to cl 37 of form 62 of the Grain and Feed Trade Association (GAFTA). Each side appointed an
arbitrator, and the two arbitrators appointed a third arbitrator. The parties presented their cases in writing over a period of 18
months, between April 1986 and October 1987. The arbitrators did not publish their award until 12 April 1989. They found in
favour of the buyers, and awarded damages of $US1,338,175.
Meanwhile, the buyers had ceased to exist. By an agreement known as a trait de scission dated 24 October 1986, the
shareholders of ETS Claeys Luck SA agreed that the company should be split into two, pursuant to art 371 of French Law No 66
537 of 24 July 1966, the equivalent of our Companies Act 1985. The effect of a scission in French law is that the assets and
liabilities of one company are 130 transferred to two or more other companies. As soon as the transfers are completed, the
transferor company is dissolved. In the present case the effect of the scission was to transfer all rights and obligations possessed
by the buyers under the contract of sale to Claeys Luck International SA, including rights and obligations in the pending
arbitration. The transfers under the trait de scission took effect on 15 December 1986. The buyers ceased to exist on that date,
long before the award in their favour. On 1 January 1989 Claeys Luck International changed its name to Finagro Holding SA. It
is said that, had Claeys Luck International not changed its name, the sellers might never have noticed. But obviously that cannot
affect our decision.
There was much discussion in the court below as to the system of law by which the principal question should be decided.
Mr Merriman submitted that the relevant law was French law. Mr Legh-Jones submitted that it was English law, and cited r 121
in Dicey and Morris The Conflict of Laws (11th edn, 1987) vol 2 p 957 in support of his submission. Before us Mr Merriman
conceded that English law is the relevant law for all purposes. His argument in this court proceeded as follows.
(1) By English law the benefit of the contract of sale, including the arbitration clause, could be and was validity assigned to
the defendants on 15 December 1986: see Shayler v Woolf [1946] 2 All ER 54, [1946] Ch 320, and Montedipe SpA v JTP-RO
Jugotanker, The Jordan Nicolov [1990] 2 Lloyds Rep 11.
(2) The defendants thereupon became equitable assignees of the benefit of the buyers claim against the plaintiffs. Notice to
the plaintiffs was not required to complete the defendants equitable title.
(3) As equitable assignees of a legal chose in action, the defendants were entitled to commence an arbitration against the
plaintiffs in their own name. Although, as matter of practice, an equitable assignee usually joins his assignor when bringing
proceedings, this is not strictly necessary: see William Brandts Sons & Co v Dunlop Rubber Co Ltd [1905] AC 454 and Weddell
v JA Pearce & Major (a firm) [1987] 3 All ER 624, [1988] Ch 26.
(4) There is no authority which precludes an assignee from joining in a pending arbitration. There is at least one case where
this has been allowed at first instance: see Montedipe SpA v JTP-RO Jugotanker, The Jordan Nicolov [1990] 2 Lloyds Rep 11.
(5) Since the defendants could have joined in the pending arbitration as soon as the equitable assignment took effect, that is
to say, on 15 December 1986, they should be treated as having been a party to the arbitration from that date. It matters not,
therefore, that the buyers ceased to exist on that date. The arbitration remained alive, and was still alive when the arbitrators
published their award in April 1989.
Mr Legh-Jones accepted every step in Mr Merrimans argument save the last. There is, he submits, a crucial distinction
between possessing a right in equity, and exercising that right. The fact that the defendants might have applied to become a party
to the arbitration does not mean that they were already a party. They had, in Mr Legh-Joness vivid phrase, bought a ticket. They
had not yet joined the train.
In my judgment, Mr Legh-Joness objection is well founded. It has never been suggested that the assignee of a cause of
action becomes a party to pending litigation simply by virtue of the assignment. There is nothing automatic about it. To become
a party to litigation, the assignee must first apply to the court for an order under RSC Ord 15, r 7.
 I cannot see why a different rule should apply to arbitrations. Mr Merriman argues that the authority of an arbitrator is based
in contract, and that this makes a difference. I accept, of course, that arbitration is a consensual method of settling 131 disputes.
But that, if anything, should make it more difficult for the assignee to join in an existing arbitration, not less.
Mr Merriman argued that we should strive to adapt our arbitration procedure so as to enable a trait de scission to take effect
in English law without undue formality. This is a desirable objective. But there are difficulties, both conceptual and practical.
In London Steamship Owners Mutual Insurance Association Ltd v Bombay Trading Co Ltd, The Felicie [1990] 2 Lloyds
Rep 21 Phillips J found it a startling proposition that a third party could become party to an arbitration without giving notice to
anyone. In that case he was concerned with a transfer of rights under the Third Parties (Rights against Insurers) Act 1930. I
would find it equally startling in the case of an equitable assignment. In Montedipe SpA v JTP-RO Jugotanker, The Jordan
Nicolov [1990] 2 Lloyds Rep 11 Hobhouse J held that a legal assignee could succeed to the rights of an assignor in a pending
arbitration. But the learned judge made clear that two steps are necessary. First the assignee must give notice to the other side to
perfect the legal assignment. Secondly, he must intervene in the arbitration, by giving notice to the arbitrators. I quote from his
judgment, where, after referring to The Felicie, he said (at 18):

However, in the case of a legal assignment written notice has to be given. Notice must have been given to the party
liable (ex hypothesi the respondent in the arbitration). In order to affect the arbitrators, notice must also be given to the
arbitrators (as, in fact, happened in the present case). Once these steps have been taken both the practical and conceptual
difficulties are, or can be, resolved. The right to arbitrate is assignable; that assignment is completed and becomes legally
binding upon the other persons concerned by the service of the notice. The service of the notice and the intervention in the
arbitration provide as effective and satisfactory a method of carrying on the proceedings as that which is provided in
relation to litigation by O. 15, r. 7(2) of the Rules of the Supreme Court.

A little later on, when dealing with the liability of the assignee for costs, he said (at 19):

As regards the subsequent costs of the arbitration, the intervention of the assignee clearly is a submission to the
jurisdiction of the arbitrators and therefore, in addition to confirming the capacity of the arbitrators to make an award in
favour of or against the assignee on the substantive claim, includes the acceptance that the arbitrators shall have in relation
to the assignee the discretion to award costs conferred by s. 18 of the Arbitration Act 1950.

In the present case not only was there no submission to the jurisdiction of the arbitrators, there was not even any notice of the
assignment. So neither of the two steps regarded as necessary by Hobhouse J were taken.
The point was put well by the learned deputy judge when he said:

I should be inclined to conclude that as a matter of English arbitration procedural law an assignee cannot become party
to a pending arbitration unless and until he effectively submits to the jurisdiction of the arbitrators.

I agree with that conclusion, and find it unnecessary to deal with the other ground on which the judge was prepared to decide the
principal question in favour of the plaintiffs.
I would add only this note of warning. It was assumed by Hobhouse J, correctly, 132that the assignor would remain liable
for costs already incurred in the arbitration, and that the effect of the assignment, therefore, was only to add an additional party
potentially liable for those costs. Not surprisingly he held that there were no practical difficulties on the facts of that case. But in
the present case, the assignor has ceased to exist. So if the plaintiff sellers had been successful, they would have had to look to
the defendants alone for their costs. Nor is it clear to me what would have happened if the plaintiffs had had a counterclaim in
the arbitration. It is elementary that an assignment, whether legal or equitable, cannot transfer the burden of a contract. In his
reply, Mr Merriman sought to meet this difficulty by relying on the independent doctrine of pure benefit and burden as
described by Megarry V-C in Tito v Waddell (No 2), Tito v A-G [1977] 3 All ER 129, [1977] Ch 106. But assuming the soundness
of that doctrine, I find it difficult to apply to the facts of the present case. There would be scope for great injustice if an insolvent
assignor could assign away the benefit of a claim in arbitration to an associated company, while remaining solely liable for the
burden of the respondents counterclaim. This has led me to question whether mere submission is enough. Because of the nature
of arbitration, as a consensual method of settling disputes, it may be that the consent of the arbitrator, and the other party to the
arbitration, is required. If this is the correct analysis, then the only exception might be whether the foreign law creates a universal
successor, as in National Bank of Greece v Metliss and Athens SA [1957] 3 All ER 608, [1958] AC 509. But that argument was
not fully developed before us, and must therefore await another occasion.
I would decide the present case on this simple ground. An assignee does not automatically become a party to a pending
arbitration on the assignment taking effect in equity. Something more is required. He must at least give notice to the other side,
and submit to the jurisdiction of the arbitrator. Since this was never done, I would answer the first question in favour of the
plaintiffs.
What is the consequence? The immediate consequence was, undoubtedly, that the arbitration lapsed. An arbitration requires
two or more parties. There cannot be a valid arbitration when one of the two parties has ceased to exist. But Mr Merriman
argued on the strength of Mercer Alloys Corp v Rolls Royce Ltd [1972] 1 All ER 211, [1971] 1 WLR 1520 and The Sardinia
Sulcis, The Al Tawwab [1991] 1 Lloyds Rep 201 that the arbitration revived when the defendants gave notice in early August
1989. I cannot accept that argument. The point is directly covered by the decision of the House of Lords in Morris v Harris
[1927] AC 252, followed by the Court of Appeal in Foster Yates & Thom Ltd v HW Edgehill Equipment Ltd (1978) 122 SJ 860.
In the latter case Megaw LJ said (and I read from the transcript):

Apart from authority, I should have taken the view that when a corporate body is dissolved as a result of a voluntary
winding-up, any action which is pending at the date of dissolution ceases, not temporarily and provisionally, but absolutely
and for all time That is the view which I should have taken on this issue as a matter of principle. It is confirmed in my
judgment, inferentially, by reference to the Rules of the Supreme Court; and also, much more importantly, by reference to
the decision of the House of Lords in Morris v Harris [1927] AC 252.

Mr Merriman sought to distinguish Foster Yates & Thom Ltd v HW Edgehill Equipment Ltd (1978) 122 Sol Jo 860 on the
ground that that case was concerned with an action, not an arbitration. But that very distinction was rejected at first instance in
that case, and subsequently abandoned in the Court of Appeal:

Before Lloyd J it was argued by counsel then appearing for the plaintiff company and for the assignees that Morris v
Harris was distinguishable from 133 the present case because it was concerned with an arbitration, and not with an action,
and because in that case the company concerned was in the position of defendant, not, as here, plaintiff (and, be it added,
here also defendant to a counterclaim). Before us, those suggested distinctions were not pursued. It was accepted that, if
an action started before dissolution of the company survived and came to life again on an order being made under s. 352 of
the Companies Act 1948, so also would arbitration proceedings. Conversely, if the arbitration proceedings came to a final
and irrevocable end on the dissolution of the company, being one of the two parties to the arbitration, the same would apply
in respect of an action.
 Before leaving Foster Yates & Thom Ltd case it is worth recalling what Megaw LJ had to say about the position of the
liquidator in Morris v Harris. He said:

I know of no way in which he could have been made a party to the pre-existing arbitration proceedings, other than by
the consent of the two parties to the reference to arbitration. (My emphasis.)

Before dealing with the remaining points, I must first complete the narrative of events. The award, as I have said, was
published on 12 April 1989. That award was, for the reasons already given, a nullity. Nevertheless the plaintiffs did not know it
was a nullity, since they did not know that the buyers had ceased to exist. On 11 May 1989 they gave notice of appeal. On 8 July
GAFTA fixed 10 August for the hearing of the appeal before the board of appeal. The following day the plaintiffs asked to be
allowed legal representation. On 3 August the plaintiffs, having made their own inquiries, found out that the buyers had been
dissolved on 15 December 1986. On 7 August the plaintiffs took issue with the defendants title to sue. They asked the Board of
Appeal to

order the production of documents relevant to the deletion of the claimants [buyers] from the Companies Registry in
Lille in December 1986, the transfer of any claim to Claeys Luck S.A., and the subsequent change of name to Finagro
Holding S.A.

On 10 August a hearing took place. The request for legal representation was granted. The date for the substantive hearing was
fixed for 4 October. The plaintiffs were ordered to pay ___15,000 on account of the boards fees. On 4 October the substantive
hearing commenced. Mr Legh-Jones, on behalf of the plaintiffs, made clear at the outset that his appearance was without
prejudice to the plaintiffs contention that the board of appeal had no jurisdiction, since the award in favour of the defendants was
a nullity. Nevertheless the board of appeal went ahead, and after a four day hearing, made an award dated 20 December,
upholding the award of the arbitrators, but reducing the damages. On 17 January 1990 the plaintiffs issued the notice of motion
in these proceedings, in which they claim a declaration that the appeal award of 20 December 1989 was a nullity.
The first of the remaining points is that the board of appeal having decided as a preliminary issue that they had jurisdiction
to determine the appeal, the only remedy open to the plaintiffs is now to make an application for leave to appeal on a question of
law under s 1 of the Arbitration Act 1979. There is nothing in this point. If, as I have held, the award of the arbitrators was a
nullity, there was nothing to appeal about. The board of appeal could not confer on themselves original jurisdiction to decide the
issue. It was, as the deputy judge pointed out, an excellent example of the board seeking to pull itself up by its own bootstraps.
Mr Merriman accepted this, but nevertheless argued that the dispute whether the 134 award of the arbitrators was a nullity was
itself a dispute arising out of the contract of sale, and therefore the Board of Appeal had jurisdiction under cl 37 of the contract,
coupled with r 10:7 of the GAFTA Arbitration Rules. Rule 10:7 of the rules provides as follows:

Any dispute as to whether any of the conditions referred to in Rules 8 to 14 inclusive have been complied with shall be
heard and determined by the Board of Appeal. If the Board of Appeal shall determine that any of those conditions have not
been complied with, it may in its absolute discretion extend the time for compliance (notwithstanding that the time may
already have expired) or dispense with the necessity for compliance and may proceed to hear and determine the appeal as if
each and all of those conditions had been complied with. The determination by the Board of Appeal of any matters to
which this paragraph applies shall be final, conclusive and binding.

There are two answers to this argument. In the first place the dispute was not a dispute arising out of the contract, but a
dispute arising upon the award: see Getreide-Import-Gesellschaft mbH v Contimar SA Cia Industrial Commercial y-Maritima
[1953] 2 All ER 223 at 228, 230, [1953] 1 WLR 793 at 801802, 805806 per Singleton and Jenkins LJJ. Rule 10:7 does not
help the defendants in that connection, since the question whether there was a valid first-tier award is not one of the matters
covered by rr 8 to 14.
Secondly an arbitration clause, however widely drafted, does not itself confer jurisdiction on an arbitrator. There must first
be a reference of the particular dispute or disputes. There was no such reference to the board of appeal in the present case.
That leads me to the last question. It is said that the sellers are estopped from denying the jurisdiction of the board of
appeal. Mr Merriman concedes that Mr Legh-Jones reserved his position at the commencement of the hearing on 4 October. But
he submits that it was by then too late. The conduct of the sellers prior to the hearing was enough to create an estoppel. In
particular he relied on the application for legal representation, and the payment of the $15,000 on account of fees. It is sufficient
to say that I agree entirely with the judgment of the learned deputy judge in rejecting this argument. I can find nothing in what
the plaintiffs said or did which could amount to a clear or unequivocal representation on the part of the plaintiffs that they were
accepting the boards jurisdiction to determine the issue. On the contrary they made clear from as early as 7 August that they
were accepting no such thing.
It follows that the plaintiffs are entitled to the declaration which they seek. This court has, of course, been conscious
throughout that the point taken by the plaintiffs is highly technical, and against the merits. But nevertheless we must apply the
law as we find it. The result, however regrettable, is that the defendants must start the arbitration again, assuming they are in
time, or can get an extension.

FARQUHARSON LJ. I agree.

NOLAN LJ: I agree.

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

Solicitors: Clifford Chance; Taylor Joynson Garrett.

Raina Levy Barrister.

135
[1991] 4 All ER 136

Westminster City Council v Duke of Westminster and others

LANDLORD & TENANT; Other Landlord & Tenant
CHANCERY DIVISION
HARMAN J
21, 22, 23, 26 NOVEMBER 1990

Landlord and tenant Covenant User of premises Use as dwellings for the working classes Covenant requiring demised
premises to be used as dwellings for the working classes Working classes to be construed in terms of housing legislation for
time being in force Housing legislation no longer referring to working classes Whether covenant still effective or obsolete.

Lands Tribunal Jurisdiction Application for discharge or modification of restrictive covenants Covenant requiring demised
premises to be used as dwellings for the working classes Whether tribunal having jurisdiction to discharge or modify covenant
Whether covenant constituting negative restriction on user or positive obligation as to user Law of Property Act 1925, s
84(1).

In 1937, pursuant to the terms of an agreement made between the parties in 1928 and a private Act of Parliament passed in 1929,
W leased to the plaintiff council for 999 years land worth ___200,000 for the purpose of the development of a council housing
scheme to provide 604 dwellings which, under cl 2(IX)(a) of the lease, were not [to] be used for any art trade business or
profession but kept and used only for the purposes of the [councils] Housing Scheme as dwellings for the working
classes within the meaning of the Housing Act 1925 or any statutory modification or re-enactment for the time being in force and
for no other purpose. Under the terms of the lease the council was required to carry out certain building works and to pay a
nominal rent and repair and insure the houses when built. In 1989 the council, which wished to sell the houses, applied for
declarations (i) that the reference to the working classes in cl 2(IX)(a) was spent and no longer effective, contending that since
the term working classes no longer appeared in housing legislation it had no meaning in cl 2(IX)(a) and consequently the
purpose of the obligation as defined in cl 2(IX)(a) requiring the demised premises to be used as dwellings for the working classes
had become obsolete, and (ii) that the Lands Tribunal had jurisdiction under s 84(1) a of the Law of Property Act 1925 to
discharge or modify the cl 2(IX)(a) obligation as being a restrictive covenant affecting the land. The trustees of Ws will
counterclaimed for a declaration that the council was obliged to use the premises as dwellings for the working classes, that the
Lands Tribunal had no jurisdiction to discharge or modify the cl 2(IX)(a) 136obligation and that any sale by the council of
houses on the land would be in breach of the 1928 agreement and the 1929 Act, contending that although the term working
classes no longer appeared in housing legislation the notion of the working classes was not obsolete and that therefore the cl
2(IX)(a) obligation was a valid, enforceable and continuing covenant. The trustees further contended that the Lands Tribunal had
no jurisdiction to discharge or modify the cl 2(IX)(a) obligation to use the demised premises as dwellings for the working classes
since it was a positive covenant and not a negative restriction on user and, furthermore, the tribunals jurisdiction in relation to
the lease itself was excluded by s 84(7) since the lease was a disposition made gratuitously or for a nominal consideration for
public purposes.
________________________________________
a Section 84, so far as material, provides:
(1) The Lands Tribunal shall have power on the application of any person interested in any freehold land affected by any restriction
arising under covenant or otherwise as to the user thereof or the building thereon, by order wholly or partially to discharge or modify any
such restriction
(7) this section does not apply where the restriction was imposed on the occasion of a disposition made gratuitously or for a nominal
consideration for public purposes

Held (1) Although the term working classes no longer appeared in housing legislation, that fact did not determine the ordinary
meaning of those words or render them obsolete since the phrase itself was still capable of definition and application to a section
of the populace, namely persons in lower income groups. It followed that the covenant in cl 2(IX)( a) requiring the demised
premises to be used as dwellings for the working classes imposed a valid, enforceable and continuing obligation on the council
(see p 141 j to p 142 b, p 144 a to f j, p 145 a b d and p 149 b h, post); dicta of Romer J in Belcher v Reading Corp [1949] 2 All
ER 969 at 984 and of Megarry V-C in Re Niyazis Will Trusts [1978] 3 All ER 785 at 788 applied.
(2) Since the council had covenanted to repair and insure the demised premises for the 999year term, it followed that the
lease did not amount to a disposition made gratuitously or for a nominal consideration for public purposes within s 84(7) of the
1925 Act, and accordingly the Lands Tribunal had jurisdiction to discharge or modify the first part of cl 2(IX)( a), which
constituted an express negative covenant precluding the premises from being used for any art trade business or profession. The
tribunal did not, however, have jurisdiction to discharge or modify the second part of cl 2(IX)( a), which constituted a positive
covenant requiring the premises to be kept and used as dwellings for the working classes, notwithstanding the fact that a
negative implication might flow from the prescribed user, and accordingly that part of the covenant could not be the subject of an
application under s 84 to the Lands Tribunal. Furthermore, the court had no jurisdiction to declare a covenant in a continuing
lease to be unenforceable on the grounds that it was obsolete. Accordingly, the trustees were entitled to declarations that the
council was obliged to use the demised premises as dwellings for the working classes, that the Lands Tribunal had no jurisdiction
to discharge or modify the positive covenant in cl 2(IX)(a) and that any sale by the council of the houses would be in breach of
both the original agreement between W and the council and the 1929 Act except where a tenant was exercising his right to buy
under the Housing Act 1985(see p 141 j to p 142 b h j, p 143 a b, p 146 f to h, p 147 d to g and p 149 j to p 150 a, post); dictum of
Lord Wilberforce in Midland Bank Trust Co Ltd v Green [1981] 1 All ER 153 at 159 considered.

Notes
For restrictive covenants, see 16 Halsburys Laws (4th edn) paras 13451354, and for cases on the subject, see 31(1) Digest
(Reissue) 381418, 30533326.
For the discharge and modification of covenants, see 16 Halsburys Laws (4th edn) paras 13601367, and for cases on the
subject, see 40 Digest (Reissue) 501509, 42644290.
For the Law of Property Act 1925, s 84, see 37 Halsburys Statutes (4th edn) 188.
For the Housing Act 1985, Pt V (the right to buy), see 21 Halsburys Statutes (4th edn) (1990 reissue) 148.

Cases referred to in judgment

Belcher v Reading Corp [1949] 2 All ER 969, [1950] Ch 380.
Blyth Corps Application, Re (1963) 14 P & CR 56, Lands Tribunal.
137
Caledonian Rly Co v Greenock and Wemyss Bay Rly Co (1874) LR 2 Sc & Div 347, HL.
Green (HE) & Sons v Minister of Health [1947] 2 All ER 469, [1948] 1 KB 34.
Guinness Trust (London Fund) v Green, Guinness Trust (London Fund) v Cope [1955] 2 All ER 871, [1955] 1 WLR 872, CA.
Midland Bank Trust Co Ltd v Green [1981] 1 All ER 153, [1981] AC 513, [1981] 2 WLR 28, HL.
Montross Associated Investments SA v Moussaieff [1990] 2 EGLR 61.
Niyazis Will Trusts, Re [1978] 3 All ER 785, [1978] 1 WLR 910.
Prenn v Simmonds [1971] 3 All ER 237, [1971] 1 WLR 1381, HL.
Rodwell v Minister of Health [1947] 1 All ER 80, [1947] 1 KB 404.
Tea Trade Properties Ltd v CIN Properties Ltd [1990] 1 EGLR 155.
Wiltons (Earl) Settled Estates, Re [1907] 1 Ch 50.

Cases also cited or referred to in skeleton arguments

Bagettes Ltd v GP Estates Co Ltd [1956] 1 All ER 729, [1956] Ch 290, CA.
Calthorpe Estate Edgbaston Birmingham, Re, Anstruther-Gough-Calthorpe v Grey [1973] 26 P & CR 120.
Chorley BC v Barrett Developments (North West) Ltd [1979] 3 All ER 634.
Plumpton Parish Councils Application, Re (1962) 14 P & CR 234, Lands Tribunal.
Price v Jenkins (1877) 5 Ch D 619, CA.
Purkisss Application, Re [1962] 2 All ER 690, [1962] 1 WLR 902, CA.
Sanders Will Trusts, Re, Public Trustee v McLaren [1954] 1 All ER 667, [1954] Ch 265.
Shepherd Homes Ltd v Sandham (No 2) [1971] 2 All ER 1267, [1971] 1 WLR 1062.
Stevens v General Steam Navigation Co Ltd [1903] 1 KB 890, CA.
Sweet v Bishop of Ely [1902] 2 Ch 508.
Sydenham (J T) & Co Ltd v Enichem Elastomers Ltd [1989] 1 EGLR 257.
Johnsey Estates Ltd v Lewis & Manley (Engineering) Ltd (Chepstow Machine Tool Co Ltd, third party) [1987] 2 EGLR 69, CA.

Summonses
Westminster City Council, by an originating summons issued on 12 May 1989 against the trustees of the will of the second Duke
of Westminster, namely the sixth Duke of Westminster, John Nigel Courtney James and Sir Richard Baker Wilbraham Bt, applied
for declarations, inter alia, (i) that cl 2(IX)(a) of a lease dated 31 March 1937 made between the second Duke of Westminster (as
grantor of land for development to provide 604 dwellings for the Grosvenor Housing Scheme) and the then governing body of the
City of Westminster (as grantee) was to be construed as not restricting the use of the demised premises for dwellings for the
working classes and (ii) that the Lands Tribunal had jurisdiction to discharge or modify the cl 2(IX)(a) obligation as to user
pursuant to s 84(1) of the Law of Property Act 1925. The trustees, by a summons dated 21 July 1989, sought declarations that the
City of Westminster was obliged to use the premises as dwellings for the working classes, that the Lands Tribunal had no
jurisdiction to discharge or modify the cl 2(IX)(a) obligation and that any sale by the City of Westminster of dwellings on land
leased from the second Duke would be in breach of an agreement made in 1928 between the two parties and the provisions of the
Westminster City (Millbank) Improvement Act 1929(19 & 20 Geo 5 c l), except where a tenant was exercising his right to buy
under the Housing Act 1985. The facts are set out in the judgment.
138

John Stuart Colyer QC and Paul Morgan for the City of Westminster
Gavin Lightman QC and Frank Hinks for the trustees.

26 November 1990. The following judgment was delivered.

HARMAN J. On 12 May 1989 the Lord Mayor and citizens of Westminster (hereafter called the City of Westminster) issued
an originating summons against three defendants who are the trustees of the will of the second Duke of Westminster, whom I will
describe as the trustees. By that originating summons the City of Westminster claimed in para (1) declarations as to the true
construction of a lease dated 31 March 1937 made between the second Duke as grantor and the then governing body of the City
of Westminster as grantees and in particular cl 2(IX)(a) of the lease. The declarations put forward firstly the meaning of sub-cl
IX)(a) as restricting the use of the premises demised to use as dwellings (my emphasis) and additionally that
references in the sub-clause to the Grosvenor Housing Scheme and for the working classes as mentioned in the sub-clause
were spent and secondly that the sub-clause was to be read as restricting the use of the premises demised to use as dwellings
which when constructed were of a type suitable for use and occupation by persons of the working classes.
By para (2) of the originating summons the court was asked to determine under s 84(2) of the Law of Property Act 1925 the
nature and extent of the restrictions in the sub-clause and whether it was enforceable. I should say at once the formulation
whether the sub-clause was enforceable was not a happy one. Mr Colyer QC, appearing for the City of Westminster, never
sought to argue that enforcement of the sub-clause was itself in doubt. The parties are, of course, not the original grantor and
grantee of the lease since the second Duke is dead and the former corporation of the City of Westminster has been dissolved and
replaced by a new City of Westminster. Nevertheless privity of estate plainly exists and once the meaning of sub-cl (IX)(a) has
been settled it can easily be enforced. The true point of para (2) of the originating summons is the determination of the meaning
of the sub-clause if neither (a) nor (b) of para (1) turns out to be correct.
A further declaration was sought by para (3) of the originating summons that the Lands Tribunal would have jurisdiction
despite the provisions of s 84(7) of the 1925 Act to modify or discharge the restriction imposed by sub-cl (IX)(a) if an application
were made to that tribunal.
The originating summons was supported by an affidavit of Mr Gerard Matthew Ives, who is the solicitor to the City of
Westminster. That affidavit exhibits the lease already mentioned, states accurately that it was made pursuant to a private Act of
Parliament called the Westminster City (Millbank) Improvement Act 1929(19 & 20 Geo 5 c l) which was also, though
unnecessarily, exhibited, and summarises the provisions of the Act. By para 11 Mr Ives states that the buildings on the land
demised by the lease now contain 604 residential flats. He refers to the duty of the City of Westminster as a housing authority
under the Housing Act 1985 and to various other provisions of the Housing Acts. He states that the plaintiffs need to know the
extent of the restriction imposed by sub-cl (IX)(a). He states that the trustees, by their solicitors, have asserted that the flats
should be let to people of lower incomes but adds that the City of Westminster does not know what amounts to a lower income
or how it should be computed. He then refers, in a way unnecessary in an affidavit which should state only facts known to the
deponent, to a series of other Housing Acts running from 1925 to 1985. He asserts in para 16 that the City of Westminster may
wish to apply to the Lands Tribunal for an order modifying the restriction. The exhibits to the affidavit are substantial, running to
about 53 pages.
139
The affidavit in answer on behalf of the trustees was sworn by John Nigel Courtenay James, the second defendant, who is a
past President of the Royal Institution of Chartered Surveyors and was for some years the chief agent to the Grosvenor Estate.
His affidavit sets out facts about the passing of the private Act in 1929 and the grant of the lease in 1937. He asserts that Mr
Ivess statement that the City of Westminster does not know at what level a tenants income would be lower is spurious and no
real difficulty of management exists. By para 9 Mr James states that the trustees are anxious that the dwellings should continue
to be available for the less privileged members of society. By para 11 Mr James asserts that the City of Westminster presented the
private Bill to and promoted it through Parliament on the footing that the lease was to be a gift from the second Duke. He
therefore contends that the City cannot now be heard to assert that the lease was not a disposition made gratuitously or for a
nominal consideration for public purposes, thereby referring to the factual considerations needed to raise the application of s
84(7) of the 1925 Act.
 He exhibits a Memorandum on the Westminster City (Millbank) Improvement Bill which he states was printed in
January 1929 at the joint expense of the second Duke and the City of Westminster. That memorandum commends the Bill to all
who may read it as being based on a gift by the second Duke of the land intended to be comprised in the lease to the City of
Westminster.
No attempt has been made, or should have been made, to cross-examine either deponent as to the matters in their respective
affidavits and the court will therefore proceed on the footing that the evidence is true. Various additional documents have been
produced from the archives of the City of Westminster and of the Grosvenor Estate, including some striking appendices to the
private Bill, some correspondence in 1928 and 1929, transcripts of speeches made at public meetings in 1929 and a memorandum
dated 11 June 1929 signed by the town clerk for the City of Westminster and Messrs Boodle Hatfield & Co for the second Duke.
Thus the evidence concerns almost entirely events of over 60 years ago. It will at once be apparent that I am not called upon to
examine who are today the working classes nor to decide what level of income amounts to a lower level nor to consider any issue
of fact. The court has to consider the precise terms of a lease granted in 1937 and also to consider whether that grant was made
for a gratuitous or nominal consideration. The question is a dry, bare legal issue.
I turn to the provisions of the lease itself. By cl 2 of the lease the lessee covenanted for itself and its assigns to duly observe
and perform the covenants following. Sub-clauses (I) to (VII) (apart from sub-cl (V)) all start with the words, The Lessee will
or will not Sub-clause (VIII) is the expected covenant affecting assignments which are prohibited as to the whole or
any part of the demised premises without the previous written licence of the landlord which licence shall not be unreasonably
withheld. Sub-clause (VIII) contains no prohibition at all against subletting. Sub-clauses (IX), (X) and (XI) are not in the form,
The lessee will or will not Sub-clause (X) prohibits activities on the premises by whomsoever may be occupying them.
Sub-clause (XI) prohibits alterations to the buildings by any person. I was told, though it was not in evidence, that the five blocks
of flats built on the demised premises were designed by Sir Edwin Lutyens so that care for their architectural appearance is
perhaps natural.
I now turn to the specific terms of cl 2(IX)(a). A property lawyer comes to this sub-clause expecting that some covenant
about the user of the demised premises will appear amongst the various obligations undertaken by the lessee. The terms of the
sub-clause fall as a matter of language into three parts but it is not subdivided as a matter of form. It runs (in the first three lines
of the typed version of the lease):
140

That save as hereinafter provided the demised premises shall not nor shall any part thereof be used for any art trade
business or profession whatsoever

That plainly imposes a restriction on user, and in a wide form. Had it stood alone the only activity which springs at once to mind
as permissible is residential user, since agricultural seems improbable.
Sub-clause (IX)(a) continues:

but that the said demised premises with the offices thereto shall be kept and used only for the purposes of the
Grosvenor Housing Scheme as dwellings for the working classes within the meaning of the Housing Act 1925 or any
statutory modification or re-enactment for the time being in force and for no other purpose

The draftsman was certainly not a man who delighted in brevity. The double emphasis of imposing first the apparently positive
obligation to use the premises only in a certain way and then adding the negative injunction that they shall be used for no other
purpose may be emphatic but is not elegant legal drafting. The essential words are that the premises shall be kept and used only
for the stated purposes.
I turn back to complete the reading of sub-cl (IX)(a). Following on and for no other purpose there appears: Provided that
the ground floor and basements of the said demised premises may be used for shops offices surgeries and storage in connection
therewith. This proviso is plainly a proviso to the whole of the preceding part of the sub-clause and not a proviso only to the
phrase for no other purpose. The reference to shops plainly amounts to a proviso on the prohibition against any trade in the
second line of the typed version of the lease. The reference to surgeries is a proviso to the prohibition against any profession,
since I cannot think of a surgery save in connection with the practice of a doctor, a dentist or a vet, all of which occupations are,
in my view, professions. The proviso is thus a true proviso to the whole of the foregoing sub-clauses and relaxes both the initial
prohibition against money-earning activities and the requirement that the premises shall be kept and used only for the purposes
as defined.
I therefore turn to consider the meaning of the phrases in sub-cl (IX)(a). It is, of course, trite law that the words are not to be
read as if they stood entirely alone. The English language gives different meanings to words according to their context.
Furthermore, as Lord Wilberforce reminded all lawyers in Prenn v Simmonds [1971] 3 All ER 237 at 239240, [1971] 1 WLR
1381 at 13831384, words are not to be read as if uttered without regard to the surrounding circumstances. It follows that the
phrases in sub-cl (IX)(a) are to be read against the background of facts when they were written. Nonetheless it is the words
themselves that must be considered and understood. It is important to remember what the City of Westminster agreed to do. By
the opening words of cl 2 the City of Westminster bound itself throughout the term of the lease, which was the lengthy period of
999 years from 1 August 1928, to observe and perform the covenants following. The covenant in sub-cl (IX)(a) is to keep
and use the demised premises in a particular way. As Mr Colyer for the City of Westminster made clear in his argument the City
accepted that that part of the sub-clause had a continuing effect. The covenant cannot, in my judgment, be read as a covenant to
do a single act, or to carry out a particular project, so that when the act is done or the project complete the covenant can be said to
be spent.
It is in my judgment obvious, and no one has argued the contrary, that the first three lines of sub-cl (IX)(a) impose a
continuing, enforceable, restrictive obligation preventing the City of Westminster, or any assignee, from using the premises for
141 any of the money-making activities set out except so far as the proviso relaxes that restriction. In my judgment it is also
clear that the second part of the sub-clause imposes a continuing obligation enforceable by the lessor, at present the trustees,
against the City of Westminster, requiring it to keep and use the premises for the particular purposes set out. Mr Colyer sought to
argue that the obligation was spent. In my judgment that is wrong as a matter of construction. The covenant is not spent but
continuing in both its parts.
In truth, in my judgment, Mr Colyers careful argument was not directed to a contention that the obligations of the sub-
clause were spent, but to a different and in my view novel point. His argument on a true analysis was not that the obligations had
been performed and once completed had no further existence but that the obligations had existed and were not completely
performed but were now incapable of performance because the purposes for which they were imposed had ceased to have a
meaning. Mr Colyer did not add that the terms of the purposes, which were the purposes of the Grosvenor Housing Scheme as
dwellings for the working classes within the meaning of the Housing Act 1925 or any such statutory modification or re-enactment
for the time being in force, are void for uncertainty. Such an argument would be unsound because, as I understand the law,
words used in a document must be read and understood as they were used and meant at the time they were written. Mr Colyer
expressly agreed in argument that in 1937 when this lease was granted the words were clear and well understood.
In my judgment Mr Colyer in arguing that the covenant, or more accurately the second part of sub-cl (IX)(a), was spent was
not using that word in its proper meaning. The proper sense of spent is that an obligation has been completely performed, and
that nothing remains to be done pursuant to that obligation. Mr Colyer never suggested that the obligation to keep and use the
demised premises as dwellings was spent. Nor did he argue that the concept of providing dwellings for the working classes
within the specified meaning was a concept which had been completely performed so as to be spent. Mr Colyer did not argue
that the relevant part of the covenant was void for uncertainty. In my judgment he sought to advance a novel obligation in law.
The true nature of the objection urged was that the purpose as defined had become obsolete. No case was cited to me on this type
of legal difficulty.
The concept of obsolescence is of course well known to Chancery lawyers in connection with charitable trusts which have
become impossible of performance due to changing social conditions. It is well known that in such circumstances the trustees
can obtain a scheme cy-prs so that the purposes of the charitable trust are modified to purposes which are similar in theme to the
original purposes but allow for modern conditions. The question of when the purposes of a charitable trust are sufficiently
obsolete to allow the making of a scheme cy-prs has been considered by the courts and working tests have evolved allowing the
application of consistent bases. No such question has ever been considered in the context of the law of landlord and tenant and
no jurisdiction exists in the court to modify covenants. The statutory provision of the jurisdiction of the Lands Tribunal to
modify obsolete covenants in leases under s 84 of the 1925 Act has obvious analogies with cy-prs schemes. But it is clear that
the covenant said to be obsolete remains binding and in theory enforceable, though no doubt difficult in practice to enforce, until
modification or discharge by the Lands Tribunal. I should add that the fact that Parliament considered it necessary in the 1925
Act to create a statutory power to discharge a restrictive covenant on the ground that it was obsolete carries an implication firstly
that until discharge the covenant remains binding, and secondly that the court has no inherent power to declare covenants
obsolete and unenforceable.
142
In pursuit of the argument that although the covenant was of continuing effect yet its effect was spent Mr Colyers first point
was that since the Grosvenor Housing Scheme was a term defined by the private Act as so much of the improvement scheme as
relates to the erection by the Council of buildings on the Millbank Estate for the purpose of rehousing it could be seen that that
was spent. Plainly the Grosvenor Housing Scheme involving the building project has been completed; the buildings are there.
But the covenant is not in my judgment capable of meaning simply that the council will cause the buildings to be built. The
covenant is to keep and use premises for purposes. I reject the first way Mr Colyer put his argument.
Secondly it was argued that if the whole statement of purposes has to be broken down into phrases for its proper
understanding it can be seen that the purposes included use as dwellings. That simply requires residential use. There followed
the phrase for the working classes within the special meaning. That, said Mr Colyer, was the key to the matter. The draftsman
had required the dwellings to be used for accommodating a particular section of the people. That section was defined as persons
who were working class within the meaning of the Housing Act 1925 or any statutory modification or re-enactment for the time
being in force. Such a section of the populace, said Mr Colyer, no longer existed because working classes had no meaning in the
Housing Acts.
Mr Colyer took me through the legislative history of the phrase working classes. He demonstrated clearly that it started in
the Housing of the Working Classes Act 1885, which contained no definition of the term. It was modified, very surprisingly, by
the Settled Land Act 1890. The phrase appeared in the Housing Act 1925 in many places. It had no general definition in that
Act. For the particular purposes of s 98 of the 1925 Act there is a meaning given by para 12(e) of Sch 5 to the Act. That
provision is not truly a definition since it states that the term working classes includes a list of occupations, including several
which would in modern times be described as self-employed such as costermongers. That is plainly an extension of the normal
meaning of the words working classes, which is set out in the Shorter Oxford English Dictionary as those who are employed to
work for wages in manual or industrial occupations. It is to be noted that the dictionary does not describe the words as
obsolete as it does in cases where in the editors opinion that is the true position. It is obvious that costermongers are not
employed by anyone and do not work for a wage.
The legislative history continues with the Housing Act 1936, which was in force at the time the lease was granted. That Act
repealed the Housing Act 1925 but used the phrase working classes widely and repeated for special purposes by Sch 11 the
widening of meaning in precisely the same words (with a slight difference of punctuation) as had appeared in Sch 5 to the
Housing Act 1925. Thus there had been a statutory re-enactment of the meaning but in terms which were to precisely the same
effect. Mr Colyer demonstrated that the Housing Act 1935 which introduced provisions concerning overcrowding was not a re-
enactment or modification of the Housing Act 1925 but a new source of statutory material which was later to run side by side
with statutory material derived from the earlier Act in Parliaments many modifications of the law. By the Housing Act 1949 the
phrase working classes is, as Mr Colyer put it, excised from the statutory material. All housing duties and powers were from
then on to be exercised for the benefit (one hopes it was a benefit) of the whole community. There followed other Housing Acts
and I accept Mr Colyers submission that by 1985 no trace of the phrase working classes is to be found in housing legislation
save for one curious, and for the purposes of this case irrelevant, remnant derived from the Housing Act 1935 concerned with the
control of overcrowding.
143
It follows, submits Mr Colyer, that since the term working classes now has no meaning within the Housing Act 1925 or
any statutory modification or re-enactment for the time being in force the term has no meaning in sub-cl (IX)(a). In my
judgment that is unsound. The obligation to keep and use the premises or dwellings for the working classes was an express and
enforceable covenant. The draftsman provided a guide to the meaning of the words working classes. He foresaw that during
the term of 999 years Parliament might make changes to housing law and he allowed those changes to have effect on the
obligations undertaken by the City of Westminster. Whatever Parliament chose to say the term working classes meant was to be
the meaning applied. What the draftsman did not make express provision for is the circumstance that Parliament has chosen not
to speak of the working classes at all. It is not that Parliament has passed a statute which declares that no one is to be considered
of the working class, nor that the term working class is to be prohibited from use. It is simply that Parliament has decided that
the concept is not useful in housing legislation and has, as Mr Colyer put it, excised the words.
Plainly the obligation of complying with the covenant is made more difficult when there is no longer available any
parliamentary reference to the words to explain their meaning. But that does not, in my judgment, make the covenant void for
uncertainty. The court is not, it has been said, to repose upon the easy pillow of uncertainty unless compelled to do so by the
total obscurity of language. In my view the covenant which was admittedly valid when imposed remains valid today. It has been
argued that the concept of the working classes is obsolete, with which I do not agree, but whether that is correct or not the court
has never, so far as the authorities referred to show, declared a covenant in a lease unenforceable because it is obsolete. Further,
none of the evidence before me is directed to showing or would enable me to decide that the concept is in fact obsolete. The fact
that Parliament has given up all use of the concept for the purposes of the Housing Acts does not determine the meaning of those
words in ordinary English speech.
I was referred to a series of cases in which distinguished judges have found the words difficult to define. In Rodwell v
Minister of Health [1947] 1 All ER 80 at 82, [1947] KB 404 at 411 Morris J said that the words were neither happy nor precise.
Nonetheless he decided that a particular occupation was not that of one of the working classes. In H E Green & Sons v Minister
of Health [1947] 2 All ER 469 at 471, [1948] 1 KB 34 at 38 Denning J (as he then was) said that the words working classes
used in the Acts are quite inappropriate to modern social conditions. Despite that the learned judge reached a conclusion. In
Belcher v Reading Corp [1949] 2 All ER 969 at 984, [1950] Ch 380 at 392 Romer J said: The phrase has a far wider and less
certain signification than it used to possess Nonetheless he decided that a certain section of the public were, on the evidence
before him, within the phrase. In Guinness Trust (London Fund) v Green [1955] 2 All ER 871 at 873, [1955] 1 WLR 872 at 875
Denning LJ (as he had then become) repeated his criticism of the words from Greens case, but held that the way to apply the test
was to ask whether the house is provided for people in the lower income range That seems to me a useful illustration of
how common sense can be applied to difficult circumstances where matters have become obscure by passage of time or changing
circumstances. Finally, in Re Niyazis Will Trusts [1978] 3 All ER 785 at 788, [1978] 1 WLR 910 at 915 Megarry V-C, a judge
noted for his extreme precision in the use of words, found himself able to express the phrase as having not lost [its] general
connotation of lower income. None of these cases shows any suggestion that the courts cannot comprehend or deal with
questions 144 arising on the meaning of the words working classes, although all of them agree that the words are much less
clear now than formerly. In my judgment those authorities contradict rather than support a suggestion that the words working
classes are incapable of any meaning today.
I thus conclude on this part of the case that the obligation in sub-cl (IX)(a) is a continuing obligation to use and keep the
premises as dwellings for the working classes and that that classification has to be understood in the light of its meaning in 1937.
I accept Mr Lightman QCs submission for the trustees that since there is now in force no modification or re-enactment of the
meaning to be found in the Housing Act 1925 one is thrown back upon that meaning as a guide. The words are used in that Act
in their ordinary English meaning but also include the additional meaning attributed to the words by Sch 5 to the Act. On those
grounds I shall refuse to make the declarations sought by para (1)(a) and (b) of the originating summons. I have, I hope,
answered question (2) of the originating summons by expressing my view that the covenant is enforceable and that its nature and
extent are those mentioned above.
I turn to question (3), which seeks a declaration that the Lands Tribunal has jurisdiction to modify or discharge the
restriction contained in sub-cl (IX)(a). I find the form of the question embarrassing. As I have said above, sub-cl (IX)(a) plainly
includes in the first three lines an express negative covenant. It must be within the jurisdiction of the Lands Tribunal to discharge
or modify that restriction unless prevented by s 84(7) of the Law of Property Act 1925. That subsection excludes the Lands
Tribunals powers

where the restriction was imposed on the occasion of a disposition made gratuitously or for a nominal consideration
for public purposes.

The question therefore is whether the lease was made gratuitously or for a nominal consideration for public purposes. Mr
Colyer helpfully conceded that the lease was certainly made for public purposes and also that the rent reserved of one shilling a
year was a nominal consideration. However, he argued that the rent was not the sole consideration. He pointed to the reddendum
itself, which runs:

In consideration of the costs incurred by the Lessee in erecting and completing the buildings and of the yearly rent
and of the Lessees covenants hereinafter contained

It is clear from the figures in the exhibited documents that the second Duke gave ___113,650 out of capital moneys in one of
the Grosvenor settlements towards the capital cost of the housing scheme and that the council spent several hundreds of
thousands of pounds on the building works. Prima facie, however, that would seem to have been past consideration at the date of
grant of the lease which itself refers to the buildings by name as being thereon erected when referring to the demised premises.
However, I am reluctant to decide upon this point because I was told by counsel towards the end of this three-day hearing that
documents had been discovered by the City of Westminster which would probably throw light on the matter but which I did not
see. I was shown during the hearing a building agreement discovered at that stage by the City of Westminster affecting the
Vincent Street part of the demised premises. The further building agreement, which I was not shown, was said to affect the
whole of the rest of the demised premises. If the lease was, as would be usual, scheduled to the building agreement then the
consideration would not have been past. I cannot understand how in a case where the City of Westminster was under an
obligation to make discovery 145 two documents of such obvious relevance and importance were not disclosed. It seems to me a
woeful failure on the part of the solicitor to the City of Westminster to have so neglected to make proper discovery.
I turn to the other part of the alleged consideration. The decision of the House of Lords in Midland Bank Trust Co Ltd v
Green [1981] 1 All ER 153, [1981] AC 513 concerns the meaning of the words nominal consideration for the purposes of the
Land Charges Act 1925, an Act closely associated with the Law of Property Act 1925 since both flow from the great amending
Law of Property Acts 1922 and 1924. That decision instructs judges as to the words meaning. Lord Wilberforce deals with the
matter with that great judges usual precision (see [1981] 1 All ER 153 at 159, [1981] AC 513 at 531532). He refers to nominal
consideration as a sum which may be stated though not expected to be paid. For my part the use of the words nominal damages
as a term of art meaning the damages which can be recovered in an action for breach of contract where no actual pecuniary
damage is proved but the breach is made out, which was always 40 shillings, and the same phrase nominal damages as meaning
the 40 shillings damages recoverable on proof of trespass without proof of actual damage, also assist in considering the term
nominal consideration. In my judgment any substantial value that is a value more than, say, ___5 passing at the time of a
disposition will prevent that disposition being for a nominal consideration. The fact that the value of the property given far
exceeds the value of the consideration given for it does not make the consideration nominal.
In the present case I am wholly satisfied on the evidence that the Duke was, and was represented by the City of Westminster
as being, extremely generous. He made a grant to the City of Westminster of land then said to be worth 200,000. The value in
todays money and with modern land values would run, no doubt, into millions or even tens of millions. But he received from the
City of Westminster covenants that it would repair the buildings throughout the 999year term granted, and that it would insure
them against fire or other destruction with a named insurance office. I hope I am allowed to take judicial notice of the fact that it
is commonplace for insurance companies to pay commission to those who arrange for insurance to be effected with that
company. It may well be, there is no evidence one way or the other, that the Grosvenor Estate receives substantial commission
on the, no doubt today large, premiums payable to insure these buildings. Whether that be so or not, in my judgment the
covenants given by the City of Westminster were quite enough to make this lease not one granted for a nominal consideration. I
therefore hold that so far as there are restrictive covenants in this lease the Lands Tribunal has power to modify or discharge
them.
I cannot resist adding that it seems to me that it would lie very ill in the mouth of the City of Westminster to blow hot and
cold in the way it would be doing if it were to make an application to the Lands Tribunal. It received a great benefit from the
second Duke, and it seems to me extremely unattractive to take a gift, made upon conditions known and agreed to at the time of
the gift, and then to turn round and seek to discharge those very conditions fixed as part of the bargain, in this case a
parliamentary contract between the parties. That, however, would be a matter for the Lands Tribunal to consider in exercising its
own discretion.
However, that is not the whole answer to question (3) in the originating summons. As I have said, the covenant falls into
several parts. The first part is plainly restrictive. Mr Lightman argued that the second part is not restrictive but positive. He
pointed to the words shall be kept and used and said that those words amounted to a continuing obligation to carry out the
purposes. That 146 cannot, he submitted, be called a restrictive covenant. The law is familiar with positive covenants in leases,
perhaps especially in user covenants. A covenant to use a particular shop for some particular trade requires the tenant not to leave
the shop empty but to actively carry on the trade. Obviously a covenant to carry out some purpose, as here to provide dwellings
for the working classes, does not require that every part of the demised premises shall always be occupied by such persons.
Premises can legitimately stand vacant between tenancies. Premises may be required to be vacant for purposes of redecoration.
It is even possible that a whole block of flats might be required to be empty for a considerable period of time if that were
necessary for purposes of repair to the block, or for better equipping the block to provide adequate dwellings. Such intervals
would not mean that the City of Westminster was not keeping and using the blocks for the proper purpose. The City of
Westminster merely needed an interval while the purpose was pursued.
But in my judgment the obligation here undertaken is a positive obligation. The word used carries to my mind a
connotation of a duty to use. The whole phrase suggests to me, what in my view is shown by the heads of agreement and other
material in evidence to be the case, that the purpose of the grant was to provide buildings in which the City of Westminster would
keep tenants. It is not a covenant that could be performed by keeping the buildings empty with a view to reducing expenditure on
maintenance. In my judgment the contrast in wording between the negative prohibition in the first lines of the covenant followed
by the words but that shows a clear shift of meaning from restraint to activity. It is of course true that a duty to use land for
some purpose necessarily means that the land shall not be used for other purposes. Nevertheless the duty to use remains a
positive obligation although a negative implication may flow from it. I did not find the authorities cited Tea Trade Properties
Ltd v CIN Properties Ltd [1990] 1 EGLR 155 and Montross Associated Investments SA v Moussaieff [1990] 2 EGLR 61 or Re
Blyth Corps Application (1963) 14 P & CR 56 of assistance on this point. It is not in dispute that the Lands Tribunal can only
modify restrictive covenants. In my judgment this part of sub-cl (IX)(a) is a positive covenant and as such cannot be the subject
of an application to the Lands Tribunal.
I will consider with counsel the formulation of the answer to question (3) since, as I see it, the question as drawn is not
capable of a clear answer on the above reasoning. The first part of the covenant is within the jurisdiction of the Lands Tribunal
but the second part of that covenant is not.
I now turn to Mr Lightmans summons by way of counterclaim. That is based in particular upon the proposition that the
deal between the parties was not simply the grant of the lease. He says that the lease is also a part of a statutory purpose shown
by the heads of agreement and the Westminster City (Millbank) Improvement Act 1929. He refers specifically to cll 2 and 4 of
the heads of agreement set out in Sch 2 to the Act which provide, in the shorthand manner of heads of agreement which these
were, by cl 2: The Council to provide and erect on the housing site housing accommodation consisting of 604 dwellings [and
other phrases] to accommodate in the first place tenants and occupiers on the housing site and on the remainder of the
Millbank Estate and, going on, All such accommodation shall in the first place be offered to tenants and occupiers of
houses on the housing site of controlled houses and other tenements and so on. And by cl 4:

The Council to be entitled to charge and be paid for any accommodation provided under cl 2 such rents as the Council
shall think reasonable having 147 regard to the rents charged by the Council for similar accommodation in other dwellings
for the working classes belonging to the Council in the neighbourhood.

Section 5 of the 1929 Act itself provided:

The heads of agreement set forth in the Second Schedule to this Act between the Council and the Duke are hereby
confirmed and made binding on the Council and the owners of the Millbank Estate and shall be carried into effect
accordingly ,

with a proviso for inconsistency. That, said Mr Lightman, resulted in the heads of agreement being incorporated into the statute
and forming a statutory obligation of their own independent of and in addition to the obligation in the lease. He referred in
particular to the decision in Re Earl of Wiltons Settled Estates [1907] 1 Ch 50, where a private Act of Parliament had been
obtained providing that an agreement made by a tenant for life should be binding upon all parties. The phrase in the private Act
was that the agreement was confirmed and made binding on the parties thereto respectively and the same shall and may be
carried into effect Those words, observed Mr Lightman, are almost ipsissimma verbis the words of s 5 in this private Act,
which says:

The heads of agreement set forth and made are hereby confirmed and made binding on the Council and the
owners and shall be carried into effect accordingly.

The correlation of words in the two private Acts is extremely close if not almost precisely the same.
In the result, said Mr Lightman, it must follow, particularly bearing in mind also the more general observations in
Caledonian Rly Co v Greenock and Wemyss Bay Rly Co (1874) LR 2 Sc & Div 347, that the result of such language is that the
heads of agreement are in effect enacted as a statutory obligation. He thus argues that the result is that the lease and the scheme
contained in the heads of agreement and the whole of it are in effect statutory obligations as well as, in the case of the lease,
obligations running firstly by contract and secondly by privity of estate. They are, in effect, double-barrelled obligations or it
may even be treble-barrelled obligations; I am not sure that the number of barrels matters.
The result is, so Mr Lightman argues, that the first declaration that he submits should be made is that on the true
construction of the heads of agreement and the Act the City of Westminster may not lawfully require or accept the payment of
any premium by or on behalf of a tenant on that land save in a particular case. That he bases upon cl 4 of the heads of agreement
which, it will be remembered, provides expressly: The Council to be entitled to charge and be paid rents An obligation
statutorily imposed to entitle you to charge and be paid rents in connection with housing accommodation must, I think, carry a
prohibition against payments of capital sums. It seems to me an inevitable consequence of an obligation to receive rents that you
cannot agree to receive a capital sum and, for example, an entirely nominal rent for the term then granted.
Mr Lightmans declaration makes one specific exception: save, he says, where the payment of such agreement is part of a
sale in accordance with and pursuant to a tenants right to buy under the Housing Act 1985. That, he says, is because the public
general Act has overridden the 1929 private Act incorporated in the heads of agreement to that specific and limited extent. That
seems to me a 148 perfectly sound exception and it seems to me that the argument on this point does flow entirely Mr Lightmans
way. Mr Colyers argument that the document was not adequately incorporated into the statute by the terms of the section does
not seem to be sufficient.
Mr Lightman then goes on to argue under para (2) of his cross-summons, which seeks a declaration by way of counterclaim
upon the same evidence as in the originating summons, that the City of Westminster is under an obligation, which I have already
held runs as a continuing obligation, to use the dwellings for the purposes of dwellings for the working classes within the
meaning of the Housing Act 1925 so far as that can be understood, as being not only an obligation under the covenant of the lease
but also an obligation pursuant to the statute and the heads of agreement. He bases that upon the terms in particular of ss 4, 5 and
6 of the statute. Section 4 states that the improvement scheme which was a defined term meaning the Millbank Improvement
and Grosvenor Housing Scheme described in Sch 1, the Grosvenor Housing Scheme being a more limited part of the matter, so
the improvement scheme is a wider phrase

is hereby confirmed and made binding on the Council and the owners of the Millbank Estate and it shall be the
duty of the owners of the Millbank Estate and the Council to carry their respective parts of the said scheme into execution
as soon as practicable.

I have already read s 5, that the heads of agreement are made binding and shall be carried into effect accordingly.
 Section 6 provides that the owners shall grant to the council a lease of the land and that it shall be for a term of 999 years at
the yearly rent of a shilling, subject to rights, with a covenant to use the land for the purposes of the Grosvenor Housing Scheme
and for no other purpose. Those phrases in s 6 are less close to the words used in the private Act considered in Re Earl of
Wiltons Settled Estates to which I have already referred.
It is clear that s 6 specifically requires the grant of the lease and specifically sets out in very broad and general terms the
principal obligations under it. But the lease itself is not scheduled to the Act nor to the heads of agreement and in all probability
was not in existence at that time. I find it difficult to believe that the lease itself is also the subject of statutory obligations and I
am not satisfied that Mr Lightman is correct in his argument that the lease is not only binding by its own powers and duties as a
normal lease but also as a statutory obligation. I shall not make a declaration in the form of para (2).
The third of Mr Lightmans declarations was that the Lands Tribunal has no jurisdiction to discharge or modify the
obligation which he says is specified in para (2), which I have held is specified in the lease, by reason of the following facts.
(a) There are imposed positive obligations as to such user. I have already held that that is plainly correct.
(b) The lease was granted gratuitously or for a nominal consideration. I have already held that that is not correct.
(c) The obligation (in so far as it is comprised in the Act and the agreement) has statutory force and effect. So far as the
statute imposes obligations that is correct but in my judgment the lease covenant is something additional to the statute and the
heads of agreement and if and so far as there is desired to be any application to the Lands Tribunal in respect of the first negative
terms of 149 sub-cl (IX)(a) in my judgment such an application could be made, although no intention to make such an application
has yet been formed.

Declarations granted in favour of the trustees.

Solicitors: G Matthew Ives; Boodle Hatfield.

Evelyn M C Budd Barrister.

[1991] 4 All ER 150

Director General of Fair Trading v Smiths Concrete Ltd

ADMINISTRATION OF JUSTICE; Contempt of Court

COURT OF APPEAL, CIVIL DIVISION

LORD DONALDSON OF LYMINGTON MR, GLIDEWELL AND TAYLOR LJJ
24, 25, 26 JUNE, 11 JULY 1991

Contempt of court Company Breach of injunction Liability of company for employees breach Company restrained from
giving effect to or enforcing agreements restricting competition Company forbidding employees from entering into such
restrictive arrangements and taking reasonable steps to prevent them from doing so Employee entering into price-fixing and
job allocation agreements with representatives of other companies in breach of injunctions Employee acting within scope of his
employment but not within scope of his authority Whether company party to agreement Whether company liable for
employees breaches Whether company in contempt of court Restrictive Trade Practices Act 1976, s 35.

In March 1978 and 1979 the appellant company, which had been a party to agreements with other companies relating to the
supply of ready-mixed concrete to which the Restrictive Trade Practices Act 1976 applied, was restrained by order of the
Restrictive Practices Court from, inter alia, giving effect to or enforcing or purporting to enforce (whether by itself or by its
servants or agents or otherwise) any agreement in contravention of s 35(1) a of the 1976 Act, which rendered void certain
agreements restricting competition in the production or supply of goods or in the application to goods of any process of
manufacture unless they were registered and made it unlawful for any person party to such an agreement who carried on business
in the United Kingdom to give effect to or enforce or purport to enforce the agreement. The appellant had expressly forbidden its
employees to make or put into effect any such agreement and had put in place adequate measures to enforce compliance with the
requirements of the 1976 Act. However, during 1983 and 1984 a unit manager employed by the appellant met representatives of
three other companies without the appellants knowledge and entered into a job allocation and price-fixing agreement or
arrangement for a particular area in breach of the 1978 and 1979 injunctions. He had, as the other parties to the agreement knew,
neither express nor ostensible authority to enter into the agreement. The Director General of Fair Trading applied for orders of
sequestration against the appellant and the other three companies and also sought committal orders against the appellants
manager and an employee of one of the other companies for contempt of court, alleging that the four companies were in contempt
for breaching the 1978 and 1979 orders by making and implementing the allocation agreement and that the two employees had
aided and abetted the contempts. The appellant denied liability but the other 150 three companies accepted that they were in
contempt. The Restrictive Practices Court found the appellant vicariously liable for contempt of court on the basis that its
employee was acting within the scope of his employment when he entered into the agreement. The court fined the appellant
___25,000. The appellant appealed.
________________________________________
a Section 35, so far as material, is set out at p 154 g to p 155 b, post

Held A company was not liable for breach of an injunction directed to the company restraining it from entering into a
restrictive arrangement contrary to the 1976 Act if the breach was committed by an employee acting outside the scope of his
authority albeit within the scope of his employment, since, the courts contempt jurisdiction being punitive in character, it was an
essential prerequisite to a finding of contempt that the factual basis was proved beyond all reasonable doubt and that there was
mens rea on the part of the alleged contemnor. If the company was not a consensual party to any agreement or arrangement to
breach the injunction, had not authorised the breach by the employee and had not put the employee in a position to commit the
breach, it could not be said to have carried out the prohibited act through the instrumentality of the employee and in those
circumstances it lacked the necessary mens rea to be in contempt. Since the appellant had expressly forbidden its employees to
enter into any arrangement which breached the 1976 Act and had taken reasonable steps to prevent them from doing so, the
appellant was not a party to the agreement made by its unit manager. In any event, even assuming that the unit manager had been
acting within the scope of his employment when he entered into the agreement, he had entered into it personally as a means of
discharging his duties as an employee of the appellant having been forbidden by the appellant to do so and after making it
abundantly clear to the other parties that that was the case. In those circumstances he had had no authority to enter into the
agreement on behalf of the appellant and his action in entering into the arrangement was not a breach of the injunction by the
appellant under s 35(2) of the 1976 Act. The appeal would therefore be allowed and the finding of contempt of court quashed
(see p 160 b e to p 161 d, p 164 b to f h j, p 165 f to h, p 166 c, p 167 b c, p 167 b c, p 168 a g to p 169 b f, p 170 d to p 171 a e,
post).
Dicta of Lord Wilberforce in Heatons Transport (St Helens) Ltd v Transport and General Workers Union [1972] 3 All ER
101 at 109 and of Slade J in Hone v Page [1980] FSR 500 at 507 applied; Therm-A-Stor Ltd v Home Insulation Ltd [1982] Com
LR 244 overruled.
Per curiam. (1) Mens rea in the context of a finding of contempt of court is not limited to a wilful intention to disobey the
courts order but extends to an intention to do the act which constitutes the disobedience with knowledge of the terms of the
order, although not necessarily an understanding that the act is prohibited (see p 168 b c, p 169 f and p 171 e, post).
(2) An order restraining X by itself, its servants or agents or otherwise is addressed to X only and directly binds only X.
Such an order not only restrains X from doing the acts personally or in the shape of its alter ego, if a juridical person, but also
restrains X from doing the acts by the instrumentality of its servants or agents. If its servants or agents are to be found guilty of
contempt, it can only be on the basis that they are aiders and abettors of Xs contempt or have so acted as to impede or interfere
with the administration of justice. Whether X is doing an act by the instrumentality of its servants or agents will depend on the
scope of their mandate judged in the light of reality rather than form. If X should have appreciated that the servant or agent
would be likely to do the prohibited act unless dissuaded by X, the act will be regarded as being within the scope of that mandate
if X has not taken all reasonable steps to prevent it. Such steps may in 151 appropriate cases involve more than express
prohibition and extend to elaborate monitoring and compliance machinery and procedures and the creation of positive incentives
designed to dissuade the servant or agent (see p 168 c to f, p 169 f and p 171 e, post).

Notes
For breach of injunction, see 9 Halsburys Laws (4th edn) para 66, and for cases on the subject, see 13 Digest (Reissue) 372,
31823189 and 28(4) Digest (2nd reissue) 425437, 71477254.
For the jurisdiction of the Restrictive Practices Court in relation to contempt of court, see 47 Halsburys Laws (4th edn) para
156.
For the Restrictive Trade Practices Act 1976, s 35, see 47 Halsburys Statutes (4th edn) 361.

Cases referred to in judgments

A-G Times Newspapers Ltd [1991] 2 All ER 398, [1991] 2 WLR 994, HL.
Barwick v English Joint Stock Bank (1867) LR 2 Exch 259, [186173] All ER Rep 194, Ex Ch.
Churchman v Joint Shop Stewards Committee of the Workers of the Port of London [1972] 3 All ER 603, [1972] 1 WLR 1094,
CA.
Heatons Transport (St Helens) Ltd v Transport and General Workers Union [1972] 3 All ER 101, [1973] AC 15, [1972] 3 WLR
431, HL.
Hone v Page [1980] FSR 500.
Hope v Carnegie (No 1) (1868) LR 7 Eq 254.
Kooragang Investments Pty Ltd v Richardson & Wrench Ltd [1981] 3 All ER 65, [1982] AC 462, [1981] 3 WLR 493, PC.
Stancomb v Trowbridge UDC [1910] 2 Ch 190.
Therm-A-Stor Ltd v Home Insulation Ltd [1982] Com LR 244.
Z Ltd v A [1982] 1 All ER 556, [1982] QB 558, [1982] 2 WLR 288, CA.

Cases also cited or referred to in skeleton arguments

A-G v Newspaper Publishing plc [1987] 3 All ER 276, [1988] Ch 333, Ch D and CA.
A-G for Tuvalu v Philatelic Distribution Corp Ltd [1990] 2 All ER 216, [1990] 1 WLR 926, CA.
Armagas Ltd v Mundogas SA [1985] 3 All ER 795, [1986] AC 717, CA and HL.
Bramblevale Ltd, Re [1969] 3 All ER 1062, [1970] Ch 128, CA.
British Basic Slag Ltds Agreements, Re [1963] 2 All ER 807, [1963] 1 WLR 727, CA.
Canadian Pacific Rly Co v Lockhart [1942] 2 All ER 464, [1942] AC 591, PC.
Comet Products UK Ltd v Hawtex Plastics Ltd [1971] 1 All ER 1141, [1971] 2 QB 67, CA.
Diazo Copying Materials Machines and Ancillary Equipment Agreements, Re [1984] ICR 429, RPC.
Dyer v Munday [1895] 1 QB 742, [18959] All ER Rep 1022, CA.
Essendon Engineering Co Ltd v Maile [1982] RTR 260, DC.
Express and Star Ltd v National Graphical Association (1982) [1986] ICR 589, CA.
Fairclough & Sons v Manchester Ship Canal Co (No 2) (1897) 41 SJ 225, CA.
Farquharson Bros & Co v C King & Co [1902] AC 325, [19003] All ER Rep 120, HL.
Freeman & Lockyer (a firm) v Buckhurst Park Properties (Mangal) Ltd [1964] 1 All ER 630, [1964] 2 QB 48, CA.
Galvanized Tank Manufacturers Associations Agreement, Re [1965] 2 All ER 1003, LR 5 RP 315, RPC.
Garage Equipment Associations Agreement, Re (1964) LR 4 RP 491, RPC.
Hely-Hutchinson v Brayhead Ltd [1967] 3 All ER 70, [1968] 1 QB 549, CA.
Hewitt v Bonvin [1940] 1 KB 188, CA.
152
Ilkiw v Samuels [1963] 2 All ER 879, [1963] 1 WLR 991, CA.
Iqbal v London Transport Executive (1973) 16 KIR 329, CA.
James & Son Ltd v Smee, Green v Burnett [1954] 3 All ER 273, [1955] 1 QB 78, DC.
Jennison v Baker [1972] 1 All ER 997, [1972] 1 QB 52, CA.
Knight v Clifton [1972] 2 All ER 378, [1971] Ch 700, CA.
Marengo v Daily Sketch and Sunday Graphic Ltd [1948] 1 All ER 406, HL.
Mileage Conference Group of Tyre Manufacturers Conference Ltds Agreement, Re [1966] 2 All ER 849, LR 6 RP 49, RPC.
Morgans v Launchbury [1972] 2 All ER 606, [1973] AC 127, HL.
National Daily and Sunday Newspaper Proprietors Agreement, Re [1986] ICR 44, RPC.
National Federated Electrical Associations Agreement, Re (1961) LR 2 RP 447, RPC.
Parker Manufacturing Co Ltd v Cooper (1901) 18 RPC 319.
Phonographic Performance Ltd v Amusement Caterers (Peckham) Ltd [1963] 3 All ER 493, [1964] 1 Ch 195.
Plumb v Cobden Flour Mills Co Ltd [1914] AC 62, HL.
Portsea Island Mutual Co-op Society Ltd v Leyland [1978] ICR 1195, DC.
R v Andrews Weatherfoil Ltd [1972] 1 All ER 65, [1972] 1 WLR 118, CA.
R v Cleminson (1985) 7 Cr App R (S) 128, CA.
R v Fairbairn (1980) 2 Cr App R (S) 315, CA.
R v Messana (1981) 3 Cr App R (S) 88, CA.
Rantzen v Rothschild (1865) 14 WR 96.
Richardson v Baker [1976] RTR 56, DC.
Rose v Plenty [1976] 1 All ER 97, [1976] 1 WLR 141, CA.
Royal Institution of Chartered Surveyors Application, Re, Royal Institution of Chartered Surveyors v Director General of Fair
Trading [1986] ICR 550, CA.
Russo-Chinese Bank v Li Yau Sam [1910] AC 174, PC.
Seaward v Paterson [1897] 1 Ch 545, [18959] All ER Rep 1127, CA.
Slingsby v District Bank Ltd [1932] 1 KB 544, [1931] All ER Rep 143, CA.
Tesco Supermarkets Ltd v Nattrass [1971] 2 All ER 127, [1972] AC 153, HL.
Thomas v National Union of Mineworkers (South Wales Area) [1985] 2 All ER 1,[1986] 1 Ch 20.
Topliss Showers Ltd v Gessy & Son Ltd [1982] ICR 501.
Walker v South Eastern Rly Co (1870) LR 5 CP 640.
Webster v Southwark London BC [1983] QB 698.

Appeal
Smiths Concrete Ltd (Smiths), being a respondent to a notice of motion dated 15 February 1989 issued by the Director General of
Fair Trading for writs of sequestration for contempt of court against Smiths and three other companies on the grounds of alleged
breaches of orders of the Restrictive Practices Court dated 14 March 1978 and 29 March 1979, appealed from the order of the
Restrictive Practices Court (Anthony Lincoln J, sitting with Professor Z A Silberston and Professor I G Stewart as assessors) (sub
nom Re Supply of Ready Mixed Concrete [1991] ICR 52) given on 24 September 1990 whereby Smiths was fined ___25,000 for
contempt of court by breaching those orders. The facts are set out in the judgment of Lord Donaldson MR.

Conrad Dehn QC and Timothy Howe for Smiths.

Stephen Richards and Matthew Collings for the Director General.

Cur adv vult

153

11 July 1991. The following judgments were delivered.

LORD DONALDSON OF LYMINGTON MR. Smiths Concrete Ltd (Smiths) appeal against an order of the Restrictive
Practices Court (Anthony Lincoln J and Professors Silberston and Stewart) (sub nom Re Supply of Ready Mixed Concrete [1991]
ICR 52) on 24 September 1990 finding them in contempt of court by breaching orders of the Restrictive Practices Court dated 14
March 1978 and 29 March 1979, fining them ___25,000 and ordering them to pay two-thirds of the trial costs (less ___1,000) and
one-quarter of the pre-trial costs (less ___1,000) of the Director General of Fair Trading to be taxed on an indemnity basis.
Section 13 of the Administration of Justice Act 1960 applies to such an appeal and the normal restrictions upon rights of appeal
from the Restrictive Practices Court (see s 10 of the Restrictive Practices Court Act 1976 and RSC Ord 60) do not apply.

THE BACKGROUND
Smiths are in the ready-mixed concrete business and were parties to certain agreements relating to its supply to which the
Restrictive Trade Practices Act 1976 applied. On 14 March 1978 and 29 March 1979 the Restrictive Practices Court made orders
restraining Smiths, amongst others, as being party to agreements specified in the respective orders:

(a) from giving effect to or enforcing or purporting to enforce (whether by itself or by its servants or agents or
otherwise) that agreement or those agreements in respect of the restrictions or information provisions accepted thereunder
respectively and (b) from giving effect to or enforcing or purporting to enforce (whether by itself or by its servants or
agents or otherwise) any other agreements in contravention of Section 35(1) of the Act of 1976.

In this appeal we have been solely concerned with para (b).

Hartigan Readymix Ltd (Hartigan), Ready Mixed Concrete (Thames Valley) Ltd (RMC Thames), Pioneer Concrete (UK)
Ltd (Pioneer) with others were similarly restrained by orders made on 14 March 1978, and RMC Thames by a further order made
on 29 March 1979 when Pioneer gave an undertaking to the like effect.
Section 35 of the 1976 Act is, so far as material, in the following terms:

(1) If particulars of an agreement which is subject to registration under this Act are not duly furnished within the time
required by section 24 above, or within such further time as the Director may, upon application made within that time,
allow (a) the agreement is void in respect of all restrictions accepted or information provisions made thereunder; and (b)
it is unlawful for any person party to the agreement who carries on business within the United Kingdom to give effect to, or
enforce or purport to enforce, the agreement in respect of any such restrictions or information provisions.
(2) No criminal proceedings lie against any person on account of a contravention subsection (1)(b) above; but the
obligation to comply with that paragraph is a duty owed to any person who may be affected by a contravention of it and
any breach of that duty is actionable accordingly subject to the defences and other incidents applying to actions for breach
of statutory duty.
(3) Without prejudice to any right which any person may have by virtue of subsection (2) above to bring civil
proceedings in respect of an agreement affected by subsection (1)(b), the court may, upon the Directors application,
154make such order as appears to the Court to be proper for restraining all or any of those mentioned in subsection (4)
below from giving effect to, or enforcing or purporting to enforce ( a) the agreement in respect of any restrictions or
information provisions; (b) other agreements in contravention of subsection (1) above; and nothing in subsection (2)
prevents the enforcement of any such order by appropriate proceedings.
(4) Those who may be restrained by an order of the Court under subsection (3) above are ( a) any person party to the
agreement who carries on business within the United Kingdom; (b) a trade association or a services supply association of
which any such person is a member; or (c) any person acting on behalf of any such association

Agreement is defined by s 43(1) as including:

any agreement or arrangement, whether or not it is or is intended to be enforceable (apart from any provision of this
Act) by legal proceedings, and references in this Act to restrictions accepted or information provisions made under an
agreement shall be construed accordingly.

The nature of the agreements which are subject to registration under the Act is set out in ss 1(1), 6, 7, 11 and 12 of the Act,
but for present purposes it suffices to say that they are restrictive of competition in one or more of various specified ways and are
concluded between two or more persons carrying on business within the United Kingdom in the production or supply of goods
or in the application to goods of any process of manufacture or, which is not this case, in the supply of certain services.

The notices of motion

 On 15 February 1989 the Director General served notices of motion in the Restrictive Practices Court seeking sequestration
orders against Smiths, Hartigan, RMC Thames and Pioneer. He also served notices of motion seeking committal orders against a
Mr Hayter, who was employed by Smiths, and a Mr Hulett, who was employed by RMC Thames. The Director General alleged
that the corporate respondents to the notices were in contempt of court in that in breach of the undertaking and/or as the case
might be the injunctions of March 1978 and March 1979

In or about March 1983 the said Companies made an agreement for the future allocation between themselves of
opportunities to supply ready mixed concrete (the Product) in the Bicester, Kidlington and Thame area of Oxfordshire in
accordance with the following approximate percentages, namely: 43% to Smiths, 21% each to Pioneer and RMC Thames
and 15% to Hartigan. (The said percentages were varied to 45% to Smiths, 15% each to Pioneer and RMC Thames and
25% to Hartigan in or about April 1984.) The representatives of the parties involved in the making and/or implementation
of the arrangement were as follows:

RMC Thames
Mr A. Hulett and Mr A. Lewis
Pioneer
Mr Stephen Gould, Mr James Tomkies and Mr K. Smythe
Hartigan
Mr Colin Johanson
Smiths
Mr Peter Hayter.
The notice of motion then alleged, with particulars, that this agreement was implemented over the period March 1983 to
March 1984. In the case of the 155 individual respondents the Director General alleged that they had aided and abetted these
contempts.

The hearing before the Restrictive Practices Court

The Director Generals contention was that representatives of the four companies, with Mr Hayter representing Smiths,
initially met in a public house in or about March 1983 and made the price-fixing and allocation agreement referred to in the
notice of motion. He conceded that the meeting together and the making of such an agreement did not of itself amount to a
breach of the orders or undertaking, which for simplicity I will hereafter refer to simply, if inaccurately, as the injunction,
because that was rightly limited, in relation to new restrictive agreements, to a prohibition on giving effect to or enforcing or
purporting to enforce such an agreement. However he alleged that there were further meetings in public houses during the
ensuing 12 months at which the agreement was given effect to, enforced or purportedly enforced.
Pioneer, RMC Thames and Hartigan accepted that they had been in contempt of court and were only concerned to minimise
any penalty. Mr Hulett admitted that his actions had placed his employers, RMC Thames, in contempt but argued that he did not
know that his actions were contrary to the orders of the court. The court rejected the factual basis of Mr Huletts argument. This
did not advance the case against Smiths or Mr Hayter because, as Mr Dehn QC appearing for Smiths rightly pointed out, Smiths
and Mr Hayter could only be found to be in contempt on evidence admissible against them. In fact there was considerable
affidavit evidence and six days of oral evidence. The whistle blower and principal witness in support of the Director Generals
case was a Mr Tomkies, who, at the material time, was employed by Pioneer and responsible for that companys operations in the
Bristol, Swindon, Chippenham and Oxford areas. He had attended some of the meetings in public houses during which, it was
said, effect was given to the new agreement and it was enforced or purported to be enforced.
Anthony Lincoln J said that the court accepted Mr Tomkies as a witness of truth and on the basis of his and other evidence
reached the following conclusions of fact ([1991] ICR 52 at 6062):

The meetings at public houses began in March 1983 as described in Mr. Tomkies affidavit. There were at least six of
these meetings. They were attended by employees of the four companies. These employees reached an arrangement which
represented a commitment to comply very broadly with the terms they were agreeing upon. If this were not the case it is
difficult to understand why they were wasting their time in meeting again and again or why at subsequent meetings there
was a review of information as to what had taken place since the last meeting. The broad aim and object of the
arrangement between the employees present at the meetings was to increase market prices and the profitability of the
companies by whom they were employed. This was achieved by allocating between the companies an approximate
percentage of concrete for jobs in delineated geographical zones, jobs for quantities of less than 50 cubic metres of
concrete generally being excluded. When Mr. Tomkies went to his first meeting he found that very rough boundaries were
already agreed upon. They were highlighted in blue on a map. The delineation was so roughly done that it was not at all
clear at any time whether, for example, Buckingham was within the agreed zones or not. To carry out this arrangement
what happened at these meetings both before and after Mr. Tomkies time was this. Each employee would state 156 what
opportunities for supplying concrete had become available since the last meeting. There was an exchange of details about
jobs and prices. Mr. Tomkies called this listing jobs. Each employee would argue his companys case for being allocated
a job on offer. In the end the jobs were allocated in such a way that the result would correspond very roughly with the
percentages in the relevant areas which had been agreed upon by all for each company. A not unimportant feature of these
meetings was the fixing of prices. Schedules of prices were drawn up and copies distributed. These were described as
reference prices. The purpose of these was that a company to whom a specific, available job was allocated was expected to
put in a tender below the figure fixed upon in the schedule and the companies not allocated that job were expected to tender
at a price at or above the reference price. These prices were higher for the northern part of the zoned territory where there
were no raw materials than for the southern part where raw materials were located. It is self-evident that the effect of these
price arrangements if implemented was to reduce if not eliminate competitive pricing. One of the many factors taken into
account when allocating work was the geographical location of each company plant. The nearer the plant to the contractor,
the cheaper the cost. This factor would be thrown into the mix along with various others, the percentages, credit facilities,
knowledge of the contractor and so on. However, under the arrangement there was a no-poaching provision: thus RMC
Thames was not actively to seek to expand its business in the Bicester area, Hartigan in Kidlington or Thame and Smiths in
Thame. A final feature of the arrangement was that whenever a company won a job allocated to another, the quantity of
concrete supplied by the first company was treated as part of the quantity allocated to that company. This then was the
overall arrangement. There is no doubt that it was a loose compact and was by no means rigidly applied. Its provisions
appear to have been regarded as markers rather than strict contractual obligations. But however loosely applied, the
employees participating in these meetings were committing themselves to some restrictions of their companies selling
operations. The fact that they met again, compared notes, fixed prices and so on points irresistibly to this conclusion. This
was no academic exercise. Indeed there were regular complaints that the arrangement was not working and that a company
had taken a job not allocated to it. Mr. Tomkies became angry at the lack of bite in the operation of the arrangement.
Prices were not rising as expected, percentages were not being achieved. Because of this lack of success in April 1984 the
areas for each company were changed by agreement between the employees of the four companies at a meeting. The size
of the areas was reduced and the percentages changed with a view to the more efficient organisation of the allocation
 system. After that the position of the companies showed significant signs of improving their performance in relation to the
new arrangement. In reaching these conclusions as to the nature of the arrangement we have taken into account the
contents and existence of the allocations book. We accept the authenticity of that book as a record kept by a succession of
Pioneers employees taken to the meetings and used by them in the course of the discussions. Entries showed percentages,
jobs available and jobs taken up. Despite the small number of cumulative totals giving a running record of the companies
failures and successes in complying with the targets laid down, we consider that the book clearly supports the account of
the arrangements given by Mr. Tomkies and Mr. Hayter. It follows from these findings that an agreement or arrangement
157 existed being the arrangement identified in the notice of motion. It was subject to registration under the Act of 1976
since it contained a number of restrictions set out in the notice of motion and it is common ground that particulars were not
furnished until 30 June 1987, well out of time under section 24 of the Act.

Anthony Lincoln J then answered a number of questions to which I must return in the context of the arguments addressed on the
appeal, but I can summarise them as follows.
(1) Was Mr Hayter a party to the agreement? The court held that he was. He attended five meetings and, when he was not
there, was informed of the outcome by telephone. He had a say in the determination of market percentages and he sought to give
the impression that he was going along with the arrangement reached between the representatives. Everyone else there thought
that he was participating.
(2) Were Mr Hayter and the other representatives giving effect to or enforcing or purporting to enforce the agreement in
respect of particular restrictions? Again the answer was Yes. Mr. Hayter was the unit manager responsible for the activities of
six plant managers. Smiths and Mr Hayter maintained that he did not and could not give effect to the arrangement in terms of
influencing Smiths trading operations. Mr Pell, his area manager, set minimum prime gross margins which Mr Hayter had to
pass on to the plant managers, who were the people who tendered for work and fixed the price. Mr Hayter could and did set
target gross margins, but he could not give effect to the pricing scheme, not least because one of the plant managers was related to
a director of Smiths and, if he did so, his activities would have become known to the board of Smiths and he would have been
dismissed.
The court did not wholly accept this. It said (at 64):

We find it difficult to believe that as a unit manager with four plant managers within his responsibility Mr. Hayter was
an impotent cipher and that his continued attendance at these meetings made no impact on Smiths trading operations
whatsoever. Thus although minimum prime gross margins were laid down for him he could intervene in pricing, he had a
discretion in setting the target gross margin, he was in charge of the performance of the unit as a whole and of the
individual plants within the unit and he generally had responsibility to achieve results. It is equally difficult to see what
purpose his repeated attendance at meetings served if Smiths case is to be taken at its face value that Mr. Hayters
participation had no influence over events in the field. We are prepared to accept that the arrangement made no substantial
difference to the way Smiths went about obtaining contracts and fixing prices. But even if it be true that these two
restrictions taken by way of example were not complied with by Smiths in the course of trading it remains the fact that Mr.
Hayter gave every appearance and impression to his fellow participants of agreeing to these restrictions and others with a
view to securing that they would be implemented and complied with. He behaved to outward appearances, even if he were
in reality impotent, as an employee of Smiths acting as if the arrangement were in operation and he thereby encouraged his
fellow participants to act restrictively. They accounted to each other, however inadequately, and to Mr. Hayter and he to
them in respect of these and other restrictions imposed by the arrangement. In doing these things at the meetings, in
assisting at the operation of the machinery set up by the arrangement, at the very least he 158 purported to give effect to the
arrangement, the very thing forbidden by the injunction. We go further. His outward actions at the meetings not only
purported to give effect, they in fact gave effect to the arrangement.

(3) Were Smiths liable for the acts of Mr Hayter? Once again the answer was Yes. The court accepted that Mr Hayter had
been expressly forbidden to enter into or give effect to or enforce or purport to enforce any such agreement or arrangement. It
further accepted that Smiths senior management were unaware of what was going on. It expressed itself (at 67) as satisfied that

on the whole Smiths took all reasonable steps to prevent breaches of the Act, and it is implicit in the numerous
instructions sent to Mr. Hayter by his superiors that the possibility of a breach was foreseen.

I add parenthetically that in context the expression on the whole was not intended to convey the meaning of more or less,
but of taking account of all the compliance measures instituted by Smiths. It held that there was no evidence that Smiths held
Mr Hayter out as being authorised to enter into the agreement or arrangement. Furthermore (at 66):

Mr. Tomkies knew that Mr. Hayter had difficulty in complying with the agreement and never thought his employers
had authorised him to enter into it. Everyone at the meetings knew that what was going on was wrong and not authorised
by their employers.

The court thus negatived any actual authority express or implied or any ostensible authority stemming from a holding out by
Smiths or from the nature of Mr Hayters duties as unit manager, the latter form of ostensible authority being negatived by the
knowledge of the others present at the meeting.
Nevertheless the court held Smiths vicariously liable for Mr Hayters acts on the footing that they were done within the
scope of his employment his participation was an unauthorised mode of doing that which he was employed to do, that is to
manage the unit.

THE APPEAL

The nature of contempt

At the heart of this appeal lies the nature of proceedings for contempt of court consisting of disobedience of its injunctive
orders. That it provides the beneficiary of such an order with an enforcement remedy is incidental. The fundamental purpose of
such proceedings is to uphold the supremacy of the rule of law and the courts authority to administer it. Accordingly, whilst the
court cannot monitor the extent to which its injunctive orders are obeyed, if evidence of a serious breach is brought to its notice it
can, in appropriate circumstances, proceed of its own motion. This was the usual course adopted by the National Industrial
Relations Court, because it was thought that to rely upon an employer himself seeking an order for the sequestration of the assets
of a trade union or for the committal of an employee who was taking industrial action in defiance of an injunctive order would
lead either to the employer taking no action and the courts authority being undermined or, if the employer did take such action,
to his long-term relationship with his workforce being unnecessarily damaged. The employer was therefore enjoined to report
breaches to the court and in complying could say with truth that he had no option, leaving the court to take action as it saw fit
(see Churchman v Joint Shop Stewards Committee of the Workers of the Port of London [1972] 3 All ER 603 at 608, [1972] 1
WLR 1094 at 1100). However, where such 159 special considerations do not apply, courts normally take no action in the absence
of a request to make a sequestration or committal order. It also follows from this fundamental purpose that, once proceedings for
such an order have been launched, they cannot be abandoned without the leave of the court, for the court itself has a major
interest in the proceedings.
Put in another way, proceedings for contempt of court are punitive rather than remedial and it follows from this that mens
reas, or an intention on the part of the person proceeded against to omit or commit the act, the omission or commission of which
constitutes disobedience of the injunctive order, must be established and the offence thereby proved beyond all reasonable doubt.

Scope and effect of injunctive orders

Bearing in mind the punitive nature of proceedings for contempt, injunctive orders must always be construed precisely and
in case of doubt, which should not of course arise, restrictively. Such orders can take effect in three different ways. First, they
bind the person to whom they are addressed. Second, they give rise to a duty on the part of persons who have notice of them not
to aid, abet or assist the person to whom they are addressed in breaching them. The third effect has only recently been
appreciated. Every citizen is under a duty not to impede or interfere with the administration of justice. In some circumstances
notice of the terms of an injunction granted against another may put other citizens on notice that, if they do the prohibited act,
they will impede or interfere with the course of justice by, for example, destroying the subject matter of a dispute which is before
the courts (see A-G v Times Newspapers Ltd [1991] 2 All ER 398, [1991] 2 WLR 994).

The scope of the orders in question

First, they directly bind only Smiths, to whom they were addressed. They were not addressed to Smiths servants or agents.
Indeed they could not be so addressed in the light of s 35(4).
Second, they bind Smiths not to do the prohibited acts either personally or by the instrumentality of others. They do not
require Smiths to ensure that no one else, whether or not he is a servant or agent of Smiths, does the prohibited acts.
Third, they forbid Smiths to give effect to or enforce or purport to enforce any agreement in contravention of s 35(1) of the
Act. The reference to s 35(1) is of crucial importance, because it is restrictive. A contravention only arises if any person party to
the agreement gives effect to or enforces or purports to enforce it (see para (b) of the subsection).
Accordingly, it not being alleged that Smiths personally breached the injunction, the Director General must show beyond
reasonable doubt that Smiths by the instrumentality of its servant or agent gave effect to or enforced or purported to enforce an
agreement which was subject to registration under s 24 of the Act, to which they were a party.

Were Smiths party to the agreement?

Mr Richards, of counsel, appearing for the Director General rightly stresses that we must not lose sight of the fact that
agreement is defined in s 43(1) of the 1976 Act to include any arrangement, which is a much looser concept than a contractual
agreement. It would accordingly, he submits, be wrong to apply the rules which might be appropriate in the context of deciding
whether or not a contractual agreement had been reached which bound Smiths. So be it, but the concept of someone being a
party to an arrangement, however loose, must carry with it a consensual element on the part of Smiths.
160
When I look for consensuality, I can find no trace of it whatsoever on the findings of the Restrictive Practices Court and we
have been referred to no evidence from which it could be inferred. Smiths expressly forbade Mr Hayter to enter into any such
arrangement on their behalf. They did not know that he had purported to do so and cannot therefore be said to have stood by and
thereby ratified his actions. They had adopted reasonable compliance systems to monitor his activities with a view to ensuring
that he did not purport to do so. Nor are they estopped from denying his authority by virtue of the fact that they had appointed
him unit manager and that he might otherwise be considered to have ostensible authority to enter into the arrangement on their
behalf, because he had made it clear to the other parties and they knew that Smiths did not consent and that he had no authority to
signify consent on their behalf.
Why then did the court below conclude that Smiths were a party to the arrangement to which Mr Hayter was a party, if
indeed it did so? The answer is that it did not think that any element of consensuality was necessary. It thought that it sufficed if
Mr Hayter was acting within the scope of his employment and, in doing what he did do, was committing an actionable breach of
a statutory duty. This is to confuse vicarious liability in tort, in which consensuality plays no part, with vicarious liability
stemming from adherence, and thus being party to an agreement or arrangement where, as in the case of vicarious liability in
contract, consensuality on the part of the principal is of the essence.
In dealing with this aspect, the judgment of the court below contains a heading Was Smiths party to the agreement?,
followed by a brief passage in which it reviewed Mr Hayters activities and concluded ([1991] ICR 52 at 62) Mr Hayter was
very clearly a party to the agreement. The next heading was Were Mr Hayter and the others giving effect to or enforcing or
purporting to enforce the agreement in respect of particular restrictions? Under this heading the court concluded, in a passage
which I have already quoted, that Mr Hayter had purported to give effect to the arrangement and that his outward actions had in
fact given effect to it. I return to this aspect briefly hereafter, but for present purposes it is only necessary to say that this part of
the judgment concluded (at 64) with the words:

If Mr. Hayters acts at the meetings were the acts of his company, an issue with which we deal below, then Smiths by
his conduct at the meetings gave effect to the arrangement in accepting the two restrictions formulated above.

Nothing further was said about whether Smiths were party to the agreement and indeed the court never in terms found that
they were. It had found that Mr Hayter was a party and that Mr Hayter gave effect to it. The next section of the judgment was
headed The liability of Smiths for the acts of Mr. Hayter and was in these terms (at 6467):

The arguments deployed before us on this issue were elaborate and refined. It is salutary to remember that injunctions
in every area of litigation are conventionally phrased by their servants or agents. Extensive inquiry as to whether a given
act falls within the scope of the authority of an employee or in the course of his employment adds a new dimension to the
policing of injunctions. At the same time a principal or master should not be held to be in contempt unless vicariously
liable through his servants or agents. It matters not whether Mr. Hayter was a servant or agent of Smiths. The basic
principles applicable to the acts of either virtually converge. In each case the test to be applied is the same: was the
servant or agent acting on behalf of, and within the scope of the authority conferred by, the master or principal? 161per
Lord Wilberforce in Heatons Transport (St. Helens) Ltd. v. Transport and General Workers Union ([1972] 3 All ER 101 at
109, [1973] AC 15 at 99). His Lordship continued: Usually a servant, as compared with an agent, has a wider authority
because his employment is more permanent and he has a larger range of duties and he may have to exercise discretion in
dealing with a series of situations as they arise. If Mr. Hayter was the servant of Smiths and if acting in the course of his
employment he knowingly entered into the prohibited agreement the employing company or master will be responsible on
grounds of vicarious liability: Z Ltd. v. A-Z and AA-LL ([1982] 1 All ER 556 at 569, [1982] QB 558 at 581). It is true that
that was a case concerned with tort. However, Mr. Hayters entry into the agreement was an actionable breach of a
statutory duty and in our view the same considerations apply as to tortious activity for the protection of the public interest.
What are the facts about his employment? He was the servant of Smiths for whom he had worked for some 17 years
having been seconded to them by the company ARC with which Smiths is associated and by which it is managed. He was
 the unit manager for Smiths. There were six plant managers below him as well as an area manager above him. He
attended board meetings and made reports to the board. Not all unit managers in this industry have the same job
specifications. But in his case the job included the efficient and profitable operation and control of all ready mixed
concrete operations in the unit. He had managerial responsibility for all of Smiths operations in the area covered by the
agreement. He was nominally responsible for pricing (though in fact he did not intervene in pricing contracts), and for
contracts and customer relations generally. He duties included meeting competitors. He was responsible for customer
contact. In all he was a manager and a duty of a manager is to manage, in this case the operations within his unit. It is
argued that these words mean that he had no responsibility for external relations. We do not accept this interpretation of his
role on the evidence. Now Mr. Hayter had not been authorised to enter into agreements of this sort. On the contrary he had
been instructed in the clearest terms to comply with the requirements of the Act of 1976. An express prohibition on [price]
fixing and allocation agreements was incorporated by reference into his job description. He was also instructed to report
any meetings he attended where representatives of competing companies were present. He was instructed to confirm that
he had carried out these instructions. So his participation was forbidden, and it appears that during the material period
19831984 Smiths senior management were unaware of what was going on. His participation was, it would seem,
deliberately concealed from higher levels of management. There is no evidence that Smiths held out Mr. Hayter as being
authorised to enter into the agreement. Mr. Tomkies knew that Mr. Hayter had difficulty in complying with the agreement
and never thought his employers had authorised him to enter into it. Everyone at the meetings knew that what was going
on was wrong and not authorised by their employers. On the basis of these facts it is argued for Smiths that it had not
conferred either express or implied authority on Mr. Hayter. We do not accept this argument. It is based on too narrow a
view of Mr. Hayters job specification. He was actually authorised to be a unit manager in charge of operations. If they
were simply to be internal, it is strange that he was issued with such full instructions circumscribing his meetings with
competitors. In any event he was there as a unit manager of Smiths and he was regarded as such at the meetings. He was
not participating in his individual capacity. As each participant argued 162 his case for allocation to his employer, each was
seeking to benefit his master and believed the others were doing the same, however unsuccessfully. In Kooragang
Investments Pty. Ltd. v. Richardson & Wrench Ltd. ([1981] 3 All ER 65 at 68, [1982] AC 462 at 471472), Lord
Wilberforce said: The manner in which the common law has dealt with the liability of employers for acts of employees
(masters for servants, principals for agents) has been progressive: the tendency has been toward more liberal protection of
innocent third parties. Here the innocent parties are not the other participants who were also bent on wrongdoing but the
public interest as represented by the Director General of Fair Trading. He also cited the classic judgment of Willes J. in
Barwick v. English Joint Stock Bank ((1867) LR 2 Exch 259 at 266, [186173] All ER Rep 194 at 198), which stated the
principle thus: In all these cases it may be said that the master has not authorized the act. It is true, he has not
authorized the particular act, but he has put the agent in his place to do that class of acts, and he must be answerable for the
manner in which the agent has conducted himself in doing the business which it was the act of his master to place him in.
Here Smiths appointed Mr. Hayter unit manager to control the operations of his unit. What he did, he did for the supposed
benefit of his master. Lord Wilberforce said ([1981] 3 All ER 65 at 69, [1982] AC 462 at 473) that that was a valuable
indication that it was done in the course of employment. As to the instructions Mr. Hayter received, they related to the
mode of doing his job but did not alter the nature or scope of his employment. His participation was an unauthorised mode
of doing that which he was employed to do, that is to manage the unit. We conclude that his attendance at the meetings
was in the course of his employment. There is however a further point raised by counsel for Smiths. Relying on Hone v.
Page ([1980] FSR 500) he invokes the following principle, that for a master to be shown to be liable in contempt for the
acts of his servants or agents it must be shown that the master either authorised the acts or could reasonably have foreseen
the possibility of such acts and failed to take all reasonable steps to prevent them. We were satisfied in this case that on the
whole Smiths took all reasonable steps to prevent breaches of the Act, and it is implicit in the numerous instructions sent to
Mr. Hayter by his superiors that the possibility of a breach was foreseen. In Hone v. Page Slade J. said that he enunciated
this principle in the absence of authority. The reference to foreseeability and to the taking of preventive measures was
made because the court was concerned, as is this court, with the issue of wilfulness in contempt. Slade J. was prepared to
assume, without deciding, that the master is not absolutely liable for the acts of his servants. [Anthony Lincoln Js
emphasis.] Having made that hypothetical assumption in favour of the master, he went on to find the master guilty of wilful
disobedience of an order of the court. The decision did not determine and was not intended to determine whether a
servants acts in contempt of court committed in the course of employment render his master vicariously liable for that
contempt, where the acts of the servant but not the master constitute wilful disobedience. In Therm-A-Stor Ltd. v. Home
Insulation Ltd. ([1982] Com LR 244) the principal was found guilty of contempt on the basis of vicarious liability even
though the principal had taken all reasonable preventive measures. Hone v. Page was not followed, it being the view of the
court that such measures went to mitigation, not to liability. This approach appears to us more nearly to accord with the
general principles of vicarious liability. Wrongful acts by servants or agents are frequently prohibited or not authorised.
But as Lord Wilberforce 163 said in Kooragang ([1981] 3 All ER 65 at 69, [1982] AC 462 at 472) principle and logic
demand that the employer should [none the less] be held liable in that case to protect innocent third parties, in this, to
protect the public interest under the Act of 1976. We therefore consider that the Director has established the charge of
contempt against Smiths and we propose to take into account such preventive measures as Smiths took in assessing to what
extent Smiths mitigated their contempt.

Assuming that Mr Hayter was acting within the scope of his employment, which was strongly disputed by Mr Dehn, what
was he found to have been doing? He had personally entered into an arrangement relating to how he would discharge his duties
as Smiths unit manager and he had given effect to that arrangement. I say that he had personally entered into the arrangement, as
contrasted with entering into it on Smiths behalf, because he made it abundantly clear to the other parties that he was forbidden
by Smiths to do so and a fortiori that he had no authority to do so on its behalf. But such an arrangement is not registrable,
because Mr Hayter did not himself carry on business anywhere and, contrary to the courts assumption, Mr Hayters action in
entering into the arrangement was not an actionable breach of statutory duty under s 35(2). It was Smiths and not Mr Hayter who
carried on business and their purely vicarious liability for the acts of their servants acting within the scope of their employment,
albeit in a way not contemplated and indeed forbidden, could not extend beyond a liability for the consequences of Mr Hayter
personally entering into and giving effect to an arrangement which was not registrable. This would not on any view constitute a
breach of the injunctions. Nor would it constitute Smiths a party to the arrangement which, under the terms of the injunctions
with their reference to s 35(1), was an essential prerequisite to its being in breach of them and so in contempt.
That conclusion would be sufficient to lead to the appeal being allowed and the finding of contempt of court quashed, but I
appreciate that the Director General is concerned with wider issues and that it may be thought, mistakenly I hope, that I have
taken too narrow or legalistic a view of what the court below was deciding. Let me therefore look at the matter on a broader
basis and assume that the court was finding or intending to find that Smiths was a party to the arrangement through the
instrumentality of Mr Hayter.
Heatons Transport (St Helens) Ltd v Transport and General Workers Union [1972] 3 All ER 101, [1973] AC 15 was a case
in which the shop stewards, who were accredited officials of the union and, in law, its agents, had authority under the rules to
instigate the industrial action complained of (see [1972] 3 All ER 101 at 110112, [1973] AC 15 at 100103 per Lord
Wilberforce). The issue was whether this authority had been effectively curtailed or withdrawn (see [1972] 3 All ER 101 at 117
118, [1973] AC 15 at 110). The House of Lords held that it had not. When Lord Wilberforce in the passage of the report quoted
in the judgment said that In each case the test to be applied is the same: was the servant or agent acting on behalf of, and within
the scope of the authority conferred by, the master or principal? (see [1972] 3 All ER 101 at 109, [1973] AC 15 at 99; my
emphasis), he was disagreeing with a decision of the Court of Appeal that the test was different. For present purposes that is
immaterial. What matters is that the key issue is the authority of the servant or agent and quite clearly Mr Hayter was acting
outside the scope of his authority, albeit within the scope of his employment.
Z Ltd v A [1982] 1 All ER 556, [1982] QB 558 was a case in which the court was reviewing the scope of Mareva injunctions
almost in the abstract. It held that 164 banks which with notice of the injunction allowed assets held by them to be dissipated
were guilty of a contempt of court on the third basis which I have mentioned, namely interfering with the administration of
justice (see [1982] 1 All ER 556 at 566567, [1982] QB 558 at 578 per Eveleigh LJ). It was so understood and applied in A-G v
Times Newspapers Ltd [1991] 2 All ER 398 at 411, 415, 425, [1991] 2 WLR 994 at 1010, 1014, 1025. Given knowledge of the
terms of the injunction upon the part of the bank or other employer, the act of the servant acting within the scope of his
employment will normally be imputed to the employer because the servant will normally have been authorised to take that action.
Eveleigh LJ in Z Ltd v A [1982] 1 All ER 556 at 569, [1982] QB 558 at 581 in the passage cited in the judgment of the court
below was saying no more than this. He was not considering the case of a servant who within the scope of his employment acts
in breach of the terms of an injunction but in defiance of an instruction not so to act which limited the authority otherwise
stemming from the scope of that employment. The Heaton case [1972] 3 All ER 101 at 120, [1973] AC 15 at 113 indeed
suggests that, if this had been the issue, the answer would have been that the employer would not have been liable, since the
House of Lords held in para 5 of the summary:

As soon as [the injunction was granted] the union became responsible for taking all possible steps to stop the blacking,
including the unequivocal withdrawal of the shop stewards authority and if necessary disciplinary action. (My emphasis.)

Unless the position of a servant differs fundamentally from that of an agent, which Lord Wilberforce said that it did not (see
[1972] 3 All ER 101 at 109, [1973] AC 15 at 99), the union would have been in contempt anyway, the remedial steps being
relevant only to penalty.
The only case in which this precise point appears ever to have been considered is Hone v Page [1980] FSR 500 at 507,
where Slade J held:

I think that a man must be deemed to do a relevant act by his servants or agents, within the meaning of an
undertaking given in this form, if (a) the persons who did the acts were his servants or agents, (b) the acts were done in the
course of the service or agency, and (c) he either (i) authorised the acts or (ii) could reasonably have foreseen the possibility
of such acts and failed to take all reasonable steps to prevent them.

Since in this case Smiths did not authorise the acts, but on the contrary expressly forbade them and foresaw the possibility of
such acts but, as the court found, took reasonable steps to prevent them, Slade Js formulation cannot stand with the law as the
court below interpreted it. I have no doubt that Slade Js formulation is wholly correct.

Giving effect to, enforcing or purporting to enforce

Mr Dehn was forensically very exercised at the court finding that Mr Hayter gave effect to the arrangement in a situation in
which, as he submitted, the only proper finding was that Mr Hayter purported to give effect to the arrangement, which is not
prohibited by the injunctions.
The basis of this argument was a contention that a party to an arrangement enforces or purports to enforce it if, and only if,
he takes action to enforce it against one or more of his fellow parties. He gives effect to it only if his conduct in his business in
relation to third parties is actually influenced by the arrangement. Here, as Mr Dehn submitted, there was no enforcement or
purported 165 enforcement against the other parties to the arrangement and no change in Mr Hayters conduct of Smiths
business and so no giving effect to the arrangement. At most there was a purported giving effect.
I do not accept this dichotomy between enforcement and giving effect. Whether either or both are apt to describe
particular conduct in particular situations is better left for ad hoc decision. So far as this case is concerned, the court held that Mr
Hayters actions at the meetings were designed to lead his fellow participants to believe that he was giving effect to the
restrictions and so to lead them to give effect themselves to the arrangement. It also declined to accept that the arrangement had
no effect on Smiths trading operations.
Even if I was inclined to interfere with these conclusions of fact by a specialist court which saw the heard the witnesses,
which I certainly am not, I doubt whether it would be proper to do so. On these findings I have no doubt that Mr Hayter, but not
Smiths, gave effect to the arrangement and probably also enforced or purported to enforce it.

THE TEXTBOOKS
It so happens that the learned Director General, Sir Gordon Borrie QC, is co-author of a textbook on the law of contempt
Borrie and Lowe Law of Contempt (2nd edn, 1983). Happily it is very far from yet being authoritative in the technical sense,
since the Director General is alive and well. On the other hand it is in every other respect a work of authority and it must be rare
for a litigant to be able to rely upon his own writings in support of his case, particularly where the work was written before the
case arose. There is also another standard textbook, namely Miller Contempt of Court (2nd edn, 1989), which is relied upon by
Borrie and Lowe p 402 in the relevant passage, which reads as follows:

5 Responsibility for Breach In so far as an individual is enjoined by an order to do or refrain from doing a particular
act the responsibility for obeying that order is clearly thrown on that individual. (But where an injunction is granted
against a husband and wife and is broken by one spouse and the other spouse is neither implicated nor to blame no liability
will answer to the other: Hope v Carnegie (1868) LR 7 Eq 254.) More difficulty occurs where orders are made against a
corporate body or a trade union. With regard to corporate bodies it seems established that liability is dependent upon the
vicarious principle (See Heatons Transport (St Helens) Ltd v T and GWU ([1972] 3 All ER 101, [1973] AC 15); Z Ltd v A-
Z and AA-LL ([1982] 1 All ER 556 at 569, [1982] QB 558 at 581) per Eveleigh LJ and Miller Contempt of Court (2nd edn,
1989) p 251) so that where an order has been made against the corporation, that body is liable for acts of its servants (at any
rate where they are acting in the course of their employment (see Miller (at p 251))). Hence, it has been held that if,
contrary to an order made against the corporate body: the act is in fact done, it is no answer to say that, done, as it must
be, by an officer or servant of the council, the council is not liable for it, even though it may have been done by the servant
through carelessness, neglect, or even in dereliction of his duty. (Per Warrington J in Stancomb v Trowbridge UDC [1910]
2 Ch 190 at 194.)

I have to say that I think that this is not an exhaustive statement of the law. There is no necessary connection between the
vicarious liability of an employer or principal for the tortious actions of his servant or agent committed whilst acting within the
scope of his employment or agency and the commission of a contempt of court. Vicarious liability in tort arises because the
employer or principal
166
 has put the [servant or] agent in his place to do that class of acts, and he must be answerable for the manner in which
the agent has conducted himself in doing the business which it was the act of his master to place him in.

(See Barwick v English Joint Stock Bank (1867) LR 2 Exch 259 at 266, [186173] All ER Rep 194 at 198.) Being answerable
for is not the same thing as intending and there can be no sufficient mens rea to support a finding of contempt unless the
employer or principal intended to do the prohibited act. This is not to say that he need personally have formed this intent. If he
left the servant or agent free to form the intent on his behalf, this will suffice and prima facie a servant or agent is free to form
such an intent within the scope of his employment or authority. This will not, however, be the case if the employer or principal
has expressly forbidden it and there are no circumstances casting doubt upon the reality of the prohibition. In so far as Therm-A-
Stor Ltd v Home Insulation Ltd [1982] Com LR 244 decides the contrary, I consider the decision to have been wrong.

THE DIRECTOR GENERALS FEARS

Mr Richards told us of the Director Generals fears that, if Smiths were not in contempt on the facts of this case, a gaping
hole exists in his power to enforce the 1976 Act. I have to say that I think that these fears are exaggerated.
All courts, and in particular the Restrictive Practices Court in its specialised field of endeavour, are concerned with realities
rather than appearances. It is idle for a company to protest that it did not wish its servants or agents to enter into and give effect
to restrictive agreements on its behalf and that it had prohibited such conduct, if its actions belie its protestations. Its liability to
be found to be in breach of an injunctive order does not depend upon identifying a nod or a wink to its servants and agents. It
depends upon a consideration of everything that it has done or has omitted to do in the situation which confronted it.
It appears from the evidence in this case, and I doubt whether this is unique, that, where an industry has a history of cosy
restrictive agreements, any meeting of executives who directly or indirectly are capable of influencing prices and the allocation of
contracts will be afflicted with an almost Pavlovian reaction to make and enforce a new restrictive agreement. It appears, and this
has surprised me, that it makes no difference that the executives concerned may not themselves enjoy profit related remuneration.
Account will have to be taken of what, in other circumstances, might be regarded as a wholly admirable desire to advance the
best interests of the company. This may not extend to full-blooded participation in mutual restrictive practices, but may be
limited, as in this case on one view of the facts, to joining the cartel with a view to making sure that the cartel did not damage
the companys interests. The greater the incentive to servants or agents to make and give effect to, enforce or purport to enforce
new restrictive agreements, the more draconian will the counter or compliance measures have to be if the court is not to find that
the reality is that the company authorised its servants or agents and that their actions were its actions.
This was indeed recognised by Smiths, which, after Mr Hayters activities became known and in the light of those activities,
strengthened their compliance measures. Measures which, as the court found, were reasonably sufficient before those activities
had been revealed would not have been sufficient thereafter.

CONCLUSIONS
The arguments advanced upon this appeal have been both subtle and complex. In seeking to do justice to them and to the
judgment of the court below, I am 167 conscious that my judgment has become more diffuse than I would have wished. It may
therefore be helpful if I summarise my conclusions.
(1) The fundamental purpose of the contempt jurisdiction of the court in the context of disobedience of court orders is to
uphold the supremacy of the rule of law and the courts authority to administer it. It is punitive in character. That it may provide
an enforcement remedy for third parties is incidental.
(2) It is an essential prerequisite to a finding of contempt that the factual basis shall have been proved beyond all reasonable
doubt and that there shall have been mens rea on the part of the alleged contemnor. Mens rea in this context does not mean a
wilful intention to disobey the courts order, but an intention to do the act which constitutes the disobedience with knowledge of
the terms of the order, although not necessarily an understanding that the act is prohibited.
(3) An order restraining X by itself, its servants or agents or otherwise is addressed only to X and directly binds only X. If
its servants or agents are to be found guilty of contempt, it can only be on the basis that they are aiders and abettors of Xs
contempt or have so acted as to impede or interfere with the administration of justice. Such an order is, however, not limited to
restraining X from doing the prohibited acts personally, if X is a natural person, or in the shape of its alter ego, if X is a juridical
person. It also restrains X from doing the acts by the instrumentality of its servants or agents.
(4) Whether X is doing an act by the instrumentality of its servants or agents will depend upon the scope of their mandate.
This will be judged in the light of reality rather than form. If X should have appreciated that the servant or agent would be likely
to do the prohibited act unless dissuaded by X, the act will be regarded as being within the scope of that mandate if X has not
taken all reasonable steps to prevent it. Such steps may in appropriate cases involve far more than express prohibition and extend
to elaborate monitoring and compliance machinery and procedures and the creation of positive incentives designed to dissuade
the servant or agent.
(5) If the mandate of the servant or agent has been effectively restricted, ie all reasonable steps have been taken to achieve
this objective, X may nevertheless be answerable to third parties for damage suffered in consequence of the acts of the servant or
agent, if it can be said that X put him in a position to do them. This is to be distinguished from answerability for acts done by X
personally through the instrumentality of his servants or agents and does not involve a disobedience by X of the courts orders or
any liability in contempt.
(6) No one can become a party to an agreement or arrangement until their adherence is consensual, whether the necessary
consensus stems from the mind of the alleged party or that of its servant or agent acting within the scope of his mandate.
(7) On the finding of the court that Smiths expressly forbade Mr Hayter to enter into the restrictive arrangement and put in
place adequate compliance measures, Mr Hayters adherence to the arrangement was not Smiths adherence, the necessary
consensuality on the part of Smiths was absent and Smiths were not a party to the arrangement. The injunction was concerned
solely with giving effect to or enforcing or purporting to enforce agreements or arrangements to which Smiths were a party and
accordingly there was no disobedience of the injunction.
(8) Independently of this consideration, on the finding of the court that Smiths expressly forbade Mr Hayter to give effect to
or enforce or purport to enforce any such arrangement and put in place adequate compliance measures, Smiths did not do the
prohibited act by the instrumentality of Mr Hayter or at all.
168
(9) The Director General has to prove both that Smiths were a party to the arrangement and that they gave effect to or
enforced or purported to enforce it, if he is to establish contempt of court by Smiths. He has done neither.
(10) Although it is immaterial to the motion which charged Mr Hayter only with aiding and abetting a contempt by Smiths,
Mr Hayter in entering into and giving effect to the arrangement was not within the scope of s 24 or s 35 of the 1976 Act, because
he did not himself carry on business within the United Kingdom or at all. His only business activities were carried on in
purported performance of his duties as a servant of Smiths.
(11) I would therefore allow the appeal and set aside the orders of the Restrictive Practices Court.

MR HAYTERS POSITION
Mr Hayter has not appealed against the orders of the Restrictive Practices Court in so far as they affected him. However, if
Smiths are not in contempt of court, it would appear that he cannot have been an aider and abettor of such a contempt as found by
the court below. Earlier in this judgment I pointed out that the court itself is involved in every allegation and finding of contempt
of court and can indeed take action to sequestrate or commit of its own motion. It must also follow that it can, and in appropriate
cases should, of its own motion set aside a finding of contempt of court and any consequential order. This aspect was not
considered during the hearing of the appeal and it is one upon which the Director General is entitled to be heard. However,
subject to any submissions on his behalf, I would set aside the orders of the Restrictive Practices Court against Mr Hayter
including those as to costs. In the absence of an appeal by Mr Hayter, which now would require an order extending the time for
appealing which would not necessarily be granted, I would not be disposed to make any order for the payment of his costs by the
Director General.

GLIDEWELL LJ. I have had the advantage of reading in draft the judgment of Lord Donaldson MR. I agree with him that the
appeal should be allowed and that the order of the Restrictive Practices Court made on 24 September 1990 (see [1991] ICR 52)
should be set aside so far as it relates to Smiths Concrete Ltd (Smiths). I add some observations of my own because we are
differing from the court below on an issue of some general importance. I do not repeat the facts, which Lord Donaldson MR has
set out in his judgment.
The notice of motion alleged that Smiths had committed breaches of orders of the court dated 14 March 1978 and 29 March
1979 by giving effect to or enforcing or purporting to enforce in contravention of s 35(1) of the Restrictive Trade Practices Act
1976 an agreement or agreements alleged to have been entered into between Smiths and the other ready-mixed concrete
producers named as respondents. The agreement in question was alleged to have been made in or about March 1983, and altered
in April 1984, by Mr Hayter in his capacity as Smiths unit manager.
Section 35(1)(b) of the 1976 Act can only be contravened by any person party to the agreement who carries on business
within the United Kingdom It follows in my view that Mr Dehn QC, for Smiths, is correct when he submits that the first
matter which the Director General was required to prove is that Smiths were parties to the agreement.
Section 43(1) of the 1976 Act defines agreement as including any agreement or arrangement, whether or not it is or is
intended to be enforceable (apart from any provision of this Act) by legal proceedings I accept the submission of Mr 169
Richards, for the Director General, that in this case the agreements alleged were not intended to be enforceable by legal
proceedings, and were in the nature of loosely worded arrangements. Nevertheless, however loose the wording, they were
agreements to which the representatives of the companies present at the meetings gave their consent.
Mr Richards argues that Mr Hayter was clearly a party to the agreements on the facts found by the court, that in making the
agreements he was acting within the scope of his employment by Smiths as unit manager and that that resulted in Smiths being
party to the agreement. Mr Richards submits that this result follows even though, as the court has found, during the material
period 19831984 Smiths senior management were unaware of what was going on. His participation was, it would seem,
deliberately concealed from higher levels of management (see [1991] ICR 52 at 66). The court also found that Mr Hayter had
been instructed in the clearest terms to comply with the requirements of the Act of 1976, which meant that he was expressly
forbidden either to make or to put into effect any such agreement.
Anthony Lincoln J, the president of the Restricive Practices Court, did not say expressly in his judgment that the court
adopted and applied the scope of employment test to determine whether Smiths were parties to the agreement. Nevertheless,
from the passages from Anthony Lincoln Js judgment cited in Lord Donaldson MRs judgment, I think it is clear that this was
the test adopted by the court below. In my view, the court was in error in adopting that test. The correct test was that which
determines whether a principal is a party to a contract entered into by his agent, namely did the agent have authority to make the
contract on the principals behalf? The same test applies to determine whether an employer is bound by a contract entered into by
his employee.
Surprisingly, there appears to be no direct authority on this question. When, in his speech in Heatons Transport (St Helens)
Ltd v Transport and General Workers Union [1972] 3 All ER 101 at 109, [1973] AC 15 at 99, Lord Wilberforce said:

In each case the test to be applied is the same: was the servant or agent acting on behalf of, and within the scope of the
authority conferred by, the master or principal?

he was speaking in a different context. Nevertheless, the passage seems to me to indicate that this would be the correct test to
decide whether an employer was party to an agreement made by his employee.
On the facts found by the Restrictive Practices Court, it is clear that Mr Hayter had neither express nor ostensible authority
from Smiths to enter into the agreements in question. If, however, an employer knew that there was a possibility that his manager
would be tempted to enter into such agreements, and failed to take all reasonable steps to prevent him doing so, the court would
be entitled to find that the employer had impliedly authorised the employee to act as he did.
Thus I agree with Lord Donaldson MR that Slade J formulated the correct test when he said in Hone v Page [1980] FSR 500
at 507:

I think that a man must be deemed to do a relevant act by his servants or agents, within the meaning of an
undertaking given in this form, if (a) the persons who did the acts were his servants or agents, (b) the acts were done in the
course of the service or agency, and (c) he either (i) authorised the acts or (ii) could reasonably have foreseen the possibility
of such acts and failed to take any reasonable steps to prevent them.

170
In the present case such authority is negatived by the courts finding that Smiths took all reasonable steps to prevent
breaches of the Act (see [1991] ICR 52 at 67).
It follows that, applying the test formulated by Slade J to the facts of this case, the Director General has failed to prove that
Smiths were parties to the agreements.
This is enough to determine the appeal. However, I should say that on other points which were argued I agree with Lord
Donaldson MR that the court was entitled on the evidence before it to find, as it did, that Mr Hayter gave effect to the agreement.
It follows, however, from what I have already said that, since Smiths were not proved to have been parties to the agreement, it
was also not proved that they gave effect to it.
Like Lord Donaldson MR, I do not believe that s 35 of the 1976 Act is rendered toothless by this decision, the unattractive
prospect which Mr Richards held out to us as the result of adopting the authority test. I am confident that, if an arrangement for
price-fixing and/or the allocation of contracts is put into effect, the facts will in most cases soon come to the attention of senior
management. If they do not, it will normally be because management has not taken all reasonable steps to prevent its employees
from entering into such an arrangement. In either case, a court would be entitled to find that if, after its management learnt of the
facts, an employing company had ratified the agreement and its putting into effect, s 35 would then have full application.
It is for these reasons, which do little more than restate what Lord Donaldson MR has said, that I agree that Smiths appeal
should be allowed. I also agree that the finding and order against Mr Hayter should be set aside, with no order as to his costs.

TAYLOR LJ. I agree.

Appeal allowed.
The court refused leave to appeal to the House of Lords but certified, under ss 1 and 13 of the Administration of Justice Act 1960,
that the following point of law of general public importance was involved in the decision: the basis of liability of an employer in
contempt and/or under the Restrictive Trade Practices Act 1976 for the acts of its employees.

Solicitors: Gouldens agents for Graham Dransfield; Treasury Solicitor.

Mary Rose Plummer Barrister.

171
[1991] 4 All ER 172

Curtis v Wild
SHIPPING

QUEENS BENCH DIVISION, MANCHESTER

HENRY J
5 JUNE 1991

Water and watercourses Navigation Reservoir Reservoir used by sailing dinghies for pleasure purposes Personal injuries
Person on board one dinghy suffering personal injuries as result of fault of another dinghy Whether reservoir used for
navigation Whether dinghy used on reservoir for pleasure purposes a vessel used in navigation Whether time limit for
bringing personal injuries claim two years or three Merchant Shipping Act 1894, s 742 Maritime Conventions Act 1911, s 8.

The question whether an enclosed sheet of water, such as a reservoir, is water which can be used by vessels or ships for
navigation for the purposes of s 742a of the Merchant Shipping Act 1894 depends not on the size of the sheet of water but on
whether the vessels are proceeding from an originating place A to a terminus B for the purpose of discharging people or cargo at
the destination point, in which case there is navigation, or whether the water is simply used for pleasure purposes by people
messing about in boats, in which case there is no navigation. Accordingly, a sailing dinghy used on a reservoir for such
pleasure purposes is not a vessel used in navigation within s 742, and where a person on board such a dinghy suffers personal
injuries caused by the fault of another dinghy the time limit for bringing an action for damages for personal injuries is the
conventional three-year limit for personal injuries claims and not the two-year limit provided for by s 8 b of the Maritime
Conventions Act 1911 (see p 174 f to h, p 175 e f j to p 176 a e f h j, post);
________________________________________
a Section 742, so far as material, is set out at p 173 j to p 174 a, post
b Section 8, so far as material, is set out at p 173 f g, post

Southport Corp v Morriss [1893] 1 QB 359 and Weeks v Ross [1913] 2 KB 229 applied.
Quaere. Whether a person who has fallen overboard from a vessel and suffers personal injuries as a result of the fault of
another vessel is no longer a person on board the former vessel for the purposes of s 8 of the 1911 Act (see p 176 j to p 177 a,
post).

Notes
For limitation of time for actions for damages for personal injuries, see 28 Halsburys Laws (4th edn) para 691, and for cases on
the subject, see 32 Digest (Reissue) 486, 37343736.
For limitation of time for an action to enforce a claim for personal injuries against a vessel or her owners, see 43 Halsburys
Laws (4th edn) para 1005, and for cases on the subject, see 42 Digest (Reissue) 456459, 51335149.
For the Merchant Shipping Act 1894, s 742, see 39 Halsburys Statutes (4th edn) 606.
For the Maritime Conventions Act 1911, s 8, see ibid 641.

Cases referred to in judgment

Southport Corp v Morriss [1893] 1 QB 359, DC.
Weeks v Ross [1913] 2 KB 229, DC.
172

Summons
By a summons dated 11 June 1990 the defendant, Clifford Wild, taking a preliminary point, sought a declaration that the action
brought by a writ issued on 11 June 1990 by the plaintiff, Majorie Edith Curtis, against the defendant for damages for personal
injuries suffered and expenses incurred as a result of an accident which occurred on or about 2 August 1987 at Belmont reservoir,
Bolton arising out of the negligence of the defendant and/or the defendants failure to navigate or manage a sailing dinghy which
collided with the plaintiff was non-maintainable by reason of s 8 of the Maritime Conventions Act 1911, in that the action had not
been commenced within two years from the date the injury was caused. The summons was heard and judgment was given in
chambers. The case is reported by permission of Henry J. The facts are set out in the judgment.

Simon Hilton for the defendant.

Digby C Jess for the plaintiff.

5 June 1991. The following judgment was delivered.

HENRY J. On 2 August 1987 the plaintiff was in a Lark dinghy sailing on Belmont reservoir when it capsized near the first
marker buoy about 50 yards from the bank and the plaintiff was thrown into the water. The defendant was sailing another dinghy,
I am told 427 metres long, which according to the statement of claim upon which this application is based had been several
dinghies and some distance behind the plaintiffs dinghy. The allegation is that the defendants dinghy negligently caused or
permitted his dinghy to strike the plaintiff who was still in the water and close to her upturned dinghy. That accident happened on
2 August 1987 and the writ was issued on 11 June 1990, that is to say within the conventional three-year period. However, it is
contended on behalf of the defendant that the action is statute-barred because of the provision of s 8 of the Maritime Conventions
Act 1911. That section, so far as is relevant, reads thus:
 No action shall be maintainable to enforce any claim against a vessel or her owners in respect of any damage or
loss to another vessel or damages for loss of life or personal injuries suffered by any person on board her [that is to say
on board that other vessel], caused by the fault of the former vessel unless such proceedings therein are commenced
within two years from the date when the damage or loss or injury was caused

So it is said that this action was not started within the two years and so is statute-barred. The court has what appears from
the statute to be an unfettered discretion to disapply that period of limitation. However, in view of the authorities construing the
exercise of that discretion to which I have not been referred the plaintiff in resisting this application does not ask me to exercise
my discretion. The point taken is as to whether these dinghies were vessels as described in s 8. By s 10 of the 1911 Act the Act
shall be construed as one with the Merchant Shipping Acts 1894 to 1907 and those Acts, as the name implies, deal with merchant
shipping and were passed to incorporate the international conventions in relation to merchant shipping into the laws of this
country. Section 742 of the Merchant Shipping Act 1894, is the definition section and reads as follows:

In this Act, unless the context otherwise requires, the following expressions have the meanings hereby assigned to
them; (that is to say,) VESSEL includes any ship or boat, or any other description of vessel used in navigation; SHIP
173includes every description of vessel used in navigation not propelled by oars

I have been referred as to the meaning of the words used in navigation to two decisions of the Divisional Court. The first is
Southport Corp v Morriss [1893] 1 QB 359, and there the appellants were the owners of an artificial lake, half a mile long by 180
yards wide situated on the foreshore in the borough of Southport. It was a lake which had been excavated from the sand to a
depth of three feet and was surrounded by a concrete wall and was not open to the sea except at high spring tides. The lake was
used for boating purposes and the appellants had placed on it for hire a vessel or launch of about three tons electrically driven and
capable of carrying between 30 or 40 passengers on trips around the lake. Each such passenger paid a fare for such a trip and the
question was whether the appellants had unlawfully allowed that vessel to ply with more than 12 passengers on board without
having a duplicate certificate issued by the Board of Trade and put up on some conspicuous part of the vessel. The question was
whether the then definition of ship under the Merchant Shipping Act 1854, which seems to have been in the same terms, applied.
Lord Coleridge CJ, in giving the leading judgment, with which Charles J agreed, said (at 361):

I am of opinion that this appeal must be allowed. The launch in question cannot be held to be within the provisions of
s. 318 [that is the requirement to put up the certificate] unless it can be said to be a ship And by s. 2 the term ship is
defined to include every description of vessel used in navigation not propelled by oars. We are therefore reduced to the
question whether this launch was a vessel used in navigation. I think that, having regard to the size of the sheet of water on
which it was used, it was not. Navigation is a term which, in common parlance, would never be used in connection with a
sheet of water half a mile long. The Attorney-General has asked where we are to draw the line. The answer is that it is not
necessary to draw it in any precise point. It is enough for us to say that the present case is on the right side of any
reasonable line that could be drawn.

The reservoir in this case was 07 of a nautical mile long and at its widest point 03 of a nautical mile wide. The first
question which the court will decide is whether having regard to the size of the sheet of water on which it was used vessels on it
were being used in navigation. The question is what is there meant by navigation. It is contended on behalf of the defendant that
navigation is simply a question of steering or adjusting a course, effectively sailing a course. If that were right then it would be
very difficult to see why the size of the sheet of water to which Lord Coleridge CJ draws attention is important. The distinction
that Lord Coleridge CJ there appears to me to be drawing is whether that sheet of water is used by vessels going from point A to
point B or whether it is used by people simply messing about in boats.
The second case to which my attention has been drawn distinguishes that case and that is Weeks v Ross [1913] 2 KB 229.
There a motor boat was used for carrying more than 12 passengers from Exeter along the river Exe for half a mile and for a
further mile along a canal to the first lock, returning thence to Exeter. Below that lock the canal continued for two miles through
other locks to the estuary of the river and it was used by sea-going ships for the purpose of going to and from Exeter. It was held
that the motor boat was a vessel used in navigation within the meaning of s 742 of the Merchant Shipping Act 1894 and so
accordingly was a passenger steamer within the meaning of s 271. In the judgment of Channell J he says (at 231):
174

The only other point is one of some difficulty and not easy to determine. It is raised by the case of Southport
Corporation v. Morris ([1893] 1 QB 359), which I think requires careful examination.

Channell J then sets out that case making a comment that the point of the lake was this (at 232):

This lake was made in order that children and other people might amuse themselves with a sort of quasi-sea when the
other sea had gone nearly out of sight. There was a small launch which was used for amusement and carried people, who
certainly were passengers and were more than twelve.

And he says that that was found not to be within the Act. He quotes Lord Coleridge CJs judgment and then says:

It is quite clear that the judgment proceeded entirely upon the view of the court as to the place where the alleged
navigation was, and the Lord Chief Justice says the term could never be used in connection with a sheet of water half a
mile long. He must be considered to have used those words with reference to the facts of the case before him. It was not
only a sheet of water half a mile long, but an enclosed sheet of water, so that a boat, or a vessel, could not be taken over
that half a mile of water and proceed further on. That being so, I absolutely agree with that decision. A pleasure pond
cannot be a place on which, in any reasonable sense of the word, anyone could say there was navigation, and that is the
ground upon which the Lord Chief Justices decision proceeded.

Breaking off there, it seems to me clear from that passage that as steering and adjusting of courses is necessary, even on a
pleasure pond which may well have marker buoys on it, the word navigation was there being used not in the sense contended
for by Mr Hilton for the defendant but in the larger going places sense. He then distinguishes that case in the following words
(at 233):

Here, although the length of water on which these launches ply is only about one-and-a-half miles from the Exe bridge
to the first lock on the canal, which in a sense is an enclosed piece of water and if really so that might prevent this being
navigation, yet it is not really so, because at the end of that mile and a half there is a lock which communicates with a
further cut (to use an ambiguous expression) which goes on to another lock, and then there is a sea lock, through which
vessels can go out to sea or can come in from the sea, and go up the dock which exists at Exeter, where vessels of
substantial size in fact do go. Vessels are passing up and down this canal constantly, but, of course, only at a time of high
water in the estuary, because outside the lock in the estuary there is no water at low tide, and they only go down to the lock
 to get to the sea when the tide is high. There is navigation there, and it is a place for navigation, and being a place for
navigation it is not the less navigation by this launch than by any other craft; the launch is navigating. The grounds upon
which the judges decided the Southport Case do not in point of fact exist in the present case. No one could say that this
place is a place where there could not be navigation when in point of fact there is a very considerable amount of navigation.
On that ground, if the matter is open to us, there can be no doubt what our decision should be.

Breaking off there, it is quite clear from his judgment in that case that for a vessel to be used in navigation within the meaning of
the 1894 Act that use must be on navigable waters, navigable waters meaning waters that are used by vessels going 175 from
point A to point B and not simply used for pleasure purposes even if those pleasure purposes may involve steering a pre-set
course.
Bray J in his judgment agreed, saying (at 234):

The only real question is whether this vessel was used in navigation. Now the case finds that it proceeded for half a
mile along the river Exe and for a mile along the canal, and that the canal continues over two miles, going through certain
locks, and finally reaches tidal water. Those being the facts, whether the magistrates have found as a fact that it was used
for navigation or not, in my opinion there could be no other proper finding than that the vessel was used for navigation. A
river is a place for navigation and a canal is a place for navigation, and they are none the less places for navigation because
as it happens this vessel only used a portion of them.

So there again one has the navigable waters concept. Lord Coleridge J agrees (at 234):

I have had some difficulty in this case because the only point the magistrates had to decide was whether the vessels
were used in navigation and there is no express finding on that point I do not think the Southport Case, which the
magistrates thought bound them, is binding here, because in this case these vessels were proceeding over waters which
were used by ships coming from the sea to the docks and back again.

That is to say, breaking off, they were navigable waters in the sense that they were navigated by people going from point A to
point B. He continues (at 234235):

Clearly such ships would be held to be navigating these waters on the ground of the nature of the waters they were
traversing. If ships coming to and from the sea were clearly navigating these waters, the fact that these particular vessels in
question did not proceed to sea does not prevent these waters being navigated by them as they would be by ships going to
and from the sea.

Again, the concept is navigable waters, that is to say using that expression in the sense of waters that were navigated on by
vessels proceeding from point A to point B. He then finally concludes (at 235):

On those grounds I think there is conclusive evidence upon which conviction was a necessary result. I leave out of
consideration various alternatives that might be suggested, such as the use of large reservoirs or small lakes or tarns. When
those questions arise it will be time enough to decide whether those are waters which can be navigated.

There again the concept is made clear. I am quite satisfied in this case that the waters of Belmont reservoir are not waters which
can be navigated within the sense used by the authorities. There was no evidence before me that there was any navigation in the
sense of proceeding from an originating place A to a terminus B for the purpose of discharging people or cargo at the destination
point. It was simply used for pleasure purposes by people who were messing about in boats. In these circumstances it seems to
me that s 8 of the Maritime Conventions Act 1911 does not apply and accordingly there is the conventional limit in this case.
That being so this application before me fails. I do not think it necessary in these circumstances to express a concluding view as
to whether the defendants contention would fail for a second reason, namely the fact that the plaintiff having gone overboard was
not a person on board the victim vessel. Clearly there might 176 be cases where fine lines would have to be drawn where
someone who had gone overboard but was clinging to the wreckage was within the definition or alternatively if a few feet away
but overboard whether they were covered by the Act. I prefer to express no opinion on that point as it is not necessary to the
decision I give today.

Summons dismissed.

Solicitors: Hill Dickinson Davis Campbell, Liverpool agents for Donne Mileham & Haddock, Shoreham-by-Sea; Keogh Ritson,
Bolton.

Mydeen Esq Barrister.

[1991] 4 All ER 177

Re R (a minor) (wardship:medical treatment)

FAMILY; Children

COURT OF APPEAL, CIVIL DIVISION

LORD DONALDSON OF LYMINGTON MR, STAUGHTON AND FARQUHARSON LJJ
11, 24 JULY 1991

Ward of court Jurisdiction Medical treatment Medical treatment involving administration of medication for wards
psychotic mental condition Wards mental condition fluctuating between normal behaviour and psychosis Ward when rational
refusing to accept medication Whether ward having sufficient competence to give or refuse consent to treatment Whether
court having jurisdiction to override refusal by ward.

A 15year-old girl who had a history of family problems and who had been on the local authoritys at-risk register was received
into voluntary care after a fight with her father and was placed in a childrens home. While in care her mental health deteriorated
and she experienced visual and auditory hallucinations and her behaviour became increasingly disturbed. On one occasion she
left the childrens home and was found on a bridge threatening to commit suicide, while on another occasion she returned to her
parents home where she ran amok causing serious damage and attacked her father with a hammer. The local authority obtained
place of safety and interim care orders and placed her in an adolescent psychiatric unit where she was sedated from time to time
with her consent. The unit sought permission from the local authority to administer anti-psychotic drugs to her because she was
behaving in a paranoid, argumentative and hostile manner. Although she had clear intervals when her mental illness was in
recession the prognosis was that if the medication was not administered she would return to her psychotic state. However, in
rational and lucid periods, when she had sufficient understanding to make the decision, she objected to taking the drugs. In those
circumstances the local authority refused to authorise the administration of drugs against her will, while the unit was not prepared
to continue to care for her unless it had authority to administer appropriate medication to control her. The local authority
commenced wardship proceedings and applied for leave for the unit to administer medication, including anti-psychotic drugs,
whether or not the ward consented. The questions arose (i) whether the judge had power to override the decision of a ward who
was a minor to refuse medication and treatment irrespective of whether the minor was competent to give her consent and (ii)
whether the ward had the requisite capacity to accept or refuse such medication or treatment. The judge granted the application,
holding that 177 although a wardship judge could not override the decision of a ward who had the requisite capacity on the facts
the ward did not have that capacity. The Official Solicitor as guardian ad litem of the ward appealed, contending that if a child
had the right to give consent to medical treatment the parents, and a fortiori the wardship courts, right to give or refuse consent
terminated.

Held In exercising its wardship jurisdiction the High Court had power to consent to medical treatment of a minor ward who
was competent to consent to treatment but who had refused consent or was not asked, and conversely the wardship court had an
overriding power, which natural parents did not have, to refuse consent or forbid treatment even if the ward consented, if the
consent or refusal of consent by the court was deemed to be in the childs welfare. Since, given the background of the wards
fluctuating mental state, it was clear that if medication was not given to the ward she would lapse into a psychotic state the judge
had been right to grant the application for the administration of medication with or without the wards consent. Moreover, the
fact of the wards fluctuating mental state meant that she was not competent to decide whether to consent to medication being
administered to her since it would be dangerous for the ward if her competence were to be judged purely on her state of mind
during a period when her mental illness was in recession. Accordingly, the judge had been right to grant the application for the
unit to administer medication irrespective of whether the ward consented and the appeal would therefore be dismissed (see p 187
b to g j to p 188 b d e, p 189 a h to p 190 a, p 191 j to p 192 b f to j, post).
Gillick v West Norfolk and Wisbech Area Health Authority [1985] 3 All ER 402 distinguished.
Per Lord Donaldson MR. A doctor may lawfully administer treatment to a child who is not a ward of court and who is
competent to, and does, refuse consent if the parent nevertheless consents notwithstanding that in the converse case of a
competent child consenting to treatment the parents have no right of veto (see p 185 d to g and p 186 e f, post); dictum of Lord
Scarman in Gillick v West Norfolk and Wisbech Area Health Authority [1985] 3 All ER 402 at 423424 considered.

Notes
For the courts jurisdiction over wards of court, see 24 Halsburys Laws (4th edn) para 576, and for cases on the subject, see 28(3)
Digest (2nd reissue) 305328, 28812969.

Cases referred to in judgments

B (a minor), Re (1991) Independent, 22 May, Fam D.
BRB v JB [1968] 2 All ER 1023, [1968] P 466, [1968] 3 WLR 566, CA.
C (a minor) (wardship: medical treatment), Re (No 2) [1989] 2 All ER 791, [1990] Fam 39, [1989] 3 WLR 252, CA.
E (a minor), Re (21 September 1990, unreported) Fam D.
G-U (a minor) (wardship), Re [1984] FLR 811.
Gillick v West Norfolk and Wisbech Area Health Authority [1985] 3 All ER 402, [1986] AC 112, [1985] 3 WLR 830, HL; rvsg
[1985] 1 All ER 533, [1986] AC 112, [1985] 2 WLR 413, CA.
Hewer v Bryant [1969] 3 All ER 578, [1970] 1 QB 357, [1969] 3 WLR 425, CA.
J v C [1969] 1 All ER 788, [1970] AC 668, [1969] 2 WLR 540, HL.
P (a minor), Re [1986] 1 FLR 272.

Cases also cited or referred to in skeleton arguments

Allcard v Skinner (1870) 36 Ch D 145, [188690] All ER Rep 90, CA.
178
B (a minor) (wardship: medical treatment), Re (1981) [1990] 3 All ER 927, [1981] 1 WLR 1421, CA.
B (a minor) (wardship: sterilisation) [1987] 2 All ER 206, CA; affd [1987] 2 All ER 206, [1988] AC 199, HL.
B v W (wardship: appeal) [1979] 3 All ER 83, [1979] 1 WLR 1041, HL.
Beaney (decd), Re [1978] 2 All ER 595, [1978] 1 WLR 770.
Boughton v Knight (1873) LR 3 P & D 64, [186173] All ER Rep 40.
D (a minor) (wardship: sterilisation), Re [1976] 1 All ER 326, [1976] Fam 185.
F (a minor) (wardship: appeal), Re [1976] 1 All ER 417, [1976] Fam 238, CA.
F (mental patient: sterilisation), Re [1990] 2 AC 1, CA; affd sub nom F v West Berkshire Health Authority (Mental Health Act
Commission intervening) [1989] 2 All ER 545, [1990] 2 AC 1, HL.
G v G [1985] 2 All ER 225, [1985] 1 WLR 647, HL.
L, Re [1968] 1 All ER 20, [1968] P 119, CA; affg [1967] 2 All ER 1110, [1968] P 119.
Manches v Trimborn (1846) 115 LJKB 305.
Marshall, Re, Marshall v Whateley [1920] 1 Ch 284.
Natanson v Kline (1960) 186 Kan 393, Kan SC.
Prince v Massachusetts (1944) 321 US 158, US SC.
R (minors) (wardship: criminal proceedings), Re [1991] 2 All ER 193, [1991] Fam 56, CA.
R v Blaue [1975] 3 All ER 446, [1975] 1 WLR 1411, CA.
Schloendorff v Society of New York Hospital (1914) 211 NY 125, NY Ct of Apps.
Sidaway v Bethlem Royal Hospital Governors [1985] 1 All ER 643, [1985] AC 871, HL.
W, Re [1970] 2 All ER 502, [1971] Ch 123, CP.
Walker, Re [1905] 1 Ch 160, CA.
X (a minor) (wardship: restriction on publication), Re [1975] 1 All ER 697, [1975] Fam 47, Fam D and CA.

Appeal
The Official Solicitor, as guardian ad litem to a girl aged 15 years 10 months, appealed from so much of the order made on 9 July
1991 by Waite J, in wardship proceedings begun by the local authority, as granted leave to the local authority to place the minor
at an adolescent psychiatric unit and there to administer to her such medication, including anti-psychotic drugs, as the units
doctors regarded as necessary whether or not the minor consented to such medication or treatment. The facts are set out in the
judgment of Lord Donaldson MR.
At the conclusion of the argument Lord Donaldson MR announced that the appeal would be dismissed for reasons to be given
later.

James Munby QC for the Official Solicitor as guardian ad litem of the minor.
Shirley Ritchie QC and Charles Geekie for the local authority.
Jeremy Rosenblatt for the father.

24 July 1991. The following judgments were delivered.

LORD DONALDSON OF LYMINGTON MR. This appeal from an order of Waite J on 9 July 1991 involves a consideration
of the power of the court to override a refusal by its ward, a 15year-old girl, to undergo medical treatment 179 involving the
taking of medication. So far as is known such a question has arisen on only one previous occasion, namely in Re E (a minor) (21
September 1990, unreported), decided by Ward J, a 15year-old boy who had religious objections, supported by his parents, to
being given a life-saving blood transfusion. Possibly in that case, and certainly in this, the judge accepted that the effect of
Gillick v West Norfolk and Wisbech Area Health Authority [1985] 3 All ER 402, [1986] AC 112 was that, if a child had achieved a
sufficient understanding and intelligence to enable him or her to understand fully what was proposed and to be capable of making
up his own mind on the matter, the parental right (and the courts right) to give or refuse consent yielded to the childs right to
make his own decisions (see [1985] 3 All ER 402 at 422, 424, [1986] AC 112 at 186 and 189 per Lord Scarman) and that this
applied as much to a situation in which the child was refusing consent (this case and Re E) as to the case in which the child was
consenting (the assumed position in Gillicks case). However, in Re E, as in this case, the judge held that the child had not
achieved the required degree of understanding.
There was some urgency and at the conclusion of the hearing we announced that the appeal would be dismissed. We could
at the same time have given reasons for agreeing with the judges decision on the facts as to the childs degree of understanding,
which would have been determinative of this appeal on any view of the law. However, the Official Solicitor had asked us to give
guidance on the extent of the courts powers in such situations and we therefore took time to put our reasons into writing. In
dismissing the appeal we made an order that in reporting these proceedings there be no publication of the identity or whereabouts
of the child, her parents, her carers or any institution in which the child was resident or being treated or educated.

The facts
I am indebted to Waite J for a very full statement of the basic facts which I can summarise, largely in his words, as follows.
R was born on 15 September 1975 and is therefore 15 years 10 months old. Her family had been known to the social
services for over 12 years and at an earlier stage she had been on the local authoritys at-risk register as one who was thought to
be a possible victim of emotional abuse. She was a child who gave rise to anxiety because of poor and sometimes violent
parental relationships and difficulties generally in establishing boundaries in her life.
Those worries became more acute this year when, on 8 March 1991, she was received into voluntary care after a fight with
her father. She claimed she felt it was unsafe to stay in the house with him. She was placed first with emergency foster parents
and then at a childrens home maintained by the local authority.
While in care she asked not to see her father and showed some ambivalence about her wish to return to live in the care of
either parent. Anxiety developed about her mental health. She seemed often flat and expressionless and resistant to being
touched by anyone. She appeared to experience visual and auditory hallucinations and sometimes suicidal thoughts. She was
accordingly referred to a consultant child psychiatrist, Dr R.
Early in May 1991 her mother went to the childrens home and cancelled the voluntary care order under which she had been
admitted. R went back home but stayed only a few minutes and then ran off. She was found and returned to the childrens home
but then ran off again and was found by the police on a bridge over the River Thames threatening suicide. In these circumstances
the local authority sought and was granted a five-day place of safety order. R was then 180 placed in a small childrens home
from which she absconded that night, being found by the police the following day at her parents home.
An interim care order was granted on 24 May and R was persuaded to return to the general childrens home to which she
had originally been admitted. Her behaviour however was increasingly disturbed. On the same night she had to be the subject of
an emergency psychiatric assessment due to her increasingly paranoid and disturbed behaviour. The psychiatrist who saw her on
that occasion was of opinion that she was ill enough to be the subject of an application under ss 2 or 3 of the Mental Health Act
1983. This view was confirmed by Rs subsequent behaviour. She absconded from the childrens home and went back to her
own house where she ran amok doing serious damage to the building and furniture. She made a most savage attack on her father
and also assaulted her mother. Thereafter she calmed down but her behaviour remained highly variable with substantial swings
of mood. The downward swings became serious enough for an application to be made on 2 June 1991 for her admission under s
2 of the Mental Health Act 1983. She at once again absconded and attacked her parents, but this time in the presence of an
emergency social worker and two psychiatrists.
She was placed in the psychiatric ward of a general hospital and remained there for one week. On 7 June 1991 she was
discharged to a more suitable centre for the treatment of someone of her age, namely an adolescent psychiatric unit (the unit)
which specialises in disturbance problems in young people of her age.
When the social worker principally concerned with R attended a case review at the unit she was given a disturbing account
of Rs progress there. The senior registrar and director of child psychiatry stated that concern was growing over Rs mental
health to the extent that serious thought was being given to the use of compulsory medication because she was becoming
increasingly defiant. Furthermore she was denying her past experience of hallucinations and voices, alleging that she had made it
all up. The social worker was advised by the staff of the unit that they had been using sedation from time to time whenever they
felt the situation warranted it, but that had always been done with Rs consent. When the social worker asked R about this, she
replied that she had given her consent because she felt she had no choice, since if she had refused they would have injected her
with drugs anyway.
Eventually matters came to a head in events which gave rise to R becoming a ward of court and to the application granted by
Waite J. On 28 June 1991 the social worker received a telephone call from a senior consultant at the unit stating that he believed
R to be in a psychotic state and that he wanted the permission of the local authority, as the body exercising legal responsibility for
R under the care order, to administer anti-psychotic medication to her. The consultant assured the social worker that this was not
a decision taken out of the blue, advising her that R was acting extremely paranoid, becoming extremely argumentative, hostile
and accusative.
After consulting higher authority within the social services, the social worker telephoned back to the unit giving the local
authoritys consent to the administration of such medication as the medical authorities of the unit might think necessary.
Later that evening R herself telephoned the social services night duty department. She advised the duty social worker (who
happened to be experienced in problems of this kind, being an approved social worker under the Mental Health Act) that the unit
were trying to give her drugs. She said she did not need them and she did not want to take them. It was a very long conversation
indeed lasting some three hours. The social worker decided that R sounded lucid and 181 rational and he did not regard her as
sectionable, ie liable to be made the subject of an application under s 2 or s 3 of the Mental Health Act 1983. Urgent
consultation took place within the social services department and as a result a decision was taken that, on reflection, the local
authority could not give the necessary permission for R to have the drugs administered to her against her will.
 On 3 July 1991 R was again seen by Dr R, the consultant child psychiatrist. R admitted to him that she had been suffering
from labile mood swings, fewer suicidal ideas than previously and visual and auditory hallucinations, although not so frequent or
persecuting as before. She behaved calmly and was rational.
Dr R reported that:

I believe that she still requires treatment as an in-patient but that she has improved sufficiently for the Mental Health
Act not to be relevant. (She also needs to be involved in later, planned assessment for care proceedings.) She is of
sufficient maturity and understanding to comprehend the treatment being recommended and is currently rational. Should
she not continue with the [unit] treatment, her more florid psychotic behaviour is likely to return, and she might become a
serious suicidal risk again. I do not believe that out-patient treatment is adequate for her at this time. I also believe that her
family situation is too chaotic for her to be able to return home at this time.

The unit had by then made it clear that it was essential, if R was to remain a patient in its care, that it should have an entirely
free hand in regard to the administration of medication to her, whether she was willing or not. Accordingly on 5 July the local
authority decided to have recourse to wardship proceedings.
Dr R gave evidence both in the form of a report and orally. He explained the nature and functions of the unit. It operated,
he said, a very carefully thought out procedure. If an adolescent patient behaved disturbingly, there was first a meeting of the
whole community. Then that may have to be followed by exclusion of the adolescent to his or her bedroom and, finally, and only
as a last resort, tranquillising medication is administered which is, or often may be, medication of the same nature and effects as
drugs prescribed for anti-psychotic purposes. That step was only taken if it was absolutely necessary to enable the staff to cope.
He confirmed that the unit could only continue to accept responsibility for R if their whole regime was acceptable to
whoever had parental responsibility for her. The message from the local authority that they could not give consent to medication
administered against her will had the result that, unless that could be changed, the unit would be unable to continue to care for
her.
Dr R stated that, if R were to lapse into a fully psychotic state, she would be a serious suicidal risk. She would be
potentially very violent and unpredictable in her behaviour and liable to hear persecuting voices. It would be likely, he said, that
she would return within some days or weeks to a state of mind in which ss 2 or 3 of the Mental Health Act would have to be
invoked. He was asked whether he was familiar with the decision in Gillicks case and said that he was and that he had applied
the principles there considered to the circumstances of Rs case. He expressed his conclusions in the following answers to
questions during his oral examination:

Q. I think there are two elements we should perhaps look at, and the first of them is whether the proposed treatment is
for the benefit and protection of a minor. Could you just comment on that limb for us? A. Yes, I think, as I have described,
that if [R] were to receive the treatment that has been recommended I think it is highly likely that her condition would
improve significantly.
182
Q. The second matter we must consider is whether, having regard to her development and maturity, she understands the
nature and the implications of the treatment proposed. Can you comment on that? A. Yes, I felt that she is mature enough
to understand the nature of the proposal. When I saw her on [4 July] she was rational and, I thought, of sufficient
understanding to be able to make a decision in her own right.
Q. Have you actually seen her yourself when she has been in a condition displaying mental illness? A. No, not a florid
state where, for example, at the time she needed to be admitted under a section, but I have seen her when I was extremely
concerned about her killing herself and experiencing hallucinations and feeling persecuted, but her behaviour was not as
floridly excitable or unpredictable at that time.
Q. When was that that you saw her in that condition, just approximately? A. This was the beginning of May.
Q. Would your comments about her understanding and consent be any different when applied to [R] in that condition?
A. Yes. I also recall that I saw her at the [meeting to assess her suitability for admission to the unit] while she was [in the
adult psychiatric ward at the general hospital] when she was behaving very aggressively and, yes, I felt in those
circumstances her rationality and capacity to understand recommendations was severely impaired.
Q. When she is in that condition would your assessment of her be one when she is or is not capable of giving an
important consent about treatment? A. In the florid psychotic stage I think she is unable to give informed consent and
therefore I agreed with my colleagues, who decided to section her under the Mental Health Act, even though that is
extremely rare in our practice.

Gillicks case
The guidance afforded by the speeches in Gillicks case [1985] 3 All ER 402, [1986] AC 112 needs, as always, to be
considered in context. The Gillick children were not wards of court and the wardship jurisdiction of the court was not in issue.
None of Mrs Gillicks daughters aged 13, 12, 10 and 5 contemplated engaging in sexual intercourse in the immediate future or
had sought or were likely independently to seek contraceptive advice or treatment (see [1985] 1 All ER 533 or 538, [1986] AC
112 at 121 per Parker LJ). Mrs Gillicks concern was not the immediate protection of her daughters or of any specific children,
but to challenge the legality of a memorandum of guidance issued by the Department of Health and Social Security (see Health
Service circular (interim series) (HS(IS)32)) which advised that (1) there was a clear need for contraceptive services to be
available for and accessible to young people at risk of pregnancy irrespective of age, (2) that it was for the doctor to decide
whether to provide contraceptive advice and treatment and (3) that the Medical Defence Union had advised that the parents of a
child, of whatever age, independently seeking advice and treatment should not be contacted by any staff without the permission
of that child.
With this objective in mind, Mrs Gillick served notice on her local area health authority formally forbidding any medical
staff employed by it from giving contraceptive or abortion advice to her four daughters, whilst they were under the age of 16,
without her consent and invited the authority to advise the doctors employed by it accordingly. The health authority declined so
to do and Mrs Gillick sought declarations against the department that the guidance given by it was unlawful and against the
authority that no doctor or other professional person employed by it was entitled as a matter of law to give contraceptive advice
and/or 183 abortion advice and/or treatment to any of her children under the age of 16 without her consent. In a word she was
asserting an absolute right of veto on the part of parents generally, and herself in particular, on medical advice and treatment of
the nature specified in relation to their children under the age of 16 (see [1985] 3 All ER 402 at 412, [1986] AC 112 at 173 per
Lord Fraser). She was not challenging the right of a wardship court to exercise its parens patriae jurisdiction. Indeed she
accepted it in her printed case (see [1985] 3 All ER 402 at 406, [1986] AC 112 at 165 per Lord Fraser). Nor was she concerned
with how that jurisdiction should be exercised.
It is trite law that in general a doctor is not entitled to treat a patient without the consent of someone who is authorised to
give that consent. If he does so, he will be liable in damages for trespass to the person and may be guilty of a criminal assault.
This is subject to the necessary exception that in cases of emergency a doctor may treat the patient notwithstanding the absence of
consent, if the patient is unconscious or otherwise incapable of giving or refusing consent and there is no one else sufficiently
immediately available with authority to consent on behalf of the patient. However consent by itself creates no obligation to treat.
It is merely a key which unlocks a door. Furthermore, whilst in the case of an adult of full capacity there will usually only be one
keyholder, namely the patient, in the ordinary family unit where a young child is the patient there will be two keyholders, namely
the parents, with a several as well as a joint right to turn the key and unlock the door. If the parents disagree, one consenting and
the other refusing, the doctor will be presented with a professional and ethical, but not with a legal, problem because, if he has the
consent of one authorised person, treatment will not without more constitute a trespass or a criminal assault.
If Mrs Gillick was to succeed in her claim to a declaration that the memorandum of guidance issued by the department was
unlawful, she had to show that no child under the age of 16 could be a keyholder in respect of contraception advice and treatment
or that the parents key overrode the childs. As Lord Fraser put it ([1985] 3 All ER 402 at 412, [1986] AC 112 at 173): She has
to justify the absolute right of veto in a parent. If she was to succeed in her claim against the area health authority, she had also
to show that it was under a duty to inform all medical staff employed by it that Mrs Gillick was exercising that right of veto, but
in the light of the Houses finding that there was no such right, this additional factor can be ignored.
In the instant appeal Mr James Munby QC, appearing for the Official Solicitor, submits that (a) if the child has the right to
give consent to medical treatment, the parents right to give or refuse consent is terminated and (b) the court in the exercise of its
wardship jurisdiction is only entitled to step into the shoes of the parents and thus itself has no right to give or refuse consent.
Whilst it is true that he seeks to modify the effect of this rather startling submission by suggesting that, if the childs consent or
refusal of consent is irrational or misguided, the court will readily infer that in the particular context that individual child is not
competent to give or withhold consent, it is necessary to look very carefully at the Gillick decision to see whether it supports his
argument and, if it does, whether it is binding upon this court.
The key passage upon which Mr Munby relies are to be found in the speech of Lord Scarman ([1985] 3 All ER 402 at 423
424, [1986] AC 112 at 188189):

as a matter of law the parental right to determine whether or not their minor child below the age of 16 will have
medical treatment terminates if and when the child achieves a sufficient understanding and intelligence to 184 enable him
or her to understand fully what is proposed. It will be a question of fact whether a child seeking advice has sufficient
understanding of what is involved to give a consent valid in law. Until the child achieves the capacity to consent, the
parental right to make the decision continues save only in exceptional circumstances. Emergency, parental neglect,
abandonment of the child or inability to find the parent are examples of exceptional situations justifying the doctor
proceeding to treat the child without parental knowledge and consent; but there will arise, no doubt, other exceptional
situations in which it will be reasonable for the doctor to proceed without the parents consent.

And ([1985] 3 All ER 402 at 421422, [1986] AC 112 at 186):

The underlying principle of the law was exposed by Blackstone [Blackstones Commentaries (1 Bl Com (17th edn,
1830) vol 1, chs 16 and 17)] and can be seen to have been acknowledged in the case law. It is that parental right yields to
the childs right to make his own decisions when he reaches a sufficient understanding and intelligence to be capable of
making up his own mind on the matter requiring decision.

What Mr Munbys argument overlooks is that Lord Scarman was discussing the parents right to determine whether or not
their minor child below the age of 16 will have medical treatment (my emphasis) and this is the parental right to which he was
referring in the latter passage. A right of determination is wider than a right to consent. The parents can only have a right of
determination if either the child has no right to consent, ie is not a keyholder, or the parents hold a master key which could nullify
the childs consent. I do not understand Lord Scarman to be saying that, if a child was Gillick competent, to adopt the
convenient phrase used in argument, the parents ceased to have an independent right of consent as contrasted with ceasing to
have a right of determination, ie a veto. In a case in which the Gillick competent child refuses treatment, but the parents
consent, that consent enables treatment to be undertaken lawfully, but in no way determines that the child shall be so treated. In a
case in which the positions are reversed, it is the childs consent which is the enabling factor and again the parents refusal of
consent is not determinative. If Lord Scarman intended to go further than this and to say that in the case of a Gillick competent
child, a parent has no right either to consent or to refuse consent, his remarks were obiter, because the only question in issue was
Mrs Gillicks alleged right of veto. Furthermore I consider that they would have been wrong.
One glance at the consequences suffices to show that Lord Scarman cannot have been intending to say that the parental right
to consent terminates with the achievement by the child of Gillick competence. It is fundamental to the speeches of the
majority that the capacity to consent will vary from child to child and according to the treatment under consideration, depending
upon the sufficiency of his or her intelligence and understanding of that treatment. If the position in law is that upon the
achievement of Gillick competence there is a transfer of the right of consent from parents to child and there can never be a
concurrent right in both, doctors would be faced with an intolerable dilemma, particularly when the child was nearing the age of
16, if the parents consented, but the child did not. On pain, if they got it wrong, of being sued for trespass to the person or
possibly being charged with a criminal assault, they would have to determine as a matter of law in whom the right of consent
resided at the particular time in relation to the particular treatment. I do not believe that that is the law.
185
I referred to a child who is nearing the age of 16, because at that age a new dimension is added by s 8 of the Family Law
Reform Act 1969 to which Lord Fraser referred (see [1985] 3 All ER 402 at 407408, [1986] AC 112 at 167). This is in the
following terms:

(1) The consent of a minor who has attained the age of sixteen years to any surgical, medical or dental treatment
which, in the absence of consent, would constitute a trespass to his person, shall be as effective as it would be if he were of
full age; and where a minor has by virtue of this section given an effective consent to any treatment it shall not be
necessary to obtain any consent for it from his parent or guardian
(3) Nothing in this section shall be construed as making ineffective any consent which would have been effective if this
section had not been enacted.

Mr Munby submits, rightly as I think, that consent by a child between the ages of 16 and 18 is no more effective than that of
an adult if, due to mental disability, the child is incapable of consenting. That is, however, immaterial for present purposes. What
is material is that the section is inconsistent with Mr Munbys argument. If Mr Munbys interpretation of Lord Scarmans speech
was correct, where a child over the age of 16 gave effective consent to treatment, not only would it not be necessary to obtain
the consent of the parent or guardian, it would be legally impossible because the parent or guardian would have no power to give
consent and the section would, or at least should, have so provided. Furthermore sub-s (3) would create problems since, if the
section had not been enacted, a parents consent would undoubtedly have been effective as a consent.
Both in this case and in Re E the judges treated Gillicks case as deciding that a Gillick competent child has a right to
refuse treatment. In this I consider that they were in error. Such a child can consent, but if he or she declines to do so or refuses,
consent can be given by someone else who has parental rights or responsibilities. The failure or refusal of the Gillick competent
child is a very important factor in the doctors decision whether or not to treat, but does not prevent the necessary consent being
obtained from another competent source.
The wardship jurisdiction
In considering the wardship jurisdiction of the court, no assistance is to be derived from Gillicks case, where this simply
was not in issue. Nor, I think, is any assistance to be derived from considering whether it is theoretically limitless if the exercise
of such a jurisdiction in a particular way and in particular circumstances would be contrary to established practice. It is, however,
clear that the practical jurisdiction of the court is wider than that of parents. The court can, for example, forbid the publication of
information about the ward or the wards family circumstances. It is also clear that this jurisdiction is not derivative from the
parents rights and responsibilities, but derives from, or is, the delegated performance of the duties of the Crown to protect its
subjects and particularly children who are the generations of the future (see Re C (a minor) (wardship: medical treatment) (No 2)
[1989] 2 All ER 791 at 793, [1990] Fam 39 at 46).
Whilst it is no doubt true to say, as Lord Upjohn did say in J v C [1969] 1 All ER 788 at 831, [1970] AC 668 at 723, that the
function of the court is to act as the judicial reasonable parent, all that, in context, he was saying was that the court should
exercise its jurisdiction in the interests of the children reflecting and adopting the changing views, as the years go by, of
reasonable men and women, the parents of children, on the proper treatment and methods of bringing up children. This is very
far from saying that the wardship jurisdiction is derived from, or in any way limited by, that of the parents. In many cases of
wardship 186 the parents or other guardians will be left to make decisions for the child, subject only to standing instructions to
refer reserved matters to the court, eg the taking of a serious step in the upbringing of medical treatment of a child, and to the
courts right and, in appropriate cases, duty to override the decision of the parents or other guardians. If it can override such
consents, as it undoubtedly can, I see no reason whatsoever why it should not be able, and in an appropriate case willing, to
override decisions by Gillick competent children who are its wards or in respect of whom applications are made for, for
example, s 8 orders under the Children Act 1989.

Gillick competence
The test of Gillick competence, although not decisive in this case, is nevertheless of general importance and the evidence
of Dr R suggests that it is capable of being misunderstood. The House of Lords in that case was quite clearly considering the
staged development of a normal child. For example, at one age it will be quite incapable of deciding whether or not to consent to
a dental examination, let alone treatment. At a later stage it will be quite capable of both, but incapable of deciding whether to
consent to more serious treatment. But there is no suggestion that the extent of this competence can fluctuate upon a day-to-day
or week-to-week basis. What is really being looked at is an assessment of mental and emotional age, as contrasted with
chronological age, but even this test needs to be modified in the case of fluctuating mental disability to take account of that
misfortune. It should be added that in any event what is involved is not merely an ability to understand the nature of the
proposed treatment in this case compulsory medication but a full understanding and appreciation of the consequences both
of the treatment in terms of intended and possible side effects and, equally important, the anticipated consequences of a failure to
treat.
On the evidence in the present case it is far from certain that Dr R was saying that R understood the implications of
treatment being withheld, as distinct from understanding what was proposed to be done by way of treatment the nature of the
proposal which I take to have been intended as a paraphrase of Lord Scarmans to understand fully what is proposed. But,
even if she was capable on a good day of a sufficient degree of understanding to meet the Gillick criteria, her mental disability, to
the cure or amelioration of which the proposed treatment was directed, was such that on other days she was not only Gillick
incompetent, but actually sectionable. No child in that situation can be regarded as Gillick competent and the judge was
wholly right in so finding in relation to R.

Conclusion
(1) No doctor can be required to treat a child, whether by the court in the exercise of its wardship jurisdiction, by the parents,
by the child or anyone else. The decision whether to treat is dependent upon an exercise of his own professional judgment,
subject only to the threshold requirement that, save in exceptional cases usually of emergency, he has the consent of someone
who has authority to give that consent. In forming that judgment the views and wishes of the child are a factor whose importance
increases with the increase in the childs intelligence and understanding.
(2) There can be concurrent powers to consent. If more than one body or person has a power to consent, only a failure to, or
refusal of, consent by all having that power will create a veto.
(3) A Gillick competent child or one over the age of 16 will have a power to consent, but this will be concurrent with that
of a parent or guardian.
(4) Gillick competence is a developmental concept and will not be lost or 187 acquired on a day-to-day or week-to-week
basis. In the case of mental disability, that disability must also be taken into account, particularly where it is fluctuating in its
effect.
(5) The court in the exercise of its wardship or statutory jurisdiction has power to override the decisions of a Gillick
competent child as much as those of parents or guardians.
(6) Waite J was right to hold that R was not Gillick competent and, even if R had been, was right to consent to her
undergoing treatment which might involve compulsory medication.

STAUGHTON LJ. The treatment centre which is most suitable to accommodate and care for the ward will not accept her unless
either (i) she consents to such medication as may be necessary, or (ii) the court authorises that medication. The is not a one-off
case, such as an abortion, sterilisation or some other surgical procedure. It is concerned with recurrent medication, which may or
may not be desirable in the future but on the evidence probably will be.
The evidence shows that at times the ward has the capacity to make a rational and informed decision. But at other times she
does not have that capacity, and those are the times when medication is desirable. The treatment centre wishes to have an
assurance that the medication may then be lawfully administered; otherwise she will not be accepted as a patient.
I agree with the conclusion of Waite J that, on those facts, the court can authorise medication, consistently with the decision
of the House of Lords in Gillick v West Norfolk and Wisbech Area Health Authority [1985] 3 All ER 402, [1986] AC 112, even if
it has no greater powers than a parent.
The alternative solution to this appeal, which gave rise to the bulk of the argument and perhaps to the appeal itself, depends
on two questions of law. (1) Does the parent of a competent minor have power to override the minors decision, either by
granting consent when the minor has refused it or vice versa? (2) Does the court have power to override the decision of a
competent minor who is a ward? In both questions I use the word competent in the Gillick sense.
As to the first question, we were referred to the speech of Lord Scarman in Gillicks case [1985] 3 All ER 402 at 423, [1986]
AC 112 at 188:

I would hold that as a matter of law the parental right to determine whether or not their minor child below the age
of 16 will have medical treatment terminates if and when the child achieves a sufficient understanding and intelligence to
enable him or her to understand fully what is proposed.

The hypothetical situation under consideration in Gillicks case was where a competent child did consent to medical treatment,
but the parent either was not asked or expressly did not consent. The House of Lords decided, as it seems to me, that a doctor
could lawfully administer treatment in such a case, although he would naturally take into account that the parent had not been
asked or had expressly not consented.
Whether the doctor could lawfully administer treatment when the parent did consent but the competent child either did not
consent or had not been asked save in the case of emergency was not a question for decision in Gillicks case. As Lord
Donaldson MR points out, it may be putting a heavy burden on doctors if, having obtained the consent of the parent of a child
under 16, they still have to consider whether the child is competent to give or refuse consent. Nevertheless the passage that I
have quoted from Lord Scarmans speech, and particularly the words whether or not, suggests that the parents consent is not
sufficient in such 188 a case. This is an important question. But it is not essential to the decision in this case, in my opinion,
because I consider (as will shortly appear) that a wardship judge can validly consent to medical treatment even if the ward refuses
her consent. In those circumstances I do not suppose that any opinion of mine as to the effect of consent by a natural parent
would be of much assistance in resolving the difference between what appears to have been Lord Scarmans view and that of
Lord Donaldson MR; so I express none.
The second question is whether the court has power to override the decision of a competent minor who is a ward. Again it
can arise in two forms: the court may be minded to consent when the ward does not (which would be the situation here, if I had
found on the evidence that the ward is competent to take the decision); or the court may be minded not to consent when the ward
does (as in the Gillick hypothetical case). I say at once that in my judgment Gillicks case did not touch on this question.
It can be argued that a wardship judge, exercising the authority of the Crown as national parent, should have no greater
powers than a natural parent. I have a good deal of sympathy with that argument, for I accept as a general principle that good
reason must be shown before the state exercises any power to control the decisions of a competent person, whether adult or
minor, which only concern his own well-being.
There is, however, a group of decisions mainly of Family Division judges, which supports the opposite conclusion. Thus in
BRB v JB [1968] 2 All ER 1023 at 1025, [1968] P 466 at 473 Lord Denning MR said the childs views are never decisive.
That, of course, was before Gillicks case. In Re P (a minor) [1986] 1 FLR 272 at 279 Butler-Sloss J said that the childs wishes
should not be given such paramount importance as to be conclusive. In Re G-U (a minor) (wardship) [1984] FLR 811 at 812
Balcombe J said that an abortion required the leave of the court although presumably the ward consented, as it had already
happened. In Re B (a minor) (1991) Independent, 22 May Hollis J said in an abortion case that the wards wishes were not
decisive. And in Re E (a minor) (21 September 1990, unreported), which concerned a blood transfusion for a boy of 15, Ward J
directly addressed the issue. He said:

whether or not he is of sufficient understanding to have given consent or to withhold consent is not the issue for
me.

For my part, I do not read the judge as deciding that in wardship there is no power to override the decision of a competent minor.
It seems to me that, while accepting that a competent minor can override the parents choice, he held that the situation was
different in wardship. Against that, there is the ruling of Waite J in the present case that the wardship judge could not override the
decision of a competent minor.
Faced with such a substantial consensus of opinion among judges who have to deal with this problem from day to day, I
conclude that the powers of a wardship judge to indeed include power to consent to medical treatment when the ward has not
been asked or has declined. If that means that the wardship judge has wider powers than a natural parent (on the extent of which
I have declined to express an opinion), it seems to me to be warranted by the authorities to which I have referred.
Then there is the converse case in wardship, where the ward consents but the court is minded either not to consent or
positively to forbid treatment. Does the judge in such a case have an overriding power, which the natural parent of a competent
child under the age of 16 does not have by reason of the Gillick 189decision? If so, there would again be a problem for doctors,
who may have to ask if the child is a ward. But the trend of the cases seem to show that, if the treatment would constitute an
important step in the childs life, the court does have that power.

FARQUHARSON LJ. R is 15 years of age, having been born on 15 September 1975. There is a history of disturbances in the
home where until recently she lived with her parents.
Following a fight with her father on 8 March 1991 R was received into care by the local authority. She was placed initially
with foster parents and then in a childrens home.
There followed a deterioration in her mental health. She began to suffer visual and auditory hallucinations and to express
suicidal thoughts. On one occasion R left the childrens home and was found by the police on a bridge threatening suicide.
During the month of May 1991 Rs behaviour became increasingly disturbed. On 24 May she returned to her parents home
where in addition to seriously damaging the contents, she attacked her father with a hammer. Thereafter her mood swings
became so marked that on 2 June 1991 a direction was given for her compulsory admission to hospital under s 2 of the Mental
Health Act 1983. She remained in a hospital for adults for one week and on 7 June 1991 she was transferred to the centre for the
treatment of adolescents at an adolescent psychiatric unit.
Unhappily, Rs condition deteriorated still further and by 28 June 1991 a senior consultant diagnosed a psychotic state and
sought permission from the local authority to administer psychotic medication. In the consultants view R was becoming
paranoid. The authority was given but that same evening R had a long telephone conversation with her social worker lasting
some three hours. The latter considered that throughout R was lucid and rational. R said that the unit were trying to give her
drugs but she did not need them and did not want them. Following that conversation the local authority withdrew its consent to
the treatment being given. On 3 July R was seen by a consultant child psychiatrist, Dr R. When he had seen her some time
earlier Dr R believed her to be a serious suicidal risk and was showing florid psychotic symptoms. However, on 3 July R,
although still entertaining suicidal ideas and suffering from visual and auditory hallucinations, behaved calmly and was rational.
Dr R concluded his report on the interview with these words:

She is of sufficient maturity and understanding to comprehend the treatment being recommended and is currently
rational. Should she not continue with the treatment, her more florid psychotic behaviour is likely to return, and she might
become a serious suicidal risk again.

The unit was not prepared to retain R as a patient unless it was given authority to use appropriate medication to control her.
In those circumstances, the local authority took wardship proceedings, making her parents, as well R, defendants in the
proceedings. R was represented by the Official Solicitor as her guardian ad litem. An application was made in the wardship
proceedings for the court to give leave for the unit to administer such medication as was medically necessary, including anti-
psychotic drugs without Rs consent. The application came before Waite J on 9 July 1991, when Dr R gave oral testimony about
Rs condition. The general thrust of his evidence was that unless R was given in-patient treatment, which might include
medication, she was likely to be a suicidal risk and to be violent and unpredictable. With such treatment her condition would
improve 190 significantly. Of his interview with R on 3 July Dr R said that she was mature enough to understand the nature of
the proposal, ie the medication, that she was rational and of sufficient understanding to be able to make a decision in her own
right. Dr R commented that when he had earlier seen R she was behaving aggressively and that her rationality and capacity to
understand recommendations were severely impaired. When R was in what the doctor described as the florid psychotic stage,
she was unable to give informed consent. The doctor summarised the position in these terms:
 I think we could predict a sort of revolving door, really, a cycle in which the unfortunately requires compulsory
admission to a mental hospital, improves sufficiently to decide she no longer wishes to accept the treatment, is discharged
with no treatment and the same problem recurs.

Finally, Dr R said that if she could not remain at the unit she would have to be admitted to a ward at an adult hospital where
the doctors would have a statutory authority to administer medication.
Counsel for the Official Solicitor, Mr Munby QC, submitted that the court should determine the application on the Gillick
principle (see Gillick v West Norfolk and Wisbech Area Health Authority [1985] 3 All ER 402, [1986] AC 112). Counsel argued
on that authority that the parental right to determine whether a child should have medical treatment terminates if and when the
child achieves a sufficient understanding and intelligence to enable him or her to understand fully what is proposed. If the child
has the capacity to give a consent valid in law it is not for the court to substitute its own different view. On the other hand, if the
child is shown not to have that capacity, then the court has the power and duty to substitute its own decision if it is different from
that of the child.
The learned judge accepted this analysis of the position in law, but came to the conclusion on the evidence available to him
that R had not the necessary capacity to make this decision. She was in his judgment a deeply disturbed and unhappy child, who
in making her decision had been the victim of her own immaturity. He accordingly granted the application.
The Official Solicitor then brought the present appeal because as counsel informs us it involves important questions of
principle. So far as R is concerned however, it seems that the decision of this court will have little impact, as she is likely to be
subjected to the medication whether the appeal succeeds or not. If Waite Js decision is upheld, as I think it should be, she will be
treated at the unit, otherwise she will receive the medication, at any rate in Dr Rs opinion, at an adult hospital.
Mr Munby of course supports the learned judges statement of the law but complains that there was no evidence upon which
he could find that R lacked the capacity to make a decision about her treatment. Counsel relied on the evidence of Dr R about
Rs state of mind on 3 July, which was the most recent account of her condition. Dr R had found on 3 July, just a few days before
the judge heard the application, that R was rational and of sufficient understanding to be able to make a decision in her own right.
In the face of that evidence counsel submits there was no room for the judge to come to what in effect was the opposite
conclusion.
In my judgment, this submission cannot be sustained. It involves assessing the mental state and capacity of the patient at a
particular moment in time, isolated from the medical history and background. It is clear from Dr Rs evidence and indeed from
the evidence of the three-hour telephone conversation that from time to time R had clear intervals when her mental illness was in
recession. It is equally clear from Dr Rs evidence that this state was neither permanent nor even 191 long term. The prognosis
was that if the medication was not given to R she would return to her earlier florid psychotic state. It would be dangerous indeed
if the learned judge, or for that matter this court, refused to authorise the medication because on a particular day R passed the
Gillick test when the likely consequences were so serious. In deciding whether the courts decision is to be substituted for that of
the patient it is the task of the court to consider the whole of the medical background of the case as well as the doctors opinion of
the effect of its decision upon the patients mental state. On the facts of this case, I am clearly of the opinion that the judges
decision was correct.
I arrive at that conclusion on the basis that the Gillick test is the correct one to apply in a case of this kind. For my part I am
far from convinced that in wardship proceedings the judges task is so limited. Gillicks case was concerned with the developing
maturity of normal children under the age of 16.
Mrs Gillick had objected to a circular published by the local health authority which contemplated medical advice about the
use of contraceptives being given to children under the age of 16 without their parents being informed. Mrs Gillick sought a
declaration that her own children she was the mother of five girls, all under the age of 16 should not be given advice of this
nature without her consent. As already indicated, the House of Lords held that a girl under the age of 16 had the legal capacity to
consent to medical examination and treatment including contraceptive treatment if she had sufficient maturity and intelligence to
understand the nature and implications of the proposed treatment. Plainly the capacity to consent will vary with the treatment
proposed but the House contemplated that as the child became equipped to make a decision of that nature the responsibility of the
parent became less.
As Lord Denning MR put it in Hewer v Bryant [1969] 3 All ER 578 at 582, [1970] 1 QB 357 at 369: it is a dwindling
right [to custody] which the courts will hesitate to enforce against the wishes of the child, the older he is.
It is to be emphasised that Gillicks case was not a wardship case and was concerned with mentally normal children. For my
part I would find it difficult to import the criteria applied in Gillicks case to the facts of the present case. We are not here solely
concerned with the developing maturity of a 15year-old child but with the impact of a mental illness upon her. The Gillick test
is not apt to a situation where the understanding and capacity of the child varies from day to day according to the effect of her
illness. I would reject the application of the Gillick test to an on/off situation of that kind. The authority of a High Court judge
exercising his jurisdiction in wardship is not constrained in this way. The judges well-established task in deciding any question
concerning the upbringing of the ward is to have regard to the welfare of the ward as the first and paramount consideration. In
some cases the decision might well be different if the Gillick test were applied. That the two approaches are distinct is vividly
illustrated in the dramatic case of Re E (a minor) (21 September 1990, unreported) by the decision of Ward J.
It is clear in the present appeal that, whether Rs capacity to withhold consent to medication was tested on the Gillick criteria
or whether the court approached the issue on the basis of her welfare being paramount, the result would have been the same.
I would dismiss the appeal.

Appeal dismissed. No order for costs. Leave to appeal to the House of Lords refused.

Solicitors: Official Solicitor; Director of Legal Services; Farrell Matthews & Weir.

Mary Rose Plummer Barrister.

192
[1991] 4 All ER 193

W H Smith Do It All Ltd v Peterborough City Council

Payless DIY Ltd v Peterborough City Council
EUROPEAN COMMUNITY; Free Movement of Goods

QUEENS BENCH DIVISION

MUSTILL LJ AND SCHIEMANN J
28, 29, 30 MARCH, 2, 3 APRIL, 4 JUNE 1990
European Economic Community Imports Reduction in volume of imports Quantitative restriction on imports from other
member states Measures having equivalent effect Prohibition on Sunday trading Opening of store on Sundays Substantial
percentage of goods sold in store imported from other member states Prohibition on Sunday trading having effect of reducing
imports from other member states Whether prohibition constituting trading rule having equivalent effect to quantitative
restriction on imports Whether prohibition contravening Community law Shops Act 1950, s 47 EEC Treaty, art 30.

The plaintiff council brought proceedings in the magistrates court against the defendant companies, which traded at their do-it-
yourself stores on Sundays in the councils area offering for sale goods which were not exempted from the prohibition on Sunday
trading contained in s 47a of and Sch 5 to the Shops Act 1950. The council alleged that the defendants had caused their retail
shops to be open for the serving of customers on Sundays other than for exempt transactions, contrary to ss 47 and 59 b of the
1950 Act. The defendants were convicted. They appealed to the Crown Court, contending that they were not guilty of the
offences charged, on the ground that s 47 was incompatible with art 30 c of the EEC Treaty, which had direct effect, because the
prohibition on Sunday trading was a measure having an effect equivalent to a quantitative restriction on imports within the
meaning of art 30 in that it was capable of hindering, directly or indirectly and actually or potentially, intra-Community trade.
The defendants submitted that the prohibition on Sunday trading significantly reduced the weekly turnover of sales in their stores
and that since a substantial proportion of their stock was imported from other member states there was a corresponding reduction
of imports from those states. The Crown Court upheld the convictions on the grounds (i) that s 47 was a national rule governing
the opening hours of retail premises which was not designed to regulate intra-Community trade but to meet national or regional
socio-cultural needs and, as such, it could not be described as a trading rule or measure having an effect equivalent to a
quantitative restriction on imports within the meaning of art 30 of the Treaty and (ii) that since the purpose of art 30 was to
promote unfettered free trade within the European Community it was not intended to override national regulatory provisions of
member states which were not enacted to regulate trade or specifically aimed at imports from member states, and therefore the
restrictive effects of s 47 were not 193 subject to art 30. The defendants appealed, contending that the s 47 prohibition was in fact
a measure equivalent to a quantitative restriction on imports and was therefore capable of contravening art 30 and that the council
had not attempted to discharge its burden of proving that the case fell outside the scope of art 30 by showing that the s 47
prohibition, which applied equally to imported and domestic products, pursued an aim which was justified with regard to
Community law and that its effects did not exceed that which was necessary to achieve that aim.
________________________________________
a Section 47 provides: Every shop shall, save as otherwise provided by this Part of this Act, be closed for the serving of customers on
Sunday: Provided that a shop may be open for the serving of customers on Sunday for the purposes of any transaction mentioned in the
Fifth Schedule to this Act.
b Section 59 provides: In the case of any contravention of any of the foregoing provisions of this Part of this Act, the occupier of the shop
shall be liable to a fine not exceeding level 4 on the standard scale.
c Article 30 is set out at p 198 g, post.

Held The prohibition on Sunday trading contained in s 47 of the 1950 Act was a measure equivalent to a quantitative restriction
on imports and, as a trading rule, it was capable of contravening art 30 of the EEC Treaty. Nevertheless, since the s 47
prohibition applied equally to domestic and imported goods and pursued an objective which was justified in relation to
Community law on the ground that national rules governing the opening hours of retail premises reflected political and economic
choices which were a matter for individual member states, it was clear that s 47 did not contravene art 30 provided that the party
seeking to rely on s 47 was able to show that the restrictive effects on intra-Community trade which might result from the
prohibition on Sunday trading did not exceed that which was necessary to achieve the objective of the prohibition. However,
given that the question whether the s 47 prohibition fulfilled the requirement of proportionality was a question of fact to be
determined by the English courts, the councils failure to adduce any evidence to establish proportionality and hence the validity
of the s 47 prohibition meant that the court had not considered the question and therefore the convictions under ss 47 and 59
could not stand. It followed that the defendants appeals would be allowed and their convictions would be quashed accordingly
(see p 203 j, p 204 j, p 212 f g, p 213 d e, p 217 h j, p 218 d e g h, p 220 b and p 221 b, post).
Summary proceedings against Oebel Case 155/80 [1981] ECR 1993 and Torfaen BC v B & Q plc Case 145/88 [1990] 1 All
ER 129 applied.
Per Schiemann J. Since the Court of Justice of the European Communities has itself decided that s 47 of the 1950 Act
applies equally to domestic and imported goods and that legislation on Sunday trading falls within the permissible sphere of
activity of the United Kingdom as a member state, the answer to the question whether the proportionality criterion is satisfied is
obvious and does not require evidence (see p 219 j to p 220 b and p 221 b, post).

Notes
For general restrictions on Sunday trading, see 47 Halsburys Laws (4th edn) paras 632644, and for cases on the subject, see
47(1) Digest (Reissue) 564568, 29943017.
For the free movement of goods in the European Economic Community and justifications for restrictions on trade between
member states, see 52 Halsburys Laws (4th edn) paras 125512111.
For the Shops Act 1950, ss 47, 59, Sch 5, see 19 Halsburys Statutes (4th edn) (1990 reissue) 424, 435, 447.
For the EEC Treaty, art 30, see 50 Halsburys Statutes (4th edn) 276.

Cases referred to in judgments

Blesgen v Belgium Case 75/81 [1982] ECR 1211.
Buet v Ministre Public Case 382/87 [1989] ECR 1235.
BV Industrie Diensten Groep v Beele Case 6/81 [1982] ECR 707.
Cinthque SA v Fdration nationale des cinmas franais Joined Cases 60 and 61/84 [1985] ECR 2605.
194
Direction gnrale des impts and Procureur de la Rpublique v Forest Case 148/85 [1986] ECR 3449.
Firma Denkavit Futtermittel GmbH v Minister fr Ernhrung-Landwirtschaft und Forsten des Landes Nordrhein-Westfalen Case
251/78 [1979] ECR 3369.
GB-INNO-BM v Confdration du Commerce Luxembourgeois Case C-362/88 [1990] ECR I-667.
Gilli v Andres Case 788/79 [1980] ECR 2071.
Krantz (H) GmbH & Co v Ontvanger der Directe Belastingen and Netherlands Case C-69/88 [1990] ECR I-583.
Oebel, Summary proceedings against Case 155/80 [1981] ECR 1993.
Procureur du Roi v Dassonville Case 8/74 [1974] ECR 837.
R v Royal Pharmaceutical Society of GB, ex p Association of Pharmaceutical Importers Joined Cases 266 and 267/87 [1989] 2
All ER 758, [1990] 1 QB 534, [1990] 2 WLR 445, CJEC.
Rewe-Zentral AG v Bundesmonopolverwaltung fr Branntwein Case 120/78 [1979] ECR 649.
SA Magnavision NV v General Optical Council (No 1) [1987] 1 CMLR 887, DC.
Torfaen BC v B & Q plc Case 145/88 [1990] 1 All ER 129, [1990] 2 QB 19, [1990] 2 WLR 1330, CJEC.
van de Haar and Kaveka de Meern BV, Criminal proceedings against Joined Cases 177 and 178/82 [1984] ECR 1797.

Cases also cited

EC Commission v Germany Case 12/74 [1975] ECR 181.
EC Commission v Germany Case 179/85 [1986] ECR 3879.
EC Commission v Ireland Case 45/87 [1987] ECR 783.
Hoffmann-La Roche v Centrafarm Vertriebsgesellschaft Pharmazeutischer Erzeugnisse mbH [1977] ECR 957.
Maydew v Flint (1984) 80 Cr App R 49, DC.
Oosthoeks Uitgeversmaatschappij BV, Criminal proceedings against Case 286/81 [1982] ECR 4575.
Portsmouth City Council v Richards [1989] 1 CMLR 673, CA.
Rau (Walter) Lebensmittelwerke v De Smedt PvbA Case 261/81 [1982] ECR 3961.
Rigby v Woodward [1957] 1 All ER 391, [1957] 1 WLR 250, DC.
Robertson, Criminal proceedings against Case 220/81 [1982] ECR 2349.
Schloh v Auto Contrle Technique SPRL Case 50/85 [1986] ECR 1855.
Smanor SA, Proceedings for compulsory reconstruction against Case 298/87 [1988] ECR 4489.
Waltham Forest London Borough v Scott Markets Ltd [1988] 3 CMLR 773.
Warner Bros Inc v Christiansen Case 158/86 [1988] ECR 2605.
Wychavon DC v Midland Enterprises (Special Events) Ltd (1987) 86 LGR 83.

Cases stated

W H Smith Do It All Ltd v Peterborough City Council

W H Smith Do It All Ltd appealed by way of case stated by the Crown Court at Peterborough (Judge Astill and justices) in
respect of its decision on 30 November 1988 whereby it dismissed their appeal against conviction by the Peterborough
Magistrates Court on 15 July 1988 of the charge set out in the information preferred by Peterborough City Council that on 6
March 1988, being occupiers of a shop at W H Smith Do It All, Lincoln Road, Walton, Peterborough, the appellants contravened
s 47 of the Shops Act 1950, in that the shop was unlawfully open for the serving of customers on a Sunday, for the purpose of
selling goods, 195contrary to s 59 of that Act. The question for the opinion of the High Court is set out at p 198 c, post. The
facts are set out in the judgment of Mustill LJ.

Payless DIY Ltd v Peterborough City Council

Payless DIY Ltd appealed by way of case stated by the Crown Court at Peterborough (Judge Astill and justices) in respect of
its decision on 30 November 1988 whereby it dismissed their appeal against conviction by the Peterborough Magistrates Court
on 15 July 1988 of the charge set out in the information preferred by Peterborough City Council that on 29 November 1987,
being occupiers of a shop at 9 Bushfields, Orton Centre, Peterborough, the appellants contravened s 47 of the Shops Act 1950, in
that the shop was unlawfully open for the serving of customers on a Sunday, for the purpose of selling goods, contrary to s 59 of
the 1950 Act and sold an item to a Mr Kenneth Morris Hill, a Shops Act officer of the council, which was not on the list of
exemptions set out in Sch 5 to that Act. The question for the opinion of the High Court is set out at p 198 c, post. The facts are
set out in the judgment of Mustill LJ.
The appeals were heard together.

Eldred Tabachnik QC and Paul Lasok for the appellants.

Stuart Isaacs and Neil Calver for the respondents.

Cur adv vult

4 June 1990. The following judgments were delivered.

MUSTILL LJ.

Introduction
For many years, it has been forbidden in England and Wales to open shops on Sunday, except for the sale of a strange
miscellany of goods now ossified in Sch 5 to the Shops Act 1950. On 13 July 1988 and 11 April 1988, Payless DIY Ltd and W H
Smith Do It All Ltd respectively infringed this prohibition. Taking the Payless case as an example of both, we find that in due
course an information was laid against the proprietors alleging that their shop was unlawfully open for the serving of customers
on a Sunday for the purpose of selling a wallpapering tool set to one Kenneth Morris Hill contrary to Section 59 of the said Act.
In reality, this was the very last purpose for which Payless (hereafter the appellants) would have opened their shop, since Mr
Hill was a Shops Act assistant of the respondent local authority. Nevertheless, the sense of the charge was plain enough. The
respondents sold Mr Hill an article which was not on the list of exemptions set out in Sch 5. On the assumption that s 47 of the
1950 Act was valid, there was no defence to the charge, and it is no surprise to learn that on 15 July 1988 the appellants were
convicted by justices of the petty sessional division of Peterborough.
What makes this appeal unusual is the need to make this assumption explicit. Forty years ago, when the Shops Act 1950
was enacted, any such statement by a court in the United Kingdom would have seemed quite inexplicable. According to the
doctrine of the separation of powers, as understood in the United Kingdom, the legislative acts of the Queen in Parliament are
impregnable. The United Kingdom has no constitutional courts in the same sense as in other countries. True, the exercise of the
royal prerogative and of delegated legislation is now theoretically capable of being called in question. But it is axiomatic that the
courts 196 have no supervisory or revising powers in relation to primary legislation. If Parliament speaks, the courts must obey.
This is still the fundamental principle of our constitutional law, but it has more recently been overlaid with qualifications of
increasing importance to daily life stemming from the accession of the United Kingdom to the European Communities. Since
then the courts have been obliged to read statutes of the United Kingdom in the light of the general principles laid down in the
EEC Treaty, as developed in instruments of the Council and the Commission, and as expounded by the Court of Justice of the
European Communities. The interaction between these community instruments and the public and private rights of organisations
and individuals in member states is complex, but one thing may be taken as clear for the purposes of the present case: that, if
there is a collision, in the context of a particular set of facts, between s 47 of the 1950 Act and art 30 of the EEC Treaty, the
former must yield. What precisely this means in practical terms is something to which we must later return. For the moment, it
is sufficient to state that the dimension added by Community law has given the commonplace facts of these two appeals their
particular importance and difficulty.

The case
 We have already referred to the conviction of the appellants before the justices. They appealed to the Crown Court at
Peterborough (Judge Astill and justices). We shall later summarise the arguments there advanced, but for the moment it is
sufficient to set out the facts which were proved without dispute and found in the special case stated by the Crown Court:

(a) As alleged in the information, the Appellants shop was open for the serving of customers on Sunday 29th
November 1987; and Mr Kenneth Morris Hill, a Shops Act Assistant employed by the Respondents bought a wallpapering
tool set at the shop on that date.
(b) The Appellants sell a substantial quantity of goods imported from Member States of the European Economic
Community (hereafter the EEC) other than the United Kingdom in their 90 stores, including the shop at 9 Bushfields,
Orton Centre, Peterborough.
(c) A substantial percentage of the weekly turnover of sales by the Appellants is achieved on Sundays in places where
the Appellants stores are open on Sundays
(d) Where no Sunday trading takes place at a store the overall retail turnover will be adversely affected. Only about
30% of the trade lost as a result of closing on Sundays is recovered over the rest of the week. This means that 70% of the
Sunday turnover is lost entirely.
(e) The reason for the loss of the Sunday turnover and the inability to recover it on other days of the week is that much
of the trade generally at the Appellants stores, especially at weekends, consists of opportunist buying and distress
purchases. Such buying will therefore not take place if the store is closed. The Sunday pound will, therefore, be spent
upon other commodities altogether, such as petrol for longer journeys, hotel accommodation, holidays or in public houses.
(f) If the Appellants Sunday turnover is reduced across the range of its products, overall, a proportionate reduction in
the sales of EEC-sourced products will similarly occur. Many products which are sold on Sundays and imported from EEC
countries are the Appellants own-brand products, for example, garden furniture, which cannot be purchased elsewhere than
from the Appellants own stores.

197
On these facts, and on the arguments addressed, the court arrived at the following decision:

We therefore concluded that the Shops Act and, in particular, Section 47, is a regulatory provision passed by a Member
State which does not fall within the definition trading rule and its effect cannot bring it within Article 30. We were sure
of our conclusion and had no doubt that Section 47 remains current English law so that no reference should be made to the
European Court.

The court therefore dismissed the appeal from the justices, and upheld the conviction, but stated the following question for
the opinion of the High Court:

Whether we were correct in law in interpreting Article 30 of the EEC Treaty as not applying to Section 47 of the Shops
Act, 1950, because it is not a trading rule?

This question is now before us for decision in a radically different context, for since the stating of the case there has
intervened the decision of the Court of Justice of the European Communities in Torfaen BC v B & Q plc Case 145/88 [1990] 1 All
ER 129, [1990] 2 QB 19.
Since the true meaning of this decision, and its relationship with the previously existing jurisprudence of the court, are
crucial to the question posed by the Crown Court and are hotly in dispute, we intend to approach if by the following stages. First,
we shall state our own understanding of the relevant European law as it stood when the case was before the Crown Court; second,
we shall summarise the course of argument in the Crown Court and the reasoning which led to the dismissal of the appeal; third,
we shall discuss the Torfaen decision and certain even more recent pronouncements in the Court of Justice which are said to
illuminate its true meaning.

European law before Torfaen

The starting point for the whole of this branch of Community law is art 30 of the EEC Treaty, which in its English version
reads as follows:

Quantitative restrictions on imports and all measures having equivalent effect shall, without prejudice to the following
provisions, be prohibited between Member States.

Also of importance in the present context are art 36 of the EEC Treaty and art 3 of Commission Directive (EEC) 70/50.
Article 36 is to the following effect:

The provisions of Articles 30 to 34 shall not preclude prohibitions or restrictions on imports, exports or goods in transit
justified on grounds of public morality, public policy or public security; the protection of health and life of humans,
animals or plants; the protection of national treasures possessing artistic, historic or archaeological value; or the protection
of industrial and commercial property. Such prohibitions or restrictions shall not, however, constitute a means of arbitrary
discrimination or a disguised restriction on trade between Member States.

Directive 70/50, the title of which states that it is

based on the provisions of Article 33(7), on the abolition of measures which have an effect equivalent to quantitative
restrictions on imports and are not covered by other provisions adopted in pursuance of the EEC Treaty,

includes the following:

198

Whereas effects on the free movement of goods of measures which relate to the marketing of products and which
apply equally to domestic and imported products are not as a general rule equivalent to those of quantitative restrictions,
since such effects are normally inherent in the disparities between rules applied by Member States in this respect; Whereas,
however, such measures may have a restrictive effect on the free movement of goods over and above that which is intrinsic
to such rules

Article 2
 1. This Directive covers measures, other than those applicable equally to domestic or imported products, which hinder
imports which could otherwise take place, including measures which make importation more difficult or costly than the
disposal of domestic production.
2. In particular, it covers measures which make imports or the disposal, at any marketing stage, of imported products
subject to a conditionother than a formalitywhich is required in respect of imported products only, or a condition
differing from that required for domestic products and more difficulty to satisfy

Article 3
This Directive also covers measures governing the marketing of products which deal, in particular, with shape, size,
weight, composition, presentation, identification or putting up and which are equally applicable to domestic and imported
products, where the restrictive effect of such measures on the free movement of goods exceeds the effects intrinsic to trade
rules. This is the case, in particular, where:the restrictive effects on the free movement of goods are out of proportion to
their purpose;the same objective can be attained by other means which are less of a hindrance to trade
It might perhaps have been thought that art 30 was aimed at those national measures whose purpose was discriminatory, or
perhaps at those whose effect was in practice discriminatory. It is, however, clear from firmly established jurisprudence,
beginning with Procureur du Roi v Dassonville Case 8/74 [1974] ECR 837, that this is too narrow an interpretation. Amongst the
cases cited to us we may mention also BV Industrie Diensten Groep v Beele Case 6/81 [1982] ECR 707, Cinthque SA v
Fdration nationale des cinmas franais Joined Cases 60 and 61/84 [1985] 1 ECR 2605 and R v Royal Pharmaceutical Society
of GB, ex p Association of Pharmaceutical Importers Joined Cases 266 and 267/87 [1989] 2 All ER 758, [1990] 1 QB 534. In
reality, however, there are many other judgments of the Court of Justice where this proposition is either explicit or implicit. (It
may also be noted that in both the Cinthque and Pharmaceutical cases the respective Advocates General proposed a narrower
reading of art 30, in opinions which were not in this respect adopted by the court.) Thus, it is now undoubted Community law
that, in the words of the Court of Justice in the Dassonville case Case 8/78 [1974] ECR 837 at 852 (para 5):

All trading rules enacted by Member States which are capable of hindering, directly or indirectly, actually or
potentially, intra-Community trade are to be considered as measures having an effect equivalent to quantitative
restrictions.

Furthermore, the use of the expression are capable of in the passage just cited can be seen to have signalled another
development of the law concerning art 30. The court rejected a submission made by the United Kingdom that measures having
equivalent effect does not cover measures which are only potentially liable to have such an effect. It is not necessary to cite the
subsequent decisions which 199 reinforce the rule that the party attacking the measures has to show that they have an actual
effect on intra-Community trade. Furthermore, it is sufficient for there to be some degree of actual or potential effect, since the
de minimis rule does not apply in this context: see Criminal proceedings against van de Haar and Kaveka de Meern BV Joined
Cases 177 and 178/82 [1984] ECR 1797.
Article 30 is subject to three exceptions. Whether these are exceptions stricti sensu operating to take outside the prohibition
of art 30 a measure which prima facie falls within it, or whether they prevent a measure from falling within art 30 at all, is a
matter of controversy. I do not understand this controversy to have any practical bearing on our present problem, so I will not
pursue it.
The first exception to art 30 is specifically created by art 36. Since it is not relied upon here, we need note only that the
burden of proving that the measure falls within the exception is on the party which seeks to justify the measure: see eg Firma
Denkavit Futtermittel GmbH v Minister fr Ernahrung-Landwirtschaft und Forsten des Landes Nordrhein-Westfalen Case 251/78
[1979] ECR 3369.
The second exception to art 30 exists where it is possible for the court to tell, simply by inspecting the measure, that it
cannot have an adverse effect on intra-Community trade. I entertain no doubt that this exception was recognised by the decisions
in Direction gnrale des impts and Procureur de la Rpublique v Forest Case 148/85 [1986] ECR 3449, Blesgen v Belgium
Case 75/81 [1982] ECR 1211 and Summary proceedings against Oebel Case 155/80 [1981] ECR 1993. Some commentators
have suggested that these cases were either wrongly decided, or were correctly decided but on the wrong grounds. We cannot
enter into this, for the decisions are binding upon us. It is, however, necessary to draw attention in passing to two features of
these cases.
First, as regards Blesgen, the court referred to art 3 of Directive 70/50 as well as art 30, plainly regarding this as at least
potentially relevant to a non-discriminatory measure restricting the sale of all alcoholic spirits in excess of a particular strength,
although it went on to hold that the measure had in fact no connection with importation and was thus not of a nature to impede
trade. Reference was made to the requirement of a restriction on free movement which (in the language of art 3 of Directive
70/50) exceeds the effects intrinsic to trade rules.
Secondly, as regards Oebel, two restrictions were in issue. The first related to permissible working hours in bakeries. This
was held to lie outside the restrictions on export barriers contained in art 34, because that article (unlike art 30) concerns only
national measures which have as their specific object or effect the restriction of patterns of exports, and the measure in question
did not. The measure was a reflection of a national economic and social policy and applied to all undertakings in a particular
industry without any difference in treatment. The second restriction, relating to the hours at which goods could be delivered, was
ancillary to the first. The court held that provided it was confined to transport for delivery to individual consumers, this
restriction could not have the effect of restricting imports or exports between member states.
The third and final exception to art 30 is the consequence of a judicial initiative. The mainspring, as I understand it, is that
there are many features of social, moral and cultural life which have not yet been regulated throughout the member states by
Community legislation. Pending the achievement of a homogeneous society by force of law, the European institutions recognise
that there are fields in which national legislation and courts can legitimately apply their own norms, notwithstanding that this may
lead to disparities of treatment within individual territories and hence to inequalities and restrictions of trade between member
states.
200
This recognition of the current realities of Community life has led to the development of a doctrine, operating in the interim
of the realisation of the community ideal, which recognises that national measures, prima facie within the interdiction of art 30,
are nevertheless to be acknowledged a validity subject to strict conditions. A full exposition of the intellectual basis of this
exception may be found in the opinion of Mr Advocate General Capotorti in Oebel. We need not quote from it here, since the
general principles have not been disputed in argument before us, and it is sufficient to record that the conditions for its application
are as follows.
First, the measure must have an objective which is recognised for community purposes as falling within a justifiable field
of national legislative or judicial activity pending a harmonisation by European laws. Unlike the categories of exception under
art 36, the list of potentially justifiable fields of law-making for the purpose of this exception is not closed, and indeed may be
incapable of description even in general terms at the present time. As we shall see, it is unnecessary for a decision in this case
now to attempt such a description.
Secondly, the exception applies only where the measure applies to domestic and imported products without discrimination.
Finally, the measure must have an effect proportional to the national needs which give the measure its justification. Various
expressions have been employed to describe this requirement. For example, it has been said that the obstacles to free movement
must be necessary to achieve the objectives of the local law. Or that the measure shall not exceed what is required for this
purpose. Or that where the member state has a choice between various measures to attain the same objective it should choose the
means which least restricts free trade. Whether these differing formulations embody different tests which must be applied
concurrently, or whether they all express a single concept of proportionality, is something which we are not called upon to decide.
This judge-made exception to art 30 is given various names by those familiar with the field: the rule of reason; the
principle of mandatory requirements; the Cassis de Dijon exception. We shall for convenience adopt the latter title, and will
pause to describe the case from which it takes its name. (The official title is Rewe-Zentral AG v Bundesmonopolverwaltung fr
Branntwein Case 120/78 [1979] ECR 649.) This concerned the importation into the Federal Republic of Germany of a liqueur
Cassis de Dijon containing 15% to 20% by volume of alcohol. This fell foul of a regulation then in force in Germany prohibiting
the sale of potable spirits having a wine-spirit content less than 32%. Holding that the regulation was prohibited by art 30, the
Court of Justice reasoned by the following stages. The regulation had an effect equivalent to a quantitative restriction on trade
between member states and hence prima facie fell within art 30. However, the court said (at 662(para 8)):

In the absence of common rules relating to the production and marketing of alcohola proposal for a regulation
submitted to the Council by the Commission on 7 December 1976(Official Journal C 309, p. 2) not yet having received the
Councils approvalit is for the Member States to regulate all matters relating to the production and marketing of alcohol
and alcoholic beverages in their own territory. Obstacles to movement within the Community resulting from disparities
between the national laws relating to the marketing of the products in question must be accepted in so far as those
provisions may be recognised as being necessary in order to satisfy mandatory requirements relating in particular to the
effectiveness of fiscal 201 supervision, the protection of public health, the fairness of commercial transactions and the
defence of the consumer.

Nevertheless, in this particular case the two suggested justifications for the regulation did not serve to validate it since

the requirements relating to the minimum alcohol content of alcoholic beverages do not serve a purpose which is in the
general interest and such as to take precedence over the requirements of the free movement of goods, which constitutes one
of the fundamental rules of the Community.

(See [1979] ECR 649 at 664 (para 14).)

The Cassis de Dijon case therefore provides a clear illustration of its eponymous principle. Several other examples were
cited to us, including BV Industrie Diensten Groep v Beele Case 6/81 [1982] ECR 707, Buet v Ministre Public Case 382/87
[1989] ECR 1235, Gilli v Andres Case 778/79 [1980] ECR 2071 and Cinthque SA v Fdration nationale des cinmas franais
Joined cases 60 and 61/84 [1985] ECR 2605. Of these, we need describe only the latter.
A French decree prohibited the exploitation for sale or hire of video cassettes of cinematographic films within one year of
the certification of the film for public display. The justification advanced was that a culturally important industry could be
preserved only if the public display of the films was protected for long enough to yield an adequate recovery of costs. When the
legitimacy of the decree was put in issue before the Court of Justice, Advocate General Sir Gordon Slynn was of the opinion that
it did not fall within art 30, because it did not discriminate against imports. The Advocate General went on to state that even if he
had not been of this opinion, he would still have considered that the measure was capable of being taken out of art 30 by the
Cassis de Dijon principle, although a decision on whether the actual provisions adopted were in fact justified as being necessary
was for the national courts to decide.
In the event, the Court of Justice differed from the first of these conclusions but agreed with the second. The relevant
passage from the judgment reads as follows ([1985] ECR 2605 at 26252626):

20. It must be stated first that, in the light of that information, the national legislation at issue in the main proceedings
of these cases forms part of a body of provisions applied in the majority of Member States, whether in the form of
contractual, administrative or legislative provisions and of variable scope, but the purpose of which, in all cases, is to delay
the distribution of films by means of video-cassettes during the first months following their release in the cinema in order
to protect their exploitation in the cinema, which protection is considered necessary in the interests of profitability of
cinematographic production, as against exploitation through video-cassettes. It must also be observed that, in principle, the
Treaty leaves it to the Member States to determine the need for such a system, the form of such a system and any temporal
restrictions which ought to be laid down.
21. In that connection, it must be observed that such a system, if it applies without distinction to both video-cassettes
manufactured in the national territory and to imported video-cassettes, does not have the purpose of regulating trade
patterns; its effect is not to favour national production as against the production of other Member States, but to encourage
cinematographic production as such.
22. Nevertheless, the application of such a system may create barriers to intra-community trade in video-cassettes
because of the disparities between 202 the systems operated in the different Member States and between the conditions for
the release of cinematographic works in the cinemas of those States. In those circumstances, a prohibition of exploitation
laid down by such a system is not compatible with the principle of the free movement of goods provided for in the Treaty
unless any obstacle to intra-Community trade thereby created does not exceed that which is necessary in order to ensure the
attainment of the objective in view and unless that objective is justified with regard to Community law.
23. It must be conceded that a national system which, in order to encourage the creation of cinematographic works
irrespective of their origin, gives priority, for a limited initial period, to the distribution of such works through the cinema,
is so justified.
24. The reply to the questions referred to the Court is therefore that Article 30 of the EEC Treaty must be interpreted as
meaning that it does not apply to national legislation which regulates the distribution of cinematographic works by
imposing an interval between one mode of distributing such works and another by prohibiting their simultaneous
exploitation in cinemas and in video-cassette form for a limited period, provided that the prohibition applies to
domestically produced and imported cassettes alike and any barriers to intra-Community trade to which its implementation
may give rise do not exceed what is necessary for ensuring that the exploitation in cinemas of cinematographic works of all
origins retains priority over other means of distribution.

There appears to be no case which explicitly decides the location of the burden of proof in the Cassis de Dijon situation, but
it was common ground during argument that, once it has been demonstrated by the objecting party that the measure falls prima
facie within the purview of art 30, it is for the justifying party to establish the necessary elements of the exception, and this
whether in strict theory the exception is correctly described as such or whether it is more properly regarded as an integral part of
determining the scope of art 30 itself. In my view, the parties were right to proceed on this common basis, given the manner in
which the principle is invariably expounded in the cases brought to our attention.

The reasoning of the Crown Court

I have already quoted the facts found in the case stated. These have one significant omission, namely that there is nothing
which could be relied upon to bring s 47 within the Cassis de Dijon exception. The reason is that no evidence of this kind was
adduced by either side, and indeed we are told that the respondents expressly disclaimed any reliance on the exception. Thus,
since art 36 was not prayed in aid the dispute in the Crown Court turned entirely upon the question whether s 47 in its entirety, or
at least that aspect of it which founded the charge against the appellants, falls within the purview of art 30.
Since this question is now dominated by the subsequent judgment of the Court of Justice in Torfaen BC v B & Q plc Case
145/88 [1990] 1 All ER 129, [1990] 2 QB 19, I will not rehearse in detail the contentions of the parties, which are very clearly set
out in the case stated. It is sufficient to say that the present appellants contended for a view of the European cases very much on
the lines of the summary which I have already set out, and drew the conclusion that since the burden of proving that the case fell
within the exceptions of art 36 or Cassis de Dijon was on the respondents, a burden which the respondents had not attempted to
discharge, s 47 could not form a valid basis for a criminal charge. For their 203 part, the respondents put forward arguments
which in their essential features were adopted by the Crown Court when it stated its opinion as follows:

(c) The question that we had to ask ourselves was whether Section 47 is incompatible with Article 30. In
considering that, we had to question whether Section 47 is a so-called trading rule as defined in the Dassonville case. We
were not shown any authority of the European Court which, in our opinion, rejects the definition trading rule and we
considered that the Dassonville case is current authority in the European Court (e) The Shops Act, 1950, was a
consolidating Act. Its provisions were enacted to regulate a number of matters. It did not have as its object the regulation
of trade. It is a national enactment, having as its purpose, in a number of ways, the regulation of the lives of people and not
the regulation of trade. The licensing laws of this country have a similar purpose. These Acts of Parliament arose out of
social and/or religious considerations and not trading considerations. Their effect on trading, if there is any, is incidental.
(f) We were told that the term trading rule seems never to have been defined in any decision of the European Court after
the Dassonville case; but it has never been rejected as a term in any subsequent decision of the European Court. We
concluded that a trading rule is a measure or enactment passed by a Member State for the specific purpose of regulating
trade. If that piece of legislation is then capable of hindering, directly or indirectly, actually or potentially, intra-
Community trade, then it is deemed to be a measure having an effect equivalent to quantitative restrictions and
contravenes Article 30 which renders it impotent. (g) Since Section 47 is a Section of an Act of Parliament enacted to
regulate matters other than trade, for example, the working times and practices of employees and the lives of purchasers
and we had in mind there specifically Section 47we concluded that it cannot be said to be a trading rule. (h) We
concluded that it was not intended that the effect of Article 30 should be so wide as to overtake national regulatory
provisions of Member States which are not passed specifically to regulate trade and which are not specifically aimed at
imports from Member States. We concluded that the purpose of Article 30 is to protect free trade within the common
market, to destroy prejudice against imports from Member States, to promote unfettered free trade within the EEC: that is,
to make the European market as free as any internal market of a Member State. Free trade means, in our judgment, more
than non-discriminatory domestic restrictions on trade. It means freedom of trade between Member States on a broader
basis. (i) We therefore concluded that the Shops Act and, in particular, Section 47, is a regulatory provision passed by a
Member State which does not fall within the definition trading rule and its effect cannot bring it within Article 30. We
were sure of our conclusion and had no doubt that Section 47 remains current English law so that no reference should be
made to the European Court.

If the matter had been entirely free from authority, I would have seen much force in the Crown Courts view that art 30 is not
aimed at a measure such as the Shops Act 1950. On the other hand, the reported cases are very strong and I would for my part
have concluded, if the matter had rested there, that the respondents contentions were right, and that absent any reliance on art 36
and Cassis de Dijon, and indeed absent any factual foundation for such reliance, the appeal ought to be allowed. Further
discussion of this is, however, unnecessary, for the dispute has been overtaken by the judgment of the Court of Justice in Torfaen
BC v B & Q plc Case 145/88 [1990] 1 All ER 129, [1990] 2 QB 19. Since this was concerned 204 with precisely the same
legislation as is now in suit it might seem that we need look no further. On this at least the parties are agreed, but on nothing else,
for the appellants contend that Torfaen was a straightforward application of the law as already firmly established, whereas for the
respondents it marked a sharp change in direction, the start of a new and more complex doctrine.
Before considering which analysis of Torfaen is to be preferred, I must first summarise the proceedings before the Court of
Justice.

The proceedings in the Torfaen case

The defendant company in Torfaen operated do-it-yourself stores and garden centres in the United Kingdom and elsewhere
in Europe. Its premises in Cwmbran were open one Sunday for the sale of goods which did not fall within Sch 5 to the 1950 Act.
The local borough council prosecuted the defendant for offences under ss 47 and 59. The magistrates court submitted the
following questions under art 177:

1. Where a Member State prohibits retail premises from being open on Sunday for the sale of goods to customers, save
in respect of certain specified items, sales of which are permitted, and where the effect of the prohibition is to reduce in
absolute terms the sales of goods in those premises, including goods manufactured in other Member States, and
correspondingly to reduce the volume of imports of goods from other Member States, is such a prohibition a measure
having equivalent effect to a quantitative restriction on imports within the meaning of Article 30 of the Treaty?
2. If the answer to Question 1 is in the affirmative, does such a measure benefit from any of the exceptions to Article
30 contained in Article 36, or from any other exception recognised by Community law?
3. Is the answer to Question 1 or Question 2 above affected by any factor so as to render the measure in question a
means of arbitrary discrimination or a disguised restriction on trade between Member States or a measure lacking in
proportionality or otherwise unjustified?

I will first summarise the contentions of the parties, as they appear from the report of the Judge Rapporteur. The prosecuting
authority contended that the provisions of the 1950 Act did not infringe art 30. No evidence was presented to the magistrates
court as to the effect which a reduction in B & Qs imports might have on the pattern of imports into the United Kingdom.
Legislative provisions such as the Shops Act are not properly to be regarded as trading rules: they are more in the nature of a
police power. Its provisions apply without distinction to both domestic and imported products. They do not make importation
more costly and difficult. Thus the Cassis de Dijon principle does not come into play. But, if it does, the requirements are
satisfied. If this too is wrong, the prohibition is justified on the grounds of the protection of health and life, public policy and
public morality. Many members of the general public wish for Sunday to be kept as a day of rest and there is a strong feeling that
it would be immoral to have full trading on Sunday. Also there is no infringement of proportionality.
The defendant maintained that s 47 is incompatible with art 30 and is not capable of being justified by reference either to art
36 or the principle of Cassis de Dijon. The 1950 Act is a measure having an effect equivalent to a quantitative restriction on
imports from other member states: see Dassonville. There is nothing in the definition in Dassonville of a measure equivalent to
suggest that discrimination between imports and domestic products or a protective effect for the latter is a necessary element of
such a measure. In the present case, the Act is 205 not to be characterised as a mandatory requirement, nor does it fall within art
36.
 The submissions for the United Kingdom entered into various issues of fact and went on to develop an argument on the case
law of the Court of Justice to the effect that case law has drawn a distinction between measures which affect particular imported
products. The Judge Rapporteur stated ([1990] 1 All ER 129 at 137, [1990] 2 QB 19 at 28):

The United Kingdom also observes that the defendants argument misinterprets the courts case law on art 30 of the
EEC Treaty. That case law has drawn a distinction between measures which affect particular imported products on the one
hand and measures which do not on the other. Measures falling within the first category, where the obstacle to imports
necessarily derives from a disparity between the corresponding rules in different member states, are subject to the
requirement of justification laid down by the court in its judgment in the Rewe-Zentral case [the Cassis de Dijon case],
cited above. Measures in the second category are not regarded by the court as hindering imports within the meaning of its
judgment in the Dassonville case, cited above, unless they are discriminatory or put imports at a disadvantage in
comparison with domestic goods As regards the contention that the rules are a means of arbitrary discrimination or a
disguised restriction on trade, the United Kingdom points out in the first place that no discriminatory effects of the rules
have been referred to and submits that there are none. Nor is it clear in what sense the rules could be considered to be a
disguised restriction of trade.

The United Kingdom concluded by proposing the following replies to the questions raised in the order for reference ([1990]
1 All ER 129 at 137138, [1990] 2 QB 19 at 29):

(1) Article 30 of the EEC Treaty is not to be interpreted as meaning that a rule which prohibits retail premises from
being open on Sunday save for the sale of certain items is a measure having equivalent effect to a quantitative restriction on
imports. (2) Question 2 does not require a reply. (3) The order for reference discloses no factor such as to render the
measure in question a means of arbitrary discrimination or a disguised restriction of trade between member states or a
measure lacking in proportionality or otherwise unjustified.

The Commission advanced contentions to the effect that the restrictions imposed by the 1950 Act, although difficult to
justify if justification were considered necessary, do not fall within art 30 since they do not prevent the importation or marketing
of goods from other member states: see the Oebel case Case 155/80 [1981] ECR 1443, the Blesgen case Case 75/81 [1982] ECR
1211 and the Forest case Case 148/85 [1986] ECR 3449.
In the light of these arguments, Mr Advocate General Van Gerven advanced propositions which we believe may fairly be
summarised as follows (omitting those which are not material to the narrow issue now before us).
(1) The opposing party need not demonstrate that the measure actually restricts intra-community trade or restricts it overall.
(2) The only cases in which the court has accepted that a measure is to be regarded as falling outside the scope of art 30 on
account of its effect in practice are those in which the court has concluded that the rules in question could not lead to a restriction
on imports and exports: see the Oebel, Blesgen and Forest cases. This is not such a situation. The form of the questions assumes
a causal link between the contested legislation and a reduction in imports.
206
(3) The decisions in the Pharmaceutical case Joined Cases 266 and 267/87 [1989] 2 All ER 758, [1990] 1 QB 534 and the
Buet case Case 382/87 [1989] ECR 1235

provide an appropriate reminder that an analysis of a national measure with reference to art 30 of the EEC Treaty
should focus on its effects (with regard to the restriction of trade) rather than on its nature (general or concerning specific
products) (The Advocate Generals emphasis.)

See [1990] 1 All ER 129 at 144, [1990] 2 QB 19 at 37(para 12).)

(4) The Advocate General proceeded to develop a thesis the essence of which was that the Cinthque case was not an
isolated decision but introduced a new dimension in the application of art 30 (see [1990] 1 All ER 129 at 147, [1990] 2 QB
19 at 41(para 18)). This was to the effect that the approach of the court had been to examine not whether imported products
were put at a disadvantage but whether the Community market was partitioned into separate national markets (see [1990] 1 All
ER 129 at 148, [1990] 2 QB 19 at 42(para 21)). On this ground, the Advocate General concluded that the application of the
Shops Act 1950, even if it had an appreciable adverse effect on imports of the goods concerned, was not such as to restrict intra-
Community trade so as to warrant the application of art 30(see [1990] 1 All ER 129 at 150151, [1990] 2 QB 19 at 46(para 25)).
(5) The Advocate General then proceeded to consider what the answers to the second and third questions should be, if his
opinion on the first question were not to prevail. This part of his opinion drew attention to a number of practical problems. We
would respectfully acknowledge the points made by the Advocate General, but feel it inappropriate to develop them here, partly
because they will have to be addressed by national courts, and perhaps by the Court of Justice itself, in proceedings which are not
now before us, and partly because the difficulties which the Advocate General expressed in the following passage were not
regarded as decisive by the court itself:

To conclude the foregoing inquiry into possible grounds justifying the measure, I would once again stress the
following point: this inquiry in my view strikingly illustrates the fact that a measure which is regarded as necessary by a
member state may often only be appraised if the court is prepared to concern itself with areas of policy for which
Community law provides no, or at any rate few, criteria of assessment. This is the reason why I suggest that such a difficult
inquiry relating to national measures such as those at issue here should be avoided as far as possible by interpreting art 30
in accordance with the intendment of the Treaty.

(See [1990] 1 All ER 129 at 154, [1990] 2 QB 19 at 50(para 33).)

Turning to the decision of the Court of Justice itself, this was expressed in terms whose true meaning is at the heart of the
dispute in the present case. It is therefore necessary to set out the relevant passages verbatim ([1990] 1 All ER 129 at 156157,
[1990] 2 QB 19 at 5253):

The first question

10. By its first question the national court seeks to establish whether the concept of measures having an effect
equivalent to quantitative restrictions within the meaning of art 30 of the Treaty also covers provisions prohibiting retailers
from opening their premises on Sunday if the effect of the prohibition is to reduce in absolute terms the sales of goods in
those premises, including goods imported from other member states.
11. The first point which must be made is that national rules prohibiting retailers from opening their premises on
Sunday apply to imported and 207 domestic products alike. In principle, the marketing of products imported from other
member states is not therefore made more difficult than the marketing of domestic products.
12. Next, it must be recalled that in Cinthque SA v Fdration nationale des cinmas franais Joined cases 60 and
61/84 [1985] ECR 2605, the court held, with regard to a prohibition on the hiring of video-cassettes applicable to domestic
 and imported products alike, that such a prohibition was not compatible with the principle of the free movement of goods
provided for in the Treaty unless any obstacle to Community trade thereby created did not exceed what was necessary in
order to ensure the attainment of the objective in view and unless that objective was justified with regard to Community
law.
13. In those circumstances, it is therefore necessary in a case such as this to consider first of all whether rules such as
those at issue pursue an aim which is justified with regard to Community law. As far as that question is concerned, the
court has already stated on Oebel, Summary proceedings against Case 155/80 [1981] ECR 1993, that national rules
governing the hours of work, delivery and sale in the bread and confectionery industry constitute a legitimate part of
economic and social policy, consistent with the objectives of public interest pursued by the Treaty.
14. The same consideration must apply as regards national rules governing the opening hours of retail premises. Such
rules reflect certain political and economic choices in so far as their purpose is to ensure that working and non-working
hours are so arranged as to accord with national or regional socio-cultural characteristics, and that, in the present state of
Community law, is a matter for the member states. Furthermore, such rules are not designed to govern the patterns of trade
between member states.
15. Second, it is necessary to ascertain whether the effects of such national rules exceed what is necessary to achieve
the aim in view. As is indicated in art 3 of Commission Directive (EEC) 70/50 of 22 December 1969, the prohibition laid
down in art 30 covers national measures governing the marketing of products where the restrictive effects of such measures
on the free movement of goods exceeds the effects intrinsic to trade rules.
16. The question whether the effects of specific national rules do in fact remain within that limit is a question of fact to
be determined by the national court.
17. The reply to the first question must therefore be that art 30 of the Treaty must be interpreted as meaning that the
prohibition which it lays down does not apply to national rules prohibiting retailers from opening their premises on Sunday
where the restrictive effects on community trade which may result therefrom do not exceed the effects intrinsic to rules of
that kind.

The second and third questions

18. In the light of the reply given to the first question, it is unnecessary to answer the second and third questions.

The effect of the Torfaen decision

Preliminary observations Before examining the rival interpretations of this judgment, it is convenient to make certain
general observations on art 3 of Directive 50/70, and on the practical implications of applying the Cassis de Dijon principle to a
measure such as s 47.
208
One of the striking features of art 3 is that it concerns only the marketing of goods, a word which, especially in conjunction
with the list of examples which immediately follows, seems more concerned with the way in which particular products are put on
sale than with the more general aspects of trade. However this may be, we see only occasional references to art 3 in the pre-
Torfaen jurisprudence (the opinion of the Advocate General in Cassis de Dijon is a conspicuous example) and no reliance upon it
as a direct ground for decision in any of the cases cited to us, apart from Torfaen.
We may also note that art 3 appears to recognise a threefold gradation, so far as concerns the effect of the measure in
question: (1) where the measure has no effect on the free movement of goods; (2) where the measure does have an effect, but the
effect does not exceed that which is intrinsic to trade rules (sc to the differing trade rules of the types in question as applied by
member states); and (3) where the measure has a greater effect than is intrinsic to such rules.
It is only to the third situation that the directive has any application. In particular, the existence of the second category, to
which the directive does not apply, shows that a degree of interference with the free movement of goods is regarded as
acceptable.
Furthermore, the third category is itself subdivided since it recognises two distinct situations in which those measures which
have more than the intrinsically acceptable effect are nullified by art 3, namely where (i) their restrictive effects on the free
movement of goods are out of proportion to their purpose and (ii) the same objective can be attained by other means which are
less of a hindrance to trade.
Although these instances both appear to be concerned with proportionality, I believe that it is correct to regard them as
distinct. In the first, the intended purpose cannot be achieved by any measure which does not have a disproportionate effect on
the free movement of goods, and the enacting member state is deemed to have erred in seeking to achieve that purpose at all. In
the second situation, the achievement of the intended purpose and the safeguarding of the free movement of trade are capable of
living together, but the member state has chosen too drastic a means to achieve the end.
As will now be clear, no question of applying the Cassis de Dijon exception will arise in the present case. Nevertheless, we
must advert to certain practical problems which rightly received much attention in argument, partly because they are likely to
arise in the proceedings which we are told are pending in some number before various courts, partly because the questions of
proportionality (using the word in a loose sense), which arise under Cassis de Dijon, must also be addressed in a rather different
form if the respondents analysis of Torfaen is correct and partly because the very existence of the difficulties said to be inherent
in applying Cassis de Dijon to a general measure such as s 47 is relied upon by Mr Isaacs to support his contention that the Court
of Justice in Torfaen has devised a novel approach to such measures.
These practical problems may be arranged under three headings: (i) the problems of balancing; (ii) the problems of
consistency in adjudication; and (iii) the problems of general measures.
The problems of balancing It is readily assumed that the exercise required by the Cassis de Dijon exception in a case such as
the present would involve a kind of cost-benefit analysis. Weights would be attributed to the interests respectively of free
movement and the socio-cultural object of the particular measure, and the court would then decide whether the latter outweighed
the former. Something of this kind is often involved in the legislative process, where political premises 209 lead to a decision
that one desirable aim must be subordinated to another. But to perform this task in a judicial context would in all but the most
obvious case be a difficult matter. The effect of a measure on the movement of goods between member states may be hard to
quantify, the more so since it is clear from the jurisprudence that even a potential effect, not demonstrable actually to exist in fact,
is sufficient to bring the measure within art 30. It is even more difficult to assess the weight to be given to the socio-cultural
forces which impelled the legislation when first enacted, the more so in a case such as the present, where more than one such
force has been in operation at the same time. And once the evaluations have been made, how is the balance to be struck, given
that the conflicting interests are so totally different in kind? How could (say) a desire to keep the sabbath holy be measured
against the free-trade economic premises of the common market?
If this is what the Cassis de Dijon exception requires, it seems to me that the task would be difficult to the point of
impossibility in any but the simplest case, where the balance is to be struck, not between two conflicting trade interests, but
between the community free trade interest on the one hand, and an intangible and elusive national moral, social or cultural norm
on the other. I believe, however, that this is not what the European jurisprudence requires even if it is understood in the sense for
which the appellants contend. There is not to be a single adjudication, with interests and the effects on interests weighed against
another, but a series of adjudications in which the interests and the effects upon them of the legislation fall to be examined
successively. First, there is a scrutiny of the actual or potential effect of the measure on intra-Community trade to see whether it
is a measure equivalent to a quantitative restriction. If the answer is affirmative, the court proceeds to decide whether the socio-
cultural purpose of the measure is one which community law recognises as justified in principle. If the answer is affirmative
again the court passes to the third stage which requires it to address the two questions posed by art 3, often compressed into a
single test of proportionality. This stage does not require the court to measure the worthiness of the legislative purpose, as a
preliminary to a comparison with the worthiness of maintaining intra-Community trade free from the inhibitions created by the
national measure. At this point in the process the legislative purpose is already legitimated in full, and is to be taken at its face
value. All that is required is to see whether the national measure goes further than the purpose demands.
If this is a correct analysis, the problem of applying Cassis de Dijon in a case such as the present will not be as intractable as
it might appear at first sight.
Problems of consistency in adjudication The understanding of the Cassis de Dijon exception just proposed also serves to
diminish, if not entirely eliminate, a problem which has been a real cause for concern. Just as the diversity of opinions on moral,
social and cultural issues between member states is not only acknowledged by the Court of Justice but forms the starting point of
this entire topic, so also must we acknowledge that opinions within the individual member states may not be homogeneous, and
that in particular they may vary from one part of a state to another. So far as Sabbatarian ideals form part of the motive power for
the Sunday trading legislation, it is undeniable that adherence to, and indeed comprehension of, these ideals varies profoundly
from one part of the United Kingdom to another. Although the Cassis de Dijon principle is remitted for decision to the national
court, in reality there is not a national court, but hundreds of courts, often comprised of lay people immersed in the values of the
local societies from which they are drawn. Even allowing for the unifying effect of possible appeals to the Crown Court, it would
seem inevitable that, if the 210 application of the Cassis de Dijon exception involved a weighing of the purposes underlying the
Sunday trading legislation, different courts in different parts of the country would reach different conclusions as to the interaction
between s 47 and art 30, and hence as to the criminality of precisely the same acts, surely an intolerable situation. If, however, no
such evaluation is involved, this problem largely disappears.
The same is also the case with the other element in the process, namely the assessment of proportionality. So long as this
was regarded as a balancing of the objectives against detriments, a measurement of the latter was just as much necessary as with
the former. This would open up the possibility that different courts faced with different evidenceand perhaps as in the present
instance with nonewould reach differing conclusions on the potential effect of s 47 on the free movement of goods, hence
again creating a risk that the same acts would be deemed criminal in one court and not in another. If, however, such a balancing
is not called for, a much less exact and more qualitative assessment of the effect on free movement will suffice, and the need to
rely on evidence in the individual case will be much reduced, and with it the risk of conflicting decisions based on different
marshalling of evidence.
The problems of a general measure As Mr Isaacs has been at pains to emphasise, almost all the European jurisprudence on
this topic has been concerned with measures aimed at specific targets: hours of work in bakeries, labelling of yoghurts and so on.
Here, the target of the Shops Act 1950 is a general mode of trading, albeit certain particular categories of goods are exempt from
the restraint. This entails that the relationship between the legislative object and the price paid for it in terms of intra-Community
trade will vary across the spectrum of saleable products. Thus, for example, it is not hard to imagine goods whose production and
market is so peculiarly British that no restriction on its sale could have any perceptible effect on trade between member states. In
other instances, a prohibition relating to goods for a specialised market largely dominated by imports from member states might
have an effect which would be large in relation to that market, although very small when compared with the volume of intra-
Community trade as a whole. Again, if one looks at the purpose rather than the effect of the legislation, it is easy enough to see
that the sale of some types of articles on Sunday would conflict more with at least some of its aims than in the case of other types.
This being so, the question is whether the compatability of the means employed with the means necessary to secure the
legislative aim should be addressed in terms of s 47 in its entirety, judging the aims and the effects on trade as a whole, or
whether it should be approached in terms of categories of goods, and, if so, how the categories should be chosen. This question is
linked with another, which concerns the status of the first decision on the matter in a national court. If the general measure is to
be regarded as a whole, then it must either be consistent with art 30 or not; its validity can hardly be allowed to oscillate with
successive decisions of national courts, based on different bodies of evidence. One would therefore expect that either the first
decision of a national court, or at the least the first decision of a court with power to bind others, would determine the matter once
and for all. This is disturbing, the more so since as the present case demonstrates, that decision may be based on inadequate
evidence or none at all.
As at present advised, I believe that Mr Tabachnik QC is right in his criticism of this approach, for art 30 does not operate to
strike down measures but rather to preclude reliance upon them to the detriment of individual rights protected by Community
law. It seems, therefore, that the problem should be approached on 211 a case-by-case basis. But how far should the
fragmentation be carried? Does the national court consider the measure in relation to intra-Community trade in wallpapering
tools, or in do-it-yourself articles (whatever exactly that may comprise)? Or should one have regard to the full range of goods
sold by these appellants on Sundays? (Surely not, for this would mean that the sale of the same articles in the same towns by
different shops might be criminal in one case and not in the other, according to the breadth of the range on offer.) As with the
problems discussed above, this difficulty may be reduced if the notion of a balancing exercise is set aside, and replaced by a more
qualitative test at the stage where the sufficiency or over-sufficiency of the measure for the valid legislative purpose is being
considered. I confess, however, that in this case, as in the others, some practical problems seem inevitably to flow from the
application of any aspect of proportionality to a general measure.

What does Torfaen decide?

In the present appeal, we find the parties deeply divided not only on what precisely the Torfaen case Case 145/88 [1990] 1
All ER 129, [1990] 2 QB 19 decided, but also on the extent to which the court thereby departed from its previous jurisprudence.
The appellants represent the judgment as an entirely orthodox application of well-established principles, conforming precisely
with the submissions which they themselves had made to the Crown Court. The respondents by contrast submit that Torfaen
represents a radical reformulation of the entire topic, rendering obsolete the arguments in the Crown Court on both sides, and
calling for a new approach from this court, an approach which will nevertheless yield the same answer as before, namely that the
prosecutions were validly founded.
Notwithstanding this controversy, certain aspects of the judgment seem quite plain. In the first place, it has established that
the understanding of the Dassonville case Case 8/74 [1974] ECR 837, and the reliance on the concept of trading rules, which
the respondents had pressed on the Crown Court, and which the latter adopted, were unsound. Moreover, the court has
established this by reference to the very statute with which we are concerned, so we may take as our starting point the proposition
that, whatever its purpose or purposes, s 47 of the 1950 Act is capable of contravening art 30.
Furthermore, it is to my mind plain that in the view of the court s 47 was not only capable of being, but actually was, a
measure equivalent to a quantitative restriction, and hence invalid unless saved by art 36 or the Cassis de Dijon exceptionor,
Mr Isaacs would add, by another qualification to art 30 for which he contends. It is true that the Court of Justice does not
explicitly state this conclusion, but any other reading would render paras 12 to 16 of its judgment otiose (see [1990] 1 All ER 129
at 156157, [1990] 2 QB 19 at 5253); and the Oebel case Case 155/80 [1981] ECR 1993 is called upon in para 13, not as an
illustration of the way that the court can decide for itself that the measure cannot have an effect on free movement, but for a
different reason to which I will refer in a moment. Since the facts found by the Crown Court in the present case do not differ
essentially from those found by the Cwmbran Magistrates Court in the Torfaen case (as quoted by the Advocate General in para
3 of his opinion), we are bound to treat s 47 as a measure equivalent to a quantitative restriction.
The Torfaen judgment enables us to take one step further. It had been argued by the appellants in the present case that the
ban on Sunday trading does not fall within any of the established categories to which the Cassis de Dijon exception applies, and
is in any event so anomalous and lacking in discernible purpose that it could not fall within the exception. The court in Torfaen
has already explicitly 212 rejected this contention, citing the analogy of the rules governing hours of work considered in Oebel,
and holding that rules governing the opening hours of retail premises reflected political and economic choices which were a
matter for member states: see para 14. The reference to member states is important. The court is not here remitting to the
national court that part of the Cassis de Dijon test which relates to the justification of the measure, but is itself deciding that
legislation on Sunday trading falls within the permissible sphere of activity of the United Kingdom as a member state. It must I
think also follow that the court tacitly rejected the attack on the intelligibility of the supposed legislative purposes of s 47, for
otherwise it would not have gone on to discuss the question of proportionality in para 15, or to reply to the first question as it did
in para 17(see [1990] 1 All ER 129 at 156, [1990] 2 QB 19 at 53).
These aspects of the Torfaen case have transformed the present dispute since it was before the Crown Court. So much so,
the appellants contend, that no dispute remains. In Torfaen the Cwmbran court is required to take up the reins again, upon receipt
of the Court of Justices consultative opinion, and to decide on the facts whether the Cassis de Dijon exception applies. Not so
here. There is no evidence upon which this court, or the Crown Court on remission, could find that the exception applies.
Furthermore, reliance on the Cassis de Dijon exception was disclaimed in the Crown Court, and disclaimed again in this court, so
that it lies outside the question of law stated for our consideration.
This argument is undeniably correct, unless the judgment of the Court of Justice has opened up new reasons for saying that s
47 lies entirely outside the scope of art 30. The respondents contend that this is just what has happened. The two contentions
which they now advance were not relied upon in the Crown Court. Nevertheless, we must admit them here, for if, as the
respondents say, the judgment of the Court of Justice has shed an entirely new light on the question posed by the Crown Court it
is our duty to apply the law as it has now been declared.
The first of the respondents arguments may be stated briefly, and in my opinion, equally briefly rebutted. It runs as follows.
The court has added a new element by introducing into this field the test imposed by art 3 of Directive 50/70. We must now ask
whether the effect of the measure exceeds the effects intrinsic to measures designed to achieve the aim in view. Here the aim in
view is to prohibit Sunday trading, and the effect of s 47 is to achieve this aim, and no more. I would reject this argument for the
following reasons.
(1) As a simple matter of language, the objective in view and the aim in view, rendered as lobjective vis in the French
language versions of paras 12 and 15, must surely refer to the result which the legislation is designed to achieve rather than the
method used to attain it.
(2) In para 15 of the judgment, the comparison is established between such national rules and the aim in view. The
former expression is plainly a reference to the national rules governing the opening hours of retail premises, identified in the
first sentence of para 14 and called such rules in the second sentence thereof. If the respondents were right, the court would be
remitting to the Cwmbran justices a comparison between the consequences for community trade of the shutting of shops on
Sundays and the consequences of legislation designed to make shops shut on Sundays. I cannot believe that this is what the court
intended.
(3) On the contrary, it seems plain to me that the aim in view to which the court referred was the ordering of working and
non-working hours so as to accord with national or regional socio-cultural characteristics: see para 14.
(4) If the respondents analysis of the judgment were correct, the answer to the 213 case before the Court of Justice would
have followed just as inexorably from the premises as the respondents say it does in the present case. The court has shown itself
both empowered and willing to decide cases outright in this field, if the answer appears obvious: see eg the Oebel case Case
155/80 [1981] ECR 1993, the Blesgen case Case 75/81 [1982] ECR 1211, the Cassis de Dijon case Case 120/78 [1979] ECR 649
and the Beele case Case 6/81 [1982] ECR 707. The court did not take this step in Torfaen, but plainly took the view that there
were issues still left for the national court to decide: see para 16 and the abstention from answering the second and third
questions ([1990] 1 All ER 129 at 156157, [1990] 2 QB 19 at 53).
The argument which I have just considered and rejected would, if valid, have terminated the inquiry before the point at
which any Cassis de Dijon issue could arise. No evidence would be needed, and burden of proof would not enter into the matter.
The respondents second, and quite different, proposition does admit a burden of proof, but introduces it at a different stage and in
the opposite direction from the classical Cassis de Dijon analysis. The argument is subtle, and I am not confident of doing justice
to the skill with which it was developed. The following are its general lines.
According to the doctrine developed by the pre-Torfaen jurisprudence, the inquiry proceeds first by inquiring whether the
purpose of the measure is discriminatory or its effect is to impede the free marketing of goods within the Community. If the
answer is Yes, on either score, the measure falls foul of art 30, unless those who seek to uphold it can establish that it is saved by
the exceptions of art 36 or Cassis de Dijon. The judgments of the Court of Justice which establish this framework for decision
have, however, all concerned rules relating to specific products. In Torfaen the court was faced for the first time with a measure
of general application designed to fulfil general socio-economic purposes, and having only an incidental effect on intra-
Community trade. For this new situation, the court designed an entirely new approach. The threshold question whether the
measure is even prima facie in contravention of art 30 is no longer to be approached in the way just mentioned. Ex hypothesi, the
possibility of an intent to discriminate is ruled out. Nor is it enough to show a possibility, or even an actuality, of an incidental
effect on trade between member states. There must now be shown by the party attacking the measure an effect on trade out of
proportion to their legislative aims.
The respondents thus interpret Torfaen as creating a wholly new tripartite classification, bearing no relation to the threefold
analysis suggested by the Commission and mentioned in para 4 of the Advocate Generals opinion (see [1990] 1 All ER 129 at
140, [1990] 2 QB 19 at 33): (1) national rules having no effect on intra-Community trade; whether these are not to be described
as trading rules at all or whether they are trading rules outside the scope of art 30 makes no difference; (2) national rules relating
to specific products which do have an effect on intra-Community trade, which are within art 30, subject to the art 36 and Cassis
de Dijon exceptions; (3) national rules of general application, designed not to govern intra-Community trade but to meet national
or regional socio-cultural needs. Even if such rules have an incidental effect on such trade, they lie outside art 30 unless shown to
have an effect greater than is intrinsic to rules with such aims. Absent such excessive effect, the rules are valid, and the stage of
investigating the art 36 and Cassis de Dijon exceptions will never arise.
The respondents go on to place s 47 of the Shops Act 1950 in the third category, and conclude that, in the absence of any
evidence in the Crown Court on which the appellants could argue that the effect extends beyond what is intrinsic, the case falls
outside art 30 and no other questions need be considered.
214
The principal argument in favour of the respondents reading of Torfaen is that the court for the first time calls up art 3 of
Directive 50/70 and draws from it the test of intrinsic effect. The preamble and other parts of the directive, quoted above, make it
clear that its purpose was to expound the scope of art 30. Thus, in the second sentence of para 15 of its judgment, the court does
seem to be discussing whether the measure falls within art 30 at all, rather than whether it is prima facie within art 30, but is
taken out by the Cassis de Dijon exception, the test for which is stated in the earlier cases in somewhat different terms.
The appellants may also claim that their reading of Torfaen envisages at least at the first stage an examination of the measure
as a whole, which will serve to reduce the practical difficulties of applying the Cassis de Dijon test to a general measure.
 These arguments have force and were skilfully developed, but I cannot accept them. The judgment of the court is said to
have broken new ground, fundamentally altering the law on equivalent measures, yet there is no trace in the judgment that
anything so radical is afoot. When the Advocate General suggested a new departure in the shape of an analogy with art 85, he
developed the reasoning in detail. There is nothing similar in the judgment itself, which to my eyes at least appears simply as a
compressed restatement of principles already taken as well established, coupled with an application of that to the instant case. It
is perhaps also legitimate to note, as the appellants have pointed out, that it was a chamber, rather than the full court, which is
said to have initiated this radical change in doctrine; a change which was not foreshadowed by anything in the submissions made
to the court, or in the opinion of the Advocate General.
Furthermore, the language of paras 12 to 14 echoes that of the established Cassis de Dijon jurisprudence. If the thrust of the
judgment was to recognise a new (third) general category of measures to which the rule aimed at specific products is henceforth
to be irrelevant, there seems no reason why the summary of the law contained in these paragraphs should have been reinforced by
the citation of the Cinthque case Joined Cases 60 and 61/84 [1985] ECR 2605. Mr Isaacs was, I believe, constrained to accept
that, even on the respondents argument, room must be left for the application of the Cassis de Dijon exception and he proposed
to accommodate it, together with art 36, by positing a judicial process carried out in two stages. The national court would first
consider whether the measure is justified in the sense used in the Torfaen judgment and, if satisfied that it is, would then pass to
proportionality, with the party opposing the measure having the burden of proving that the effect exceeds its intrinsic effects.
Then, if the measure had run the gauntlet of the first stage, the court would, as a second stage, consider justifiability and
proportionality again, in the context of art 36, Cassis de Dijon and other exceptions, this time with the burden on the party
supporting the measure. This does not appear to me a likely structure for the court to have set out to create, and one which would
have been expected to be spelt out on the lines just summarised if it had been intended. Yet there is nothing of this kind in the
judgment.
Nor does the proposed new scheme offer any net practical advantage, for, as the Advocate General pointed out in relation to
a rather different argument based on a distinction between general and special measures, the placing of individual measures into
one category or the other would certainly not be straightforward (see [1990] 1 All ER 129 at 156, [1990] 2 QB 19 at 52(para 12)).
For my part, I cannot see any reason why the treatment of a national measure should depend upon whether it takes the shape of
(say) a ban on Sunday trading expressed to apply to all products except those set out in a schedule or whether it applies only to
products set out in a schedule, nor how in a case where many products are 215 specifically banned it is possible to tell when the
line is passed dividing the particular from the general.
It is true that we do find brought together in the Torfaen judgment the test of effects beyond those intrinsic (from art 3) and
the test of excess beyond what is necessary to achieve the justified object (from the earlier jurisprudence), and that the two are not
identically expressed. But, in my view, to impute an intention to create a whole new doctrine from this linguistic difference is to
over-analyse the judgment. The question on which the Cwmbran court sought the opinion of the Court of Justice was whether s
47 fell within or without the scope of art 30. The essence of the response was that, in principle, s 47 was the kind of measure
which, being of a nature whose objective was justified in terms of Community law, did not contravene art 30, subject always to
fulfilling the requirement of proportionality. Having given this much guidance, and having reminded itself that proportionality
was a question of fact for the national court, the Court of Justice had no need to go further, by restating the familiar idea of
proportionality with complete precision, or entering into questions of burden of proof.
In my judgment, the importance of Torfaen lies in the illustration which it provides of the kind of national measure that the
court will regard as potentially consistent with Community law. Aside from that, I would regard it as being in the direct line of
jurisprudence, of which Cassis de Dijon and Cinthque are prominent examples.
This is not the end of the matter, for we must review our conclusions in the light of two very recent European cases. The
first is H Krantz GmbH & Co v Ontvanger der Directe Belastingen and Netherlands Case C-69/88 [1990] ECR I-583, which
concerned a Dutch measure permitting execution for fiscal debts over goods in the hands of the debtor, even where the goods
were the property of third parties. It was argued that this was a measure equivalent, within art 30, because it might have the
effect of deterring vendors in other member states from delivering goods under credit sales to buyers in the Netherlands. This
proposition was rejected, because the risk was too problematical to create a perceptible effect on intra-Community trade. The
case was thus in the line of the Oebel, Blesgen and Forest cases, as demonstrated by the citation of the two latter cases in the
opinion of the Advocate General. Its interest for present purposes lies only in certain observations of the Advocate General on
the judgment, then very recently delivered, in Torfaen. The Advocate General undoubtedly does state, in para 7 of his opinion,
that the judgment seemed to suggest that somewhat different legal considerations applied to laws forming part of the general
legislative framework governing economic activity, from those which aim directly and exclusively at the production or marketing
conditions for certain products or categories of products (see [1990] 1 All ER 129 at 141142, [1990] 2 QB 19 at 3435). With
this statement, of high authority, I would not venture to disagree, at least so far as one must acknowledge that general and specific
laws do by their nature call for a rather different formal analysis. Whether the Advocate General intended to go further, I do not
know, since the conclusion which he went on to express on the question of perceptible effect made him abstain from exploring
the practical consequences of this difference. There is, however, nothing in the opinion to suggest that any such radical new
distinction as proposed by Mr Isaacs is to be derived from Torfaen, and with particular reference to burden of proof, the language
employed in para 10 of the opinion to describe the exercise which the national judge is called upon to perform would tend to
suggest (if in truth it touches the question at all), that it remains as in Cassis de Dijon with the party seeking to uphold the
measure.
216
Secondly, there is GB-INNO-BM v Confdration du commerce luxembourgeois Case C-362/88 [1990] ECR I-667. This
was cited only for a very brief passage from the opinion of the Advocate General, which may be read as suggesting that Torfaen
was, like Oebel, a case where the measure had no perceptible effect on the external trade of the member state. Undoubtedly,
Torfaen resembled Oebel in that it related to a national measure within the area of domestic socio-economic policy, as the citation
of Oebel in Torfaen is sufficient to show. But I must with due respect say that, for the reasons already developed, I cannot
understand Torfaen as being a case where the court proceeded directly to the conclusion that the measure had no perceptible
effect and, indeed, neither counsel in the present case suggested that this was so.
Finally, we must refer to SA Magnavision NV v General Optical Council (No 1) [1987] 1 CMLR 887, a decision of the
Divisional Court on a general measure prohibiting the sale of spectacles without prescription. The judgment of Macpherson J,
with which Watkins LJ agreed, contains a discussion of art 30 which would have been most germane to our present problems, and
might well have led to a conclusion favourable to the respondents, if it had been a presently binding authority. It is, however,
clear that the reasoning cannot survive the judgment of the Court of Justice, which we must of course prefer, and, accordingly,
without any disrespect, we say no more about it.

Conclusions
It is undeniable that, whether or not our opinions on this very contentious subject are correct, there will remain serious
problems whenever a national court is required in practice to apply the appropriate qualification, in terms of proportionality, to
the right of the member state to enact legislation of general effect within the field reserved to it by the present state of Community
law. I have indicated some of them, and there are others. I do not, however, have to solve them here. Sufficient to say that they
bear just as much on the interpretations of one side as on the other. What matters for present purposes is that the respondents
took their stand on the blunt proposition that this kind of legislation could not infringe art 30. It is quite plain that the Court of
Justice did not go so far. Such legislation may be valid, and may not, according to circumstances. If the existence of these
circumstances had been in issue, both the detailed analysis of the law, the appreciation of the facts and the burden of proof would
have required close consideration. Such considerations however, were never raised by the respondents in the Crown Court. They
addressed no arguments and called no evidence upon them. Whether the test for validity is the same as in Cassis de Dijon or
something a little different is of no account. The respondents argued for a proposition which, however plausible it may have
seemed at the time, cannot now be maintained. We are asked a clear-cut question of lawWhether we [the Crown Court] were
correct in law in interpreting Article 30 of the EEC Treaty as not applying to Section 47 of the Shops Act, 1950, because it is not
a trading rule?
I would answer this question in the negative, and quash the convictions in each case.
In conclusion, I should mention two further matters. First, we invited and received submissions on the powers of the High
Court to remit to the Crown Court (as distinct from magistrates) a case stated where the facts set out in the case are insufficient to
enable the High Court to answer all the questions of law which appear to arise. If it had happened that the present dispute could
not properly be decided without an application of the Cassis de Dijon exception, we should have had to decide whether such
powers exist and, if so, whether to exercise them. In 217 this particular instance, however, the case has been fought on a narrow
front, and the exception has not been relied upon. The case can be decided, and the question answered, without any further
findings of fact, and there is accordingly no need to explore the procedural issue.
Secondly, I have had the advantage of reading in draft the judgment which Schiemann J is about to deliver. In the latter part
of this judgment, Schiemann J expresses tentative conclusions on the legislative purposes of the 1950 Act, and on the likely
outcome of any application of the principles of Torfaen when the full range of issues is put in suit. For my part, I prefer to
abstain from stating any opinion on these questions. As to the former, because the legislative purpose of the Act was, for good
reason, barely explored in argument, and, at first sight, I am not sure that I wholly agree with Schiemann Js analysis. As to the
latter, we have not heard argument on a point which was specifically disclaimed in the Crown Court.
In my judgment, this appeal should be allowed.

SCHIEMANN J. I agree that the questions posed by the Crown Court ought to be answered in the negative, that these appeals
ought to be allowed and that there should be no remission to the Crown Court. Mr Isaacs disclaimed reliance on the Cassis de
Dijon exception (see Rewe-Zentral AG v Bundesmonopolverwaltung fr Branntwein Case 120/78 [1979] ECR 649). I
respectfully agree with Mustill LJ that it is implicit in Torfaen BC v B & Q plc Case 145/88 [1990] 1 All ER 129, [1990] 2 QB 19
that Sunday trading legislation is only valid if it satisfies the Cassis de Dijon criteria. These cases were argued before the Crown
Court prior to the decision in Torfaen and it can now be seen that, wholly understandably, the wrong questions were addressed by
the Crown Court. In particular the question, What is a trading rule?, is not the decisive question in the present case.
The underlying problems are not unique to this case and since the argument lasted several days it may be useful if I indicate
how, as at present advised. I see the general position post-Torfaen. I say as at present advised deliberately since some of what
follows was advanced by neither side and has not been tested by argument.
On facts similar to those found in the present case, the magistrates court is bound to convict unless of the view that the
application of s 47 of the Shops Act 1950 to the facts of the present case is incompatible with art 30 of the EEC Treaty.
Such an application would, according to the Court of Justice in Torfaen, only be incompatible with art 30 if both (i) s 47 is a
measure having equivalent effect to quantitative restrictions on imports and (ii) s 47 does not exemplify one of the permissible
exceptions to the application of art 30.
It is clear from Torfaen and the facts found in the present case that s 47 is a measure having equivalent effect to quantitative
restrictions on imports.
It is clear from the Court of Justices case law, and the parties accept, that, once it is established that s 47 is a measure having
equivalent effect to quantitative restrictions on imports, it is for the justifying party to persuade the court that s 47 does not
exemplify one of the permissible exceptions.
One of the permissible exceptions of present relevance is the Cassis de Dijon exception. In order to fall within that
exception, s 47 would need to fulfil three broad criteria (the Cassis de Dijon criteria). Those criteria are: (i) it must apply to
imported and domestic products alike (the non-discrimination criterion); (ii) it must pursue an aim which is justified with regard
to Community law (the justifiability criterion); and (iii) its effects must not exceed what is necessary to achieve the aim in view
(the proportionality criterion).
218
The Court of Justice reaffirmed these three criteria in Torfaen as providing limitations to the application of art 30. The Court
of Justice, when acting under art 177

has no jurisdiction to rule on the compatibility of national legislation with Community law. It may however provide
the national court with an interpretation of Community law which will enable that court to resolve the issue of law with
which it is faced.

(See Direction gnrale des impts and Procureur de la Rpublique v Forest Case 148/85 [1986] ECR 3449 at 3472(para 6).)
Sometimes in the course of its judgment, the Court of Justice will note a finding of fact or record that which is not disputed.
Nevertheless, the formal position is as indicated in Forest.

The non-discrimination criterion

Thus in Torfaen it was obvious given the facts of the case that the non-discrimination criterion was satisfied and the court so
noted.

The justifiability criterion

Turning to the justifiability criterion, its application requires, as a matter of logic, two steps: (i) the ascertainment of the aim
which the legislation under attack is pursuing; and (ii) a decision as to whether that aim is justified with regard to Community
law.
Reaching a decision as to what is the aim in view, when one is considering primary legislation is, given English styles of
statutory drafting, a difficult task since the aim is frequently not stated and indeed different components of the legislature may
have had differing aims in view. The problem of establishing the aim in view of secondary legislation or decisions taken pursuant
to legislation will frequently be easier-but we are not concerned with this.
Many decisions in life, including legislative decisions, are taken with many aims in view. Further, one may have an
intermediate aim because one judges that the achievement of the intermediate aim will in due course facilitate the achievement of
an ultimate aim. Further, different people will agree on the desirability of achieving a particular intermediate aim although each
uses this as a method of achieving a different ultimate aim peculiar to him. In the context of Sunday trading, it is pretty clear that
there is a majority legislative opinion in favour of keeping Sunday a (by and large) non-working day but that the ultimate aims
are varying. What is clear is that no one wishes to keep Sunday a non-working day as an end in itself; each is pursuing some
other ultimate goal which a non-working Sunday is regarded as serving.
In Torfaen there was no finding by the magistrates court which referred the matter to the Court of Justice as to what the aim
in view of the Sunday trading legislation was. It seems to me clear, from paras 13 and 14 of the decision and from the answer
which the Court of Justice gave to the magistrates court as recorded at the end of the decision, that the Court of Justice accepted
that the aim pursued by the Sunday trading legislation was justified in regard to Community law (see [1990] 1 All ER 129 at 156,
[1990] 2 QB 19 at 5253). In order to reach this conclusion, the Court of Justice must, as a matter of logic, first have identified
that aim.
The only identifiable aim seems to be the intermediate aim-namely to keep Sunday a non-working day. It seems to me that
the court accepted what the Advocate General in his opinion at paras 30 and 31 with great hesitation suggested, 219namely that
a ban on Sunday trading meets the desire to encourage all manner of (non-working) activities and social contacts on one and the
same day (see [1990] 1 All ER 129 at 153, [1990] 2 QB 19 at 4849). The Court of Justices decision gives no indication that
the court had any other aim in mind. It seems to me that the Court of Justice concluded that such an aim was an aim which
fulfilled the justifiability criterion. If I am right in this analysis then in future cases the magistrates courts and the Crown Court
can proceed on the basis that the aim in view of the legislation is to keep Sunday a non-working day. No evidence needs to be
called as to what the aim in view of the legislation is. I respectfully agree with Mustill LJ that the Court of Justice itself decided
that legislation on Sunday trading falls within the permissible sphere of activity of the United Kingdom as a member state.

The proportionality criterion

When considering whether the proportionality criterion has been satisfied, it is not necessary to balance the value of a work-
free Sunday against the effect of Community trade of legislation designed to achieve this aim. I respectfully agree with Mustill
LJ that the case law envisages a series of adjudicationsIs the measure equivalent to a quantitative restriction? Does the
measure pursue a justifiable aim? Does the measure go further than its purpose demands?and that the proportionality criterion
is only concerned with the last of these adjudications.
In the field of administrative decisions or subordinate legislation, it is easy to envisage situations where a measure under
attack, which is non-discriminatory, and which pursues an aim which is compatible with Community law, nevertheless goes
beyond what is necessary to achieve the aim in view. In such cases the measure may be unlawful as being incompatible with
Community law. It is more difficult to envisage such a situation where the measure in question is a piece of general legislation.
It is, however, not impossible. In the context of Sunday trading, an example would be legislation passed with the aim of having
one non-working day per week but which forbade the opening of shops on either day of the weekend. This would satisfy the
non-discrimination criterion and the justifiability criterion but would not satisfy the proportionality criterion.
Returning to Torfaen and Sunday trading, if one accepts (as the Advocate General suggests) that the aim in view is the
desire to encourage all manner of (non-working) activities and social contacts on one and the same day then (as the Advocate
General also accepts)

the imposition of a general closing or non-trading day on a day already devoted to such activities and contacts by a
large part of the population is indeed necessary and proportionate to the aim pursued.

(See [1990] 1 All ER 129 at 153, [1990] 2 QB 19 at 49(para 31).)

If I am right in the foregoing, then it seems to me that the answer to the application of the proportionality criterion is obvious
in these cases and does not require any evidence. Sunday trading is one of those fields in which, to use Mustill LJs words,
national legislatures and courts

can legitimately apply their own norms, notwithstanding that this may lead to disparities of treatment within individual
territories and hence to inequalities and restrictions of trade between member states.

In my judgment, the answer to the question If the answer to the proportionality question is obvious in this case, why did not
the Court of Justice say so? is that the Court of Justice was exercising its jurisdiction under art 177 to give a 220 preliminary
ruling on the interpretation of the EEC Treaty. It ruled that it was for the national court to decide whether or not the
proportionality criterion was satisfied. It had no jurisdiction to decide that matter itself. The Court of Justice, no doubt out of a
respect for national courts, is not I think accustomed to decide more than it has to, although it is certainly true that, where there
has been no dispute in the argument before it as to a particular matter, that fact is often noted as being beyond argument. The fact
that the Court of Justice did not in Torfaen opine that when the national court came to apply the proportionality criterion it would
find the answer obvious does not lead me to the conclusion that the answer cannot be obvious. Indeed, I think that it is.
However, bearing in mind the course that the argument took before the Crown Court and before us, I agree with the order
proposed by Mustill LJ.

Appeals allowed.

Solicitors: Metcalfe Copeman & Pettefar, Peterborough; Jeffreys Orrell & Co, Peterborough.

Dilys Tausz Barrister.

[1991] 4 All ER 221

Stoke-on-Trent City Council v B & Q plc

Norwich City Council v B & Q plc
EUROPEAN COMMUNITY; Free Movement of Goods

CHANCERY DIVISION
HOFFMANN J
9, 10, 11, 12, 13, 18 JULY 1990

European Economic Community Imports Reduction in volume of imports Quantitative restrictions on imports from other
member states Measures having equivalent effect Prohibition on Sunday trading Opening of do-it-yourself store on Sundays
Substantial proportion of goods sold in store imported from other member states Prohibition on Sunday trading having effect
of reducing imports from other member states Whether prohibition proportionate to objective of statute Whether prohibition
contravening Community law Shops Act 1950, s 47 EEC Treaty, art 30.

The defendant operated do-it-yourself shops in which a proportion of the goods sold were imported from member states of the
European Economic Community. The defendant regularly opened its shops in the plaintiff councils areas for trade on Sundays in
breach of s 47a of the Shops Act 1950, which provided that except for the serving of exempted goods, which the goods sold by
the defendant in its shops were not, every shop was to remain closed for the serving of customers on Sunday. Sunday trading in
contravention of s 47 of the 1950 Act was a summary criminal offence punishable by a fine. The plaintiff councils sought
injunctions to restrain the defendant from opening its shops on Sundays in contravention of s 47. The defendant contended that s
47 was unenforceable because by preventing the defendant from selling on Sunday goods imported from other member states it
infringed art 30b of the EEC Treaty, which prohibited quantitative restrictions on imports between member states and all
measures having equivalent effect, and that the restriction on Sunday trading contained in s 47 was contrary to Community law
because it was disproportionate to the object of ensuring that working and non-working hours were so arranged as to accord with
national or regional socio-cultural characteristics.
221
________________________________________
a Section 47 is set out at p 224 f, post
b Article 30 is set out at p 224g, post

Held Section 47 of the 1950 Act pursued the legitimate objective of ensuring that shop workers did not have to work on
Sundays and, on the basis of facts of which the court was entitled to take judicial notice, it was a measure which, so far as it
affected Community trade, was a reasonable means of achieving that objective and therefore it satisfied the requirement of
proportionality. It was not the courts function to decide whether the objective could be achieved by other means having less
effect on Community trade. Accordingly, s 47 did not infringe art 30 of the EEC Treaty. Furthermore, if criminal prosecutions
punishable by fine would not secure effective compliance with the 1950 Act, the court would exercise its civil jurisdiction to
grant an injunction restraining a shopkeeper from trading on Sundays. It followed that the plaintiff councils were entitled to the
injunctions sought (see p 230 e f, p 232 b to e, p 233 b, p 235 b c, p 236 f to j, p 237 b c f h j and p 238 f to h, post).
Torfaen BC v B & Q plc Case 145/88 [1990] 1 All ER 129 applied.

Notes
For general restrictions on Sunday trading, see 47 Halsburys Laws (4th edn) paras 632644, and for cases on the subject, see
47(1) Digest (Reissue) 564568, 29943017.
For the free movement of goods in the European Economic Community and justifications for restrictions on trade between
member states, see 52 Halsburys Laws (4th edn) paras 125512111.
For the Shops Act 1950, s 47, see 19 Halsburys Statutes (4th edn) (1990 reissue) 424.
For the EEC Treaty, art 30, see 50 Halsburys Statutes (4th edn) 276.

Cases referred to in judgment

Ackroyd v McKechnie (1986) 161 CLR 60, Aust HC.
Anti-Inflation Act, Re (1976) 68 DLR (3d) 452, Can SC.
Cinthque SA v Fdration nationale des cinemas franais Joined Cases 60 and 61/84 [1985] ECR 2605.
Conerney v Jacklin (1985) 129 SJ 285, CA.
Edwards Books and Art Ltd v R (1986) 35 DLR (4th) 1, Can SC.
London City Corp v Bovis Construction Ltd (1988) 86 LGR 660, CA.
McGowan v Maryland (1961) 366 US 420, US SC.
Oebel, Summary proceedings against Case 155/80 [1981] ECR 1993.
Pickstone v Freemans plc [1988] 2 All ER 803, [1989] AC 66, [1988] 3 WLR 365, HL.
Procureur du Roi v Dassonville Case 8/74 [1974] ECR 837.
R v Goldstein [1983] 1 All ER 434, [1983] 1 WLR 151, HL.
R v Simpson [1983] 3 All ER 789, [1983] 1 WLR 1494, CA.
Rewe-Zentral AG v Bundesmonopolverwaltung fr Branntwein Case 120/78 [1979] ECR 649.
Smith (W H) Do It All Ltd v Peterborough City Council [1991] 4 All ER 193, [1991] 1 QB 304, [1990] 3 WLR 1131, DC.
Stoke-on-Trent City Council v B & Q (Retail) Ltd [1984] 2 All ER 332, [1984] AC 754, [1984] 2 WLR 929, HL.
Torfaen BC v B & Q plc Case 145/88 [1990] 1 All ER 129, [1990] 2 QB 19, [1990] 2 WLR 1330, CJEC.
Uebergang v Australian Wheat Board (1980) 145 CLR 266, Aust HC.
Waterman v Wallasey Corp [1954] 2 All ER 187, [1954] 1 WLR 771, DC.

Cases also cited

Imperial Tobacco Ltd v A-G [1980] 1 All ER 866, [1981] AC 718, HL.
222
North Eastern Dairy Co Ltd v Dairy Industry Authority of NSW (1975) 134 CLR 559, Aust HC.
North West Leicestershire DC v Gramlo Ltd [1988] CA Transcript 410.
Post Office v Estuary Radio Ltd [1967] 3 All ER 663, [1968] 2 QB 740, CA.
Stafford BC v Elkenford Ltd [1977] 2 All ER 519, [1977] 1 WLR 324, CA.
Willesden UDC v Morgan [1915] 1 KB 349, [191415] All ER Rep 422, DC.
Wychavon DC v Midland Enterprises (Special Events) Ltd [1987] 86 LGR 83.

Actions

Stoke-on-Trent City Council v B & Q plc

By writ dated 7 December 1989 and a statement of claim dated 9 January 1990 Stoke-on-Trent City Council sought an injunction
to restrain the defendant, B & Q plc, from opening or causing to be opened on Sundays its do-it-yourself shop at Festival Park,
Hanley, Stoke-on-Trent, for the serving of customers in contravention of s 47 of the Shops Act 1950. The facts are set out in the
judgment.

Norwich City Council v B & Q plc

By writ dated 23 January 1990 and a statement of claim indorsed thereon Norwich City Council sought an injunction to restrain
the defendant, B & Q plc, from opening or causing to be opened on Sundays its do-it-yourself shop at Westwick Street, Norwich,
for the serving of customers in contravention of s 47 of the Shops Act 1950. The facts are set out in the judgment.

Stuart Isaacs and Neil Calver for the local authorities.

David Vaughan QC, Gerald Barling, Nicholas Davidson and David Anderson for B & Q.

Cur adv vult

18 July 1990. The following judgment was delivered.

HOFFMANN J.

The issues
Who is to decide whether shops should be allowed to open on Sundays? Is it to be Parliament or this court? That is an
incomplete, somewhat tendentious but not entirely inaccurate way of stating the question before me. The plaintiffs in these two
actions are local authorities which seek injunctions to restrain B & Q plc from contravening s 47 of the Shops Act 1950 by
opening do-it-yourself shops in Hanley and Norwich on Sundays. Section 47 makes Sunday trading a summary criminal offence
punishable by fine. But the local authorities take the view that fines would be ineffective to stop B & Q from breaking the law
and that nothing short of an injunction will do. They have therefore brought these civil proceedings under the powers conferred
by s 222 of the Local Government Act 1972. B & Q say that s 47 is unenforceable because it infringes art 30 of the EEC Treaty.
It also says this is not a case in which a court can or should exercise the civil jurisdiction to grant an injunction. But I shall first
deal with the substantive point on the Treaty.

(2) The EEC Treaty

The EEC Treaty is the supreme law of this country, taking precedence over Acts of Parliament. Our entry into the
Community meant that (subject to our undoubted but probably theoretical right to withdraw from the Community 223 altogether)
Parliament surrendered its sovereign right to legislate contrary to the provisions of the Treaty on the matters of social and
economic policy which it regulated. The entry into the Community was in itself a high act of social and economic policy, by
which the partial surrender of sovereignty was seen as more than compensated by the advantages of membership.
The member states of the Community differ widely in their histories, customs and social and cultural values. It was
certainly not the object of the Community to introduce uniformity in all these matters. The purpose of the Treaty was to bring
about a European common market but not to interfere with national law and customs which did not constitute obstacles to the
establishment of such a market. But there are many provisions in the Treaty expressed in language capable of being given a
wider or narrower interpretation. According to the way they are interpreted, they may have more or less of an impact on
questions of social policy which in member states are strongly felt to be matters for national decision. It is the function of the
Court of Justice of the European Communities in Luxembourg to interpret the Treaty and for the national court to apply it. In its
interpretation of the Treaty the European Court has tried to tread a careful line which permits both boldness in advancing the
objects of the Community and sensitivity to the domestic interests of member states. In applying the Treaty as interpreted by the
court, the national court has to be aware of another division of powers: not between European and national jurisdiction, but
between legislature and judiciary. The fact that the European Court has said that a particular question is one for decision by the
national court does not endow that court with quasi-legislative powers. It must confine itself within the area of judicial
intervention required by the Treaty and not trespass on questions which are for democratic decision in Parliament.

(3) The Shops Act 1950 and art 30

Section 47 of the Shops Act 1950 says:

Every shop shall, save as otherwise provided by this Part of this Act, be closed for the serving of customers on
Sunday: Provided that a shop may be open for the serving of customers on Sunday for the purposes of any transaction
mentioned in the Fifth Schedule to this Act.

Schedule 5 permits the sales on Sunday of a miscellaneous list of goods such as newspapers, flowers and confectionery.
Article 30 of the Treaty reads as follows:

Quantitative restrictions on imports and all measures having equivalent effect shall, without prejudice to the following
provisions, be prohibited between Member States.

Article 36 contains an exception for prohibitions or restrictions justified on grounds of public morality, public policy or
public security and various other grounds but adds that Such prohibitions or restrictions shall not, however, constitute a
means of arbitrary discrimination or a disguised restriction on trade between Member States.
B & Q say that a prohibition on Sunday trading is a measure having equivalent effect to a quantitative restriction on imports
because they have demonstrated through a persistent course of illegal Sunday trading over the past few years that in DIY stores
and garden centres, Sunday is the best trading day of the week. Furthermore, trade which is lost through having to close on
Sundays is not recovered during the rest of the week. Enforcing the law therefore causes a net fall in turnover, including sales of
goods imported from other member states. Mr 224 Fred Molenaar of Leiden, director of a large Dutch bulb exporter, says that
Sunday is by far the best day for selling bulbs. If people could not buy bulbs on Sundays, they would not necessarily buy them
on weekdays. They might just not plant bulbs that year and spend the money on something else instead. Mr Molenaar says that
his experience of Sunday closing by shops which were previously open is that there has been a substantial drop in total sales.
There is no suggestion that this affects bulbs grown in Holland differently from bulbs grown in Spalding. The effect is to reduce
bulb sales, including imports.
In 1988 B & Q raised the art 30 defence in a prosecution by Torfaen Borough Council before the Cwmbran magistrates. The
magistrates made a reference under art 177 requesting a preliminary ruling on the interpretation of the Treaty. On 23 November
1989 the European Court delivered its judgment: see Torfaen BC v B & Q plc Case 145/88 [1990] 1 All ER 129, [1990] 2 QB 19.
To put the judgment into context I must give a brief account of the jurisprudence on art 30. Its interpretation has been developed
in a very large number of rulings but I need not do more than mention a few landmarks.

(4) The jurisprudence on art 30

Quantitative restrictions on imports are relatively easy to identify but the problem has been to say what amounts to a
measure having equivalent effect. The Commission stated its view in Directive (EEC) 70/50 of 22 December 1969, which was
issued pursuant to its duty under art 33(7) to give directives for the abolition of restrictions existing at the time when the Treaty
came into force. As this directive is mentioned in the Torfaen judgment and this has given rise to some argument, I shall
summarise its effect. It is prefaced by 18 recitals. Recitals (4) to (7) deal with measures which discriminate between domestic
and imported products and either preclude importation or make it more difficult or costly than the disposal of domestic
production. These are regarded as ipso facto having an effect equivalent to quantitative restrictions. Recital (8) says that
measures which

relate to the marketing of products and which apply equally to domestic and imported products are not as a general
rule equivalent to those of quantitative restrictions, since such effects are normally inherent in the disparities between rules
applied by Member States in this respect.

Non-discriminatory marketing measures are thus prima facie lawful. But recital (9) says that
 such measures may have a restrictive effect on the free movement of goods over and above that which is intrinsic to
such rules.

In such case, the measure is equivalent to a quantitative restriction. Recital (10) gives illustrations of measures having effect
over and above that which is intrinsic:

such is the case where imports are either precluded or made more difficult or costly than the disposal of domestic
production and where such effect is not necessary for the attainment of an objective within the scope of the powers for the
regulation of trade left to Member States by the Treaty; whereas such is in particular the case where the said objective can
be attained just as effectively by other means which are less of a hindrance to trade; whereas such is also the case where the
restrictive effect of these provisions on the free movement of goods is out of proportion to their purpose.

Recitals (9) and (10) embody the requirement of proportionality, which under Community law applies to all trade restrictions
imposed for legitimate purposes. 225As recital (10) shows, the concept can be stated in various ways. In R v Goldstein [1983] 1
All ER 434 at 436, [1983] 1 WLR 151 at 155 Lord Diplock said it meant You must not use a steam hammer to crack a nut, if a
nutcracker would do.
Article 2 then specifies the kinds of discriminatory measures which member states are required to abolish and art 3 deals
with the non-discriminatory measures where the restrictive effect of such measures on the free movement of goods exceeds the
effects intrinsic to such trade rules. It goes on to say:

This is the case, in particular, wherethe restrictive effects on the free movement of goods are out of proportion to
their purposethe same objective can be attained by other means which are less of a hindrance to trade.

Commission Directive (EEC) 50/70 is not directly applicable to the question in this case. It did not have direct effect as law
in the national courts and as an interpretation of art 30, it merely expressed the view of the Commission. Authoritative
interpretation was a matter for the court, which soon put the directive behind it.
The first landmark in the courts jurisprudence was Procureur du Roi v Dassonville Case 8/74 [1974] ECR 837. This
concerned a Belgian law which provided that goods bearing a designation of origin (such as champagne or Scotch whisky)
could not be imported unless accompanied by a certificate of origin from the exporting country. The object of the law was to
prevent the sale in Belgium of counterfeit products. The Dassonvilles had bought genuine Scotch whisky in France but could not
in practice obtain an official certificate of origin because this was issued only to the French importer from whom they had
purchased. They were prosecuted for bringing the whisky into Belgium without the appropriate certificate and the question for
the court was whether the certification requirement infringed art 30. The court formulated what has become known as the
Dassonville test:

All trading rules enacted by Member States which are capable of hindering, directly or indirectly, actually or
potentially, intra-Community trade are to be considered as measures having an effect equivalent to quantitative
restrictions.

(See [1974] ECR 837 at 852(para 5).)

By this test the certification requirement was a quantitative restriction. The court did not express a view on whether, as a
measure intended to prevent counterfeiting, it fell within the exceptions in art 36 because in any event the fact that only direct
importers could obtain certificates without difficulty meant that it was a means of arbitrary discrimination or a disguised
restriction.
Dassonville was concerned with a measure applicable only to imports. In the next landmark case the court was concerned
with a measure expressed in terms applicable equally to imports and domestic products but which had the effect of preventing
certain commodities from being imported. This was Rewe-Zentral AG v Bundesmonopolverwaltung fr Branntwein Case 120/78
[1979] ECR 649, better known as the Cassis de Dijon case. The measure in question was a German law which prohibited the sale
of fruit liqueurs having an alcoholic content of less than 25%. This ruled out the French blackcurrant liqueur known as Cassis de
Dijon, which had an alcoholic content of less than 20%.
The court was pressed with the Commissions view in recital (8) of Commission Directive (EEC) 70/50 that measures which
apply equally to domestic and imported products are as a general rule not within art 30. In a seminal opinion Mr Advocate
General Capotorti rejected this approach as too narrow. It was 226 understandable that the Commission should have adopted a
prudent approach to enforcement of art 30 in the transitional period of the Community but such restraint was no longer justified.
The difficulty for the court, however, was that in framing the exceptions in art 36, the draftsman of the Treaty principally
had in mind the kind of justifications which might legitimately be put forward for measures which overtly prohibited or restricted
imports. Once the court interpreted art 30 to cover all measures, whether discriminatory or not, which might affect intra-
Community trade, the range of legitimate justifications also had to be widened. In Cassis de Dijon [1979] ECR 649 at 662(para
8) the court took this step:

Obstacles to movement within the Community resulting from disparities between the national laws relating to the
marketing of the products in question must be accepted in so far as those provisions may be recognized as being necessary
in order to satisfy mandatory requirements relating in particular to the effectiveness of fiscal supervision, the protection of
public health, the fairness of commercial transactions and the defence of the consumer.

Based on this passage, the term mandatory requirements has come to be used as shorthand for measures relating to the
marketing of products which have the object of securing legitimate social or economic objectives consistent with the common
market in its present state. It is sometimes treated as a new judge-made exception to art 30, additional to the categories in art 36,
or sometimes as a qualification to the extension of art 30 to non-discriminatory measures. Since it is accepted that in any case the
burden is on the party who seeks to justify the measure, the question of whether it is an exception or a qualification is probably
academic. In Cassis de Dijon itself, the court accepted that in general the Federal Republic was entitled to regulate the marketing
of alcohol in its territory but was unable to identify any legitimate purpose which the law might serve. It therefore infringed art
30.
The final landmark before Torfaen was Cinthque SA v Fdration nationale des cinmas franais Joined Cases 60 and
61/84 [1985] ECR 2605. Whereas in Cassis de Dijon the measure in question was expressed in general terms but had the effect
of altogether preventing the import of certain foreign products, the French measure in Cinthque applied to a single item, video
cassettes, and did not either distinguish between or differ in its effect upon domestic products and imports. It was a measure
designed for the protection of the film industry and prohibited the sale of video cassettes of any film within a period of a year
from the date on which the film was authorised to be shown in cinemas. Advocate General Sir Gordon Slynn advised caution.
Cassis de Dijon, he said, was a case in which although the measure covered domestic and foreign goods, it required a distributor
to take steps additional to those which he would normally and lawfully take in the marketing of his goods (ie put more alcohol
in his blackcurrant liqueur) so that imports may be restricted and national producers be given protection in practice (see [1985]
ECR 2605 at 2611). But the French law in no way discriminated against importers. It put them on exactly the same footing as
domestic traders. He therefore advised that the law did not come within art 30 at all.
The court did not accept this approach. It held that in principle the law came within art 30 because it had the effect of
preventing video cassettes which were freely circulating in one member state from being sold or hired in another ([1985] ECR
2605 at 2626(para 22)):

the application of such a system may create barriers to intra-Community trade in video-cassettes because of the
disparities between the 227 systems operated in the different Member States and between the conditions for the release of
cinematographic works in the cinemas of those States. In those circumstances a prohibition of exploitation laid down by
such a system is not compatible with the principle of the free movement of goods provided for in the Treaty unless any
obstacle to intra-Community trade thereby created does not exceed that which is necessary in order to ensure the attainment
of the objective in view and unless that objective is justified with regard to Community law.

The court went on to say that the protection of the cinema industry by a non-discriminatory measure designed to give
priority for a limited period to film distribution through cinemas was a legitimate objective. It expressed no view on the question
of proportionality, which was presumably left for decision by the Paris court which had made the reference. I consider later how
the Paris court might have dealt with the question (see p 235, post).

(5) The Torfaen case

The Cwmbran magistrates referred the following three questions to the European Court:

1. Where a Member State prohibits retail premises from being open on Sunday for the sale of goods to customers, save
in respect of certain specified items, sales of which are permitted, and where the effect of the prohibition is to reduce in
absolute terms the sales of goods in those premises, including goods manufactured in other Member States, and
correspondingly to reduce the volume of imports of goods from other Member States, is such a prohibition a measure
having equivalent effect to a quantitative restriction on imports within the meaning of Article 30 of the Treaty?
2. If the answer to Question 1 is in the affirmative, does such a measure benefit from any of the exceptions to Article
30 contained in Article 36, or from any other exception recognised by Community law?
3. Is the answer to Question 1 or Question 2 above affected by any factor so as to render the measure in question a
means of arbitrary discrimination or a disguised restriction on trade between Member States or a measure lacking in
proportionality or otherwise unjustified?

(See [1990] 1 All ER 129 at 155156, [1990] 2 QB 19 at 52.)

As in Cinthque, Mr Advocate General Van Gerven urged caution in the interpretation of art 30. The measure was, as in
that case, entirely non-discriminatory. Furthermore, it did not relate to any particular product, nor did it prohibit the sale of any
products, except on one day a week. It was therefore much harder to say, as in Cinthque, that the law partitioned the common
market by creating a situation in which a given product could be sold in one place but not another. Mr Advocate General Van
Gerven was particularly concerned that the ever-widening scope of art 30 would result in a corresponding increase in the kind of
objectives which, under the Cassis de Dijon doctrine, the court had to classify as legitimate or not for the purposes of Community
law. The court would have to

decide in an increasing number of cases on the reasonableness of policy decisions of member states taken in the
innumerable spheres where there is no question of direct or indirect, factual or legal discrimination against, or detriment to,
imported products.

(See [1990] 1 All ER 129 at 151, [1990] 2 QB 19 at 46.)

228
Mr Advocate General Van Gerven clearly felt doubts as to the justiciability of these questions as well as the burden which
they would impose upon the court. He therefore recommended that the Cinthque principle should be confined to cases in
which the measures in question can lead to a national market being screened off, or access to that market being made
unacceptably difficult, less profitable or less attractive for economic operators from other member states (see [1990] 1 All ER
129 at 146, [1990] 2 QB 19 at 40(para 17)). By this criterion, the Sunday trading laws did not in his opinion infringe art 30.
But once again the court refused to accept the proposed limitation. I shall set out in full its answer to the first question
([1990] 1 All ER 129 at 156, [1990] 2 QB 19 at 5253):

10. By its first question the national court seeks to establish whether the concept of measures having an effect
equivalent to quantitative restrictions within the meaning of art 30 of the Treaty also covers provisions prohibiting retailers
from opening their premises on Sunday if the effect of the prohibition is to reduce in absolute terms the sales of goods in
those premises, including goods imported from other member states.
11. The first point which must be made is that national rules prohibiting retailers from opening their premises on
Sunday apply to imported and domestic products alike. In principle, the marketing of products imported from other
member states is not therefore made more difficult than the marketing of domestic products.
12. Next, it must be recalled that in Cinthque SA v Fdration nationale des cinmas franais Joined cases 60 and
61/84 [1985] ECR 2605 the court held, with regard to a prohibition on the hiring of video-cassettes applicable to domestic
and imported products alike, that such a prohibition was not compatible with the principle of the free movement of goods
provided for in the Treaty unless any obstacle to Community trade thereby created did not exceed what was necessary in
order to ensure the attainment of the objective in view and unless that objective was justified with regard to Community
law.
13. In those circumstances it is therefore necessary in a case such as this to consider first of all whether rules such as
those at issue pursue an aim which is justified with regard to Community law. As far as that question is concerned, the
court has already stated in Oebel, Summary proceedings against Case 155/80 [1981] ECR 1993 that national rules
governing the hours of work, delivery and sale in the bread and confectionery industry constitute a legitimate part of
economic and social policy, consistent with the objectives of public interest pursued by the Treaty.
14. The same consideration must apply as regards national rules governing the opening hours of retail premises. Such
rules reflect certain political and economic choices in so far as their purpose is to ensure that working and non-working
hours are so arranged as to accord with national or regional socio-cultural characteristics, and that, in the present state of
Community law, is a matter for the member states. Furthermore, such rules are not designed to govern the patterns of trade
between member states.
15. Second, it is necessary to ascertain whether the effects of such national rules exceed what is necessary to achieve
the aim in view. As is indicated in art 3 of Commission Directive (EEC) 70/50 of 22 December 1969, the prohibition laid
down in art 30 covers national measures governing the marketing of products where the restrictive effect of such measures
on the free movement of goods exceeds the effects intrinsic to trade rules.
229
 16. The question whether the effects of specific national rules do in fact remain within that limit is a question of fact to
be determined by the national court.
17. The reply to the first question must therefore be that art 30 of the Treaty must be interpreted as meaning that the
prohibition which it lays down does not apply to national rules prohibiting retailers from opening their premises on Sunday
where the restrictive effects on Community trade which may result therefrom do not exceed the effects intrinsic to rules of
that kind.

Having given this answer, the court said that it was unnecessary to answer the second and third questions.

(6) Interpretation of the Torfaen ruling

The judgment of the European Court was intended to be an authoritative interpretation of the Treaty sufficient to enable the
domestic court to decide the case. But every decoding is another encoding and there have been arguments over what the
judgment means. It was even suggested that in the last resort I might have to make another reference to find out. In my
judgment however its effect, in the light of the developing jurisprudence to which I have referred, is tolerably plain.
The court has decided that the validity of the English Sunday trading law depends on the answers to two questions. (1) Does
the law pursue an aim which is justified with regard to Community law? (2) Does the effect of the law exceed what is necessary
to achieve the end in view? In my judgment the court has itself answered the first question. It is true that in para 14 it said that
rules governing the opening hours of retail premises were a matter for the member states in so far as their purpose is to ensure
that working and non-working hours are so arranged as to accord with national or regional socio-cultural characteristics (see
[1990] 1 All ER 129 at 156, [1990] 2 QB 19 at 53(my emphasis)). If one reads in so far as meaning if it is the case that, it
could be said that the national court was being left to decide whether this condition was met. In my judgment, however, in so
far was intended to mean because and the court was deciding that the purpose of s 47 of the Shops Act 1950 satisfied the
description. This was the view of Mustill LJ and Schiemann J in a recent decision of the Divisional Court, W H Smith Do It All
Ltd v Peterborough City Council [1991] 4 All ER 193, [1991] 1 QB 304, and I respectfully agree. Both judgments also contain
illuminating obiter dicta on the questions addressed in this case. In any case, it seems to me plain and obvious that the purpose of
s 47 was to arrange working and non-working hours in shops in England and Wales so as to accord with the regional socio-
cultural characteristic by which people generally do not work on Sundays.
The principal argument before me has been directed to the second question which the European Court specifically said was a
question of fact to be determined by the national court. Mr Isaacs, for the local authorities, put forward an argument that on a
proper reading of the judgment, no question of fact arose. This was based on the reference in para 15 to Commission Directive
(EEC) 70/50. Mr Isaacs said this must be taken to mean that the court was incorporating into its judgment (a) the presumption of
legality for non-discriminatory measures in recital (8) of the directive, which the European Court had abandoned in Cassis de
Dijon and (b) the criteria for lack of proportionality in recital (10), which Mr Isaacs said included a requirement that imports are
either precluded [impossible, unmglich] or made more difficult or costly than the disposal of domestic production As the
law plainly did not have this effect, nothing remained to be said.
230
I rather doubt whether recital (10) intended a discriminatory effect to be an element of each of the examples it gives of lack
of proportionality, but in any case I reject Mr Isaacss submission on the straightforward ground that it would make nonsense of
the rest of the European Courts judgment. I also reject the submission that it signalled a return to the presumption of legality for
a new class of case which included Torfaen but excluded Cassis de Dijon and its progeny. It is in my judgment plain that the
court regarded the case as governed by Cinthque and therefore in the direct line of descent from Cassis de Dijon. The point is
fully discussed in the judgments in the W H Smith Do It All case, with which again I respectfully agree. I agree with Mr Isaacs
that there is a slight puzzle about why, with so many recent statements of the proportionality rule available, the court chose to
revert to that in Commission Directive (EEC) 70/50 but I do not think that too much should be read into this citation. It may have
thought that in the context of Sunday trading rules, the formulation where the restrictive effect of such measures on the free
movement of goods exceeds the effects intrinsic to trade rules was more helpful than most. It does not follow that the whole
directive must be treated as incorporated by reference.

(7) The question of fact

In R v Goldstein [1983] 1 All ER 434 at 436, [1983] 1 WLR 151 at 155 Lord Diplock said that to satisfy the requirement of
proportionality in a prosecution brought under a measure falling with an art 36 exception, it was necessary for the Crown

to adduce factual evidence (1) to identify the various mischiefs which the challenged restrictive measures were
intended to prevent, (2) to show that these mischiefs could not have equally effectively been cured by other measures less
restrictive of trade and (3) to show that the measures were not disproportionately severe having regard to the gravity of the
mischiefs against which they were directed.

This accords with the European Courts view that proportionality was a question of fact. But I do not think, when Lord
Diplock spoke of factual evidence, that he intended to require the prosecution to prove matters of which the court could properly
take judicial notice. It follows that if the court is satisfied on the basis of judicial notice that the requirements of proportionality
have been met, there is no need for the prosecution to adduce oral or documentary evidence. Judicial notice is not confined to
questions which everyone would be able to answer of his own knowledge. It includes matters of a public nature such as history,
social customs and public opinion, which may have to be culled from works of reference. As the late Professor Sir Rupert Cross
said, judicial notice is important for two reasons:

In the first place, it expedites the hearing of many cases. Much time would be wasted if every fact which was not
admitted had to be the subject of evidence which would, in many instances, be costly and difficult to obtain. Secondly, the
doctrine tends to produce uniformity of decision on matters of fact where a diversity of findings might sometimes be
distinctly embarrassing.

(See Cross on Evidence (5th edn, 1979) p 160. This was the last edition prepared by Sir Rupert. It appears in the sixth edition
(1985) at p 70.)
The second point is particularly important here. Since Torfaen there have been numerous prosecutions for Sunday trading in
magistrates courts and the Crown Court. In many of these, evidence has been led on the question of proportionality. A troupe of
experts has toured the country giving their views over periods of several days and as a result some courts have convicted and
others have acquitted. 231If the question depends simply on the oral evidence led at the trial, even a decision of the House of
Lords on appeal from one of these cases need not settle the matter. The prosecution will fail if the local authoritys travelling
expert fails to turn up, or if his evidence is different. We shall have the absurd state of affairs that the Sunday trading laws will be
valid on one day and invalid on another, enforceable in Wellingborough but not in Pendle. The summary prosecution of offences
under s 47 will in practice become impossible because local authorities will have excessive demands made upon their resources.
On the other hand if, as I believe to be the case, all the relevant facts are properly matters of judicial notice, the question can be
settled authoritatively by the normal rules of judicial precedent: cf R v Simpson [1983] 3 All ER 789 at 793, [1983] 1 WLR 1494
at 1499, citing the above passage from Cross. The importance of judicial notice in constitutional cases appears from
Commonwealth authorities such as Uebergang v Australian Wheat Board (1980) 145 CLR 266 at 302 and Re Anti-Inflation Act
(1976) 68 DLR (3d) 452 at 495496.

(8) The objectives of the Shops Act

In order to decide whether the effects of s 47 exceed what is necessary to achieve the aim in view, I must first decide what
the aim was. There was a good deal of argument about it but the dispute seemed to me largely semantic. The aim is in my view
clear enough from the terms of the 1950 Act itself, namely to ensure that, so far as possible, shopkeepers and shop assistants did
not have to work on Sunday. The fact that the promoters of the 1950 Act embraced this aim suggests that they must have thought
in general terms that it was undesirable to have to work on Sundaythere could be no rational basis for confining this view to
shop workers. In that sense they were seeking to maintain what they regarded as the traditional English Sunday. But the
immediate aim of the legislature was not universal. They may have thought that other trades were not subject to the same
pressures or that they had sufficient protection from trade unions or other legislation or simply that other trades were not their
concern. No doubt some would have supported the measure for other or wider reasons or because they hoped to gain from its
incidental effects. Sabbatarians, for example, may have approved on the general ground that work on Sunday profaned the
Lords Day and bus drivers who disliked working on Sundays might have liked the idea that fewer buses would be needed if
people could not go shopping. People who lived in shopping districts might like the quiet Sunday atmosphere. But these wider
or incidental effects were not the aims of the legislation.
This view is supported by the parliamentary history and subsequent judicial comment. The Shops Act 1950 was a
consolidation Act. Section 47 was derived from the Shops (Sunday Trading Restrictions) Act 1936, which originated in a private
members Bill. B & Q invited me to read the speech in Hansard of the sponsor, Mr Loftus, when introducing the second reading
debate (see 308 HC Official Report (5th series) cols 21582170). The debate is summarised by Frankfurter J in his opinion
upholding the constitutionality of American Sunday trading laws in McGowan v Maryland (1961) 366 US 420 at 480482. The
learned justice says in particular (at 481): Speakers asserted the necessity for maintaining the traditional quality of the Sunday
in this country. To which he then added in a footnote: Throughout the debates it is emphasized that the bill was a Sunday
Trading Restriction Bill and not a Bill to have one days rest in seven. I had some doubt about whether this was permissible
but Mr Vaughan QC for B & Q said that in the exceptional case in which the court is concerned with the purpose of the
legislation rather than its construction, consultation of Hansard is permitted: 232see Pickstone v Freemans plc [1988] 2 All ER
803, [1989] AC 66 and Conerney v Jacklin (1985) 129 SJ 285. Mr Isaacs did not strenuously object and in the event Hansard
added little to what could be deduced from the terms of the 1950 Act. Mr Loftus painted a picture of other workers spending
their summer Sundays going into the country on bicycles or by bus, returning with fruit and flowers and of shop workers denied
these delights because owners felt that they could not shut on Sundays for fear of losing trade to rivals who stayed open.
As for judicial comment, I need cite only Donovan J in Waterman v Wallasey Corp [1954] 2 All ER 187 at 188, [1954] 1
WLR 771 at 773 where he said: The purpose of the Act is to protect shop assistants If I might be allowed to enlarge this
remark in a brief unreserved judgment to include shopkeepers, it is entirely consistent with what I have said so far.
It is equally clear that the 1950 Act did not contemplate that its aim could be fully achieved. Certain concessions were in
practice unavoidable. For one thing, someone had to sell the fruit and flowers which the workers carried back from their country
expeditions. No one contemplated that public houses should have to shut on Sunday and this meant that cafs selling light
refreshments had to be able to stay open: it would have been strange if the only refreshment available on Sundays was alcoholic.
In 1936 many people had to buy fresh food on Sunday because they had no refrigerators and so newly cooked provisions and
fresh fruit and vegetables were allowed, but not tinned fruit, which could perfectly well be bought on Saturday. This kind of
reasoning, based on necessity and tradition, produced the list of excepted items now reproduced in Sch 5 to the 1950 Act. It was
also thought unnecessary to have the shop closed except for the serving of customers: if the shopkeeper wanted to spend the
day cleaning up or stocktaking he was at liberty to do so because that would not threaten his rivals with loss of custom. Then
there was a special provision for Jews, who closed on Saturday. It was thought unfair that the observance of their religion should
reduce them to a five-day week and so they were allowed to open until 2 pm on Sunday, a compromise which ensured them and
their employees at least Sunday afternoon at leisure. There were statutory compensations for any employee who, by reason of
one or other of these exceptions, worked on Sunday. If he worked more than four hours he had to get a whole day off in lieu and
if less than four hours, a half day off.
B & Q argue that these exceptions, some of which have turned out to give rise to very arbitrary distinctions, show that the
object of the legislation was not to relieve shop workers from having to work on Sunday but to produce a situation in which some
worked and some did not. This submission is used to support the argument that various alternative systems, such as exempting
DIY shops and garden centres, would produce a situation which did not give shop workers materially less protection than the
present law but would be much less restrictive of Community trade. I think that it is fallacious. So far as the Shops Act 1950
allows goods to be sold on Sundays, this is not in furtherance of its objectives but by way of recognition that its objectives could
not be fully achieved.
Since 1936 the Sunday trading laws have withstood many attempts by private members Bills and in one case even by the
government to secure their abolition or amendment. Public opinion polls during the last decade have shown a remarkably
consistent division of opinion, one third of the population in England and Wales favouring retention of the existing law and two-
thirds favouring abolition or amendment, though without any agreement among the majority about the form which such
amendment should take. The issue is plainly one about which feelings run very high.
233

(9) The proportionality tests

B & Q submit that the concept of proportionality requires the measure to pass two tests, which they identify as the
balancing test and the necessity test. This division is based upon the two illustrations of lack of proportionality in art 3 of
Commission Directive (EEC) 70/50: (1) the restrictive effects on the free movement of goods are out of proportion to their
purpose and (2) the same objective can be attained by other means which are less of a hindrance to trade. The same distinction
can be found in various judgments of the European Court, although it is not developed and there is no discussion of the difference
between them. There is a similar dual test in Lord Diplocks speech in R v Goldstein [1983] 1 All ER 434 at 436, [1983] 1 WLR
151 at 155, to which I have already referred.
To assist the court in applying these tests B & Q have provided the court with a vast mass of factual and expert evidence, full
of useful and curious learning. Apart from calling one economic expert in rebuttal of some of the theories advanced on behalf of
B & Q, the local authorities have been content to rely on matters of common knowledge or of which the court can otherwise take
judicial notice. I can briefly summarise the effect of the economic evidence. There are respectable grounds for thinking that
complete abolition of restrictions on Sunday trading would lead to a once and for all increase of about 1% to 2% in the retail
sector. This would be at the expense of savings or spending on other things like mortgage payments, insurance or holidays. In
the DIY and garden goods sectors, there are stronger grounds for thinking that sales would be greater if Sunday trading were
allowed than if the prohibition were uniformly enforced. B & Q estimate that the difference is of the order of 10%, from which
figure they deduce that lost Community imports would be of the order of 670m a year. The local authorities expert points out
that these calculations are not entirely secure because they depend upon the experience of B & Q at a time when their shops open
on Sundays and many competitors are closed. It does however seem reasonable to suppose that in these sectors there is Sunday
spending which would not be recovered in the rest of the week. How much of the money not spent in that way would then be
spent during the week on the other Community imports is impossible to establish and probably not relevant.
 There is also evidence that many employees value the opportunity to work on Sundays to earn extra money and in the case
of mothers working part-time, to leave the children with their husbands and escape from the home into different company and
surroundings. B & Q report little difficulty in finding volunteers to staff their shops. Many people enjoy being able to shop on
Sundays, particularly for items which need lengthy appraisal and family debate. DIY shops and garden centres are particularly
popular and profitable. The fact that many shops now open illegally on Sunday has had no detectable effect on whether or not
people go to church. Very likely other evidence could be adduced of adverse effects of Sunday trading but the local authorities
did not elect to call any.

(10) The division of powers

By far the most important question in this case concerns the function of the court in applying the proportionality tests. This
is a case of a sovereign legislature acting to further what the European Court has held to be legitimate objectives. It is subject
only to a requirement that the measure should not be disproportionate to the importance of its objective. The question is one on
which strong and differing views may be held and which has been the subject of frequent parliamentary debate. Is the court to
apply its own opinion of the importance of ensuring that shop workers do not have to work on Sundays and weigh that against its
opinion of the importance of selling more Dutch bulbs or Italian 234 furniture? If the legislature has declined to adopt any
modification of the existing exceptions, is the court to say that modifications should nevertheless be introduced because in its
opinion they would not detract from the legislative object and would mean that the 1950 Act was less of a hindrance to
Community trade?
In my judgment it is not my function to carry out the balancing exercise or to form my own view on whether the legislative
objective could be achieved by other means. These questions involve compromises between competing interests, which in a
democratic society must be resolved by the legislature. The duty of the court is only to inquire whether the compromise adopted
by the United Kingdom Parliament, so far as it affects Community trade, is one which a reasonable legislature could have
reached. The function of the court is to review the acts of the legislature but not to substitute its own policies or values.
This is not an abdication of judicial responsibility. The primacy of the democratic process is far more important than the
question of whether our Sunday trading laws could or could not be improved. I cannot imagine that in Cinthque SA v
Fdration nationale des cinmas franais Joined Cases 60 and 61/84 [1985] ECR 2605 the French court in applying the ruling
of the European Court considered that it was under a duty to form an independent view of the importance of the cinema industry
to France or whether that industry could be better protected by other means. These are also essentially legislative questions
involving a balancing of interests and the judiciary cannot do more than decide whether the view of the legislature is one which
could reasonably be held. It seems to me that unless both the European Court and the national courts exercise this kind of
restraint, it will be impossible to avoid the concerns expressed by Mr Advocate General Van Gerven in Torfaen [1990] 1 All ER
129, [1990] 2 QB 19 about the justiciability of some of the questions raised by the wide construction given to art 30.
The power to review Acts of Parliament is new to the courts of this country but familiar in any country, like the United
States, Canada and Australia, which has a constitution containing limitations on the powers of an otherwise sovereign legislature.
In some cases it will be apparent to the court that the legislative power has been used for an ulterior and impermissible purpose.
In others exercise of the power will be clearly invalidated by some basic error of reasoning: see eg Ackroyd v McKechnie (1986)
161 CLR 60. But in cases in which different views were reasonably tenable, the courts have not attempted to usurp the functions
of the legislature. Thus in Re Anti-Inflation Act (1976) 68 DLR (3d) 452 the Supreme Court of Canada had to consider the
exercise by the Dominion legislature of a power to regulate the Canadian economy on the grounds of economic emergency.
Laskin CJCs conclusion was expressed in the following terms (at 498):

In my opinion, this Court would be unjustified in concluding that the Parliament of Canada did not have a rational
basis for regarding the Anti-Inflation Act as a measure which, in its judgment, was temporarily necessary to meet a
situation of economic crisis
(My emphasis.)
In McGowan v Maryland (1961) 366 US 420 at 507, the American Supreme Court case on Sunday observance legislation,
Frankfurter J said:

to many who do not regard it sacramentally, Sunday is nevertheless a day of special, long-established associations,
whose particular temper makes it a haven that no other day could provide. The will of a majority of the community,
reflected in the legislative process during scores of years, presumably prefers to take its leisure on Sunday. The spirit of
any people expresses in goodly measure the heritage which links it to its past. Disruption 235 of this heritage by a
regulation which, like the unnatural labors of Claudius shipwrights, does not divide the Sunday from the week, might
prove a measure ill-designed to secure the desirable community repose for which Sunday legislation is designed. At all
events, Maryland, Massachusetts and Pennsylvania, like thirty-one other States with similar regulations, could reasonably
so find. (My emphasis.)

Similarly in Edwards Books and Art Ltd v R (1986) 35 DLR (4th) 1 the question was whether a prohibition on Sunday
trading in Ontario which contained only a limited exemption for Jews who closed on Saturday infringed their constitutional
guarantee of freedom of religion. The legislation was held to be for a legitimate objective within the powers of the provincial
legislature, namely to regulate working practices. The question was whether it involved a disproportionate burden on Jews. La
Forest J said (at 6668):

The atmosphere of community repose and relaxation traditionally associated with Sunday and its resultant recuperative
effects is a goal the Legislature may reasonably believe is necessary for the public welfare. A similar view has been
adopted in the United States; see McGowan v. Maryland ((1961) 366 US 420) in describing the criteria comprising the
proportionality requirement, the court has been careful to avoid rigid and inflexible standards. That seems to me to be
essential. Given that the objective is of pressing and substantial concern, the Legislature must be allowed adequate scope
to achieve that objective. It must be remembered that the business of government is a practical one That is especially
so in a field of so many competing pressures as the one here in question In seeking to achieve a goal that is
demonstrably justified in a free and democratic society, therefore, a Legislature must be given reasonable room to
manoeuvre to meet these conflicting pressures That being so, it seems to me that the choice of having or not having an
exemption for those who observe a day other than Sunday must remain, in essence, a legislative choice.
(My emphasis.)
These extracts, in which I have emphasised the significant passages, confirm my opinion that in this case the courts duty
goes no further than to decide whether it is a reasonably tenable view that preventing shop workers from having to work on
Sundays is a sufficiently important objective to justify the consequent reduction in Community trade and that no means other than
requiring shops to shut would achieve the same objective with less hindrance to trade.

(11) Applying the proportionality tests

In passing the Shops (Sunday Trading Restrictions) Act 1936 and in refusing to accept any modifications since that date,
Parliament must be taken to have decided that the objective of preventing shop workers from being or feeling under any
economic pressure to work on Sunday was sufficient to outweigh the inconvenience which would thereby be caused to people
who wanted to shop or work or any loss of trade for the economy as a whole. This view continues to be strongly held by a large
number of people. Whether I personally agree with it or not, it would be presumptuous of me to characterise it as untenable. On
the contrary, I accept that it is capable of forming a rational basis for legislation. And if Parliament was willing to accept the
detriments I have mentioned, it must I think follow that (if the question had arisen) it would have been equally willing to accept
the reduction in Community trade as a part of the wider effect on trade as a whole.
These considerations are sufficient to resolve the balancing test in favour of the validity of the 1950 Act. A similar approach
produces the same result when the 236 necessity test is applied. B & Q submitted that in considering alternative measures which
might have a lesser effect on Community trade, it was wrong to compare the effect they would have with an Arcadian idyll in
which no one worked on Sundays. The comparison must be with the current reality in which anyone can work in any shop as
long as it is not open for the serving of customers, in which shops (including DIY shops and garden centres) can open lawfully
for the sale of Sch 5 goods and in which the law is in any case widely disobeyed.
This argument is in my judgment mistaken. The object of the legislation was to secure that as few shop workers as possible
worked on Sundays. The need for exceptions was recognised but the exceptions were not part of the legislative purpose; they
were considered to be unavoidable concessions. Any enlargement of the exceptions must result in more shop workers falling
outside the protection of the 1950 Act. It cannot therefore be argued that because exceptions already exist, a few more would do
no harm. The irrelevance of the exceptions is confirmed by the opinion of Mr Advocate General Van Gerven in the Torfaen case
[1990] 1 All ER 129 at 153154, [1990] 2 QB 19 at 49(para 32):

B & Qs line of argument, however, concerns primarily the effectiveness and consistency of the rule. Community law
lays down a different type of requirement: the obstacle which in practice results from the rule must be proportionate to the
aim pursued, that is to say no more restrictive for intra-Community trade than is necessary for the intended purpose;
whether the rule achieves its purpose in this respect is irrelevant.
(The Advocate Generals emphasis.)
It seems to me that the history of the Sunday trading law shows that the existing exceptions are regarded by Parliament as
the limits of what is necessary to achieve the legislative object. Of course there are illogicalities in Sch 5 and opinions may differ
about whether it draws the line in the right place. On the other hand, illogical compromise tends to be a British socio-cultural
characteristic, to adopt the language of the European Court. That may also explain why Sunday trading is permitted in Scotland
but not in England and Wales. In my judgment Parliament was entitled to decide that the present restrictions were necessary to
attain the objects of the 1950 Act and that different restrictions would be inadequate, even though they might have less effect on
Community trade.
I should mention that some reliance was placed on a decision by a stipendiary magistrate at Pendle that the object of s 47
was intended to protect Sunday leisure activities and that since many people regarded Sunday shopping in DIY and garden centre
shopping as a leisure activity, a ban on such shopping was disproportionate. That seems to me based on a misconception. It was
never the purpose of s 47 to protect shoppers from the pain of having to buy things on Sunday and the fact that certain kinds of
shopping may be a pleasure is irrelevant. The 1950 Act was to protect shop workers and there is no evidence that anyone regards
Sunday work, even in a DIY shop, as a leisure activity.
The result is that although I accept that the burden is upon the prosecution to justify the proportionality of the measure, that
burden is in my judgment fully discharged on the basis of facts of which the court is entitled to take judicial notice. The factual
and expert evidence adduced by B & Q does not disturb that conclusion.

(12) The injunction

B & Q submit that whatever my view on the validity of s 47 of the Shops Acts 1950, I should not grant an injunction. It
argues that the proper place in which to determine the criminality of its actions is a criminal court and that unless a 237 civil court
can see at once that an act is indisputably criminal, the jurisdiction to grant an injunction should not be exercised. In this case it
is said that the law since Torfaen is doubtful and that consequently no injunction should be granted at least until the matter has
been settled by a criminal appellate court of high authority.
A somewhat similar submission was made by B & Q at an earlier stage in these actions when it moved to strike out the
proceedings as an abuse of process. I said on that occasion that the correct stage at which to decide whether the local authorities
satisfied the criteria laid down by the courts for the grant of an injunction was at the trial. It was clear from the decision of the
House of Lords in Stoke-on-Trent City Council v B & Q (Retail) Ltd [1984] 2 All ER 332 at 342, [1984] AC 754 at 776777 that
a previous conviction in a criminal court is not a necessary condition for the exercise of the civil jurisdiction. In any case, B & Q
have in fact been convicted by magistrates on more than one occasion since Torfaen.
The criteria for the grant of an injunction were summarised as follows by Bingham LJ in London City Corp v Bovis
Construction Ltd (1988) 86 LGR 660 at 682:

(1) the jurisdiction is to be invoked and exercised exceptionally and with great caution (2) there must
certainly be something more than mere infringement of the criminal law before the assistance of civil proceedings can be
invoked and accorded for the protection or promotion of the interests of the inhabitants of the area (3) the essential
foundation for the exercise of the courts discretion to grant an injunction is not that the offender is deliberately and
flagrantly flouting the law but the need to draw the inference that the defendants unlawful operations will continue unless
and until effectively restrained by the law and that nothing short of an injunction will be effective to restrain them

Of course I accept that the whole of this is predicated upon the assumption that the court is satisfied that the conduct in
question is criminal. But I am. Because the issues raised in this case are to some extent unfamiliar, I have taken some time to
explain my reasons. That does not mean that the answer is not plain. The remaining criteria also seem to me satisfied. We are
not dealing with casual offences but with a profitable business which, as B & Qs own evidence amply demonstrates, owes a
great deal of its success to systematic breaches of the law. That makes the case an exceptional one and shows that continued
criminal prosecution is not likely to be effective to secure compliance. Since Torfaen, B & Q have been convicted by the
Cwmbran and other magistrates. That has not had the slightest effect on their conduct. Mr Vaughan said that despite these
convictions, there had been acquittals (as in Pendle) and that B & Q was entitled to take the view that the law was unsettled. But
having regard to the conclusion I have reached, I can only proceed on the footing that the law is clear. It may be that B & Q will
(subject to any appeal) accept this decision and give an undertaking or assurance that it will not in future trade on Sundays in
Norwich or Stoke-on-Trent. Like Lord Diplock in Stoke-on-Trent City Council v B & Q (Retail) Ltd [1984] 2 All ER 332 at 342,
[1984] AC 754 at 777, I shall ask. But in the absence of such an assurance or undertaking, the local authorities are in my
judgment entitled to injunctions.

No order. Undertaking given by B & Q not in future to trade on Sundays in Norwich or Stoke-on-Trent. The court certified
under s 12 of the Administration of Justice Act 1969 that a question of general public importance relating to the construction of
an enactment was involved in the decision and that a sufficient case for an appeal direct to the House of Lords had been made
out.
238
15 November. The Appeal Committee of the House of Lords gave leave to appeal.

14 January 1991. The appeals were ordered to be consolidated.20 May. The Appeal Committee of the House of Lords referred
to the Court of Justice of the European Communities under art 177 of the EEC Treaty the following questions and adjourned
further consideration of the appeal pending conclusion of the reference: (1) whether the effect of the Court of Justices rulings in
Union Dpartementale des Syndicats CGT de lAisne v Socit Internationale de Distribution dEquipements Familiaux (SIDEF
CONFORAMA) (Case C-312/89) and Criminal proceedings against Marchandise (Case C-332/89) OJ 1991 C78, pp 8, 9 was to
determine that the prohibition contained in art 30 of the EEC Treaty did not apply to national rules, such as those in issue in
Torfaen BC v B & Q plc (Case 145/88) [1990] 1 All ER 129, [1990] 2 QB 19, which prohibited retailers from opening their
premises on Sunday for the serving of customers with certain goods; (2) if not, whether it was nevertheless immediately apparent,
whether or not evidence was adduced, that the restrictive effects on intra-Community trade which might result from national
rules such as those in question (1) did not exceed the effects intrinsic to rules of that kind, as that phrase was used in the ruling
of the Court of Justice in Torfaen BC v B & Q plc; (3) if not, on what criteria and by reference to what, if any, factual or other
evidence the national court should determine the question whether or not the restrictive effects on intra-Community trade which
might result from national rules such as those in question (1) exceeded the effects intrinsic to rules of that kind within the
meaning of that phrase as used in the ruling of the Court of Justice in Torfaen BC v B & Q plc.

Solicitors: Sharpe Pritchard agents for S W Titchener, Stoke-on-Trent and R M Auton, Norwich; Hepherd Winstanley & Pugh,
Southampton.

Evelyn M C Budd Barrister.

239
[1991] 4 All ER 240

Kirklees Borough Council v Wickes Building Supplies Ltd

Mendip District Council v B & Q plc
LOCAL GOVERNMENT

COURT OF APPEAL, CIVIL DIVISION

DILLON, MANN AND BELDAM LJJ
15, 16, 17, 30 APRIL 1991

Injunction Interlocutory Undertaking as to damages Undertaking by local authority Proceedings to enforce compliance
with statute Local authority having power to enforce statute by prosecution or action for injunction Local authority seeking
to restrain Sunday trading Respondent contending national legislation relating to Sunday trading incompatible with European
Community Law Whether local authority required to give cross-undertaking in damages in proceedings for injunction
Whether Crown immunity from giving cross-undertaking in damages extending to local authority acting in law enforcement
capacity Whether cross-undertaking in damages required under European law to protect retroactive effect of Community law
rights Shops Act 1950, s 47 Local Government Act 1972, s 222 EEC Treaty, art 30.

Two local authorities sought interlocutory injunctions pursuant to s 222 a of the Local Government Act 1972 to restrain two
retailers from trading on Sundays, contrary to s 47 b of the Shops Act 1950. Both local authorities declined to give a cross-
undertaking in damages but were nevertheless granted the relief sought without any requirement to do so, on the ground that
where a local authority was seeking to enforce the law in its area under its statutory powers it was entitled to the same exemption
from giving a cross-undertaking in damages as the Crown had when seeking an interlocutory injunction. Both retailers indicated
that they would have submitted to injunctions had such undertakings been given. The retailers appealed against the grant of the
interlocutory injunctions when the local authorities had refused to offer a cross-undertaking in damages. The retailers contended
in any event that they were entitled to trade on Sundays because s 47 of the 1950 Act was contrary to art 30 c of the EEC Treaty
and was therefore void and unenforceable.
________________________________________
a Section 222, so far as material, is set out at p 247 e, post
b Section 47 provides: Every shop shall, save as otherwise provided by this Part of this Act, be closed for the serving of customers on
Sunday: Provided that a shop may be open for the serving of customers on Sunday for the purposes of any transaction mentioned in the
Fifth Schedule to this Act.
c Article 30, so far as material, is set out at p 244 a, post

Held The appeals would be allowed and the injunctions discharged for the following reasons
(1) Since national courts were required to protect rights conferred by Community law and since a person would, were he to
succeed in establishing a right under art 30 of the EEC Treaty by showing that a national law was incompatible with Community
law, be entitled to have the national law set aside with unrestricted retroactive effect so as to prevent his rights being in any way
adversely affected, it followed that in the absence of the protection of a cross-undertaking in damages the retailers would,
pending the trial of the issue whether s 47 of the 1950 Act was incompatible with Community law, be precluded from any
possibility of recompense for any period during which any 240 injunction restraining them from trading on Sundays was in force.
In each case therefore the judge had been bound as a matter of Community law to require the retailer to be given the protection
afforded by a cross-undertaking in damages before the local authority was granted the interim relief it sought; Amministrazione
delle Finanze dello Stato v Simmenthal SpA Case 106/77 [1978] ECR 629 and Factortame Ltd v Secretary of State for Transport
(No 2) Case C-213/89 [1991] 1 All ER 70 considered.
(2) A local authority exercising the power conferred upon it by s 222 of the 1972 Act to bring civil proceedings in its own
name to enforce within its area the provisions of a statute such as the 1950 Act, or other public law, by an action for an injunction
was required to give a cross-undertaking as to damages before an interlocutory injunction would be granted, since the special
privilege afforded to the Crown not to give such undertakings did not extend to local authorities. Furthermore (per Beldam LJ) it
would not be just and convenient to grant injunctions in favour of the local authorities in the absence of a cross-undertaking in
damages. Since the local authorities were not prepared to give such undertakings and it was not the function of the court to
anticipate the outcome of the trial the judges had erred in dispensing with the requirement and the injunctions would accordingly
be discharged (see p 247 d, p 248 a b, p 251 c d f j to p 252 b and p 256 j to p 257 a c d, post); dictum of Lord Diplock in F
Hoffmann-La Roche & Co AG v Secretary of State for Trade and Industry [1974] 2 All ER 1128 at 11491150, 1152 followed.

Notes
For an undertaking in damages as a condition of being granted an interlocutory injunction, see 24 Halsburys Laws (4th edn)
paras 10721076, and for cases on the subject, see 28(4) Digest (2nd reissue) 397402, 68626919.
For the Shops Act 1950, s 47, see 19 Halsburys Statutes (4th edn) (1990 reissue) 424.
For the Local Government Act 1972, s 222, see 25 Halsburys Statutes (4th edn) (1990 reissue) 340.

Cases referred to in judgments

A-G v Logan [1891] 2 QB 100, DC.
A-G Wright [1987] 3 All ER 579, [1988] 1 WLR 164.
Allen v Jambo Holdings Ltd [1980] 2 All ER 502, [1980] 1 WLR 1252, CA.
American Cyanamid Co v Ethicon Ltd [1975] 1 All ER 504, [1975] AC 396, [1975] 2 WLR 316, HL.
Amministrazione delle Finanze dello Stato v Simmenthal SpA Case 106/77 [1978] ECR 629.
Bourgoin SA v Ministry of Agriculture Fisheries and Food [1985] 3 All ER 585, [1986] QB 716, [1985] 3 WLR 1027, QBD and
CA.
Director General of Fair Trading v Tobyward Ltd [1989] 2 All ER 266, [1989] 1 WLR 517.
Factortame Ltd v Secretary of State for Transport (No 1) [1989] 2 All ER 692, [1990] 2 AC 85, [1989] 2 WLR 997, HL.
Factortame Ltd v Secretary of State for Transport (No 2) Case C-213/89 [1991] 1 All ER 70, [1991] 1 AC 603, [1990] 3 WLR
818, CJEC and HL.
Gateshead Metropolitan BC v Texas Homecare Ltd and Great Mills (North) Ltd (1 November 1988, unreported), Ch D at
Newcastle.
Hammersmith London Borough v Magnum Automated Forecourts Ltd [1978] 1 All ER 401, [1978] 1 WLR 50, CA.
Hoffmann-La Roche (F) & Co AG v Secretary of State for Trade and Industry [1974] 2 All ER 1128, [1975] AC 295, [1974] 3
WLR 104, HL.
241
London City Corp v Bovis Construction Ltd (1988) 86 LGR 660, CA.
R v Goldstein [1983] 1 All ER 434, [1983] 1 WLR 151, HL.
R v Licensing Authority, ex p Smith Kline & French Laboratories Ltd (Generics (UK) Ltd intervening) (No 2) [1989] 2 All ER
113, [1990] 1 QB 574, [1989] 2 WLR 378, CA.
Rochdale BC v Anders [1988] 3 All ER 490.
Sierbien v Westminster City Council (1987) 86 LGR 431, CA.
Smith (WH) Do It All Ltd v Peterborough City Council, Payless DIY Ltd v Peterborough City Council [1991] 4 All ER 193,
[1991] 1 QB 304, [1990] 3 WLR 1131, DC,.
Smith v Inner London Education Authority [1978] 1 All ER 411, CA.
Stoke-on-Trent City Council v B & Q (Retail) Ltd [1984] 2 All ER 332, [1984] AC 754, [1984] 2 WLR 929, HL.
Stoke-on-Trent City Council v B & Q plc, Norwich City Council v B & Q plc [1991] 4 All ER 221, [1991] Ch 48, [1991] 2 WLR
42.
Stoke-on-Trent City Council v Toys R Us Ltd (18 October 1990, unreported), Ch D.
Torfaen BC v B & Q plc Case 145/88 [1990] 1 All ER 129, [1990] 2 QB 19, [1990] 2 WLR 1330, CJEC.
Union Dpartmentale des Syndicats CGT de lAisne v Sidef Conforama Case C-312/89, Criminal proceedings against A
Marchandise Case C-332/89(1991) Times, 6 March, CJEC.

Cases also cited or referred to in skeleton arguments

B & Q Ltd v Shrewsbury and Atcham BC [1990] 3 CMLR 535, Crown Ct at Shrewsbury.
Bosch (Robert) GmbH v Hauptzollamt Hildesheim Case 135/77 [1978] ECR 855.
Gouriet v Union of Post Office Workers [1977] 3 All ER 70, [1978] AC 435, HL.
Imperial Tobacco Ltd v A-G [1980] 1 All ER 866, [1981] AC 718, HL.
Newberry v Cohens (Smoked Salmon) Ltd, Newberry v Adelson (1956) 54 LGR 343, DC.
North Western Leicestershire DC v Gramlo Ltd [1988] CA Transcript 410.
Portsmouth City Council v Richards (1988) 87 LGR 757, CA.
Stoke-on-Trent City Council v B & Q (Retail) Ltd [1983] 2 All ER 787, [1984] Ch 1, CA; affd [1984] 2 All ER 332, [1984] AC
754, HL.
Thomas v Chief Adjudication Officer [1991] 3 All ER 315, [1991] 2 WLR 886, CA.
Wardale v Binns [1946] 2 All ER 100, [1946] KB 451, DC.

Interlocutory appeals

Kirklees BC v Wickes Building Supplies Ltd

Wickes Building Supplies Ltd (Wickes) appealed from the decision of Mervyn Davies J given on 14 May 1990([1990] 1 WLR
1237) whereby, without requiring a cross-undertaking in damages, the plaintiff, Kirklees Borough Council, he granted an
injunction restraining Wickes until after judgment or until further order from using or causing or permitting to be used any
premises within the Kirklees area as a retail do-it-yourself centre or for the purpose of any other retail trade or business on
Sundays except for the purpose of carrying out transactions exempted from the operation of s 47 of and Sch 5 to the Shops Act
1950. The facts are set out in the judgment of Dillon LJ.

Mendip DC v B & Q plc

B & Q plc (B & Q), appealed from a decision of Mummery J given on 1 August 1990([1991] 1 CMLR 113) whereby, without
requiring a cross-undertaking in damages, the plaintiff, Mendip District Council, he granted an injunction restraining B & Q until
trial or further order in the meantime whether by its 242 directors or officers or servants or agents or any of them or otherwise
howsoever from opening or causing or permitting to be opened on Sundays its premises at Wirral Park, Glastonbury for the
serving of customers in breach of s 47 of the Shops Act 1950. The facts are set out in the judgment of Dillon LJ.
The cases were heard together.

Andrew Collins QC and Paul Lasok for Wickes.

Stuart Isaacs QC and Timothy Straker for the Kirklees council.
John EA Samuels QC, Gerald Barling and Nicholas Davidson for B & Q.
Stuart Isaacs QC and Neil Calver for the Mendip council.

Cur adv vult

30 April 1991. The following judgments were delivered.

DILLON LJ. The court has before it two interlocutory appeals which raise the same issue.
One is an appeal by the defendant in the first above-mentioned action, Wickes Building Supplies Ltd (Wickes), against an
order of Mervyn Davies J of 14 May 1990 whereby he granted the plaintiffs in that action, the Kirklees Borough Council, an
injunction restraining Wickes until judgment or further order from using or causing or permitting to be used any premises within
the Kirklees area as a retail do-it-yourself centre or for the purpose of any other retail trade or business on Sundays except for the
purpose of carrying out transactions exempted from the operation of s 47 of the Shops Act 1950 by Sch 5 to that Act (see [1990]
1 WLR 1237). That injunction applies in particular to premises of Wickes at Huddersfield and Dewsbury.
The other appeal is an appeal by the defendant in the second above-mentioned action, B & Q plc (B & Q), against an order
of Mummery J of 1 August 1990 whereby he granted the plaintiffs in that action, the Mendip District Council, an injunction
restraining B & Q until judgment or further order from opening or causing or permitting to be opened on Sundays B & Qs
premises at Wirrall Park, Glastonbury for the serving of customers in breach of s 47 of the Shops Act 1950(see [1991] CMLR
113).
The special factor in these two appeals which distinguishes them from the numerous other Sunday trading cases which have
previously come before this court is that Mervyn Davies J decided that it was appropriate to grant the injunction without
requiring the usual cross-undertaking in damages from the plaintiff council. Mummery J in the Mendip case followed the
decision of Mervyn Davies J. We were told by counsel that since the decision of Mervyn Davies J the judges of the Chancery
Division have granted as many as 100 interlocutory injunctions to local authorities to restrain Sunday trading without requiring
those authorities to give cross-undertakings in damages.
The criminal and civil courts in this country have had to deal for quite a few years past with the enforcement of s 47 at the
suit of local authorities in England or Wales against retailers, and in particular retailers owning chains of DIY shops, which object
to keeping their shops closed on Sundays. The Scottish courts have not been troubled by the problem since there is no
comparable legislation in force in Scotland.
Latterly the retailers have asserted, as a defence to claims to enforce s 47 243whether in the criminal or civil courts, that s
47 is contrary to art 30 of the EEC Treaty and is thus void and unenforceable. Article 30 provides, in now familiar wording, that:

Quantitative restrictions on imports and all measures having equivalent effect shall be prohibited between Member
States.

It is common ground that art 30 creates rights in those injured by its infringement which are directly enforceable in the
national courts of the member states of the Community.
There has already been one decision of the Court of Justice of the European Communities in relation to s 47. That was
Torfaen BC v B & Q plc Case 145/88 [1990] 1 All ER 129, [1990] 2 QB 19 on a reference by the Cwmbran Magistrates Court in
the course of criminal proceedings against B & Q in that court. The decision of the European Court in the Torfaen case has also
been considered by the European Court in two further cases, both heard and decided together: Union Dpartmentale des
Syndicats CGT de lAisne v Sidef Conforama Case C-312/89 and Criminal proceedings against A Marchandise Case C-
332/89(1991) Times, 6 March in which the European Court upheld the validity of the Sunday trading restrictions of France and
Belgium.
The actual ruling of the European Court in the Torfaen case [1990] 1 All ER 129 at 157, [1990] 2 QB 19 at 53 was:

art 30 of the Treaty must be interpreted as meaning that the prohibition which it lays down does not apply to
national rules prohibiting retailers from opening their premises on Sunday where the restrictive effects on Community trade
which may result therefrom do not exceed the effects intrinsic to rules of that kind.

In para 16 of the judgment it is stated that the question whether the effects of specific national rules do in fact remain within
the limits permissible in relation to art 30 is a question of fact to be determined by the national court (see [1990] 1 All ER 129 at
156, [1990] 2 QB 19 at 53).
That ruling in the Torfaen case has been interpreted by the European Court in para 10 of its judgment in the Conforama case
and in the corresponding paragraph of its judgment in the Marchandise case as follows:

In the Torfaen judgment the Court ruled, in relation to similar national legislation prohibiting the opening of retail
shops on Sundays, that such a prohibition was not compatible with the principle of the free movement of goods provided
for in the Treaty unless any obstacle to Community trade thereby created did not exceed what was necessary in order to
ensure the attainment of the objective in view and unless that objective was justified with regard to Community law.

By way of apparent contrast to the ruling in the Torfaen case, however, the actual ruling of the European Court in the
Conforama and Marchandise cases was:

The prohibition contained in art 30 of the Treaty, properly construed, does not apply to national legislation prohibiting
the employment of staff on Sundays.

Mr Isaacs QC has, consequently, submitted that by its decisions in the Conforama and Marchandise cases the European
Court has tacitly rejected the view expressed in para 16 of the judgment in the Torfaen case. It follows therefore, he says, that the
application of art 30 is a matter of Community law for the European Court and that the decision in the Conforama and
Marchandise cases upholding the 244 French and Belgian Sunday trading laws necessarily involve that art 30 does not apply to s
47. He submits therefore that this court should deal with these appeals on the footing that Wickes and B & Q have no European
law defence to the claims against them.
I do not regard it as at all clear that the European Court has resiled, as Mr Isaacs suggests, from the view expressed in para
16 in its judgment in the Torfaen case. There is nothing on the face of the judgments in the Conforama and Marchandise cases to
explain why the actual decisions in those cases are worded differently from the wording of the decision in the Torfaen case. If
therefore it was necessary to reach a conclusion on these submissions of Mr Isaacs in order to dispose of the present appeals, I
should feel bound to direct a fresh reference to the European Court.
Mr Isaacs takes the further point that the issues of European law as to the application of the Torfaen case on which Wickes
and B & Q seek to rely have been decided in favour of local authorities by Hoffmann J in a final, as opposed to interlocutory,
judgment in Stoke-on-Trent Council v B & Q plc, Norwich City Council v B & Q plc [1991] 4 All ER 221, [1991] Ch 48. He
points out that that judgment was referred to by Sir Nicolas Browne-Wilkinson V-C in Stoke-on-Trent City Council v Toys R Us
Ltd (18 October 1990, unreported) as a definitive judgment so far as courts at first instance are concerned. That judgment of
Hoffmann J is however the subject of a leap-frog appeal to the House of Lords which is due to be heard next month, and it is not
for this court to attempt to predict the decision of the House of Lords.
We must therefore approach these interlocutory appeals on the footing that it is possible that the House of Lords may take a
different view of the law to that of Hoffman J and/or that the European Court may give a further ruling which is contrary, in its
application to s 47, to the submissions of Mr Isaacs as to the effect of the decisions in the Conforama and Marchandise cases. In
saying this, I am comforted by the well-known observations of Sir Robert Megarry V-C as to the open-and-shut case which
turned out not to be so etc.
It was submitted for Wickes and B & Q that so long as EEC law has not been finally determined against them they have an
arguable defence to any prosecution for Sunday trading which might be brought against them under the Shops Act 1950, and that
therefore it is wrong and inappropriate for the plaintiff councils to invoke the civil law and relief by way of injunction in civil
proceedings against them. On the view I take on the issues as to the cross-undertaking in damages it is unnecessary to consider
that submission.
The issues as to the cross-undertaking are fundamental because the two councils made it plain in the courts below and again
in argument in this court that they are not prepared to give any cross-undertaking in damages. If therefore this court is of the
view that the judges below were wrong to dispense with the cross-undertaking, these appeals must be allowed and the injunctions
granted at first instance must be discharged.
The history of the cross-undertaking in damages is conveniently set out by Lord Diplock in his speech in F Hoffmann-La
Roche & Co AG v Secretary of State for Trade and Industry [1974] 2 All ER 1128 at 11491151, [1975] AC 295 at 360361. Its
importance is further underlined in Lord Diplocks speech in American Cyanamid Co v Ethicon Ltd [1975] 1 All ER 504 at 509
511, [1975] AC 396 at 407409. As Lord Diplock stated in the Hoffmann-La Roche case [1974] 2 All ER 1128 at 1150, [1975]
AC 295 at 360:

By the end of the [nineteenth] century the insertion of such an undertaking in all orders for interim injunctions granted
in litigation between subject and subject had become a matter of course.

245
Even in Allen v Jambo Holdings Ltd [1980] 2 All ER 502, [1980] 1 WLR 1252, where an interlocutory injunction had been
obtained by a legally aided plaintiff who had very few assets to support the cross-undertaking and the defendant applied, albeit
unsuccessfully, for the injunction to be discharged on the ground of the plaintiffs impecuniosity, the cross-undertaking was given
for what it was worth. So far as my own experience goes, it was the universal practice, as between subjects, to require the cross-
undertaking however overwhelmingly strong the plaintiffs case might appear to be, since it was not the function of the court,
hearing an application for an interlocutory injunction, to anticipate the outcome of the trial. A plaintiff who was not willing to
give the cross-undertaking could not obtain an interlocutory injunction; he would have to press for a speedy trial without interim
relief, or, if circumstances permitted, obtain a judgment under RSC Ord 14(or a default judgment or judgment on admissions).
There was however an exception in favour of the Crown. It was the practice, before the Crown Proceedings Act 1947, not to
require the cross-undertaking as to damages from the Crown when the Crown obtained an interlocutory injunction. The reasons
for that practice are examined by the House of Lords in the Hoffmann-La Roche case. In that case their Lordships, affirming the
decision of this court, held, according to the summary in the headnote, that in a case where the Crown sought by injunction to
enforce what was prima facie the law of the land, the person against whom it sought the injunction was required to show very
good reason why the Crown should be required to give the cross-undertaking as a condition on being granted the injunction.
In the first of the appeals before us, Mervyn Davies J extended the Crowns exemption recognised in the Hoffmann-La
Roche case to cases where a local authority as plaintiff is seeking under statutory powers to enforce within its area what is
claimed to be the law. That course was followed by Mummery J in the second appeal and by other judges in numerous other
cases as already mentioned. Mervyn Davies J may have thought that he was merely exercising his discretion in the particular
case before him, but what he has in fact done is to lay down a new principle of law. This court is therefore fully entitled to
consider whether that new principle is justified, as a matter of domestic law or in the context of European law.
I consider European law first.
It is now clear, and accepted by both sides from the decisions of the European Court in Amministrazione delle Finanze dello
Stato v Simmenthal SpA Case 106/77 [1978] ECR 629 and Factortame Ltd v Secretary of State for Transport (No 2) Case C-
213/89 [1991] 1 All ER 70, [1991] 1 AC 603 that where a provision of national legislation is in conflict with a requirement of
Community law, the national court, having a duty to give effect to that requirement of Community law, has immediate power to
override the national legislative provision, and does not have to await the setting aside of that provision by legislative or other
constitutional means or by specific decision of the European Court (see the Simmenthal decision [1978] ECR 629 at 643
644(paras 1326).
The examination by the European Court in the Simmenthal decision was to ascertain what consequences flowed from the
direct applicability of a provision of Community law in the event of incompatibility with a legislative provision of a member state
(para 13). The conclusion in para 25 was that the setting aside of the incompatible legislative provision of the member state
must in every case have unrestricted retroactive effect so as to prevent the rights in question from being in any way adversely
affected.
It is the duty of the national court to ensure the legal protection which persons 246 derive from the direct effect of provisions
of Community law (see the Factortame decision [1991] 1 All ER 70 at 105, [1991] 1 AC 603 at 643644(para 19)).
If therefore Wickes and B & Q are right that s 47 of the Shops Act 1950 is incompatible with art 30 of the EEC Treaty and is
thereby overriden, they have a current right to open their stores for Sunday trading, and it is the duty of the national courts to
protect that right.
If there is no cross-undertaking, the right to trade on Sunday will, assumedly, be established at the trial, but without the
unrestricted retroactive effect required by the Simmenthal case. In that event, Wickes and B & Q will have been adversely
affected by having been restrained by injunctions from Sunday trading pending the trial, without any compensation. On the facts
that is clearly proved.
Consequently, in my judgment, the court is under European law bound to require cross-undertakings in damages from the
plaintiff authorities if interlocutory injunctions to restrain Sunday trading until judgment or further order are to be granted.
That in itself leads to the conclusion that these appeals must be allowed, since the cross-undertakings are not forthcoming.
On this aspect the courts below had, and this court has, no discretion.
I am however further of the view that, even as a matter of domestic law, Mervyn Davies J was wrong to extend to local
authorities the Crown immunity from giving a cross-undertaking in damages which was upheld in the Hoffmann-La Roche case.
The present, and similar, proceedings are brought by local authorities under s 222 of the Local Government Act 1972, which
provides:

(1) Where a local authority consider it expedient for the promotion or protection of the interests of the inhabitants of
their area(a) they may prosecute or defend or appear in any legal proceedings and, in the case of civil proceedings, may
institute them in their own name

Before the enactment of that section, a local authority could not bring civil proceedings for an injunction in its own name. It
could only come to court for such relief as the relator in a relator action brought by the Attorney General.
But though a relator action was always brought to enforce public rights or public law, it was accepted practice, never
challenged, that if an interlocutory injunction was sought the relator, although not the Attorney General, must give the usual
cross-undertaking in damages. So equally after s 222 was enacted, local authorities which instituted proceedings in their own
names for injunctions habitually gave the cross-undertakings if they obtained interlocutory injunctions.
 If a contrary rule is now to apply, it is only to apply when a local authority is seeking to enforce the law as declared in a
public and general Act of Parliament, or in a statutory instrument made under a public and general Act of Parliament? Or is it to
extend to the enforcement of provisions in a local Act of Parliament, of which there are many promoted by local authorities, or
provisions in the local authoritys own byelaws? If the dispensation extends so far, does it also extend to statutory corporations,
such as those established to run the nationalised industries? These have a duty to provide services in the public interest, and some
such as British Rail may need to obtain injunctions to protect those services in the public interest. Moreover some statutory
corporations have statutory powers to make and enforce byelaws which are binding on the public. Privately owned companies
such as water companies which acquired formerly nationalised undertakings on privatisation may have similar powers.
247
The position of the Crown has, in my judgment, always been regarded as exceptional, and is still to be so regarded. See
Factortame Ltd v Secretary of State for Transport (No 1) [1989] 2 All ER 692, [1990] 2 AC 85 in so far as the House of Lords
there overruled the majority decision of this court in R v Licensing Authority, ex p Smith Kline & French Laboratories Ltd
(Generics (UK) Ltd intervening) (No 2) [1989] 2 All ER 113, [1990] 1 QB 574. I see no need to extend, and no sufficient
justification for extending, to local authorities the special privilege of the Crown not to give a cross-undertaking as to damages
when it obtains an interlocutory injunction. That privilege, as upheld in the Hoffmann-La Roche case [1974] 2 All ER 1128,
[1975] AC 295, was a privilege of the Crown alone.
In my judgment, Mervyn Davies J misdirected himself on this point, and on this ground also I would allow these appeals.
The cross-undertaking is exacted as a matter of elementary fairness when an interlocutory injunction is granted in advance
of the determination of the parties rights at a trial. No doubt local authorities would the more readily start proceedings to enforce
this that or the other law and apply for interlocutory injunctions to that end if they knew that if they failed at the trial to establish
infringement, and so the injunctions should never have been granted, they would still be free from all liability to compensate the
other party for loss occasioned by the injunction wrongly granted. They would be similarly encouraged if they knew that if they
failed they would not have to pay the costs of the other party, but that has never been the law. Moreover it is for the legislature,
and not the courts, to yield, if so minded, to the threat of the local authorities that unless they are accorded the privileged position
of the Crown in relation to the cross-undertaking they will not perform their duty under s 71 of the Shops Act 1950 to enforce s
47, if it is valid under Community law, by the only means of enforcement which have proved effective, sc by injunction.

MANN LJ. I gratefully adopt the description of the circumstances giving rise to these two interlocutory appeals which has been
given by Dillon LJ. The appeals raise only one question. It is this. Were the judges in the courts below correct in principle when
they exercised their discretion so as to grant interim injunctions to the respondent plaintiffs without those plaintiffs having first
given an undertaking in damages? The question is so confined because each appellant defendant would have submitted to an
injunction until trial or order had the undertaking been given. The question raises issues of some general importance.
The practice of refusing an interim injunction where a plaintiff refuses to give an undertaking in damages is of long
standing. To require an undertaking is the usual course where it would afford protection to the defendant against loss sustained
by him in refraining from doing what he may (however improbably) establish he was entitled to do. There is no dispute but that
an undertaking would protect the defendants against loss caused by the closure of their shops on Sundays. Had that not been so,
then other matters would have arisen for consideration in that there would have had to be struck a balance of convenience having
regard to all the circumstances of the case. Examples of such a process are Allen v Jambo Holdings Ltd [1980] 2 All ER 502,
[1980] 1 WLR 1252, where an undertaking had been given by a plaintiff who was impecunious, and Factortame Ltd v Secretary
of State for Transport (No 2) Case C-213/89 [1991] 1 All ER 70, [1991] 1 AC 603, where an undertaking would have had no
effective meaning.
Mervyn Davies J departed from the usual course in the Kirklees case and gave his reasons for departure as follows ([1990] 1
WLR 1237 at 12461247):

In my view I do have a discretion [to dispense with an undertaking]. I say that because if the practice of exacting
an undertaking is not applied as of 248 course against the Crown as a condition of the grant of an interlocutory injunction
in a law enforcement action then the practice ought not to be applied as of course against a local authority when the local
authority engages in its law enforcement duties.

Mummery J in the Mendip case understandably thought it appropriate that he should follow Mervyn Davies J in what was an
indistinguishable situation (see [1991] 1 CMLR 113 at 118(para 16)). We were told that over 100 interim injunctions in restraint
of Sunday trade have now been granted in the Chancery Division on a similar basis.
Section 222(1) of the Local Government Act 1972 enables a local authority to institute legal proceedings in their own name
where they consider it expedient for the promotion or protection of the interests of the inhabitants of their area This
provision enables a local authority to seek an injunction to restrain breaches of an enactment, and in particular of s 47 of the
Shops Act 1950(see Stoke-on-Trent City Council v B & Q (Retail) Ltd [1984] 2 All ER 332, [1984] AC 754). I need not pause
upon the criteria which they must satisfy before final relief can be granted (see as to these, London City Corp v Bovis
Construction Ltd (1988) 86 LGR 660 at 682 per Bingham LJ). Until the enactment of s 222(1) a local authority could not
(special provision apart) enforce for the public good in their own name a statutory or other provision, but had to secure the
authority of the Attorney General to institute proceedings in his name at their relation. Relator actions at the instance of local
authorities were not uncommon. In proceedings at the relation of a local authority in order to enforce the law, the Attorney
General was exercising his right to act on behalf of the Crown as parens patriae in order to restrain wrongful conduct which
injuriously affected the public. If an interim injunction was sought in a relator action then an undertaking in damages was
required from the relator (see F Hoffmann-La Roche & Co AG v Secretary of State for Trade and Industry [1974] 2 All ER 1128
at 1152, [1975] AC 295 at 363 per Lord Diplock). There are many reported instances of local authorities giving such
undertakings, and that this was the price of interim relief in a relator action was never questioned even although the relator was
not a party to the proceedings (see A-G v Logan [1891] 2 QB 100 at 106).
Once it had become established that the 1972 Act enabled local authorities to apply for the restraint of unlawful conduct,
they turned to consider whether applications for interim relief in actions to enforce s 47 need be supported by an undertaking in
damages. The first reported case is Rochdale BC v Anders [1988] 3 All ER 490, where Caulfield J refused an injunction in the
absence of an undertaking. In Gateshead Metropolitan BC v Texas Homecare Ltd and Great Mills (North) Ltd (1 November
1988, unreported), his Honour AJ Blackett-Ord sitting as a deputy judge of the High Court at Newcastle, said that the practice of
the court varied. He granted an injunction without an undertaking on substantially the same ground as that subsequently relied on
by Mervyn Davies J in the Kirklees case. The ground equates the local authoritys position with that of the Crown when bringing
a law enforcement action.
The position of the Crown in regard to an undertaking was considered by the House of Lords in the Hoffmann-La Roche
case [1974] 2 All ER 1128, [1975] AC 295. The House decided that since the Crown Proceedings Act 1947 allowed the recovery
of damages by action against the Crown, the former practice of never requiring a cross-undertaking from the Crown was one
which could be examined. The result of this examination was that there is no longer any reason in an action to enforce a private
law right why the Crown should not have to pay the price for interim relief which is ordinarily paid by the subject. However, the
action before the House was not an action to enforce a private law right. The interim relief was 249 claimed in an action for an
injunction to enforce a statutory order with which compliance was by statute enforceable by civil proceedings by the Crown for
an injunction (Monopolies and Restrictive Practices (Inquiry and Control) Act 1948, s 11(2)). The House of Lords held that
in such an action an undertaking ought not ordinarily to be required. Lord Reid said ([1974] 2 All ER 1128 at 1134, [1975] AC
295 at 341):

this is a case in a different and novel field. No doubt it was thought that criminal penalties were inappropriate as a
means of enforcing orders of this kind, and the only method of enforcement is by injunction. Dealing with alleged
breaches of the law is a function of the Crown (or of a department of the executive) entirely different in character from its
function in protecting its proprietary right. It has more resemblance to the function of prosecuting those who are alleged to
have committed an offence. A person who is prosecuted and found not guilty may have suffered serious loss by reason of
the prosecution, but in general he has no legal claim against the prosecutor. In the absence of special circumstances I see
no reason why the Crown, in seeking to enforce orders of this kind, should have to incur legal liability to the person alleged
to be in breach of the order.

Lord Morris of Borth-y-Gest drew attention to the character of the proceedings as being that of law enforcement (see [1974]
2 All ER 1128 at 1142, [1975] AC 295 at 351). Lord Diplock said ([1974] 2 All ER 1128 at 11521153, [1975] AC 295 at 364):

even before the passing of the Crown Proceedings Act 1947 the fact that the suit was brought to enforce jus
publicum was not of itself sufficient to displace the ordinary rule that a defendant was entitled to the usual undertaking in
damages as a condition of the grant of any interlocutory injunction against him; though the undertaking was exacted from
the relator and not from the Crown on whose behalf the Attorney-General was the nominal plaintiff in the suit. I see no
reason since the passing of the 1947 Act why a rigid rule that the Crown itself should never be required to give the usual
undertaking in damages should be retained in those law enforcement actions where the Crown now sues without a relator.
Nevertheless, the converse does not follow that in this type of action the court, in granting an interim injunction, ought
always to require an undertaking as to damages from the Crown. A relator owes no duty to the public to initiate any law
enforcement action. He does not usually do so unless he or a section of the public that he represents has some special
interest to protect in enforcing that particular law, that is not shared by the public at large. Even if he has no special interest
and it is not essential that he shouldhis action nevertheless is that of an officious, though well-meaning, bystander who
is content merely to stand by. When, however, a statute provides that compliance with its provisions shall be enforceable
by civil proceedings by the Crown for an injunction, and particularly if this is the only method of enforcement for which it
provides, the Crown does owe a duty to the public at large to initiate proceedings to secure that the law is not flouted, and
not simply to leave it to the chance that some relator may be willing to incur the expense and trouble of doing so. I agree,
therefore, with all your Lordships that the practice of exacting an undertaking in damages from the Crown as a condition of
the grant of an interlocutory injunction in this type of law enforcement action ought not to be applied as a matter of course,
as it should in actions between subject and subject, in relator actions, and in actions by the Crown to enforce or to protect
its proprietary or contractual rights. On the contrary, the 250 propriety of requiring such an undertaking from the Crown
should be considered in the light of the particular circumstances of the case.

In the light of the speeches in the Hoffmann-La Roche case there is no doubt that in an action by the Crown to enforce by the
prescribed method the terms of a statute or other provision, the court can depart from ordinary practice and not require a cross-
undertaking unless the circumstances are such that one ought to be required. A real doubt as to the validity of the statute or other
provision might be such a circumstance. On the basis that a local authority is in the same position as the Crown, Mervyn Davies
and Mummery JJ thought there were no circumstances requiring an undertaking in the cases before them. Whether or not there
were, was extensively discussed before us, but there was no occasion for the discussion if the basis is unsound.
If a local authority seeking to enforce the law by civil action is to be regarded as being in the same position as the Crown,
then the effect of s 222(1) of the 1972 Act will have been to open the possibility of the authority securing interim relief without
giving the undertaking which would have been required of them as a matter of course in a relator action. This change will have
altered the position of those against whom the provisions of, for example, the 1950 Act, are sought to be enforced by civil action,
and will have altered it to their detriment by depriving them of a customary protection (as to the general value of which see
Hammersmith London Borough v Magnum Automated Forecourts Ltd [1978] 1 All ER 401 at 405, [1978] 1 WLR 50 at 55 per
Lord Denning MR). I see no reason for such a surprising change. It was pressed upon us that local authorities were now
performing law enforcement functions of their own. As a general proposition that is unexceptionable, but it by no means follows
that the Crown and a local authority should be equated in regard to the requirement of an undertaking. The decision in the
Hoffmann-La Roche case is not about law enforcement actions in general. It is specifically about actions by the Crown under a
statute providing a prescribed means of law enforcement. The decision may extend to proceedings to enforce a public right
brought by the Attorney General ex officio, and in A-G v Wright [1987] 3 All ER 579 at 581, [1988] 1 WLR 164 at 166 Hoffmann
J held that it did. Nevertheless in my judgment and granted the consequences to which I have referred, there is no reason to
extend the decision in regard to the Crown to some or all actions by a local authority under s 222(1) of the 1972 Act. I say some
or all for there is no perceptible limitation. I express no opinion upon the case where a local or other public authority brings a
civil action under a statute which prescribes that action as being the only method of enforcing a law which they are obliged to
enforce. Suffice to say such a case might be closer to the reasoning of Lord Diplock in the Hoffmann-La Roche case and would
require a consideration of Director General of Fair Trading v Tobyward Ltd [1989] 2 All ER 266, [1989] 1 WLR 517.
It was suggested that unless a local authority is ordinarily not to be required to give an undertaking, the authority might be
deterred from exercising its power to take civil proceedings in aid of its duty to enforce the criminal law under s 71 of the 1950
Act for fear of the consequences of ultimately being proved wrong. An argument based upon an apprehended pusillanimity is not
in my view sufficient to displace the ordinary practice. The root of any problem there may be is the notorious inadequacy of the
fines impossible in the prescribed enforcement process. I believe that before 1972 most actions at the relation of a local authority,
and after 1972 most s 222 actions to enforce a public right, have been actions where the process of prosecution has had, or may
have, no deterrent effect. Adequacy of penalty in any context is a consideration for the legislature.
The two cases under appeal are cases where, for the reasons which I have given, 251the ordinary practice should have been
followed and an undertaking required. The plaintiffs refused (and still refuse) to give an undertaking, and accordingly in my
judgment the injunctions should not have been granted.
There is a second reason in my judgment why the injunctions must be discharged. The defendants claim that art 30 of the
EEC Treaty confers upon them the right to open their shops for the serving of customers on Sunday notwithstanding s 47 of the
1950 Act. Article 30 is an article which has direct effect, and is one to which a national court must give effect notwithstanding
any conflicting provisions of national legislation (see Amministrazione delle Finanze dello Stato v Simmenthal SpA Case 106/77
[1978] ECR 629). Whether the art 30 claim is well founded is in dispute. Similar claims have been, and are to be, considered by
the courts here and by the Court of Justice of the European Communities. In Torfaen BC v B & Q plc Case 145/88 [1990] 1 All
ER 129 at 157, [1990] 2 QB 19 at 53 the Court of Justice (Sixth Chamber) ruled as follows:

art 30 of the Treaty must be interpreted as meaning that the prohibition which it lays down does not apply to
national rules prohibiting retailers from opening their premises on Sunday where the restrictive effects on Community trade
which may result therefrom do not exceed the effects intrinsic to rules of that kind.
 The determination of whether effects on trade exceed the effects which are intrinsic was said to be a matter for the national
courts (see [1990] 1 All ER 129 at 156, [1990] 2 QB 19 at 53). In Stoke-on-Trent City Council v B & Q plc, Norwich City
Council v B & Q plc [1991] 4 All ER 221, [1991] Ch 48, Hoffmann J applied the Torfaen case and decided that s 47 was not
disproportionate. Accordingly it did not conflict with art 30 which therefore did not confer a right upon the trader. The learned
judge gave a certificate under s 12(1) of the Administration of Justice Act 1960, and the Appeal Committee subsequently allowed
a petition by the trader for leave to appeal. The appeal is shortly to be heard.
National courts are obliged to protect rights conferred by European law which have direct effect (see the Simmenthal case).
There is here an asserted right under the EEC Treaty. It is not a groundless assertion, as is adequately demonstrated by the
willingness of the House of Lords to entertain it. The existence of the right now awaits the decision of the House or of the Court
of Justice upon any reference made by the House or upon a reference which has already been made by a stipendary magistrate
sitting at Reading. If the right is established, then it must be established with unrestricted retrospective effect (see the
Simmenthal case [1978] ECR 629 at 644645(para 25)). To grant an interim injunction without the protection (which here would
be adequate) of an undertaking in damages would preclude effective retrospective effect if the right is ultimately established for
there would be no recompense for the period of inhibition. Mr Stuart Isaacs QC sought to avoid the conclusion which must
inevitably follow from this proposition by arguing that the full European Court has recently developed the ruling by its Sixth
Chamber in the Torfaen case by ruling that provisions similar to s 47 of the 1950 Act are not in conflict with art 30, and that
accordingly it is now conclusively determined that Sunday traders have no right derived from art 30( Union Dpartmentale des
Syndicats CGT de lAisne v Sidef Conforama Case C-312/89 and Criminal proceedings against A Marchandise Case C-
332/89(1991) Times, 6 March). It is by no means clear to me whether and to what extent the Torfaen case has been developed.
The answer can be given only in the future by the Court of Justice. As matters are, it follows from my proposition that if interim
relief is to be granted the court must (not may) require that there be the protection afford by an undertaking. The protection was
(and is) not offered. It cannot be imposed, 252and accordingly here is a second ground (not argued below) why the injunction
should not have been granted.
I would allow both appeals.

BELDAM LJ. I, too, am grateful to Dillon LJ for his description of the origin and history of these two appeals which I
gratefully adopt. I also agree that the result of the appeals turns upon the question whether in the circumstances of the two cases
under appeal it was just and convenient to grant the respondents an interlocutory injunction, notwithstanding that they were
unwilling or unable to ive an undertaking to pay any damages occasioned by the making of the order should the appellants
succeed at trial.
There is no doubt in my mind that the respondents satisfied the criteria for showing that the grant of an injunction was
necessary if they were to fulfil their duty of enforcing s 47 of the Shops Act 1950. I am satisfied that, in the words of Bingham
LJ in London City Corp v Bovis Construction Ltd (1988) 86 LGR 660 at 682, the respondents laid the essential foundation for the
grant of such an injunction in showing that the appellants would continue to open their stores for trade on Sundays unless and
until they were effectively restrained from doing so and that nothing short of an injunction would be effective for this purpose.
There remains the question whether, since the ruling of the Court of Justice of the European Communities in Torfaen BC v B
& Q plc Case 145/88 [1990] 1 All ER 129, [1990] 2 QB 19, the appellants conduct was unlawful. Since that ruling, the
appellants have argued that to prove a breach of s 47 an enforcing local authority must satisfy the requirement of proportionality
by adducing evidence directed to the three issues identified by Lord Diplock in R v Goldstein [1983] 1 All ER 434 at 435, [1983]
1 WLR 151 at 154. The appellants say that evidence is available to them which, if accepted, would lead at least to the conclusion
that the respondents had not satisfied the burden of proving that any obstacle to Community trade created by s 47 did not exceed
what was necessary to ensure the attainment of the objective of s 47. Upon the assumption that the objective was that identified
by the Advocate General in the Torfaen case, the requirement of proportionality remained to be satisfied.
The respondents raised two answers to the appellants arguments. The first was that no issue of fact to which evidence
needed to be directed remained for the court. It was not for the Court of Justice to rule on the compatibility of a national
provision with the EEC Treaty; the courts function was to provide the national court with all the criteria for the interpretation of
Community law which would enable the national court to assess that compatibility for the purpose of giving judgment in the case
before it. Either on the basis relied upon by Schiemann J in WH Smith Do It All Ltd v Peterborough City Council, Payless DIY
Ltd v Peterborough City Council [1991] 4 All ER 193, [1991] 1 QB 304 that no evidence was required because the answer was
obvious or upon the basis of the reasoning of Hoffmann J in Stoke-on-Trent City Council v B & Q plc, Norwich City Council v B
& Q plc [1991] 4 All ER 221, [1991] Ch 48, the court could be satisfied that s 47 was not incompatible with art 30.
It is necessary to consider whether the difficulties raised by the terms of the European Courts judgment in the Torfaen case
can be resolved in either of these ways for the decision in Stoke-on-Trent City Council v B & Q plc is shortly to be reviewed by
the House of Lords.
The second answer given by the respondent is that those difficulties have disappeared as a result of the rulings of the Court
of Justice in Union Dpartmentale des Syndicats CGT de lAisne v Sidef Conforma Case C-312/89 and Criminal proceedings
against A Marchandise Case C-332/89(1991) Times, 6 March. In those cases the 253 court was asked to rule on French and
Belgian legislation prohibiting the employment of workers in retail shops on Sunday which had comparable effect to s 47 of the
Shops Act 1950. The court, after referring to its judgment in the Torfaen case, stated (at para 12):

It must further be stated that the restrictive effects on trade which may stem from such rules do not seem
disproportionate to the aim pursued.

It then stated (at para 13):

In answer to the first question submitted it must therefore be held that the prohibition contained in Article 30 of the
Treaty properly construed does not apply to national legislation prohibiting the employment of staff on Sundays

I do not think it is open to this court to use the answer given by the Court of Justice to a question referred to it under art 177
on different legislation and in different cases to modify the criteria for interpretation of Community law as it applies to s 47 of the
1950 Act. Nor is it appropriate to do so on an application for interlocutory relief. There is, on the basis of the ruling in the
Torfaen case, a serious question to be tried whether in the cases of the appellants the respondents can satisfy the test that the
restrictive effects on trade stemming from s 47 are not disproportionate to the aim pursued.
In Amministrazione delle Finanze dello Stato v Simmenthal SpA Case 106/77 [1978] ECR 629 at 644(para 21) the Court of
Justice held that every national court must in a case within its jurisdiction apply Community law in its entirety and protect rights
which the latter confers on individuals. It is not disputed that the provisions of art 30 have direct effect. In Factortame Ltd v
Secretary of State for Transport (No 2) Case C-213/89 [1991] 1 All ER 70, [1991] 1 AC 603, it was made clear that national
courts are expected to ensure the full effectiveness of rights claimed under Community law by granting interim relief and that
prima facie it is the duty of the national court to do everything necessary to preserve the existence of rights so claimed. In the
course of his opinion in that case the Advocate General said the purpose of interim protection was-

to achieve that fundamental objective of every legal system, the effectiveness of judicial protection. Interim protection
is intended to prevent so far as possible the damage occasioned by the fact that the establishment and the existence of the
 right are not fully contemporaneous from prejudicing the effectiveness and the very purpose of establishing the right, which
was also specifically affirmed by the court when it linked interim protection to a requirement that, when delivered, the
judgment will be fully effective

(See [1991] 1 All ER 70 at 93, [1991] 1 AC 603 at 630; the Advocate Generals emphasis.)
Later he referred to such protection as being a fundamental and an indispensable instrument of any judicial system which
seeks to achieve in the particular case and always in an effective manner the objective of determining the existence of a right and
more generally of giving effect to the relevant legal provision whenever the duration of the proceedings is likely to prejudice the
attainment of this objective and therefore to nullify the effectiveness of the judgment.
If the respondents in the present appeal do not succeed in showing the compatibility of s 47 with art 30 of the EEC Treaty,
the appellants would undoubtedly suffer substantial damage. I agree that the normal means of securing that the appellants rights
are protected is by an undertaking in damages. But in the present case the respondents contend that they should not be required
to give 254 such an undertaking because they are seeking an injunction in aid of their public duty of enforcing the criminal law
and their position is therefore comparable to that of the Attorney General acting on behalf of the Crown. They further contend
that the reason they are unable to offer such an undertaking in damages is that if they had to consider the financial implications of
giving such an undertaking in every case, they could not justify a decision to bring proceedings of this kind under s 222 of the
Local Government Act 1972. Consequently, although they could still proceed by way of prosecution under s 71 of the Shops Act
1950, the law would remain effectively unenforceable. In the Factortame case the applicants were seeking to restrain the Crown
from enforcing a law which they claimed was in breach of obligations under articles of the Treaty. The House of Lords had held
that it had no power to grant interim relief in such a case against the Crown but the Court of Justice ruled that a national rule must
be disregarded if its effect was to prevent the courts from giving full effect to Community law. When after the European Courts
ruling the House considered under the guidelines established in American Cyanamid Co v Ethicon Ltd [1975] 1 All ER 504,
[1975] AC 396 whether to grant interim relief in that case, Lord Goff set out the matters which should guide a court in exercising
its discretion. His exposition was accepted by the House. He said ([1991] 1 All ER 70 at 119, [1991] 1 AC 603 at 672):

I turn to consider the impact on these guidelines of the public interest, with particular reference to cases in which a
public authority is seeking to enforce the law against some person and either the authority seeks an interim injunction to
restrain that person from acting contrary to the law, and that person claims that no such injunction should be granted on the
ground that the relevant law is, for some reason, invalid, or that other person seeks an interim injunction to restrain the
action of the authority on the same ground. I take the first stage. This may be affected in a number of ways. For example,
where the Crown is seeking to enforce the law, it may not be thought right to impose on the Crown the usual undertaking in
damages as a condition of the grant of an injunction: see F Hoffmann-La Roche & Co AG v Secretary of State for Trade
and Industry [1974] 2 All ER 1128, [1975] AC 295.

It is to be observed that Lord Goff expressed a possible reservation about imposing the usual undertaking in damages only in
the case of enforcement of the law by the Crown. He continued ([1991] 1 All ER 70 at 119120, [1991] 1 AC 603 at 672673):

there would be no remedy in damages available to the applicants in the present case for loss suffered by them by
reason of the enforcement of the 1988 Act against them, if the relevant part of the Act should prove to be incompatible with
European law (see Bourgoin SA v Ministry of Agriculture Fisheries and Food [1985] 3 All ER 585, [1986] QB 716).
Conversely, an authority acting in the public interest cannot normally be protected by a remedy in damages because it will
itself have suffered none. It follows that, as a general rule, in cases of this kind involving the public interest, the problem
cannot be solved at the first stage, and it will be necessary for the court to proceed to the second stage, concerned with the
balance of convenience. Turning then to the balance of convenience, it is necessary in cases in which a party is a public
authority performing duties to the public that one must look at the balance of convenience more widely, and take into
account the interests of the public in general to whom these duties are owed: see Smith v Inner London Education
Authority [1978] 1 All ER 411 at 422 per Browne LJ, and see also Sierbien v Westminster City Council (1987) 86 LGR
431. 255Like Browne LJ, I incline to the opinion that this can be treated as one of the special factors referred to by Lord
Diplock in the passage from his speech which I have quoted. In this context, particular stress should be placed on the
importance of upholding the law of the land, in the public interest, bearing in mind the need for stability in our society, and
the duty placed on certain authorities to enforce the law in the public interest. This is of itself an important factor to be
weighed in the balance when assessing the balance of convenience. So if a public authority seeks to enforce what is on its
face the law of the land, and the person against whom such action is taken challenges the validity of that law, matters of
considerable weight have to be put into the balance to outweigh the desirability of enforcing, in the public interest, what is
on its face the law, and so to justify the refusal of an interim injunction in favour of the authority, or to render it just or
convenient to restrain the authority for the time being from enforcing the law.

After referring to views expressed by members of the appellate committee in the Hoffman-La Roche case, Lord Goff
continued ([1991] 1 All ER 70 at 120, [1991] 1 AC 603 at 674):

I myself am of the opinion that in these cases, as in others, the discretion conferred on the court cannot be fettered by a
rule; I respectfully doubt whether there is any rule that, in cases such as these, a party challenging the validity of a law must
(to resist an application for an interim injunction against him, or to obtain an interim injunction restraining the enforcement
of the law) show a strong prima facie case that the law is invalid. It is impossible to foresee what cases may yet come
before the courts; I cannot dismiss from my mind the possibility (no doubt remote) that such a party may suffer such
serious and irreparable harm in the event of the law being enforced against him that it may be just or convenient to restrain
its enforcement by an interim injunction even though so heavy a burden has not been discharged by him. In the end, the
matter is one for the discretion of the court, taking into account all the circumstances of the case.

It is at the second stage of the balance of convenience that Lord Goff states that in cases in which one party is a public
authority performing duties to the public that the interests of the public in general become an important consideration. He laid
particular stress on the importance of upholding the law of the land in the public interest, bearing in mind the need for stability in
our society and the duty placed on certain authorities to enforce the law in the public interest. This, he said, is of itself an
important factor to be weighed in the balance when assessing the balance of convenience. He added ([1991] 1 All ER 70 at 119
120, [1991] 1 AC 603 at 673):

So if a public authority seeks to enforce what is on its face the law of the land, and the person against whom such
action is taken challenges the validity of that law, matters of considerable weight have to be put into the balance to
outweigh the desirability of enforcing, in the public interest, what is on its face the law, and so to justify the refusal of an
interim injunction in favour of the authority

In approaching the grant of an interlocutory injunction, it seems to me that it is as an aspect of the justice of the case that the
court weighs the effect which the grant or refusal of the relief will have on the parties. Where only one party may suffer damage
and it could be substantial, to excuse the opposite party from the usual undertaking would place on only one party a risk of
injustice which I believe a court would contemplate only in the most exceptional circumstances. 256In the present cases the
respondents did not enjoy the traditional immunity from such undertakings afforded to the Crown and, as in the Factortame case,
the court was required to protect rights conferred by Community law. In considering the position under Community law Mervyn
Davies J in the case of the first appellant said ([1990] 1 WLR 1237 at 1247):

(d) It is by no means clear to me that if the defendant were to succeed at trial it would be entitled to any damages in
respect of the period pending trial in that if article 30 is held to nullify section 47 it may do so without retrospective effect
as to acts done prior to the date of annulment. To my mind the defendant, if successful at trial, ought not to recover
damages in respect of a period prior to the date when section 47 is declared ineffective.

In this, for the reasons stated, I believe the learned judge was in error. His decision was followed in the case of the second
appellants. Accordingly it seems to me that in both cases the appellants have shown the judges discretion to have been exercised
wrongly. Nor do I think that the other circumstances which led the judges to exercise their discretion to grant the relief claimed
in the absence of the usual undertaking in damages justified the exercise of their discretion in that way.
Accordingly I would allow the appeals.

Appeals allowed. Leave to appeal to the House of Lords refused.

Solicitors: Metcalfe Copeman & Pettefor, Peterborough; Sharpe Pritchard agents for MRG Vause, Huddersfield; Hepherd
Winstanley & Pugh, Southampton; Sharpe Pritchard agents for AF lAnson, Shepton Mallet.

Carolyn Toulmin Barrister.

[1991] 4 All ER 257

Re Seagull Manufacturing Co Ltd (in liq)

CIVIL PROCEDURE: COMPANY; Insolvency

CHANCERY DIVISION
MUMMERY J
20, 21, 22 MARCH, 30 APRIL 1991

Insolvency Service Service out of jurisdiction Company in compulsory liquidation Public examination of officer of
company British person resident abroad Whether court having jurisdiction to direct public examination of officer resident
abroad and order service of process out of jurisdiction Whether power to order public examination limited to persons in
England at relevant time Insolvency Act 1986, s 133 Insolvency Rules 1986, r 12.12.

The court has jurisdiction under s 133 a of the Insolvency Act 1986 to order the public examination of a director of a company in
compulsory liquidation regarding the companys affairs irrespective of his nationality and nothwithstanding that he is resident
abroad, since, on its true construction, s 133 is not limited by any territoriality principle and applies to the class of persons set out
in s 133(1), namely persons who have concerned themselves in the affairs of the company which is being wound up in the
specified capacities of officer, liquidator, administrator, receiver, manager or participant in the promotion, formation or
management of the company, whether or not they are British subjects or within the jurisdiction of the English court at the relevant
time. It follows that the court has discretion under r 12.12 b of the Insolvency Rules 1986 to give leave to serve a 257 public
examination order out of the jurisdiction on a person falling within the class of persons specified in s 133(1) of the 1986 Act (see
p 265 b j to p 266 g, post).
________________________________________
a Section 133, so far as material, is set out at p 260 g to j, post
b Rule 12.12, so far as material, is set out at p 261 c, post

Dictum of Lord Scarman in Clark (Inspector of Taxes) v Oceanic Contractors Inc [1983] 1 All ER 133 at 139 applied.
Re Tucker (a bankrupt), ex p Tucker [1988] 1 All ER 603 distinguished.

Notes
For service out of the jurisdiction in insolvency proceedings, see 3(2) Halsburys Laws (4th edn reissue) para 782.
For public examination of officers of a company being wound up, see 7(2) Halsburys Laws (4th edn reissue) paras 1535
1544.
For the Insolvency Act 1986, s 133, see 4 Halsburys Statutes (4th edn) (1987 reissue) 814.
For the Insolvency Rules 1986, r 12.12, see 3 Halsburys Statutory Instruments (1991 reissue) 472.

Cases referred to in judgment

Anglo-African Steamship Co, Re (1886) 32 Ch D 348, CA.
Blain, Ex p, re Sawers (1879) 12 Ch D 522, [187480] All ER Rep 708, CA.
Clark (Inspector of Taxes) v Oceanic Contractors Inc [1983] 1 All ER 133, [1983] 2 AC 130, [1983] 2 WLR 94, HL.
Cooke v Charles A Vogeler Co [1901] AC 102, [19003] All ER Rep 660, HL.
Theophile v Solicitor General [1950] 1 All ER 405, [1950] AC 186, HL.
Tucker (a bankrupt), Re, ex p Tucker [1988] 1 All ER 603, [1990] Ch 148, [1988] 2 WLR 748, CA; rvsg [1987] 2 All ER 23,
[1988] 1 WLR 497.
Wendt, Re, ex p Official Receiver (1889) 22 QBD 733, CA.

Cases also cited

Harrods (Buenos Aires) Ltd, Re [1991] BCLC 69.
Jogia (a bankrupt), Re, ex p the trustee v D Pennellier & Co Ltd [1988] 2 All ER 328, [1988] 1 WLR 484.
MacKinnon v Donaldson Lufkin & Jenrette Securities Corp [1986] 1 All ER 653, [1986] Ch 482.
Macleod v A-G for New South Wales [1891] AC 455, PC.
Appeal
The Official Receiver appealed from the decision of Mr Registrar Pimm on 25 September 1990 setting aside an order dated 17
July 1990 requiring John Colin Slinn, the director of Seagull Manufacturing Co Ltd (in compulsory liquidation), to attend court
for the purpose of being publicly examined and an order for service of a copy of the order on Mr Slinn in Alderney, Channel
Islands on the grounds (i) that the court had jurisdiction under s 133 of the Insolvency Act 1986 to order the attendance of a
British subject who was or had been an officer of a company registered in England and Wales being wound up by the court
notwithstanding his residence abroad and (ii) that the court also had jurisdiction under r 12.12 of the Insolvency Rules 1986, SI
1986/1925, to give leave to serve an order for public examination on such a person abroad. The facts are set out in the judgment.

Nigel Davis for the Official Receiver.

Robin Hollington for Mr Slinn.

Cur adv vult

258

30 April 1991. The following judgment was delivered.

MUMMERY J. This case raises two connected jurisdictional questions. The answer to each question turns on the true
construction of the relevant provisions relating to public examination of persons under the Insolvency Act 1986 and the
Insolvency Rules 1986, SI 1986/1925.
Does the court, on the application of the Official Receiver in a compulsory winding up, have power (1) to direct the public
examination of a director of the company in compulsory liquidation if that director is out of the jurisdiction and (2) to order
service of process, order of the court or other document relating to the public examination to be effected on that director out of
the jurisdiction?
The company in compulsory liquidation is Seagull Manufacturing Co Ltd (Seagull). The director in question is Mr Colin
Slinn. He now lives at 11 Le Bourgage, Alderney, Channel Islands. In the view of the Official Receiver the affairs of Seagull
cannot be duly wound up without the public examination of Mr Slinn in order to establish the conduct of the affairs of the
company and the application of its assets.

The proceedings
The two questions have arisen for decision in the following circumstances. On 17 July 1990 Mr Registrar Buckley, on the
application of the Official Receiver under s 133 of the Insolvency Act 1986 and r 4.211 of the Insolvency Rules 1986, made two
orders: (1) he ordered Mr Slinn to attend at the Royal Courts of Justice, Strand, London on 25 September 1990 for the purposes
of being publicly examined; (2) he made an order pursuant to r 12.12 of the 1986 rules that the Official Receiver be at liberty to
serve Mr Slinn by first class post with a sealed copy of the order for his public examination and also a sealed copy of that order
for service at his address in Alderney or elsewhere within the jurisdiction of the Bailiwick of Guernsey (of which Alderney forms
part).
On 25 September 1990 Mr Registrar Pimm, on the application of Mr Slinn, set aside both orders on the ground that they
were made without jurisdiction since at all material times Mr Slinn was in Alderney.
The Official Receiver appeals against that order pursuant to r 7.47(2) of the 1986 rules by notice of appeal dated 27
September 1990. The grounds of appeal are that: (1) upon its true construction s 133 of the 1986 Act empowers the court to
order the attendance of a British subject who is or has been an officer of a company registered in England and Wales being wound
up by the court, notwithstanding his residence abroad; and (2) upon its true construction r 12.12 of the 1986 rules empowers the
court to give leave to serve an order for public examination upon such a person, notwithstanding his residence abroad.

The facts
The relevant facts are not disputed. Seagull was incorporated in England as a private company on 17 March 1983. It carried
on the business of a computer utility organisation from a registered office in Dorchester. Mr Slinn was a director of Seagull from
27 January 1986 to 3 July 1988. He was also the tenant of the Dorchester premises. Documents filed under the Companies Acts
state that he is a British subject. In affidavit evidence sworn by him in these proceedings he does not deny that he is a British
subject. He claims, however, that from January 1979 until July 1986 he resided and was domiciled in the Isle of Man and that
since July 1986 he has been resident and domiciled in Alderney.
259
Seagull is being wound up by the court following an inquiry instigated by the Department of Trade and Industry on 30 May
1989 under s 447 of the Companies Act 1985. A petition to wind up Seagull on the public interest ground was subsequently
presented by the Department of Trade under s 440 of the Companies Act 1985. The court made a compulsory winding-up order
on 4 April 1990. It was alleged in the petition that Seagull was insolvent. The estimated claims exceed 2m. Since April 1990
the Official Receiver has unsuccessfully attempted to persuade Mr Slinn to submit a statement of affairs and to co-operate with
him in the provision of information required in the winding up.
On 11 April 1990 the Official Receiver obtained an order in aid under s 426 of the 1986 Act addressed to the court of
Alderney. The provisions of that section were extended with modifications to Guernsey with effect from 1 February 1990: see
the Insolvency Act 1986 (Guernsey) Order 1989, SI 1989/2409, made pursuant to s 442 of the 1986 Act. On 25 April 1990 the
court of Alderney ordered the seizure of books and papers of Seagull in Mr Slinns possession as he had refused to hand them
over to the Official Receiver. The order was executed on 27 April 1990. The court also ordered the private examination of Mr
Slinn in Alderney. On 3 May 1990 an examiner was appointed, but no progress was made because on 17 May 1990 Mr Slinn
gave notice of appeal against both orders. The appeals to the Royal Court of the Island of Guernsey were dismissed on 8
November 1990. Mr Slinn is now appealing to the Court of Appeal in Guernsey. The appeals have not been heard and in the
meantime the books and papers of Seagull are in the custody of the court of Guernsey. The Official Receiver has not, therefore,
been able to inspect them.

Statutory provisions
The relevant provisions of the Insolvency Act 1986 for the public examination of officers are contained in ss 133 and 134.
They are two of a number of provisions for investigation procedures in the winding up of a company contained in Ch VI of Pt IV
of the 1986 Act. The provisions of ss 133 and 134 are new and supersede the previous power for public examination exercisable
in more limited circumstances: see s 270 of the Companies Act 1948.
Section 133 provides as follows:

(1) Where a company is being wound up by the court, the official receiver or, in Scotland, the liquidator may at any
time before the dissolution of the company apply to the court for the public examination of any person who(a) is or has
been an officer of the company; or (b) has acted as liquidator or administrator of the company or as receiver or manager or,
in Scotland, receiver of its property; or (c) not being a person falling within paragraph (a) or (b), is or has been concerned,
or has taken part, in the promotion, formation or management of the company
 (3) On an application under subsection (1), the court shall direct that a public examination of the person to whom the
application relates shall be held on a day appointed by the court; and that person shall attend on that day and be publicly
examined as to the promotion, formation or management of the company or as to the conduct of its business and affairs, or
his conduct or dealings in relation to the company
The provisions of s 134 are concerned with the enforcement of orders made under s 133.
Chapter 19 of Pt 4 of the Insolvency Rules 1986 contains procedural provisions 260 for the public examination of company
officers and others. Rule 4.211(1) provides:

If the official receiver applies to the court under section 133 for the public examination of any person, a copy of the
courts order shall, forthwith after its making, be served on that person.
Finally, reference should be made to r 12.12, which contains provision for service outside the jurisdiction:

(1) Order 11 of the Rules of the Supreme Court, and the corresponding County Court Rules, do not apply in
insolvency proceedings.

(2) A bankruptcy petition may, with the leave of the court, be served outside England and Wales in such manner as the
court may direct.
(3) Where for the purposes of insolvency proceedings any process or order of the court, or other document, is required
to be served on a person who is not in England and Wales, the court may order service to be effected within such time, on
such person, at such place and in such manner as its thinks fit, and may also require such proof of service as it thinks fit

By virtue of r 13.7 insolvency proceedings means any proceedings under the 1986 Act or the 1986 rules.

Territoriality and service out of the jurisdiction

The principles governing the teritoriality of legislation and service out of the jurisdiction are clear. They may be
conveniently summarised as follows.
(1) There is a well-settled general rule of statutory construction that English legislation is primarily territorial in effect:
Cooke v Charles A Vogeler Co [1901] AC 102 at 107, [19003] All ER Rep 660 at 662. That means

simply that, unless the contrary is expressly enacted or so plainly implied that the courts must give effect to it, United
Kingdom legislation is applicable only to British subjects or to foreigners who by coming to the United Kingdom, whether
for a short or long time, have made themselves subject to British jurisdiction.

(See Clark (Inspector of Taxes) v Oceanic Contractors Inc [1983] 1 All ER 133 at 139, [1983] 2 AC 130 at 145 per Lord
Scarman.)
That principle was established over a century before in Ex p Blain, re Sawers (1879) 12 Ch D 522, [187480] All ER Rep
708, a decision of the Court of Appeal that the generality of the word debtor in s 6 of the Bankruptcy Act 1869 was qualified or
limited by the territoriality principle. Debtor did not include a foreigner who had never been in the jurisdiction so that the
English court of bankruptcy had no power to make an order for service of notice of a bankruptcy petition out of the jurisdiction
on such a person or to make an adjudication of bankruptcy. See also Cooke v Charles A Vogeler Co [1901] AC 102 at 108,
[19003] All ER Rep 660 at 662 and compare Theophile v Solicitor General [1950] 1 All ER 405, [1950] AC 186, a decision of
the House of Lords that the word debtor, as used in s 1(2) of the Bankruptcy Act 1914, included a foreigner who had committed
an act of bankruptcy, but had left England, where he had carried on a business, and was resident abroad. The order granting leave
to serve a bankruptcy petition out of the jurisdiction was upheld.
(2) In the application of the territoriality rule of construction to the relevant statutory provisions the court must inquire in the
particular case as to the person with respect to whom Parliament is presumed to be legislating. In Clark (Inspector 261 of Taxes)
v Oceanic Contractors Inc [1983] 1 All ER 133 at 144, [1983] 2 AC 130 at 152 Lord Wilberforce formulated the relevant
question as follows: Who is within the legislative grasp, or intendment, of the statute under consideration?
(3) Leave to serve process and orders on persons out of the jurisdiction is not a matter of practice in the exercise of an
inherent power of the court. The power to grant leave to serve out of the jurisdiction must be expressly authorised by statute or
rules having statutory force: see eg Re Anglo-African Steamship Co (1886) 32 Ch D 348 at 350351 and Re Wendt, ex p Official
Receiver (1889) 22 QBD 733 at 735.
The most recent example of the application of these principles to insolvency legislation is Re Tucker (a bankrupt), ex p
Tucker [1988] 1 All ER 603, [1990] Ch 148, a decision of the Court of Appeal that, on its true construction, the provisions of s
25(1) of the Bankruptcy Act 1914 conferring power on the court to require the production of documents by, and attendance for
examination of, the debtor and other persons, did not assert a jurisdiction over British subjects resident abroad. The court
therefore set aside orders made by the registrar, on the application of the trustee in bankruptcy, (1) for the issue of a summons
under s 25 requiring the debtors brother, a British subject living in Belgium, to produce documents and to attend at court for
examination and (2) authorising service of the summons on the debtors brother in Belgium.
The court also refused to exercise its discretion to make an order under s 25(6) of the 1914 Act for the examination of the
debtors brother in Belgium before an examiner appointed by the English court.
The judgments of Dillon LJ in Re Tucker was the sheet anchor of the submissions made on behalf of Mr Slinn. In reliance,
in particular, on a passage in that judgment it was submitted that, like s 25(1) of the 1914 Act, s 133 of the 1986 Act is about
summoning people to appear before an English court to be examined on oath (see [1988] 1 All ER 603 at 609, [1990] Ch 148 at
158). Section 25(1) of the Bankruptcy Act 1914 was in these terms:

The court may, on the application of the official receiver or trustee, at any time after a receiving order has been made
against a debtor, summon before it the debtor or his wife, or any person known or suspected to have in his possession any
of the estate or effects belonging to the debtor, or supposed to be indebted to the debtor, or any person whom the court may
deem capable of giving information respecting the debtor, his dealings or property, and the court may require any such
person to produce any documents in his custody or power relating to the debtor, his dealings or property.

It was submitted that this type of provision must be construed against the background summarised by Dillon LJ in his
judgment in Re Tucker [1988] 1 All ER 603 at 609, [1990] Ch 148 at 158. The general practice in international law is that courts
of a country only have power to summon before them persons who accept service or are present within the territory of that
country when served with the appropriate process. There is no general power in English law either to serve process on British
subjects resident abroad or to serve a subpoena on a British subject resident outside the jurisdiction to compel him to come and
give evidence in an English court. Having referred to those general propositions, Dillon LJ expressed the view that he

would not expect s 25(1) to have empowered the English court to haul before it persons who could not be served with
the necessary summons within the jurisdiction of the English court.
262
 He went on to reject the contention of the trustee in bankruptcy that the expression any person in s 25(1) meant any person
in the world or, at least, any British subject anywhere in the world.
I fully agree that, on the authority of Re Tucker, the court must approach the construction of s 133 with all those general
considerations in mind. Ultimately, however, the question as to who are the persons with respect to whom Parliament is
presumed to be legislating in this case must turn on the legislative language, context and purpose of the particular provisions
contained in s 133 of the 1986 Act.
This was made clear by Dillon LJ in his judgment when he made particular reference to s 25(6) of the Bankruptcy Act 1914,
which was in these terms:

The court may, if it thinks fit, order that any person who if in England would be liable to be brought before it under
this section shall be examined in Scotland or Ireland, or in any other place out of England.

Dillon LJ then remarked that this subsection settled conclusively the disputed question of the territoriality of s 25(1). He
said ([1988] 1 All ER 603 at 609, [1990] Ch 148 at 158):

This wording carries inevitably, in my judgment, the connotation that if the person is not in England he is not liable to
be brought before the English court under the section.

He went on to state ([1988] 1 All ER 603 at 610, [1990] Ch 148 at 158):

Subsection (6) thus confirms that a person who is not at any relevant time in England, and so cannot be served with a
summons of the English court in England, cannot be examined by that court under sub-s (1).

Sir Nicolas Browne-Wilkinson V-C and Lloyd LJ agreed with the judgment of Dillon LJ.
The equivalent provisions in the Insolvency Act 1986 for the private examination of a bankrupt are now contained in ss 366
and 367. Section 367(3) is the equivalent provision to s 25(6) and reads:

The court may, if it thinks fit, order that any person who if within the jurisdiction of the court would be liable to be
summoned to appear before it under section 366 shall be examined in any part of the United Kingdom where he may be for
the time being, or in any place outside the United Kingdom.

There is little doubt that, on the authority of Re Tucker, the court would construe the provisions of ss 366 and 367 as subject
to the same territorial qualification as s 25 of the Bankruptcy Act 1914. The wide discretionary power of the court to order a
private examination of any person with regard to the dealings, affairs and property of the bankrupt thus only applies to such a
person who is in England at the relevant time and can be served with the appropriate summons in England.
Sections 236 and 237 of the Insolvency Act 1986 confer on the court a similar power to order private examination of any
officer of the company and also any person known or suspected to have in his possession any property of the company or
supposed to be indebted to the company or any person whom the court thinks capable of giving information concerning the
promotion, formation, business, dealings, affairs or property of the company (s 236(2)). The enforcement provisions 263 in s 237
contain a sub-s (3) which is similarly worded to s 367(3) of the 1986 Act.
It was submitted on behalf of Mr Slinn that, in the light of these provisions, it was most unlikely that Parliament intended
that s 133 of the 1986 Act should apply to a person out of the jurisdiction or that it should authorise service of a summons or
order of the English court on a person out of the jurisdiction. If there is no power to summon Mr Slinn to attend before an
English court for his private examination and there is no power to serve him out of the jurisdiction with a summons or order for
his private examination, Parliament cannot be presumed to be intending to legislate for the case of Mr Slinn in the context of the
more draconian power of public examination under s 133. By s 426 of the 1986 Act Parliament has provided a procedure for the
examination of a person who is resident out of the jurisdiction. That procedure has already been invoked in this case by the
Official Receiver for the private examination of Mr Slinn in Alderney. In those circumstances it is wrong to presume that
Parliament intended to empower the English courts to grant leave to serve Mr Slinn out of the jurisdiction in respect of any public
examination before the English court. If, on its true construction, s 133 does not confer on the English court any power to direct
service out of the jurisdiction of process or orders relating to public examination of an officer of the company, r 12.12(3) cannot
grant such a power or, if it does, it is ultra vires.
I am not convinced by these contentions that the public examination provisions of s 133 are territorially limited in the same
way as the private examination provisions of ss 236 and 237 in the case of the winding up of a company, and of ss 366 and 367 in
the case of a bankrupt.
The provisions for private examination are different from the provisions of s 133 in two important respects. First, the power
of the court to summon persons to appear before it for private examination extends to a very much wider class of persons than the
courts power in the case of a public examination. The power to summon for a private examination applies not only to any officer
of the company (or the bankrupt) but also to any person who may have in his possession any property of the company (or of the
bankrupt) or who may be indebted to the company (or the bankrupt). It even extends to any person who may be able to give
information to the court concerning the company (or the bankrupt) and the relevant dealings, affairs and property.
As was observed by Dillon LJ in Re Tucker [1988] 1 All ER 603 at 608, [1990] Ch 148 at 156 if the words any person are
given their natural meaning in the private examination provisions they cover any person of any nationality in any part of the
world. The very width of the class of persons specified in the private examination provisions in the bankruptcy legislation was
an important factor in leading the court to the conclusion that the relevant class of persons must be limited by the territoriality
principle and therefore confined to persons in England at the relevant time who could be served with a summons of the English
court in England.
By way of contrast, the power of the court to order public examination under s 133 is confined to a restricted class of
persons who have voluntarily concerned themselves in a specified capacity in the affairs of the company which is being wound
up, ie as officer, liquidator, administrator, receiver or manager, or as participant in the promotion, formation or management of
the company.
The second important difference between the provisions for public examination and for private examination is that the latter
contain express provisions (namely s 237(3) in the case of a company and s 367(3) in the case of a bankrupt) which, in the words
of Dillon LJ in Re Tucker, conclusively and inevitably connote that if 264 the person in question is not in England he is not
liable to be brought before the English court. By way of contrast, such a provision is conspicuously absent from both s 133 and
the provisions for its enforcement in s 134.
In my judgment, it is more appropriate to compare the public examination provisions in the case of companies in s 133 with
the public examination provisions relating to bankrupts than with the private examination provisions relating to bankrupts
construed by the Court of Appeal in Re Tucker.
The relevant provisions for the public examination of a bankrupt were contained in s 15 of the Bankruptcy Act 1914 and are
now contained in s 290 of the Insolvency Act 1986. There can be no doubt that, having regard to the definition of a debtor in s
1(2) of the 1914 Act and the conditions now contained in s 265(1) of the 1986 Act, the power to order the public examination of a
bankrupt was not, and is not, confined to British subjects or other persons present or resident in England. Further, the bankruptcy
rules in force at the relevant time authorised the English court to order service on a debtor who was not in England of an order to
attend a public examination. This was specifically provided in r 17 of the Bankruptcy Rules 1890 and was also covered by the
wide wording of provisions for service out of the jurisdiction contained in r 86 of the Bankruptcy Rules 1952, SI 1952/2113 (as
amended by the bankruptcy (Amendment) Rules 1962, SI 1962/295).
The provisions with respect to the public examination of bankrupts are similar in three respects to the provisions for public
examination under s 133. First, the court may only order the public examination of the bankrupt as to his affairs, dealings and
property: see s 290(1) and (3) of the 1986 Act. There is no power to order the public examination of any other person in a
bankruptcy matter. Similarly, in the case of a winding up the court may only order the public examination of persons who have
voluntarily participated in a specified capacity in the affairs of the company as to the promotion, formation or management of
the company or as to the conduct of its business and affairs, or his conduct or dealings in relation to the company: see s 133(1)
and (3). There is no power under s 133 to order the public examination of any other person.
Secondly, the court has no discretion to refuse to direct a public examination either in the case of a bankrupt or in the case of
the winding up of a company, if the application is duly made in accordance with the provisions of the relevant subsection: see s
290(3) in the case of bankruptcy and s 133(3) in the case of a company in liquidation.
Thirdly, neither the provisions relating to the public examination of a bankrupt nor the provisions relating to the public
examination in the case of a winding up of a company contain any provision similar to that formerly contained in s 25(6) of the
Bankruptcy Act 1914 and now contained, in the case of bankruptcy, in s 367(3) of the 1986 Act and, in the case of companies, in
s 237(3) of that Act.
When I contrast the provisions for public examination and private examination which were contained in the 1914 Act and
are now contained in the 1986 Act and then compare them respectively with the provisions for public examination and private
examination in the case of the winding up of a company, I would expect s 133 to empower the English court to summon before it
for public examination persons who have voluntarily participated in the affairs of the company, even though they cannot be
served with the necessary summons within the jurisdiction of the English court. I would expect the court to have jurisdiction
under s 133 similar in territorial scope to its jurisdiction to order public examination of a bankrupt under s 290 and to serve the
bankrupt out of the jurisdiction.
In my judgment, s 133, on its true construction, plainly implies that its 265 provisions apply to all who fall within a class of
persons specified in s 133(1), whether they are British subjects or not and whether they are within the jurisdiction of the English
court or not at the relevant time. It does not seem to me to involve any violation of the principles of public or private
international law to construe the provisions of s 133 so as to make a person in the specified class liable to public examination,
even though he may be out of the jurisdiction. The winding up of the company is governed by English law. Parliament has
newly legislated for the public examination of specified classes of persons. Those specified classes of persons are restricted to
those who have acted in one capacity or another in relation to the affairs of the company which is either liable to be wound up by
the English court under English law or is, in fact, being so wound up.
In the words of Lord Wilberforce in Clark (Inspector of Taxes) v Oceanic Contractors Inc [1983] 1 All ER 133 at 144,
[1983] 2 AC 130 at 152, I would expect such persons to be within the legislative grasp, or intendment of s 133 whether or not
they are at any relevant time in England and whether or not they can be served with a summons of the English court in England.
The new provisions of s 133 have been drafted along very similar lines to those for the public examination of a bankrupt. In
these circumstances I am of the view that Parliament intended to legislate for those specified persons wherever they are.
If I am right in my construction of s 133, the Official Receivers application against Mr Slinn has been duly made under sub-
s (1) of s 133 and therefore Mr Registrar Buckley had no discretion to refuse an application that a public examination of Mr Slinn
should be held: see the mandatory terms of s 133(3). Rule 4.211 required that a copy of the courts order should forthwith be
served on Mr Slinn. As Mr Slinn was not in England, Mr Registrar Buckley had a discretion under r 12.12 to order service to be
effected within such time, on such person, at such a place and in such manner as he thought fit. In my judgment, the registrar
had the necessary jurisdiction to make both orders of 17 July 1990 and he properly exercised his discretion under r 12.12 by
ordering that the Official Receiver be at liberty to serve Mr Slinn by first class post with a sealed copy of the order for his public
examination and a sealed copy of the order for service at his address in Alderney or elsewhere within the jurisdiction of the
Bailiwick of Guernsey.
For all these reasons I allow the appeal of the Official Receiver and restore the orders made by Mr Registrar Buckley on 17
July 1990.

Appeal allowed

Solicitors: Treasury Solicitor; Vance Harris, Crowborough.

Hazel Hartman Barrister.

266
[1991] 4 All ER 267

Re Paramount Airways Ltd

COMPANY; Insolvency

CHANCERY DIVISION
MERVYN DAVIES J
25 APRIL, 8, 9, 10, 17 MAY, 12, 13, 19 JUNE 1991

Insolvency Service Service out of jurisdiction Transaction at undervalue Office-holder of company seeking reversal of
transaction entered into by company at undervalue Whether court having jurisdiction to entertain application against foreign
person resident abroad and order service of process out of jurisdiction Whether power to order adjustment of prior
transactions having extra-territorial effect Insolvency Act 1986, s 238 Insolvency Rules 1986, r 12.12.

On its true construction the phrase any person in s 238 a of the Insolvency Act 1986, which enables the administrator or
liquidator of a company to apply for an order reversing a transaction entered into by the company with any person at an
undervalue, does not have extra-territorial effect so as to affect a foreigner resident abroad and, accordingly, the court has no
jurisdiction to entertain an application under s 238 seeking an order against a person resident who is abroad with no place of
business in the United Kingdom and who does not carry on business within the jurisdiction, especially where that person is a
foreign bank which has not directly entered into the relevant transaction. It follows that any order under r 12.12 b of the
Insolvency Rules 1986 granting leave to serve a s 238 application on such a person abroad will be set aside (see p 276 b to d j and
p 277 f g, post).
________________________________________
a Section 238 is set out at p 270 c to g, post
b Rule 12.12 is set out at p 270 j to p 271 a, post

Clark (Inspector of Taxes) v Oceanic Contractors Inc [1983] 1 All ER 133 applied.
Re Seagull Manufacturing Co Ltd (in liq) [1991] 4 All ER 257 considered.

Notes
For service out of the jurisdiction in insolvency proceedings, see 3(2) Halsburys Laws (4th edn reissue) para 782.
For transactions at undervalue, see ibid paras 643644.
For the Insolvency Act 1986, s 238, see 4 Halsburys Statutes (4th edn) (1987 reissue) 887.
For the Insolvency Rules 1986, r 12.12, see 3 Halsburys Statutory Instruments (1991 reissue) 472.

Cases referred to in judgment

Anglo-African Steamship Co, Re (1886) 32 Ch D 348, CA.
Babanaft International Co SA v Bassatne [1989] 1 All ER 433, [1990] Ch 13, [1989] 2 WLR 232, CA.
Blain, Ex p, re Sawers (1879) 12 Ch D 522, [187480] All ER Rep 708, CA.
Clark (Inspector of Taxes) v Oceanic Contractors Inc [1983] 1 All ER 133, [1983] 2 AC 130, [1983] 2 WLR 94, HL.
Cooke v Charles A Vogeler Co [1901] AC 102, [19003] All ER Rep 660, HL.
Derby & Co Ltd v Weldon (No 1) [1989] 1 All ER 469, [1990] Ch 48, [1989] 2 WLR 276, CA.
MacKinnon v Donaldson Lufkin & Jenrette Securities Corp [1986] 1 All ER 653, [1986] Ch 482, [1986] 2 WLR 453.
Prenn v Simmonds [1971] 3 All ER 237, [1971] 1 WLR 1381, HL.
267
Seagull Manufacturing Co Ltd (in liq), Re [1991] 4 All ER 257, [1991] 3 WLR 307.
Theophile v Solicitor General [1950] 1 All ER 405, [1950] AC 186, HL.
Tucker (a bankrupt), Re, ex p Tucker [1988] 1 All ER 603, [1990] Ch 148, [1988] 2 WLR 784, CA.

Cases also cited

Cia Merabello San Nicholas SA, Re [1972] 3 All ER 448, [1973] Ch 75.
Derby & Co Ltd v Weldon (No 6) [1990] 3 All ER 263, [1990] 1 WLR 1139, CA.
Farrell v Alexander [1976] 2 All ER 721, [1977] AC 59, HL.
Galbraith v Grimshaw [1910] AC 508, [190810] All ER Rep 561, HL.
International Westminster Bank plc v Okeanos Maritime Corp [1987] 3 All ER 137, sub nom Re a company (No 00359 of 1987)
[1988] Ch 210.
Jogia (a bankrupt), Re, ex p the trustee v D Pennellier & Co Ltd [1988] 2 All ER 328, [1988] 1 WLR 484.
Macleod v A-G for New South Wales [1891] AC 455, PC.
Manta Line Inc v Sofianites [1984] 1 Lloyds Rep 14, CA.
Robertson, Ex p, re Morton (1875) LR 20 Eq 733.
Tracomin SA v Sudan Oil Seeds Co Ltd (No 1) [1983] 3 All ER 137, [1983] 1 WLR 1026, CA.
Tracomin SA v Sudan Oil Seeds Co Ltd (No 2) [1983] 3 All ER 140, [1983] 1 WLR 1026, CA.
Tucker (a bankrupt), Re (No 2), ex p the trustee v Langton Investment SA [1988] 2 All ER 339, [1988] 1 WLR 497.
Vocalion (Foreign) Ltd, Re [1932] 2 Ch 196, [1932] All ER Rep 519.

Motion
Hambros Bank (Jersey) Ltd (Hambros), by a notice of motion dated 19 March 1991, applied, inter alia, for an order that the order
of Mr Registrar Buckley of 30 November 1990 directing that the joint administrators of Paramount Airways Ltd, Roger Arthur
Powdrill and Joseph Beaumont Atkinson, be at liberty to serve an originating application under s 238 of the Insolvency Act 1986
on Hambros in Jersey claiming payment of moneys transferred to Hambros as a result of prior transactions entered into by
Paramount Airways at an undervalue be set aside on the grounds (i) that the court had no jurisdiction to grant the relief sought by
the originating application or to make such order or, alternatively, (ii) that having regard to all the circumstances of the case it
was not a proper case for service out of the jurisdiction and the court in its discretion should refuse leave for such service. The
facts are set out in the judgment.

Nigel Davis for Hambros;.

Nicholas Merriman QC and Richard Salter for the administrators.

Cur adv vult

19 June 1991. The following judgment was delivered.

MERVYN DAVIES J. This is an application to set aside an order dated 30 November 1990 made by Mr Registrar Buckley. The
application is by a Jersey company Hambros Bank (Jersey) Ltd (Hambros). It is made against Mr Roger Arthur Powdrill and Mr
Joseph Beaumont Atkinson. Mr Powdrill and Mr Atkinson are referred to as the administrators because they are the joint 268
administrators of a company called Paramount Airways Ltd. They were appointed by an order dated 7 August 1989 on a petition
presented by Air 2000 Ltd. The registrars order dated 30 November 1990 was made ex parte. Therein it was ordered that the
administrators be at liberty to serve an originating application (issued on 29 November 1990) by post upon Hambros in the
Channel Islands, more particularly at 13 Broad Street, St Helier, Jersey. Hambros now applies to set aside that order. On the
fourth day of the hearing before me there was an application to amend the application to set aside by adding an application to
strike out the originating application. I declined to allow the amendment.
It is said that the courtwhether registrar or judgehas no jurisdiction to give leave to serve the originating application in
the Channel Islands; alternatively, if such jurisdiction there be, the order ought not to have been made. Before considering those
questions I must set out the events that led to the administrators seeking to serve Hambros in Jersey. As I have said, on 7 August
1989 Paramount was placed in administration. The administrators began to investigate the affairs of the company. Their
inquiries centred on a Mr John Ferriday. He had been a Paramount director. On 13 September 1989 the administrators, in the
name of the company, issued a writ against Mr Ferriday and other defendants. The claims against Mr Ferriday were for breach of
fiduciary duty, with allegations of constructive trust and other matters. The sums claimed were very considerable. The writ was
amended as to the sums claimed on 14 November 1989 and the writ was reissued. The administrators formed the view that Mr
Ferriday had sent sums of money belonging to Paramount to the Channel Islands and that such money was in an account or
accounts at Hambros. Accordingly the administrators started proceedings in the Royal Court of the Island of Jersey. The plaintiff
in such proceedings was Paramount and the defendants were Ryco Trust Ltd and Hambros. I have seen particulars of the
Paramount claim dated 22 September 1989 and Hambros answer thereto dated 27 October 1989. The administrators were
interested in two sums of money in particular, the one being a sum of 1.3m and the other 346,800. As to the 1.3m, that is said
to have been in an account in Lloyds Bank plc in England in the name of Paramount. It was transferred on 4 July 1989 to an
account in Jersey in the name of Ryco Trust at Hambros. At Hambros there was also an account in the name of Anser General
Investments SA, a Panamanian company. On 4 July 1989 the 1.3m was moved from the Ryco account to the Anser account.
Anser is said to be controlled by Mr Ferriday. As to the 346,800, that is part of a sum said to have been held for Paramount by a
firm in England called Martin Boston & Co. On 29 July 1989 346,800 went from the Boston account to the Ryco account in
Jersey. On 1 August 1989 the money was transferred from the Ryco account to the Anser account. The administrators contend
that Hambros knew that the two sums I have mentioned belonged to Paramount. Hambros denied the administrators claim.
The Jersey proceedings were the subject of a consent order dated 27 June 1990. The proceedings were stayed. Paragraph 3
of the consent order is in these terms:

3. That the second defendants [Hambros] will submit to the jurisdiction of the English Court in relation to all claims
and matters arising out of and which currently form the substance of these present proceedings.

The next event to mention is that the administrators obtained leave to add defendants to the action in England. It will be
recalled that on 13 September 1989 Paramount had issued a writ against Mr Ferriday and two others. On 8 November 1990 there
were added as fourth defendant, Standard Chartered Bank, and as fifth 269 defendant, Hambros. The claim against Hambros is
for a declaration that Hambros is liable to pay to Paramount as constructive trustee the sums of 346,800 and 1,300,000, with
orders for payment, alternatively payment of these sums as money had and received or as Paramounts money traceable in equity.
These claims against Hambros are pleaded in an amended statement of claim.
Thus it is that the administrators sue Hambros in England for the sums of 13m and 346,800. In this connection Hambros
submit to the jurisdiction of the English court, as they agreed to do by the Jersey court order dated 27 June 1990. No doubt the
administrators hope to succeed in the writ action. But they desire as well to make use of s 238 of the Insolvency Act 1986.
Section 238 is in these terms:

Transactions at an undervalue (England and Wales).(1) This section applies in the case of a company where( a) an
administration order is made in relation to the company, or (b) the company goes into liquidation; and the office-holder
means the administrator or the liquidator, as the case may be.
(2) Where the company has at a relevant time (defined in section 240) entered into a transaction with any person at an
undervalue, the office-holder may apply to the court for an order under this section.
(3) Subject as follows, the court shall, on such an application, make such order as it thinks fit for restoring the position
to what it would have been if the company had not entered into that transaction.
(4) For the purposes of this section and section 241, a company enters into a transaction with a person at an undervalue
if(a) the company makes a gift to that person or otherwise enters into a transaction with that person on terms that provide
for the company to receive no consideration, or (b) the company enters into a transaction with that person for a
consideration the value of which, in money or moneys worth, is significantly less than the value, in money or moneys
worth, of the consideration provided by the company.
(5) The court shall not make an order under this section in respect of a transaction at an undervalue if it is satisfied( a)
that the company which entered into the transaction did so in good faith and for the purpose of carrying on its business, and
(b) that at the time it did so there were reasonable grounds for believing that the transaction would benefit the company.

I say now that ifsee sub-s (2)Paramount has at a relevant time entered into a transaction with any person at an
undervalue it is common ground that the transaction was at a relevant time.
If the administrators are to make use of s 238 they will be engaging in insolvency proceedings because that phrase is
defined in r 13.7 of the Insolvency Rules 1986, SI 1986/1925, as meaning any proceedings under the 1986 Act or those rules.
Since the proceedings in contemplation involve a Jersey company one must have regard to r 12.12 of the 1986 rules:

Service outside the jurisdiction

12.12(1) Order 11 of the Rules of the Supreme Court, and the corresponding County Court Rules, do not apply in
insolvency proceedings.
(2) A bankruptcy petition may, with the leave of the court, be served outside England and Wales in such manner as the
court may direct.
(3) Where for the purposes of insolvency proceedings any process or order of the court, or other document, is required
to be served on a person who is not in England and Wales, the court may order service to be effected within 270 such time,
on such person, at such place and in such manner as it thinks fit, and may also require such proof of service as it thinks fit.
(4) An application under this Rule shall be supported by an affidavit stating(a) the grounds on which the application
is made, and (b) in what place or country the person to be served is, or probably may be found.

It was under that rule that the administrators on 30 November 1990 obtained ex parte leave to serve Hambros in Jersey; and it is
that leave that I am now asked to set aside.
At first sight the leave in question appears to be a matter for the courts direction under r 12.12(3). I say that because (a) s
238(2) authorises an application against any person, (b) the person here involved is Hambros, (c) Hambros is a Jersey
company without a place of business in England and (d) r 12.12 provides for leave to serve outside the jurisdiction. Mr Nigel
Davis who appeared for Hambros said that no mere matter of discretion arose. He submitted that the court has no jurisdiction to
give leave to serve a s 238 application on Hambros as being a Jersey company without a place of business in England. Mr Davis
accepted that if jurisdiction exists then r 12.12 gives the court power to give leave to serve Hambros. However, on that footing,
he submitted that the court should then in its discretion refuse leave.
Yet a further question arises for decision. Mr Merriman QC for the administrators referred to the consent order dated 27
June 1990 mentioned above. He said that thereby Hambros had submitted to the jurisdiction of the English court on the matter of
the intended s 238 application. Mr Davis said there was no such submission, and, even if there was, that did not avail the
administrators because the parties cannot by their acts or submission confer jurisdiction on the court. He referred to these words
in Dicey and Morris The Conflict of Laws (11th edn, 1987) vol 1, p 302:

Submission cannot give the court jurisdiction to entertain an action or other proceeding which in itself lies beyond the
competence or authority of the court.

See also Cheshire and North Private International Law (11th edn, 1987) p 193. I accept Mr Daviss submissionthat is to say
that even if the parties agreed to submit any s 238 application to the jurisdiction of the English court the English court has no
jurisdiction to hear the application if s 238 is to be construed as not allowing a s 238 application to be made against such a person
as Hambros, ie a company registered in Jersey without any place of business in England and not carrying on business in England.
I add that the question whether or not Hambros did in fact agree to submit the s 238 application to the English court was
argued before me at length. I will therefore express my views on that question.
I have already set out the material part (cl 3) of the Jersey consent order dated 27 June 1990. The question is whether or not
by agreeing to cl 3 Hambros consented to trial in England of not only the proceedings then on record in Jersey but also any
proceedings which might be launched in England under s 238 of the 1986 Act. The answer to that question depends on the true
construction of cl 3. When so construing, evidence of negotiations or of the parties intention is not to be regarded. The evidence
should be

restricted to evidence of the factual background known to the parties at or before the date of the contract, including
evidence of the genesis and objectively the aim of the transaction.
271

(See Prenn v Simmonds [1971] 3 All ER 237 at 241, [1971] 1 WLR 1381 at 1385.) The factual background was that Paramount
(by the administrators) was suing Mr Ferriday in England for breach of fiduciary duty. As well Paramount (again by the
administrators) was suing Hambros in Jersey. The sums claimed were the same or much the same as those claimed in England
from Mr Ferriday. In the Jersey action the allegation was that Mr Ferriday had caused Paramount money to be transferred to
Jersey, such money being held in accounts at Hambros. It was alleged that the money was to be

held and applied for the benefit of [Paramount]; alternatively, the funds were transferred by or on behalf of Mr
Ferriday in breach of his fiduciary duty to [Paramount].

Thus there were running at the same time the English action against Ferriday and the Jersey action against Hambros. The money
claim was the same in both actions. In this situation it was convenient, at any rate from the point of view of the administrators, to
seek to have one action with Ferriday and Hambros joined as defendants. As I understand it Hambros agreed to this course with
the eventual result that cl 3 was agreed on 27 June 1990. Prior to that date the administrators solicitor in Jersey had mentioned
the possibility of the administrators making use in England of s 238 (see the letter of Messrs Ogier & Cornu (Mr White) dated 14
June 1990). So the possibility that there might be s 238 proceedings was known when the consent order was made. With that
background in mind I turn to words of the consent order. I have seen only the draft but counsel were content to accept the draft
as final. The draft says that Paramount and Hambros Have agreed that these present proceedings can be stayed on the following
terms There follow five terms but term three as I have quoted it is the only presently material term. I see that Hambros
submit in relation to all claims and matters arising out of and which currently form the substance of these present proceedings.
The substance of the Jersey proceedings was the allegationsee para 4 of the order of justice served in Jersey on 22 September
89that the funds held by Hambros were to be held for the benefit of Paramount, alternatively that the funds were transferred by
or on behalf of Mr Ferriday in breach of his fiduciary duty to the plaintiff. Thus the substance of the Jersey proceedings did not
embrace the assertion of a particular statutory claim within s 238 or any equivalent statutory provision in Jersey (if such there be).
For that reason I decline to find that Hambros submitted any s 238 claim to the English jurisdiction.
I add that both counsel desired me to read correspondence and affidavit evidence that was said to bear on the meaning of the
consent order. I did read the documents put before me. There were among them an affidavit by Advocate Michel (for Hambros)
and by Advocate White (for the administrators), and correspondence between Advocate Michel and Advocate White between 14
June 1990 and 26 June 1990. As to those documents I can only say that were I allowed to take them into consideration I would
not change my mind.
I turn now to the principal question put before me, ie whether this court has jurisdiction to entertain a s 238 application
against Hambros.
I was referred to a number of authorities. Ex p Blain, re Sawers (1879) 12 Ch D 522, [187480] All ER Rep 708 was a case
under the Bankruptcy Act 1869. A judgment creditor sought leave to serve bankruptcy petitions on two Chileans resident in
Chile who had never been to England although they were partners with persons in England carrying on business in England.
Sections 6 and 8 of the 1869 Act referred to the debtor or a debtor. James LJ says (12 Ch D 522 at 526, [187480] All ER
Rep 708 at 709):
272

It appears to me that the whole question is governed by the broad, general universal principle that English legislation,
unless the contrary is expressly enacted or so plainly implied as to make it the duty of an English Court to give effect to an
English statute, is applicable only to English subjects or to foreigners who by coming into this country, whether for a long
or a short time, have made themselves during that time subject to English jurisdiction.

Brett LJ says (12 Ch D 522 at 528, [187480] All ER Rep 708 at 711):

It is said that the case is literally within the words of the statute, and so, no doubt, it is. But does it follow that,
because a case is literally within the words of a statute of any country, therefore it is within the jurisdiction of the Courts of
that country? Certainly not. The governing principle is that all legislation is prima facie territorial, that is to say, that the
legislation of any country binds its own subjects and the subjects of other countries who for the time bring themselves
within the allegiance of the legislating power.

See also Cotton LJ (12 Ch D 522 at 530, [187480] All ER Rep 708 at 712).
The learned Lord Justices used very wide words. One sees that in construing a statute

the governing principle is that all legislation is prima facie territorial, that is to say, that the legislation of any country
binds its own subjects and the subjects of other countries who for the time being bring themselves within the allegiance of
the legislating power.

(See 12 Ch D 522 at 528, [187480] All ER Rep 708 at 711 per Brett LJ.) This principle has been maintained in many cases:
see eg Re Anglo-African Steamship Co (1886) 32 Ch D 348, where it was held that the court had no jurisdiction to give leave to
serve notices of orders in the winding up of a company on persons residing out of the jurisdiction; and Cooke v Charles A
Vogeler Co [1901] AC 102, [19003] All ER Rep 660, a case on the Bankruptcy Act 1883 recognising that a debtor or creditor
in the Act must be persons who are subject to the jurisdiction of the English Bankruptcy law; cf Theophile v Solicitor General
[1950] 1 All ER 405, [1950] AC 186. However one comes to more recent times. In Clark (Inspector of Taxes) v Oceanic
Contractors Inc [1983] 1 All ER 133 at 138139, [1983] 2 AC 130 at 144145. Lord Scarman quotes from Ex p Blain parts of
the passages that I have set out above and goes on to say that the territorial principle referred to above is a rule of construction:

Put into the language of today, the general principle being there stated is simply that, unless the contrary is expressly
enacted or so plainly implied that the courts must give effect to it, United Kingdom legislation is applicable only to British
 subjects or to foreigners who by coming to the United Kingdom, whether for a short or a long time, have made themselves
subject to British jurisdiction. Two points would seem to be clear: first, that the principle is a rule of construction only
and, second, that it contemplates mere presence within the jurisdiction as sufficient to attract the application of British
legislation.

And Lord Wilberforce says ([1983] 1 All ER 133 at 144, [1983] 2 AC 130 at 152):

Oceanic contends, and the Court of Appeal has held, that the provisions regarding collection of tax by deduction from
wages can never have been intended to apply to a foreign company, non-resident in the United Kingdom, which makes
payments outside the United Kingdom. In my opinion this contention is erroneous, because it is based on a mistaken
application or 273 understanding of the territorial principle. That principle, which is really a rule of construction of
statutes expressed in general terms, and which as James LJ said is a broad principle, requires an inquiry to be made as to
the persons with respect to whom Parliament is presumed, in the particular case, to be legislating.

So the approach to s 238 is not merely as to territory or location. One must also consider the person with respect to whom
Parliament is presumed, in the particular case of s 238, to be legislating.
Re Tucker (a bankrupt), ex p Tucker [1988] 1 All ER 603, [1990] Ch 148 is a case that followed the Oceanic case. It
concerned s 25 of the Bankruptcy Act 1914, which empowered the court to summon before it persons suspected to have
possession of effects of the debtor. It was held that on a true construction s 25 did not allow of the summoning of a British
subject resident abroad. Dillon LJ referred to the Blain and Oceanic cases and said ([1988] 1 All ER 603 at 609, [1990] Ch 148
at 158):

I look, therefore, to see what s 25(1) is about, and I see that it is about summoning people to appear before an English
court to be examined on oath and to produce documents. I note that the general practice in international law is that the
courts of a country only have power to summon before them persons who accept service or are present within the territory
of that country when served with the appropriate process. There are exceptions under RSC Ord 11, but even under those
rules no general power has been conferred to serve process on British subjects resident abroad. Moreover, the English
court has never had any general power to serve a subpoena ad testificandum or subpoena duces tecum out of the
jurisdiction on a British subject resident outside the United Kingdom, so as to compel him to come and give evidence in an
English court. Against this background I would not expect s 25(1) to have empowered the English court to haul before it
persons who could not be served with the necessary summons within the jurisdiction of the English court.

The cases so far mentioned had under consideration the insolvency law in existence before the passing of the Insolvency Act
1986. I come now to a case under that Act. It is the judgment of Mummery J in Re Seagull Manufacturing Co Ltd (in liq) [1991]
4 All ER 257, [1991] 3 WLR 307. The learned judge had to consider whether or not, in the course of the winding up of an
English company, s 133 of the 1986 Act empowers the court to order a person who had been a director of the company to attend
the court for public examination despite the fact that the director, although a British subject, was at all material times resident
abroad. An order to attend was made. After referring in particular to the Oceanic and Tucker cases the learned judge said
([1991] 4 All ER 257 at 266, [1991] 3 WLR 307 at 316317):

In my judgment, s 133, on its true construction, plainly implies that its provisions apply to all who fall within a class of
person specified in s 133(1), whether they are British subjects or not and whether they are within the jurisdiction of the
English court or not at the relevant time. It does not seem to me to involve any violation of the principles of public or
private international law to construe the provisions of s 133 so as to make a person in the specified class liable to public
examination, even though he may be out of the jurisdiction. The winding up of the company is governed by English law.
Parliament has newly legislated for the public examination of specified classes of persons. Those specified classes of
persons are restricted to those 274 who have acted in one capacity or another in relation to the affairs of a company which
is either liable to be wound up by the English court under English law or is, in fact, being so wound up. In the words of
Lord Wilberforce in Clark (Inspector of Taxes) v Oceanic Contractors Inc [1983] 1 All ER 133 at 144, [1983] 2 AC 130 at
152, I would expect such persons to be within the legislative grasp, or intendment of s 133 whether or not they are at any
relevant time in England and whether or not they can be served with a summons of the English court in England. The new
provisions of s 133 have been drafted along very similar lines to those for the public examination of a bankrupt. In these
circumstances I am of the view that Parliament intended to legislate for those specified persons wherever they are.

The conclusion of Mummery J is, if I may say so, readily understandable and, just as the learned judge had to consider what
persons were within the legislative grasp of s 133, so I have to consider what persons are within the grasp of s 238. One of
course applies to s 238 the rule of construction mentioned by Lord Scarman and Lord Wilberforce. Before seeking to apply the
rule I will first mention some considerations put before me as material but which, to my mind, do not indicate how the rule is to
be applied for present purposes.
(a) Sections 238 to 241 are in a sense new and original and no help is to be derived from the sections about avoiding
transactions that appear in earlier statutes, such as ss 317 and 320 of the Companies Act 1948 and s 42 of the Bankruptcy Act
1914.
(b) Rule 12.12 of the Insolvency Rules 1986 is no pointer as to the meaning of any person in s 238. If s 238 confers no
jurisdiction then r 12.12 cannot authorise service of proceedings as to which the court has no jurisdiction, that is to say service
out can be ordered only in respect of a case within the competence of the court.
(c) It was suggested that the courts attitude towards foreigners (as shown in such cases as Ex p Blain, re Sawers (1879) 12
Ch D 522, [187480] All ER Rep 708) has in recent times changed; so that one may nowadays more readily construe a statute as
being intended to extend to foreigners. The change was said to be illustrated by recent decisions in the Mareva field such as
Derby & Co Ltd v Weldon (No 1) [1989] 1 All ER 469, [1990] Ch 48 and Babanaft International Co SA v Bassatne [1989] 1 All
ER 433, [1990] Ch 13. This suggestion seems to me not to be sustainable. The Insolvency Act 1986 was executed before the
extension of the Mareva jurisdiction and, more importantly, the Blain principle was fully accepted in the Oceanic case in 1983
and has been applied since the passing of the 1986 Act by Mummery J in the Seagull case. In this connection it may be
interesting to note some words of Hoffmann J in MacKinnon v Donaldson Lufkin & Jenrette Securities Corp [1986] 1 All ER 653
at 658, [1986] Ch 482 at 493albeit a case not concerned with insolvency:

The principle is that a state should refrain from demanding obedience to its sovereign authority by foreigners in
respect of their conduct outside the jurisdiction.

(d) Section 241 authorises the making of orders concerning property and s 436 shows that property must be read as
property wherever situated. So it may perhaps be suggested that s 238 should be read as extending to any person with property
abroad. I do not accept that suggestion. The meaning of property as defined in s 436 does not control the meaning of any
person in s 238.
 (e) The Civil Jurisdiction and Judgments Act 1982 does not apply to 275 bankruptcy, winding-up or analogous proceedings:
see art 1 of the Convention on Jurisdiction and the Enforcement of Judgments in Civil and Commercial Matters (Brussels, 27
September 1968; EC 46 (1978); Cmnd 7395) set out in Sch 1 to the 1982 Act.
(f) I presume that Hambros is a subsidiary or intimately connected with Hambros Bank in England. That is a peculiarity of
this case that cannot affect the construction of s 238.
Having put aside considerations (a) to (f) above I turn to consider how it is that one construes the words any person in s
238(2). There is a presumption against applying statutory provisions outside the United Kingdom to persons who are not
resident there: see Lord Lowry in the Oceanic case [1983] 1 All ER 133 at 148, [1983] 2 AC 130 at 157. So one starts from the
position that Hambros are not caught by s 238. But then, following Lord Wilberforces guidance, one asks who is within the
legislative grasp of s 238. No doubt there are within that grasp British subjects, companies registered in England and foreigners
present in England. It may well be that the grasp extends to a foreign company carrying on business in England. But having
gone so far there is as yet no justification for saying that a Jersey company such as Hambros (with no address and no business
here) must have been aimed at when s 238 was enacted. Having so far sought to apply the rule of construction in a purely general
sense I go on to consider whether s 238 can be regarded as aimed at a particular person such as Hambros, which has, to put it
generally, been involved with Paramount, ie the company now in administration in England.
I have already summarised Hambros involvement with Paramount, that is to say it is said that Hambros holds in accounts in
Jersey two sums (1.3m and 346,800) being sums which were sent from or at the behest of Paramount to Rycos account with
Hambros in Jersey and then moved from that account to another Hambros account, namely the Anser account; the administrators
contending that Hambros knew that the sums belong to Paramount.
Thus the administrators in any s 238 application will not be alleging any transaction that took place directly between
Paramount and Hambros. The administrators will have to invoke s 241(2):

An order under section 238 or 239 may affect the property of, or impose any obligation on, any person whether or not
he is the person with whom the company in question entered into the transaction or (as the case may be) the person to
whom the preference was given; but such an order(a) shall not prejudice any interest in property which was acquired
from a person other than the company and was acquired in good faith, for value and without notice of the relevant
circumstances, or prejudice any interest deriving from such an interest, and (b) shall not require a person who received a
benefit from the transaction or preference in good faith, for value and without notice of the relevant circumstances to pay a
sum to the office-holder, except where that person was a party to the transaction or the payment is to be in respect of a
preference given to that person at a time when he was a creditor of the company.

Thus one must ask whether the grasp abroad of s 238 extends not only to a person X who has directly entered into a
transaction with the company but also to a person Y who is once or more removed from the companyas is Hambros. I doubt
whether, in light of the territorial principle, s 238 is to be construed as aiming at a succession of persons abroad such as X, Y etc.
It is said that s 238 is designed to frustrate wrongdoing so that it should be 276 construed liberally so as to support that
purpose. I do not think the construction of s 238 can be influenced by any consideration of that kind. Moreover, when one reads
the section it will be seen that it may operate against a person X who has received property at an undervalue irrespective of any
wrongdoing on the part of X; cf ss 238(5) and 241(2) as to the position of a person Y to whom X may have passed the property.
Then it is said that the transaction which the administrators are challenging is a transaction that has a connection with
England (in that the money sought to be recovered was sent from England); so that s 238 ought to authorise the recovery of that
money from a person outside England. That is persuasive. Nevertheless it does not permit me to say that s 238 is construed as
affecting Hambros. In saying that I have in mind Dicey and Morris The Conflict of Laws (11th edn, 1987) vol 1, pp 11101111
and Cheshire and North Private International Law (11th edn, 1987) p 911. Dicey and Morris p 1111 says:

the question, as yet undecided, in what circumstances the courts will compel the creditor to refund if he did not
reside in England or had no knowledge of the adjudication in bankruptcy or obtained the property abroad without legal
process, has given rise to much speculation. It is suggested, although with some hesitation, that in the modern law
jurisdiction to compel creditors to refund the value of property obtained abroad is related to that for restraining creditors
from recovering debts abroad. A creditor who obtains property of the bankrupt situated abroad must be compelled to
refund it to the trustee if, at the time when he received the payment, he was resident in England.

By analogy it seems to me that Hambros having obtained (abroad) Paramount money can be compelled to refund it only if, when
it received the money in Jersey, it had some equivalence of residence in England. It had not. Given the presumption of
territoriality that is implicit in s 238 I am not prepared now to construe s 238 in such a way as runs counter to the sentiment
expressed in the last sentence quoted from Dicey and Morris above.
Having considered the matter as best I can, I conclude, with regret, for the reasons I have given, that the court has no
jurisdiction to hear an application against Hambros under s 238 in that s 238 does not allow an application being made against a
company not registered in England and which does not have a place of business in England and which has not been carrying on
business in England. The order of Mr Registrar Buckley dated 30 November 1990 will be set aside.
I add that had I come to the conclusion that a s 238 application was open to the administrators I should have exercised my
discretion under r 12.12 of the 1986 rules in favour of the administrators. I say that because there is current in England the
Chancery action that I have mentioned. Hambros submitted to the jurisdiction in that regard. A s 238 application could
conveniently be heard with the Chancery action. On the other hand there are now no proceedings between the parties in Jersey;
so that, even if an application akin to s 238 can be made in Jersey, and is made, then the situation would be that there would be
the Chancery action in England and the s 238 action in Jersey, those actions relating to the same subject matter.

Application granted. Leave to appeal granted.

Solicitors: Norton Rose; Wilde Sapte.

Jacqueline Metcalfe Barrister.

277
[1991] 4 All ER 278

Hughes v National Union of Mineworkers and others

TORTS; Negligence: CRIMINAL; Police
QUEENS BENCH DIVISION AT LEEDS
MAY J
12, 13 MARCH 1991

Police Negligence Duty to take care Conduct of police operations Persons to whom duty owed Police officer involved in
operations Police officer injured during violent public disorder Officer part of police force attempting to keep order Officer
suing chief constable for negligently exposing plaintiff to excessive and avoidable risk of injury Whether chief constable liable
to individual officers injured by attacks from rioters Whether contrary to public policy for senior police officer charged with
controlling serious public disorder to be liable to officer injured by attacks from rioters Police Act 1964, s 48(1).

The plaintiff, a serving police officer, was posted from another force to assist the North Yorkshire police in maintaining peace at a
colliery where striking mineworkers were picketing working miners who were being escorted to work. The plaintiff was injured
when a large number of pickets surged forward towards police lines throwing missiles and he was knocked over in the ensuing
disorder. The plaintiff brought an action against the chief constable pursuant to s 48(1) a of the Police Act 1964, which provided
that the chief officer of police was liable in respect of any torts committed by constables under his direction and control in the
performance of their functions. The plaintiff alleged that the officer in charge at the colliery had deployed the forces at his
disposal negligently, so that the plaintiff was exposed to an excessive and avoidable risk of injury. The chief constable applied to
strike out the plaintiffs claim against him as disclosing no reasonable cause of action because the chief constable owed the
plaintiff no relevant duty of care in circumstances where what was in issue was the immediate operational control of police
officers in dealing with violent public disorder and the plaintiffs injuries had been directly caused by those perpetrating the
disorder, since it would not be fair, just and reasonable to impose a duty of care on the chief constable in those circumstances and
would be against public policy to do so. The registrar dismissed the chief constables application. The chief constable appealed.
________________________________________
a Section 48 is set out at p 280 j, post

Held As a matter of public policy senior police officers charged with the task of deploying what might or might not be an
adequate force of officers to control serious public disorder were not generally liable to individual officers under their command
if those officers were injured by attacks from rioters, since to hold that a duty of care was owed in such circumstances would be
significantly detrimental to the control of public order in that critical decisions which often had to be made by senior officers with
little or no time for considered thought would be prejudiced if they were affected by the fear of a potential negligence claim by a
subordinate if rioters injured that subordinate. Accordingly, the plaintiffs claim against the chief constable was bound to fail and
would be struck out. The chief constables appeal would therefore be allowed (see p 288 b to f, post).
Per curiam. Section 48 of the 1964 Act is concerned with the fact of vicarious liability of chief officers of police and does
not bear on the extent or definition of the torts for which they are to be vicariously liable (see p 286 f, post).
278

Notes
For negligence and the duty to take care generally, see 34 Halsburys Laws (4th edn) paras 15, and for cases on the subject, see
36(1) Digest (2nd reissue) 2150, 132221.
For the Police Act 1964, s 48, see 33 Halsburys Statutes (4th edn) 628.

Cases referred to in judgment

Anns v Merton London Borough [1977] 2 All ER 492, [1978] AC 728, [1977] 2 WLR 1024, HL.
B v Islington Health Authority [1991] 1 All ER 825, [1991] 1 QB 638, [1991] 2 WLR 501.
Bourhill (or Hay) v Young [1942] 2 All ER 396, [1943] AC 92, HL.
Caparo Industries plc v Dickman [1990] 1 All ER 568, [1990] 2 AC 605, [1990] 2 WLR 358, HL; rvsg [1989] 1 All ER 798,
[1989] QB 653, [1989] 2 WLR 316, CA.
Donoghue (or MAlister) v Stevenson [1932] AC 562, [1932] All ER Rep 1, HL.
Hill v Chief Constable of West Yorkshire [1988] 2 All ER 238, [1989] AC 53, [1988] 2 WLR 1049, HL.
Home Office v Dorset Yacht Co Ltd [1970] 2 All ER 294, [1970] AC 1004, [1970] 2 WLR 1140, HL.
Knightley v Johns [1982] 1 All ER 851, [1982] 1 WLR 349, CA.
Murphy v Brentwood DC [1990] 2 All ER 908, [1991] 1 AC 398, [1990] 3 WLR 414, HL.
Peabody Donation Fund (Governors) v Sir Lindsay Parkinson & Co Ltd [1984] 3 All ER 529, [1985] AC 210, [1984] 3 WLR
953, HL.
Rigby v Chief Constable of Northamptonshire [1985] 2 All ER 985, [1985] 1 WLR 1242.
Rondel v Worsley [1967] 3 All ER 993, [1969] 1 AC 191, [1967] 3 WLR 1666, HL.
Rowling v Takaro Properties Ltd [1988] 1 All ER 163, [1988] AC 473, [1988] 2 WLR 418, PC.
Sutherland Shire Council v Heyman (1985) 60 ALR 1, Aust HC.
Yuen Kun-yeu v A-G of Hong Kong [1987] 2 All ER 705, [1988] AC 175, [1987] 3 WLR 776, PC.

Appeal
The Chief Constable of the North Yorkshire Police appealed from the decision of Mr District Registrar Cliffe given on 27 July
1990 dismissing the chief constables application to strike out the action brought by the plaintiff, Anthony Hughes, against the
National Union of Mineworkers, the National Union of Mineworkers (Durham area) and the chief constable for damages for
personal injuries received while on duty at Kellingley Colliery, North Yorkshire on 6 September 1984, as disclosing no
reasonable cause of action against the chief constable. The appeal was heard and judgment was given in chambers. At the
request of counsel for the chief constable and with the concurrence of counsel for the plaintiff, the matter was listed for mention
on 15 March 1991 and the judgment was then handed down in open court. The facts are set out in the judgment.

David Gripton for the chief constable;.

David Hall for the plaintiff.

13 March 1991. The following judgment was delivered.

MAY J. This is an appeal by the Chief Constable of the North Yorkshire Police from the decision of Mr District Registrar Cliffe
on 27 July 1990, when he refused to order that the plaintiffs claim against the chief constable, who is the third 279 defendant in
these consolidated proceedings, be struck out as disclosing no reasonable cause of action.
The plaintiff, Anthony Hughes, was a serving police officer in the Lancashire Constabulary, and the action arises from
injuries which he suffered on 6 September 1984 during mineworkers disturbances at Kellingley Colliery in North Yorkshire. The
relevant paragraphs of the statement of claim read as follows:
 2. On the 6th day of September 1984 the Plaintiff, in the course of his employment, was posted on the Lancashire
Constabulary Support Unit assisting the North Yorkshire Constabulary in their maintenance of the public peace at the
Kellingley Colliery, North Yorkshire where mineworkers were engaged in picketing working miners who were being
escorted to work.
3. The Plaintiff formed part of the front line of Officers outside the Colliery entrance and had taken up a position at the
end of a line which then joined at a right angle a further line of Police Officers. At about 7 am a loud whistle blew and a
vast number of pickets surged forwards throwing missiles at the Officers and thereafter persons in the surging crowd
struggled with the Plaintiff and knocked him backwards so that he landed on the ground and approximately eight to ten
pickets fell on him causing him the injuries hereinafter set out.

It is then alleged:

4. The said injury was caused by negligence on the part of the Defendant.

The particulars of negligence read as follows:

The Defendant was negligent in that he, his servants or agents: (i) Caused or permitted or required the Plaintiff to take
up a position in the Police line whereby he was not supported by Officers standing behind him; (ii) Failed in time or at all
to notice that the Plaintiff was effectively unprotected in the situation that occurred whereby he was pushed from the front
with no support from behind; (iii) Failed to organise and/or to implement any or any proper system of riot and disorder
control; (iv) Failed to deploy the Officers available in a safe and suitable fashion so that the Plaintiff was properly
protected; (v) Failed to warn the Plaintiff that he was not being supported from the rear; (vi) Exposed the Plaintiff to a risk
of injury; (vii) Failed to exercise any or any proper co-ordination of the Police forces available; (viii) Failed in the matters
set out in sub paragraphs (i)-(vii) above to operate a safe system of work, failed to take any or any proper care for the safety
of the Plaintiff and exposed him to an unnecessary and foreseeable risk of injury, which occurred.

I am told that further and better particulars in answer to a request by other defendants states that the number of mineworkers
attacking the police on the day in question was in the order of 4,000.
The action is brought against the chief constable pursuant to s 48(1) of the Police Act 1964, which provides:

The chief officer of police for any police area shall be liable in respect of torts committed by constables under his
direction and control in the performance or purported performance of their functions in like manner as a master is liable in
respect of torts committed by his servants in the course of their employment, and accordingly shall in respect of any such
torts be treated for all purposes as a joint tortfeasor.

Mr Hall, who appeared for the plaintiff, confirmed that this was in essence a 280 claim which alleged that the particular
police officer or officers in charge at the colliery on the day deployed the available forces negligently so that the plaintiff was
exposed to an excessive and avoidable risk of personal injury. Wider allegations relating to police deployment generally or to
police training or organisation are not relied on. It is not, for instance, alleged that there should have been a larger police force
than there actually was on duty at this colliery on the day in question. In thus limiting the case, the plaintiff abandoned the main
basis, as I understand it, upon which the district registrar decided in favour of the plaintiff, that is that para 4(iii) of the statement
of claim contained an arguable allegation that the chief constable, rather than the officer in charge on the day, should have
implemented a safer system of riot control.
I observe that, beyond the general assertion that the plaintiff was not personally supported by a second and perhaps third line
of officers at the point where he was positioned, the pleading contains no specific allegation of what on the ground the officer in
charge should have done to avoid the risk of personal injury to the plaintiff. It is not, for instance, alleged that any particular
different and safer formation should have been used, nor is there said to have been a particular and identified failure to comply
with standing orders or recognised procedures.
Mr Gripton, who appeared for the chief constable, submitted that in the circumstances of the case the chief constable owed
the plaintiff no relevant duty of care. He accepted that there could be circumstances where a chief constable, as the employer or
master of a constable, owed the constable a duty of care to guard against his personal injury. But he submitted that such a duty
did not extend to circumstances where what was called in question was the immediate operational control of policemen seeking
to deal with violent public disorder where the plaintiffs injuries were directly caused by those perpetrating the disorder.
The submission, as I have understood it, relies essentially on two related points: firstly, that it would not be fair, just or
reasonable to impose such a duty and, secondly that to do so would be against public policy. The first point seeks to rely on
Caparo Industries plc v Dickman [1990] 1 All ER 568, [1990] 2 AC 605 and related cases, the second point on Hill v Chief
Constable of West Yorkshire [1988] 2 All ER 238, [1989] AC 53. Both are decisions of the House of Lords.
Caparo Industries plc v Dickman was a case where negligence was alleged against auditors and actions were brought against
the auditors by shareholders or potential shareholders of the company that was being audited and the headnote reads that it was
held (see [1990] 1 All ER 568):

The three criteria for the imposition of a duty of care were foreseeability of damage, proximity of relationship and the
reasonableness or otherwise of imposing a duty. In determining whether there was a relationship of proximity between the
parties the court, guided by situations in which the existence, scope and limits of a duty of care had previously been held to
exist rather than by a single general principle, would determine whether the particular damage suffered was the kind of
damage which the defendant was under a duty to prevent and whether there were circumstances from which the court could
pragmatically conclude that a duty of care existed.

In Lord Bridges opinion there is reference to the now departed-from case of Anns v Merton London Borough [1977] 2 All
ER 492, [1978] AC 728 and a passage which reads as follows ([1990] 1 All ER 568 at 573574, [1990] 2 AC 605 at 617618):

But since Annss case a series of decisions of the Privy Council and of your Lordships House, notably in judgments
and speeches delivered by Lord Keith, have emphasised the inability of any single general principle to provide 281 a
practical test which can be applied to every situation to determine whether a duty of care is owed and, if so, what is its
scope: see Peabody Donation Fund v Sir Lindsay Parkinson & Co Ltd [1984] 3 All ER 529 at 533534, [1985] AC 210 at
239241, Yuen Kun-yeu v A-G of Hong Kong [1987] 2 All ER 705 at 709712, [1988] AC 175 at 190194, Rowling v
Takaro Properties Ltd [1988] 1 All ER 163 at 172, [1988] AC 473 at 501 and Hill v Chief Constable of West Yorkshire
[1988] 2 All ER 238 at 241, [1989] AC 53 at 60. What emerges is that, in addition to the foreseeability of damage,
necessary ingredients in any situation giving rise to a duty of care are that there should exist between the party owing the
duty and the party to whom it is owed a relationship characterised by the law as one of proximity or neighbourhood
and that the situation should be one in which the court considers it fair, just and reasonable that the law should impose a
duty of a given scope on the one party for the benefit of the other.
 Towards the end of Lord Bridges opinion he says ([1990] 1 All ER 568 at 581, [1990] 2 AC 605 at 627):

It is never sufficient to ask simply whether A owes B a duty of care. It is always necessary to determine the scope of
the duty by reference to the kind of damage from which A must take care to save B harmless: The question is always
whether the defendant was under a duty to avoid or prevent that damage, but the actual nature of the damage suffered is
relevant to the existence and extent of any duty to avoid or prevent it. (See Sutherland Shire Council v Heyman (1985) 60
ALR 1 at 48 per Brennan J.)

Caparo was a case concerning whether auditors owed a duty of care to individual shareholders or to members of the public
at large who relied on the accounts to buy shares in the company. It was a case of pure economic loss, and it is clear that their
Lordships consideration was directed mainly to the existence or otherwise of a duty to guard against such loss. The case did not
concern a duty to guard against personal injury.
It is, however, pointed out that in the passage which I have quoted not only are economic loss cases referred to but also Hill
v Chief Constable of West Yorkshire, which was a case of physical injury. That was a case where the mother and administratix of
a victim of murder brought an action under s 48(1) of the Police Act 1964 claiming damages against the chief constable in whose
area a lot of other previous offences had taken place. The headnote reads (see [1988] 2 All ER 238):

She contended that the circumstances of the earlier murders and attacks were so similar that it was reasonable to infer
that they had been committed by the same person, that it was foreseeable that unless apprehended that person would
commit further offences of the same type, that it was the duty of the police to use their best endeavours and exercise all
reasonable care and skill in apprehending him and that they had been in breach of that duty in the manner in which they
had carried out their investigation, thereby failing to detect S [the murderer] before he murdered [the plaintiffs] daughter.
The chief constable [in that action] applied to strike out [the plaintiffs] claim under RSC Ord 18, r 19 as disclosing no
reasonable cause of action. The question arose whether the police, in the course of carrying out their function of
suppressing crime, owed a duty of care to a member of the public who suffered injury through the activities of a criminal.
The judge held that the police owed no such duty and the Court of Appeal affirmed his decision. [The plaintiff] appealed to
the House of Lords.
282
Held In the absence of any special characteristic or ingredient over and above reasonable foreseeability of likely harm
which would establish proximity of relationship between the victim of a crime and the police, the police did not owe a
general duty to individual members of the public to identify and apprehend an unknown criminal even though it was
reasonably foreseeable that harm was likely to be caused to a member of the public if the criminal was not detected and
apprehended. Furthermore, even if such a duty did exist public policy required that the police should not be liable in such
circumstances. It followed that the chief constable could not be liable in damages for negligence because of failure of the
police to detect S [the murderer] before he murdered [the plaintiffs] daughter. The appeal would therefore be dismissed.

The case was referred to me principally on the public policy aspect of the decision, but it was also pointed out that in the
opinion of Lord Keith he says ([1988] 2 All ER 238 at 240, [1989] AC 53 at 59):

There is no question that a police officer, like anyone else, may be liable in tort to a person who is injured as a direct
result of his acts or omissions. So he may be liable in damages for assault, unlawful arrest, wrongful imprisonment and
malicious prosecution, and also for negligence. Instances where liability for negligence has been established are Knightly v
Johns [1982] 1 All ER 851, [1982] 1 WLR 349 and Rigby v Chief Constable of Northamptonshire [1985] 2 All ER 985,
[1985] 1 WLR 1242.

I shall refer to those two cases later in this judgment.

The decision that the police in this instance owed no duty of care to individual members of public was reached by extensive
reference to Home Office v Dorset Yacht Co Ltd [1970] 2 All ER 294, [1970] AC 1004, and Lord Keith said ([1988] 2 All ER 238
at 242243, [1989] AC 53 at 62):

The Dorset Yacht case was concerned with the special characteristics or ingredients beyond reasonable foreseeability
of likely harm which may result in civil liability for failure to control another man to prevent his doing harm to a third
The conclusion must be that although there existed reasonable foreseeability of likely harm to such as [the plaintiffs
daughter] if [the murderer] were not identified and apprehended, there is absent from the case any such ingredient or
characteristic as led to the liability of the Home Office in the Dorset Yacht case. Nor is there present any additional
characteristic such as might make up the deficiency. The circumstances of the case are therefore not capable of
establishing a duty of care owed towards Miss Hill by the West Yorkshire police.

And then on the public policy aspect, Lord Keith continues: That is sufficient for the disposal of the appeal. Consequently
all the rest of his opinion is obiter but he then goes on ([1988] 2 All ER 238 at 243244, [1989] AC 53 at 6364):

But in my opinion there is another reason why an action for damages in negligence should not lie against the police in
circumstances such as those of the present case, and that is public policy. In Yuen Kun-yeu v A-G of Hong Kong [1987] 2
All ER 705 at 712, [1988] AC 175 at 193, I expressed the view that the category of cases where the second stage of Lord
Wilberforces two-stage test in Anns v Merton London Borough [1977] 2 All ER 492 at 498, [1978] AC 728 at 752 might
fall to be applied was a limited one, one example of that category being Rondel v Worsley [1967] 3 All ER 993, [1969] 1
AC 191. Application of that second stage is, however, capable of constituting a separate 283 and independent ground for
holding that the existence of liability in negligence should not be entertained. Potential existence of such liability may in
many instances be in the general public interest, as tending towards the observance of a higher standard of care in the
carrying on of various different types of activity. I do not, however, consider that this can be said of police activities. The
general sense of public duty which motivates police forces is unlikely to be appreciably reinforced by the imposition of
such liability so far as concerns their function in the investigation and suppression of crime. From time to time they make
mistakes in the exercise of that function, but it is not to be doubted that they apply their best endeavours to the performance
of it. In some instances the imposition of liability may lead to the exercise of a function being carried on in a detrimentally
defensive frame of mind. The possibility of this happening in relation to the investigative operations of the police cannot
be excluded. Further, it would be reasonable to expect that if potential liability were to be imposed it would be not
uncommon for actions to be raised against police forces on the ground that they had failed to catch some criminal as soon
as they might have done, with the result that he went on to commit further crimes. While some such actions might involve
allegations of a simple and straightforward type of failure, for example that a police officer negligently tripped and fell
while pursuing a burglar, others would be likely to enter deeply into the general nature of a police investigation, as indeed
the present action would seek to do. The manner of conduct of such an investigation must necessarily involve a variety of
decisions to be made on matters of policy and discretion, for example as to which particular line of inquiry is most
advantageously to be pursued and what is the most advantageous way to deploy the available resources. Many such
 decisions would not be regarded by the courts as appropriate to be called in question, yet elaborate investigation of the facts
might be necessary to ascertain whether or not this was so. A great deal of police time, trouble and expense might be
expected to have to be put into the preparation of the defence to the action and the attendance of witnesses at the trial. The
result would be a significant diversion of police manpower and attention from their most important function, that of the
suppression of crime. Closed investigations would require to be reopened and retraversed, not with the object of bringing
any criminal to justice but to ascertain whether or not they had been competently conducted. I therefore consider that
Glidewell LJ, in his judgment in the Court of Appeal in the present case, was right to take the view that the police were
immune from an action of this kind on grounds similar to those which in Rondel v Worsley were held to render a barrister
immune from actions for negligence in his conduct of proceedings in court (see [1987] 1 All ER 1173 at 11831184, [1988]
QB 60 at 76).

Lord Templeman said ([1988] 2 All ER 238 at 245, [1989] AC 53 at 6465):

It may be, and we all hope that the lessons of the Yorkshire Ripper case have been learned, that the methods of
handling information and handling the press have been improved, and that co-operation between different police officers is
now more highly organised. The present action would not serve any useful purpose in that regard. The present action
could not consider whether the training of the West Yorkshire police force is sufficiently thorough, whether the selection of
candidates for appointment or promotion is defective, whether rates of pay are sufficient to attract recruits of the required
calibre, whether financial restrictions prevent the provision of 284 modern equipment and facilities or whether the
Yorkshire police force is clever enough and, if not, what can and ought to be done about it. The present action could only
investigate whether an individual member of the police force conscientiously carrying out his duty was negligent when he
was bemused by contradictory information or overlooked significant information or failed to draw inferences which later
appeared to be obvious. That kind of investigation would not achieve the object which [the plaintiff] desires. The
efficiency of a police force can only be investigated by an inquiry instituted by the national or local authorities which are
responsible to the electorate for that efficiency.

There are significant differences between Hills case and the case which is before me, and these in particular include firstly
the question in that case whether the police owed a duty to individual members of the public. In this case the question is whether
senior police officers owe a duty to those under their command. Secondly, the question in Hill was whether considered
operational decisions could be called in question. In this case the question is whether immediate decisions in the heat of a serious
public disorder can be called in question.
Mr Hall for the plaintiff argues that Caparo Industries plc v Dickman [1990] 1 All ER 568, [1990] 2 AC 605 is not in point
because it addresses claims for pure economic loss and not claims, as here, for personal injury or physical damage.
He referred me to the decision of Potts J in B v Islington Health Authority [1991] 1 All ER 825, [1991] 1 QB 638, a case of
personal injury concerning an operation on a pregnant woman which caused injury to her embryo child, and Potts J was there
referred to Caparo Industries plc v Dickman and to Murphy v Brentwood DC [1990] 2 All ER 908, [1991] 1 AC 398. He said
([1991] 1 All ER 825 at 830, [1991] 1 QB 638 at 644645):

In considering the submissions that have been made as to the nature of the duty of care and the approach which should
be adopted in its formulation I have had the speeches delivered by their Lordships in mind, in particular, those of Lord
Bridge and Lord Oliver in both cases and that of Lord Keith in the latter. Both these cases however were concerned with
the duty of care where the loss claimed was purely economic. Different considerations arise where the loss is caused by
physical damage, as Lord Bridge recognised in Caparo Industries plc v Dickman [1990] 1 All ER 568 at 574, [1990] 2 AC
605 at 618: One of the most important distinctions always to be observed lies in the laws essential approach to the
different kinds of damage which one party may have suffered in consequence of the acts or omissions of another. It is one
thing to owe a duty of care to avoid causing injury to the person or property of others. It is quite another to avoid causing
others to suffer purely economic loss. In the same case Lord Oliver said ([1990] 1 All ER 568 at 584585, [1990] 2 AC
605 at 632): it is now clear from a series of decisions in this House that, at least so far as concerns the law of the
United Kingdom, the duty of care in tort depends not solely on the existence of the essential ingredient of the foreseeability
of damage to the plaintiff but on its coincidence with a further ingredient to which has been attached the label proximity
and which was described by Lord Atkin in the course of his speech in Donoghue v Stevenson [1932] AC 562 at 581, [1932]
All ER Rep 1 at 12 as such close and direct relations that the act complained of directly affects a person whom the person
alleged to be bound to take care would know would be directly affected by his careless act. It must be remembered,
however, that Lord Atkin was using these words in the context of loss caused by physical damage where the existence of
the nexus between the careless 285 defendant and the injured plaintiff can rarely give rise to any difficulty. To adopt the
words of Bingham LJ in the instant case ([1989] 1 All ER 798 at 808, [1989] QB 653 at 686): It is enough that the
plaintiff chances to be (out of the whole world) the person with whom the defendant collided or who purchased the
offending ginger beer. Thus I proceed [Potts J continued] on the basis that the nature of the duty of care in cases
involving physical injury and consequential loss remains as it was before the decisions of the House of Lords in Caparo
Industries plc v Dickman [1990] 1 All ER 568, [1990] 2 AC 605 and Murphy v Brentwood DC [1990] 2 All ER 908, [1991]
1 AC 398. In Donoghue v Stevenson [1932] AC 562, [1932] All ER Rep 1 the foresight of a reasonable man was accepted
as a general test as to whether a duty of care existed. In Bourhill v Young [1942] 2 All ER 396 at 403, [1943] AC 92 at 104,
where the issues was whether the presence of a pregnant woman at the scene of an accident was reasonably foreseeable,
Lord Macmillan said: The duty to take care is the duty to avoid doing or omitting to do anything the doing or omitting to
do which may have as its reasonable and probable consequence injury to others and the duty is owed to those to whom
injury may reasonably and probably be anticipated if the duty is not observed. In my view this formulation of the duty is
appropriate in the present case and I respectfully adopt it.

Mr Hall submits that in this case there is proximity and sufficient foreseeability of probable injury so that the duty of care is
established and that the question shifts to whether as a matter of fact the duty was broken. The facts averred, says Mr Hall, must
be taken at this stage as provable, and those facts amount to a breach of the duty. The plaintiff, he says, was so deployed that the
general risk of injury which he accepts existed was increased.
Mr Hall further submits that the scope of s 48 of the Police Act 1964 is wide and that Parliament could have excluded or
limited the liability of chief officers of police had this been an intention. In my view s 48 is concerned with the fact of vicarious
liability and does not bear on the extent or definition of the torts for which the chief officer of police is to be vicariously liable.
On the issue of public policy, Mr Hall expressly limited the scope of the plaintiffs case in the way that I have indicated and
submitted that the case therefore did not raise wide-ranging considerations which would require extensive research and evidence.
The formulation by Potts J is plainly the law where there is personal injury and the injury is perpetrated by the person said to
owe the duty of care. That is not, however, this case, where the plaintiffs injury was perpetrated by the rioting miners whom the
plaintiff with others was deployed to control. In this sense, the present case does not fall directly within the authorities which
Potts J cited and followed. It may be that for such an intermediate case the considerations in the Caparo case come into play, but,
as will appear, I do not consider that this case should be decided on those lines.
 I was then referred to two cases directly concerned with liability of police officers, the first of which is Knightley v Johns
[1982] 1 All ER 851, [1982] 1 WLR 349. It is a decision of the Court of Appeal and concerned a traffic accident at the exit of a
tunnel carrying one-way traffic. A number of policemen came on the scene including an inspector, and the inspector forgot to
close the tunnel. In consequence of this, he ordered two police officers on motor cycles, one of whom was the plaintiff, to go
back and close the tunnel. The headnote reads (see [1982] 1 All ER 851):
286

The two officers then rode back through the tunnel against the oncoming traffic. Near the entrance of the tunnel the
plaintiff collided with an oncoming motorist and was injured. The motorist was found on the facts not to have been
negligent. Both the inspector in ordering the plaintiff to ride back through the tunnel in the face of the oncoming traffic
and the plaintiff in carrying out the order acted contrary to, and in breach of, their police forces standing orders for road
accidents in the tunnel

Held (1) The inspector was negligent in not closing the tunnel before he gave orders for that to be done and also in ordering or
allowing his subordinates, including the plaintiff, to carry out the dangerous manoeuvre of riding back along the tunnel contrary
to the standing orders for road accidents in the tunnel
The case then went on to consider other points which are not material to the case before me.
It is clear from that case that the basis upon which the inspector was held to be negligent depended on the two points, firstly,
that he was negligent in not closing the tunnel and, secondly, that he was negligent in ordering his subordinates to do a very
dangerous thing contrary to explicit standing orders. The standing orders are set out in terms in the judgment of Stephenson LJ
(see [1982] 1 All ER 851 at 856857, [1982] 1 WLR 349 at 356), and he says, having reviewed the facts ([1982] 1 All ER 851 at
858, [1982] 1 WLR 349 at 357):

That satisfies me that he [the inspector] was negligent in not closing the tunnel and in ordering or allowing his
subordinates to do a very dangerous thing contrary to standing orders.

That case shows that a police inspector may owe a duty of care to an officer under his command in what may broadly be
called operational circumstances where his decisions were no doubt taken somewhat in the heat of the moment. The duty may
be characterised as a duty to comply with specific standing orders and the negligence, as I have indicated, was a failure to close
the tunnel and a breach of quite specific provisions of the standing orders.
The second case is Rigby v Chief Constable of Northamptonshire [1985] 2 All ER 985, [1985] 1 WLR 1242, a decision of
Taylor J. The brief facts taken from the headnote were (see [1985] 2 All ER 985):

In 1977 the plaintiffs shop was burnt out when police fired a canister of CS gas into the building in an effort to flush
out a dangerous psychopath who had broken into it. The canister set the shop ablaze. At the time the canister was fired
into the shop there was no fire-fighting equipment to hand, as a fire engine which had been standing by had been called
away.

The case considers whether there was a cause of action in trespass and held that there was not, and then goes on to consider
whether a claim in negligence would succeed, and the brief findings there were that since there was a real and substantial fire risk
involved in firing the gas canister into the building, and since that risk was only acceptable if there was equipment available to
put out a potential fire at an early stage, the defendant, the police officer in charge, had been negligent in firing the gas canister
when no fire-fighting equipment was in attendance.
The plaintiff in that case was a particular member of the public whose shop the dangerous psychopath had occupied. That
again was an operational decision but a more considered one. There appears to have been no particular need to fire the 287
canister at the particular moment that it was fired rather than, for instance, half an hour later. As with Knightley v Johns the
officer in question made a specific identified error.
The particular facts of the case before me are those pleaded in paras 3 and 4 of the statement of claim. The plaintiff was one
of a number of police officers deployed to control serious public disorder by a vast number of picketing miners. He was injured
by some of those disorderly miners. Having considered Hill v Chief Constable of West Yorkshire on the one hand and Knightley v
Johns and Rigby v Chief Constable of Northamptonshire on the other, in my judgment, as a matter of public policy, if senior
police officers charged with the task of deploying what may or may not be an adequate force of officers to control serious public
disorder are to be potentially liable to individual officers under their command if those individuals are injured by attacks from
rioters, that would be significantly detrimental to the control of public order.
It will no doubt often happen that in such circumstances critical decisions have to be made with little or no time for
considered thought and where many individual officers may be in some danger of physical injury of one kind or another. It is
not, I consider, in the public interest that those decisions should generally be the potential target of a negligence claim if rioters
do injure an individual officer, since the fear of such a claim would be likely to affect the decisions to the prejudice of the very
task which the decisions are intended to advance. Accordingly, in my judgment, public policy requires that senior police officers
should not generally be liable to their subordinates who may be injured by rioters or the like for on the spot operational decisions
taken in the course of attempts to control serious public disorder. That, in my judgment, should be the general rule in cases of
policing serious public disorders. There may be exceptions where the plaintiffs injuries arise, as in Knightley v Johns, from
specifically identified antecedent negligence or specific breach of identified regulations, orders or instructions by a particular
senior officer. There is no such specific allegation in the statement of claim in this case and none has been suggested in
argument. It follows that the plaintiffs claim against the third defendant taken at its pleaded highest is bound to fail and that the
claim should be struck out. I therefore allow this appeal.

Appeal allowed.

Solicitors: Hammond Suddards, Bradford; Russell Jones & Walker.

K Mydeen Esq Barrister.

288
[1991] 4 All ER 289

Killick v Roberts
LANDLORD & TENANT; Tenancies: CONTRACT

COURT OF APPEAL (CIVIL DIVISION)

NEILL, MUSTILL AND NOURSE LJJ
14 MAY, 13 JUNE 1991

Rent restriction Protected tenancy Misrepresentation Fraudulent misrepresentation Rescission Effect of rescission
Landlord induced by fraudulent misrepresentation to grant tenant protected tenancy Protected tenancy expiring by effluxion of
time and statutory tenancy arising Rescission of protected tenancy Whether rescission of protected tenancy bringing statutory
tenancy to an end Rent Act 1977, ss 2(1)(a), 98(1).

The plaintiff owned a bungalow which she let out between Easter and the end of October each year as a holiday home and during
the winter months at a reduced rental to persons requiring short-term accommodation. The defendant fraudulently represented to
the plaintiff that he was having a house built for him which would be ready for his occupation at the end of February 1989, and
on the faith of that representation the plaintiff let the bungalow to him from 30 November 1988 to 1 March 1989 under a written
agreement, with the option to extending the tenancy for a further four weeks at a rent of 40 per week. The tenancy was a
protected tenancy for the purposes of the Rent Act 1977. The plaintiff did not, prior to the commencement of the tenancy, give to
the defendant notice in writing that possession might be recovered under Case 13 in Sch 15 to the 1977 Act. On 6 February 1989
the defendant exercised the option to extend the tenancy for a further four weeks until 29 March 1989, but failed to vacate the
bungalow on that date and thereafter became a statutory tenant by virtue of s 2(1)(a)a of the 1977 Act. The plaintiff brought an
action for possession. The judge held that in the circumstances the plaintiff was entitled to have the tenancy agreement rescinded
and ordered that the plaintiff should recover possession. The defendant appealed, contending that by virtue of s 98(1) b of the
1977 Act, which provided that the court could only make an order for possession of a statutory tenancy on the grounds specified
in Sch 15 none of which had any application in the circumstances, the recission of the tenancy agreement had not brought to an
end his statutory tenancy of the bungalow.
________________________________________
a Section 2(1), so far as material, is set out at p 293 a, post
b Section 98(1), so far as material, provides: a court shall not make an order for possession of a dwelling-house which is for the time
being let on a protected tenancy or subject to a statutory tenancy unless the court considers it reasonable to make such an order and ( b)
the circumstances are as specified in any of the Cases in Part I of Schedule 15 to this Act.

Held The plaintiff was entitled to have the tenancy agreement rescinded since she had been induced to enter into it by the
defendants fraud and that remedy, remained available to her notwithstanding that the tenancy had expired by effluxion of time.
Moreover, since the policy of the 1977 Act was to protect those who had been contractual tenants and not to protect a person who
was not entitled to occupy the premises in the first place, it followed that the effect of rescission was to restore the parties to the
position they would have been in if the agreement had not been made, and on rescission of the protected tenancy the statutory
tenancy which had sprung from it was brought to an end. Accordingly the appeal would be dismissed (see p 292 d e and p 293 d
to p 294 b, post).
289
Dicta of Denning LJ in Solle v Butcher [1949] 2 All ER 1107 at 1122 and of Asquith LJ in Haberman v Westminster
Permanent Building Society [1950] 2 All ER 16 at 20 applied.

Notes
For protected tenancies, see 27 Halsburys Laws (4th edn) para 580, and for cases on the subject, see 31(2) Digest (Reissue) 976
979, 78417866.
For statutory tenancies, see 27 Halsburys Laws (4th edn) para 590, and for cases on the subject, see 31(2) Digest (Reissue)
10251031, 81238177.
For the Rent Act 1977, ss 2, 98, see 23 Halsburys Statutes (4th edn) (1989 reissue) 522, 594.

Cases referred to in judgments

Haberman v Westminster Permanent Building Society [1950] 2 All ER 16, [1950] 2 KB 294, CA.
Keeves v Dean, Nunn v Pellegrini [1924] 1 KB 685, [1923] All ER Rep 12, CA.
Peters v Batchelor (1950) 100 LJ 718, CA.
Solle v Butcher [1949] 2 All ER 1107, [1950] 1 KB 671, CA.

Cases also cited

Johnson v Agnew [1979] 1 All ER 883, [1980] AC 367, HL.
Lovibond (John) & Sons Ltd v Vincent [1929] 1 KB 687, [1929] All ER Rep 59, CA.
Sutton v Dorf [1932] 2 KB 304, [1932] All ER Rep 70.
Wilkins v Carlton Shoe Co Ltd (1930) 46 TLR 415, CA.

Appeal
The defendant, Brian Henry Edmund Roberts, appealed from the judgment of Mr Recorder R E Newbold given in the Plymouth
County Court on 1 August 1990 ordering that the tenancy agreement dated 30 November 1988 made between the plaintiff,
Genevieve Rosemary Killick, and the defendant in relation to the premises known as Tremardy, Kiln Lane, Stokenham,
Kingsbridge, Devon, be rescinded and that the defendant give up possession of the premises to the plaintiff. The facts are set out
in the judgment of Nourse LJ.

Christopher Naish for the defendant.

Stephen Lowry for the plaintiff.

Cur adv vult

13 June 1991. The following judgment was delivered.

NOURSE LJ (giving the first judgment at the invitation of Neill LJ). This appeal raises a question under the Rent Act 1977.
Does an order for the rescission of a protected tenancy by reason of a fraudulent misrepresentation on the part of the tenant bring
to an end a statutory tenancy which has taken effect on the expiry of the protected tenancy?
The landlord and the plaintiff in the action is Mrs Genevieve Rosemary Killick. She is the owner of a bungalow known as
Tremardy, Kiln Lane, Stokenham, Kingsbridge, Devon. Since about 1986 she has usually let it as a holiday bungalow between
Easter and the end of October in each year and, during the winter months, at a reduced rental to persons requiring short-term
accommodation. By a written agreement dated 30 November 1988 she let the bungalow to the 290 defendant, Mr Brian Henry
Edmund Roberts, from that date until 1 March 1989, with the option of extending weekly for a further four weeks, at a rent of
40 per week. The agreement did not contain any covenants on the part of either party. As was later found to have been the case,
the plaintiff did not, as she could have done, give notice in writing to the defendant that possession might be recovered under
Case 13 in Sch 15 to the 1977 Act. The other statutory requirements having been satisfied, it is agreed therefore that the tenancy
was a protected tenancy for the purposes of that Act.
By a letter addressed to the plaintiff dated 6 February 1989 the defendant duly exercised his option to extend the tenancy for
a further four weeks, ie until 29 March 1989. He did not vacate the bungalow on that date. Thereafter he became the statutory
tenant of it by virtue of s 2(1)(a) of the 1977 Act. On 30 March he wrote to the plaintiff asking her to extend the tenancy for a
further four weeks. In a letter of 3 April she refused that request. On 6 April she issued a summons in the Plymouth County
Court claiming possession of the bungalow on the ground that the tenancy had expired on 29 March. On 19 April the defendant
put in an informal defence raising points which were later abandoned.
On 26 May 1989 the defendant served an amended defence alleging that the plaintiff had not, prior to the commencement of
the tenancy, given him written notice that possession of the bungalow might be required under Case 13 in Sch 15 to the 1977 Act.
He claimed the protection of that Act. On 30 May amended particulars of claim were served, in which it was alleged that prior to
the commencement of the tenancy the plaintiff had given the defendant a written notice pursuant to Case 13. On 20 October
1989 reamended particulars of claim were served. They raised additional claims for breaches by the defendant of alleged
obligations to keep the bungalow and its contents in good and tenantable repair and to occupy it for his sole occupation as a
residence only and not to carry on any trade or business there. It was also alleged that, at the time of making the agreement and
in order to induce the plaintiff to let the bungalow to him, the defendant falsely represented to her that he was having a house
built for him elsewhere which would be ready for his occupation at the end of February 1989, and that the plaintiff had acted on
the faith of that representation in agreeing to let the bungalow to him.
The trial took place before Mr Recorder R E Newbold in April and August 1990. At the outset he decided that the plaintiff
could not rely on Case 13 and the trial proceeded on the other issues. In his judgment delivered on 1 August the learned recorder,
while deciding that there had been no breaches of the alleged obligations as to repair and user, found as a fact that the defendant
had made a fraudulent misrepresentation, as pleaded in the reamended particulars of claim, which had had the effect of inducing
the plaintiff to enter into the tenancy agreement. He also found that she had sustained financial loss as a result thereof. Having
referred to several authorities, he held that the plaintiff was entitled to have the tenancy agreement rescinded. He assumed, rather
than decided, that that would have the effect of determining the defendants statutory tenancy of the bungalow. He also found
that if the plaintiff had not let it to the defendant she would have let it to someone who would have caused no difficulty in ending
the agreement at the appropriate date. Although the contrary was submitted in this court, I am satisfied that there was evidence
on which that finding could properly be made.
The recorders order dated 1 August 1990 provided, first, that the tenancy agreement be rescinded, secondly, that the
plaintiff should forthwith recover possession of the bungalow from the defendant and, thirdly, that the plaintiff 291 should
recover damages, ie mesne profits, in the sum of 4,870. It is agreed that 2,800 of that amount represented mesne profits at the
rate of 40 per week, ie at the rate equivalent to the rent paid by the defendant, and that the balance of 2,070 represented the
amount of the extra rent which the plaintiff would have got if she had been able to let the bungalow on holiday lettings during the
summer months. As to costs, it was ordered that, save that the plaintiff should recover the costs of issue of process, there should
be no order up to 20 October 1989 (the date on which the reamended particulars of claim were served), but that thereafter the
plaintiff should have her costs to be taxed on scale 3.
On his appeal to this court the defendant, through Mr Naish, has submitted, first, that the rescission of the tenancy agreement
did not bring to an end his statutory tenancy of the bungalow, secondly, that the loss of extra rent on holiday lettings was caused
by the plaintiffs failure to serve a notice pursuant to Case 13 and, thirdly, that the recorder erred in principle in not giving the
defendant all his costs up to 20 October 1989 and a proportion of them thereafter. Only the first of these submissions has raised a
question of any substance.
As to that question, it is clear that the plaintiff, having been induced to enter into the tenancy agreement by the fraud of the
defendant, was entitled to have it rescinded. Although it may be unusual, and in a sense contradictory, for a tenancy to be
rescinded after it has expired by effluxion of time, I do not doubt that the remedy remains available. The effect of rescission is,
so far as practicable, to restore the parties to the position they would have been in had the contract not been made. Moreover,
being an equitable remedy, it is sometimes granted only on terms. On either count it may be appropriate for the rights of the
parties to be adjusted even though the contract no longer subsists.
What effect did the order for rescission have in this case? In order to answer that question, I must start by supposing,
contrary to the true facts, that the order was made at a time when the tenancy was still subsisting. It appears clear that in that
state of affairs the right to a statutory tenancy would have perished with the protected tenancy: see Solle v Butcher [1949] 2 All
ER 1107, [1950] 1 KB 671, where a subsisting lease of rent protected premises was rescinded on the ground of a common
mistake of fact, the landlord being put on terms to grant the tenant a licence and then a lease of the premises at the full permitted
rent. Denning LJ said ([1949] 2 All ER 1107 at 1122, [1950] 1 KB 671 at 697):

If the tenant does not choose to accept the licence or the new lease, he must go out. He will not be entitled to the
protection of the Rent Restrictions Acts because, the lease being set aside, there will be no initial contractual tenancy from
which a statutory tenancy can spring.

The observations of Asquith LJ in Haberman v Westminster Permanent Building Society [1950] 2 All ER 16 at 20, [1950] 2
KB 294 at 301302 are to much the same effect. It seems probable that a similar view was taken by yet another division of this
court in Peters v Batchelor (1950) 100 LJ 718. However, the report is very brief and it does not specifically state that the
rescission of the lease would necessarily bring to an end the tenants statutory right to remain in occupation.
Accordingly, where a protected tenancy is rescinded while it is still subsisting the tenant does not become a statutory tenant
of the dwelling-house because there is no longer any contractual tenancy from which it can spring. However, Mr Naish
submitted that the position is different where the contractual tenancy has expired before it is rescinded. He pointed to the fact
that here the plaintiff did not issue her proceedings until about a week after the tenancy agreement had expired, so that the
defendant had already become the statutory tenant of the bungalow. He relied on s 2(1)(a) of the 1977 Act:
292

Subject to this Part of this Act(a) after the termination of a protected tenancy of a dwelling-house the person who,
immediately before that termination, was the protected tenant of the dwelling-house shall, if and so long as he occupies the
dwelling-house as his residence, be the statutory tenant of it

Mr Naish then relied on s 98, which provides that the court shall not make an order for possession of a dwelling-house which is
for the time being subject to a statutory tenancy, except on familiar grounds which would only have been available to the plaintiff
here if she had served a written notice under Case 13. Mr Naish emphasised that a statutory tenants right of occupation is
personal to himself and incapable of transmission to a third party except in the special cases provided for by the Act: see eg
Keeves v Dean, Nunn v Pellegrini [1924] 1 KB 685, [1923] All ER Rep 12.
 Mr Lowry, for the plaintiff, pointed out that on facts such as we have here the defendants fraud could not have been
discovered until after the tenancy had expired. It was only then that the plaintiff could know that the defendant was not going to
give up possession and that what he had told her about having another house built for him elsewhere was false. Mr Lowry
submitted that it would be an unjustifiable exception to the rule that fraud unravels everything if the statutory tenancy could
survive when the protected tenancy could not.
In my judgment the submissions of Mr Lowry are to be preferred. A statutory tenancy cannot arise unless there is a
protected tenancy from which it can spring. If the effect of the rescission of the protected tenancy is, so far as practicable, to
restore the parties to the position they would have been in had the tenancy not been granted, it would seem to follow that the
statutory tenancy ought to come to an end on the rescission of the protected tenancy. Admittedly the extinction of a statutory
right is different from the extinction of a contractual right. In deciding whether there can be an extinction in the first category we
must look at the policy of the statute under which the right arises. The policy of the 1977 Act is to protect those who have been
contractual tenants. It is not to protect someone who, having been deprived of his contractual tenancy, is adjudged not to have
been entitled to occupy the premises in the first place. I therefore see no reason in principle why a statutory tenancy should
survive the rescission of a protected tenancy which has already expired. On this approach no distinction is to be made between a
rescission ordered on the ground of a fraudulent misrepresentation by the tenant and one ordered, for example, on the ground of a
common mistake of fact. But, if I was wrong in thinking that no such distinction ought to be made, I would nevertheless hold
that it cannot on any footing be the policy of the 1977 Act that a statutory tenancy which has sprung from a protected tenancy
obtained by fraud should survive the rescission of the protected tenancy. For these reasons I would decide the first question in
favour of the plaintiff.
The second and third questions must be decided in like manner. In regard to the second question Mr Naish sought to argue
that it was the plaintiffs failure to serve a notice under Case 13 which caused the defendant to remain in possession. That point
is unarguable. The remaining in possession and the consequential loss to the plaintiff of the extra rent on holiday lettings was
directly caused by the fraudulent misrepresentation which procured the grant of the tenancy.
As to the third question, it is true that the learned recorder, instead of making no order as to the defendants costs up to 20
October 1989, might have ordered the plaintiff to pay his costs up to that date. However, I cannot say that he erred in principle in
not making such an order, particularly when he had found that the plaintiff had only had to go to the court because of the fraud of
the defendant. 293 In regard to the period after 20 October 1989 Mr Naish argued that, since the plaintiff had pursued the action
on four different bases, on only one of which she succeeded, there ought to have been an apportionment of the costs between the
successful and the unsuccessful claims. Again that was a matter well within the recorders discretion and his decision cannot be
interfered with by this court.
Having decided all three questions in favour of the plaintiff, I would dismiss this appeal accordingly.

MUSTILL LJ: I agree.

NEILL LJ: I also agree.

Appeal dismissed.

Solicitors: Cornish & Co, Tolnes; Nash & Co, Plymouth.

LI Zysman Esq Barrister.

[1991] 4 All ER 294

Doyle and others v Northumbria Probation Committee

CIVIL PROCEDURE

QUEENS BENCH DIVISION

HENRY J
23 FEBRUARY, 5, 22 MARCH 1991

Statement of claim Striking out Private law action Public law defence Plaintiff bringing action against public authority
for breach of contract Authority claiming contract ultra vires Whether plaintiff obliged to proceed by judicial review
Whether plaintiffs action should be struck out.

The plaintiffs were employed as probation officers by the defendant probation authority, which was a body corporate established
under statutory powers. In 1975 the authority decided to pay its probation officers home-to-office mileage allowance each day
regardless of whether an officer used his car on official business, that mileage allowance being incorporated in the probation
officers conditions of service and contracts of employment. In 1981 the authority decided to discontinue the home-to-office
mileage allowance because it considered the allowance to be too expensive. The probation officers made it clear that they
considered that such action would be a breach of their contracts of employment. Nevertheless, the authority started to phase out
the allowance from 1 June 1983 and it was finally withdrawn on 1 June 1985. On 27 June 1983 the plaintiffs sent a letter before
action, claiming that the authority was in breach of contract. In October 1984 the authority raised for the first time the defence
that it had no statutory power to pay the allowances. On 24 February 1989, which was just before the expiry of the limitation
period for bringing an action, the plaintiffs, representing 173 other probation officers, issued a writ claiming damages for breach
of contract. The authority applied to strike out the writ and statement of claim and to dismiss the action on the ground that the
action raised questions of public law which ought properly to have been the subject of proceedings by way of judicial review.
294

Held Where a public authority was being sued in an action commenced by writ to enforce a private law claim, such as breach
of contract, and raised by way of defence a public law issue, such as whether the authority had had power to contract, in
circumstances such that the plaintiff was out of time to proceed by way of judicial review, then, applying the principle that a
plaintiff ought not to be required to proceed by way of judicial review in circumstances where a private law right which he sought
to invoke would or might in consequence be adversely affected, the plaintiffs action would not be struck out as an abuse of
process. Accordingly, since the plaintiffs had a genuine private law claim, seeking private law remedies, and their claim in no
way depended on the plaintiffs asserting or proving any public law infringement of their rights and since striking out their claim
and requiring them to proceed by way of judicial review would not merely adversely affect the plaintiffs private law rights, but
would effectively divest them of those rights because, due to the lapse of time, leave to apply for judicial review would not be
granted, the court would not strike out the claim. The application would therefore be dismissed.
Wandsworth London BC v Winder [1984] 3 All ER 976 applied.
OReilly v Mackman [1982] 3 All ER 1124, Cocks v Thanet DC [1982] 3 All ER 1135 and Davy v Spelthorne BC [1983] 3
All ER 278 considered.

Notes
For the scope of judicial review and when judicial review is an exclusive remedy, see 1(1) Halsburys Laws (4th edn reissue)
paras 6465.

Cases referred to in judgment

Cocks v Thanet DC [1982] 3 All ER 1135, [1983] 2 AC 286, [1982] 3 WLR 1121, HL.
Davy v Spelthorne BC [1983] 3 All ER 278, [1984] AC 262, [1983] 3 WLR 742, HL.
Gillick v West Norfolk Health Authority [1985] 3 All ER 402, [1986] AC 112, [1985] 3 WLR 830, HL.
Letang v Cooper [1964] 2 All ER 929, [1965] 1 QB 232, [1964] 3 WLR 573, CA.
McLaren v Home Office [1990] ICR 824, CA.
OReilly v Mackman [1982] 3 All ER 1124, [1983] 2 AC 237, [1982] 3 WLR 1096, HL.
Pyx Granite Co Ltd v Ministry of Housing and Local Government [1959] 3 All ER 1, [1960] AC 260, [1959] 3 WLR 346, HL.
R v Derbyshire CC, ex p Noble [1990] ICR 808, CA.
R v East Berkshire Health Authority, ex p Walsh [1984] 3 All ER 425, [1985] QB 152, [1984] 3 WLR 818, CA.
Wandsworth London BC v Winder [1984] 3 All ER 976, [1985] AC 461, [1984] 3 WLR 1254, HL; affg [1984] 3 All ER 83,
[1985] AC 461, [1984] 3 WLR 563, CA.

Summons
By summons dated 15 June 1990 the defendants, the Northumbria Probation Committee, applied to strike out the writ issued on
24 February 1989 and the statement of claim served on 22 May 1990 and to dismiss the action brought against the committee by
the plaintiffs, Patrick Joseph Doyle, Lynn Margaret Crowther, Wendy Dale, John Davies and Roger Kennington, claiming
damages for breach of the plaintiffs contracts of employment, on the grounds that the action raised questions of public law which
ought properly to be or have been the subject of proceedings by way of judicial review and the bringing of a civil action 295 was
an abuse of process. The summons was heard in chambers but judgment was given by Henry J in open court. The facts are set
out in the judgment.

Brian Langstaff for the plaintiffs.

Derrick Turriff for the committee.

Cur adv vult

22 March 1991. The following judgment was delivered.

HENRY J: The Northumbria Probation Committee is a statutory corporation established under the Powers of Criminal Courts
Act 1973. It is responsible for the probation service in its area, and is the employer of the probation officers in that area. The
plaintiffs in this action are or were probation officers employed by the committee. There are five named plaintiffs, and by
agreement the action is a test case on behalf of a further 173.
In 1975 the committee decided to pay the probation officers employed by it home-to-office mileage in their motor cars, up to
a daily maximum of ten miles each way, and irrespective of whether the probation officer had to use his car on official business
on the day in question. These agreements were incorporated in the local Code of Conditions of Service, and are to be found in
the March 1981 edition in section 2, paras 13 and 14. These conditions of service were, as the name implies, part of the contracts
of employment of probation officers.
In 1981 the committee wished to discontinue these payments as home-to-office mileage was proving very expensive.
However, the probation officers and their union would not agree to this. Negotiation on this subject was deferred while a similar
dispute between the county council and their staff was resolved. Negotiations between the committee and the probation officers
were reopened at the end of 1982, but agreement between them was not reached, and on 18 January 1983 the committee indicated
that the allowances would be withdrawn. The probation officers made it clear that they would regard that as a breach of contract,
and the local union branch indicated that they intended to take legal proceedings at the appropriate time.
On 28 February 1983 the then chief probation officer wrote to all probation officers informing them that the relevant
allowance would be phased out from 1 June 1983 and would be withdrawn with effect from 1 June 1985. The plaintiffs case is
that that letter was an anticipatory breach of their service contracts, and that as from 1 June 1983 the defendants were in actual
breach of the contracts of employment with the probation officers. On 27 June 1983 the solicitors for the plaintiffs sent a letter
before action to the committee, and on 29 June 1983 the secretary to the committee replied denying liability. So the first battle
line was drawn.
At this time the nature of the dispute was viewed by both sides as being governed by the law of contract, uncomplicated by
any limit on the committees powers. The limitation period for such an action is six years. Since the repeal in 1954 of the
provisions originally to be found in the Public Authorities Protection Act 1893, our law has had no different or shorter period of
limitation where an action commenced by writ is brought against a public body.
The plaintiffs made full use (if that is the right word) of those six years, only issuing their writ on 24 February 1989. Even
then they did not serve it on the committee for the best part of 11 monthsagain a period of delay which the rules then allowed
them. By then it was a very stale claim indeed, albeit one 296 permitted by the rules. But the application before me is not one to
dismiss for want of prosecution.
In the years that have passed from June 1983, there has been correspondence between the parties. That correspondence
finally seems to have petered out in about April 1988, until revived by the writ that I am here concerned with. But by October
1984 the nature of the dispute had broadened, with the committee taking as their principal line of defence the fundamental point
that they had never had power under the relevant legislation to pay that particular allowance. This point was inconsistent with
their earlier decision to phase out the payments and represented a complete change of front on their part.
The plaintiffs challenge this interpretation of the committees powers and there was an exchange of counsels opinions on
this point, with conflicting views being put forward. From the way that Mr Turriff (on behalf of the committee) has presented the
case, it seems that this issue of the committees powers may be the only live issue on liability if the action is to proceed. It does
not seem that the committee intend to justify their actions under the law of contract. In the correspondence that I have seen,
however, the committee at no time limited themselves solely to the ultra vires defence. But, by the time the plaintiffs commenced
their action, they knew at least that a major issue in the case was a public law issue relating to the committees powers to
authorise the payments.
The statement of claim was served on the committee on 22 May 1990, and on 15 June 1990 the committee took out a
summons to strike out the writ and statement of claim and to dismiss the action under RSC Ord 18, r 19(1)( b). Helpfully a
schedule was attached to that summons, setting out the grounds of the application which is the one presently before me. It is
sufficient for me to quote two paragraphs of those grounds:

(9) The Committee contend that the terms of the agreement relied on by the Plaintiffs as entitling them to payment of
the sums claimed are ultra vires the Committee.
(10) In the circumstances this action raises questions of public law which ought properly to be or have been the subject
of proceedings by the Plaintiffs by way of judicial review and the bringing and pursuing of proceedings by way of ordinary
civil action is an abuse of the process of the Court.

The inspiration for this way of proceeding is to be found in the well-known case of OReilly v Mackman [1982] 3 All ER
1124, [1983] 2 AC 237 in the speech of Lord Diplock. I summarise the points he makes.
(i) RSC Ord 53 provides a procedure whereby every type of remedy for the infringement of the rights of an individual that
are entitled to protection in public law can be obtained.
(ii) Built into those procedures are protections against groundless, unmeritorious or tardy harassment of public bodies.
(iii) Such protections are necessary to satisfy the public policy which requires speedy certainty in the resolution of such
disputes in the interests both of good administration and the protection of rights of third parties indirectly affected by the
challenged public law decision.
(iv) So, where an action is commenced by way of writ where the challenge should have been mounted under Ord 53, unless
such an action can be struck out summarily as an abuse of the process of the court, then the whole purpose of the public policy
towards which Ord 53 is directed would be defeated.
Under Ord 53, where the plaintiff wrongly brings his claim in the form of an application for judicial review, the court has
power to order that claim to be continued as though it had been commenced by writ. But, where a claim is wrongly commenced
by writ, the court has no power to convert it into a claim 297 for judicial review. And, if the plaintiffs were now to bring a free-
standing application for judicial review, their delay has been such that I would find it difficult to envisage the court granting leave
to them to apply for such judicial review. Therefore it seems to me that, if the committee succeed in the application that they are
making, that will be the end of the plaintiffs claim.
It seems to me that the correct analysis of the facts that I have analysed are these. The 1975 decision of the committee to
pay home-to-office mileage was a public law decision because of the statutory underpinning to the probation officers conditions
of employment. If this payment had been made ultra vires the decision could have been challenged by way of judicial review by
an interested party, for instance a ratepayer, provided of course that he did so promptly. There was no challenge to that decision.
In 1983 the committee commenced phasing out payment of that allowance. Their decision to do this might or might not
have been in breach of the probation officers contracts of employment, but could not have been ultra vires or a breach of their
public law duties.
That decision to discontinue was not prompted by the view that they had acted ultra vires in paying the allowance, as is
obvious from the fact that the payments were phased out and not discontinued immediately.
In these circumstances, had any action been commenced by the plaintiffs in 1983, realistically any such action would have
had to have been an action by writ for breach of the contracts of employment. No doubt had then been cast on the committees
power to make the payments in the first place, and it is not incumbent on employees of a public authority faced with a prima facie
breach of contract to investigate or prove that the public body which employed them had power to contract with them on the
terms agreed.
Accordingly, it seems to me clear that, in 1983: (a) the plaintiffs had a good private law cause of action for breach of
contract, which they could commence at any time within six years; and (b) had they then applied to proceed by way of judicial
review, the application would very likely have been stayed, as the applications in R v East Berkshire Health Authority, ex p Walsh
[1984] 3 All ER 425, [1985] QB 152 and R v Derbyshire CC, ex p Noble [1990] ICR 808 (cases that I refer to later) were.
It is clear to me that the plaintiffs then had a cause of action for breach of contract. By cause of action I mean a factual
situation, the existence of which entitles one person to obtain from the court a remedy against another person (per Diplock LJ in
Letang v Cooper [1964] 2 All ER 929 at 934, [1965] 1 QB 232 at 242). That accrued cause of action was a genuine private law
claim: it was not a public law challenge disguised as a private law action. Accordingly, no leave was required to bring it at any
time within the six year limitation period, and the financial elements of the relief claimed were not discretionary.
When the situation changed in October 1984, when the ultra vires point was taken, after that it was clear that the committee
were relying on a public law defence. So then a clear public law issue was introduced into the dispute, but by the committee. At
this time the plaintiffs had not issued their writ, and they did not do so until the end of the period private law allowed them, that is
to say for another four and a half years.
If the committee are right, first, in their contention that their 1975 payments were ultra vires and also that, as a result of this,
the matter cannot be decided in an action brought by writ but must be litigated under Ord 53, then their second thoughts in 1984
as to the extent of their powers in 1975 had profound effects on the plaintiffs accrued causes of action. These effects would be:
first, leave would be required; second, the limitation period would be drastically reduced; third, it would be more difficult for
them to obtain cross-examination and discovery of 298 documents; and, fourth, the financial remedies they sought would
become, in theory at any rate, discretionary. Even more fundamentally, if the plaintiffs should in 1984 have proceeded by way of
judicial review, they are, as I have said, unlikely to get leave so to proceed now.
With that introduction, I come now to the rule in OReilly v Mackman. The ratio of that case is to be found in Lord
Diplocks speech ([1982] 3 All ER 1124 at 1134, [1983] 2 AC 237 at 285):

Now that those disadvantages to applicants have been removed and all remedies for infringements of rights protected
by public law can be obtained on an application for judicial review, as can also remedies for infringements of rights under
private law if such infringements should also be involved, it would in my view as a general rule be contrary to public
policy, and as such an abuse of the process of the court, to permit a person seeking to establish that a decision of a public
authority infringed rights to which he was entitled to protection under public law to proceed by way of an ordinary action
and by this means to evade the provisions of Ord 53 for the protection of such authorities. My Lords, I have described this
as a general rule; for, though it may normally be appropriate to apply it by the summary process of striking out the action,
there may be exceptions, particularly where the invalidity of the decision arises as a collateral issue in a claim for
infringement of a right of the plaintiff arising under private law, or where none of the parties objects to the adoption of the
procedure by writ or originating summons. Whether there should be other exceptions should, in my view, at this stage in
the development of procedural public law, be left to be decided on a case to case basis: a process that your Lordships will
be continuing in the next case in which judgment is to be delivered today (see Cocks v Thanet DC [1982] 3 All ER 1135).

The rule as set out there does not cover this case and that is common ground. The reason for that is that the plaintiffs here
do not seek to establish that they had any public law entitlement to the disputed allowance: their claim to it is purely contractual.
Therefore they do not claim any remedy for infringement of their public law rights. Public law only comes into the action as a
result of the committees assertion by way of defenceor anticipated assertion by way of defencethat they had no power to
pay the disputed allowance.
As indicated by Lord Diplock, OReilly v Mackman was extended in Cocks v Thanet DC [1982] 3 All ER 1135, [1983] 2 AC
286. There the plaintiff alleged that the defendant council was in breach of its duty to house him and claimed damages for such
breach. In order to mount his damages claim, he had to establish a breach of public law duties owed to him. He commenced his
action by writ and was stopped in that course, in that it was struck out as an abuse of process of the court in the House of Lords.
As it was there necessary for the plaintiff to show that his public law rights were infringed before he could get his private
law claim off the ground, so it was found that there was an abuse of process for him to go by writ. That extension of the rule in
OReilly v Mackman again does not cover this case, for the same reasons as before.
Since those two cases have been decided, there has been a wealth of authority on these points and I have been treated to a
review of those authorities. I summarise them very shortly.
In Davy v Spelthorne BC [1983] 3 All ER 278, [1984] AC 262 the plaintiff alleged that he had been given negligent advice
by the defendant local authoritys servant and as a result he had not appealed an enforcement notice. He brought an action for
damages for negligence. He did not have to impugn the enforcement notice 299 directly. He started his action by writ. He was
allowed to continue it by the House of Lords.
In Wandsworth London BC v Winder [1984] 3 All ER 976, [1985] AC 461 the council sued the defendant for arrears of rent.
The defendant, by his defence and counterclaim, asserted that the notices served on him increasing the rent were ultra vires. An
application was made to strike out his defence and counterclaim as an abuse, on the basis that it should have been taken by way
of judicial review. That application failed and so he was allowed to continue with that defence and counterclaim.
In R v East Berkshire Health Authority, ex p Walsh [1984] 3 All ER 425, [1985] QB 152 a dismissed nursing officer sought
certiorari under Ord 53 to quash his dismissal. It was held that he was seeking to enforce his private contractual right and that he
should have proceeded by way of writ. His application for judicial review was therefore stayed.
In Gillick v West Norfolk Health Authority [1985] 3 All ER 402, [1986] AC 112 a mother attacked an area health authoritys
guidance to medical practitioners. It was held that she could have gone by way of judicial review, but because of the strong
private law element she was entitled to proceed by way of ordinary action.
In R v Derbyshire CC, ex p Noble [1990] ICR 808 a deputy police surgeon was dismissed. He sought to quash his dismissal
by certiorari and sought mandamus for his reinstatement. His application for leave to judicially review the decision was
dismissed. It was held that that was not appropriate for judicial review.
In McLaren v Home Office [1990] ICR 824 a prison officer, by a writ, sought a declaration that he was still employed on the
old shift system. The Home Office applied to strike out the action on the basis that he should have gone by judicial review. It
was held that, as the issues related to his private law claim, so he could proceed by way of writ.
Three plain principles emerge from those decisions.
(i) In cases within the OReilly v Mackman doctrine, the courts will be astute to see that there is no evasion of the Ord 53
protections designed to eliminate groundless, unmeritorious or tardy harassment of local authorities by the use of an action by
writ which in reality is seeking redress for the infringement of public law rights.
(ii) However, in cases not within the rule there is no necessary or overriding objection to public law issues being litigated in
writ actions, whether in the Queens Bench Division or in the Chancery Division: see the Davy, Wandsworth London BC and
Gillick cases.
(iii) Order 53 should not be used for the litigation of private law claims.
Looking at those authorities, including OReilly v Mackman and Cocks v Thanet DC, there have been eight reported cases on
this topic cited to me. Five of those eight went to the House of Lords. All eight went to the Court of Appeal. In four cases the
plaintiffs were allowed to proceed with their chosen method of action and in four they were not. The principles that Lord
Diplock expected would emerge from the decisions in OReilly v Mackman have clearly not yet fully been worked out, and the
reason for this seems to me to be clear, namely that the circumstances in which there may be such a mixture of private and public
law claims are infinitely various and can arise in very disparate situations. But the wealth of authority on this point and the
potential for expensive appeals on it leads one to conclude that, until the principles are worked out, there is potentially a
formidable extra hurdle for plaintiffs in litigation where public law and private law mix. It seems to me that this is at present an
area of the law where the forms of action abolished by the Common Law Procedure Acts in the nineteenth century appear to be in
danger of returning to rule us from their graves.
The committee submit to me that these proceedings should be stayed on the 300 basis of the following proposition. They
submit that where a dispute arises which gives rise to an issue of public law (as this does, in the manner I have indicated), and the
determination of that issue is essential to determine whether or not the plaintiff has a good private law claim for breach of
contract, and where that public law issue is effectively the only issue in the proceedings, the plaintiff must proceed by way of
judicial review for the reasons given by Lord Diplock in OReilly v Mackman.
While it is conceded that this proposition would be an extension of any principle so far laid down by the cases, it is said that
it would be a logical extension. The reason for this is, so it is said, that, where a public law decision of an administrative body is
questioned, the need for speedy resolution of it with proper safeguards against meritless claims is in the interest of good
administration, which is the overriding public interest here, so it is said.
From the authorities, I get most help from Davy v Spelthorne BC and Wandsworth London BC v Winder. I find, first, that
this is a genuine private law claim, seeking private law remediesa claim which in no way depends on the plaintiffs asserting or
proving any public law infringement of the plaintiffs rights.
Second, the plaintiffs have, subject to the public law defence, an accrued private law right to private law remedies. I quote
from Lord Frasers speech in Davy v Spelthorne BC [1983] 3 All ER 278 at 283, [1984] AC 262 at 273:

The present proceedings, so far as they consist of a claim for damages for negligence, appear to me to be simply an
ordinary action for tort. They do not raise any issue of public law as a live issue. I cannot improve on the words of Fox LJ,
in the Court of Appeal, when he said: I do not think that the negligence claim is concerned with the infringement of
rights to which [the plaintiff] was entitled to protection under public law, to use Lord Diplocks words in OReilly v
Mackman. The claim, in my opinion, is concerned with the alleged infringement of the plaintiffs rights at common law.
Those rights are not even peripheral to a public law claim. They are the essence of the entire claim (so far as negligence is
concerned).

Substitute breach of contract for negligence in those words and those words would seem to me to apply in this case.
Third, to strike out these proceedings now and to require the plaintiffs to proceed by way of judicial review would not (in the
words of Robert Goff LJ in Wandsworth London BC v Winder [1984] 3 All ER 83 at 97, [1985] AC 461 at 481) merely adversely
affect the plaintiffs private law rights, but would effectively divest the plaintiffs of those rights because, due to the time lapse,
leave for judicial review would not now be granted.
Fourth, it seems to me that the principle annunciated by their Lordships in Wandsworth London BC v Winder applies. I cite
from the headnote the summary of Lord Frasers speech (see [1985] AC 461):

Held, dismissing the appeal, that it was a paramount principle that the private citizens recourse to the courts for the
determination of his rights was not to be excluded except by clear words and that there was nothing in the language of
RSC, Ord 53 which could be taken as abolishing a citizens right to challenge the decision of a local authority in the course
of defending an action of the present nature, nor did section 31 of the Supreme Court Act 1981 which referred only to an
application for judicial review have the effect of limiting a defendants rights sub silentio Dictum of Viscount
Simonds in Pyx Granite Co Ltd v Ministry of Housing and Local Government ([1959] 3 All ER 1 at 6, [1960] AC 260 at
286) applied. OReilly v Mackman and Cocks v Thanet District Council distinguished.
 301

I cite the way Robert Goff LJ put matters in the Court of Appeal in Wandsworth London BC v Winder first where, having
cited Lord Frasers speech in Davy v Spelthorne BC, he says ([1984] 3 All ER 83 at 96, [1985] AC 461 at 480):

I read this passage in Lord Frasers speech as expressing the opinion that the principle in OReilly v Mackman should
not be extended to require a litigant to proceed by way of judicial review in circumstances where his claim for damages for
negligence might in consequence be adversely affected. I can for my part see no reason why the same consideration should
not apply in respect of any private law right which a litigant seeks to invoke, whether by way of action or by way of
defence. For my part, I find it difficult to conceive of a case where a citizens invocation of the ordinary procedure of the
courts in order to enforce his private law rights, or his reliance on his private law rights by way of defence in an action
brought against him, could, as such, amount to an abuse of the process of the court. But in any event I am satisfied that it
cannot be right that his so proceeding should be held to amount to an abuse of process if the effect would be that his power
to enforce his private law rights, or to rely on them by way of defence, either would or might be adversely affected. I am
unable to read RSC Ord 53 or s 31 of the Supreme Court Act 1981 as intended in any way to curtail a citizens private law
rights.

Then again ([1984] 3 All ER 83 at 97, [1985] AC 461 at 481):

He [the defendant] is therefore invoking the protection of his existing private law rights. Furthermore, it is plain that
to require him (as the judge has done) to proceed by way of judicial review would not merely adversely affect the private
law rights on which he seeks to rely but effectively divest him of them, because the time has long since passed when he
was free to make any such application. I fully appreciate that public authorities may be exposed to great inconvenience if
they are unable to invoke the principle of OReilly v Mackman in a case such as the present. But such inconvenience may
arise in many cases where a citizen successfully challenges action by a public authority affecting his private law rights
under a decision by the public authority which proves to have been made ultra vires. The successful challenge by the
citizen may be a source of great embarrassment for the public authority, as it contemplates all the earlier occasions on
which it has given effect to the ultra vires decision and the possibly immense cost to ratepayers of putting the matter right.
Sometimes indeed, as experience has shown, it may even be necessary to legislate in order to extricate the public authority
from its difficulties. But it does not in my judgment follow that there is an abuse of process by the citizen in invoking the
assistance of the ordinary courts, by action or by defence, in order to enforce, or to claim the protection of, his private law
rights. If it is thought that any limit should be placed on citizens proceeding in this way, in the interests of good
administration, then this is, in my judgment, a matter for Parliament.

On the basis of the principles as there expressed, it seems to me in all the circumstances that I would not be justified in
regarding this claim as an abuse of the process of the court. So the application to strike it out therefore fails.

Summons dismissed.

Solicitors: Brian Thompson & Partners, Newcastle upon Tyne; D A Manners, Newcastle upon Tyne.

K Mydeen Esq Barrister.

302
[1991] 4 All ER 303

Lloyds Bank Export Finance Ltd v Inland Revenue Commissioner

TAXATION; Income Tax, Assessment

PRIVY COUNCIL
LORD KEITH OF KINKEL, LORD TEMPLEMAN, LORD JAUNCEY OF TULLICHETTLE, SIR ROBERT MEGARRY AND SIR DAVID CROOM-JOHNSON
20, 21 MAY, 19 JUNE 1991

Income tax Assessment Assessment out of time New Zealand Making assessment Whether assessment only made where
process of determination produces taxable income on which tax payable Whether determination that no tax payable
constituting an assessment Whether further assessment may be made more than four years after determination made that no
tax was payable Income Tax Act 1976(NZ), ss 19, 25.

The taxpayers submitted returns for the 1976 and 1977 years of assessment showing small profits. However, because of
substantial losses in prior years which they were entitled to carry forward and set off, the Commissioner of Inland Revenue made
determinations to the effect that no tax was payable by them for the two years in question. Some five years after the second of
the two determinations the commissioner sought to assess the taxpayers to tax in respect of the years 1976 and 1977. The
taxpayers challenged the assessments on the ground, inter alia, that the four-year time limit under s 25 a of the New Zealand
Income Tax Act 1976 within which the commissioner was entitled to increase an assessment already made had expired and the
further assessments were therefore statute-barred. The judge upheld the taxpayers objections, but the Court of Appeal of New
Zealand allowed an appeal by the commissioner, holding that an assessment under s 19 b of the 1976 Act was made only when
the process of determining the income, if any, of a taxpayer determining the allowable deductions or rebates and ascertaining
thereby the balance of income, if any, on which tax was payable resulted in there being taxable income, that if no amount of
taxable income was produced by that process no assessment had taken place, that the determinations by the commissioner for the
years 1976 and 1977 that no tax was payable by the taxpayers had therefore not constituted assessments, and that accordingly s
25 of the 1976 Act did not apply to bar the commissioner from making fresh assessments for those years. The taxpayers appealed
to the Privy Council.
________________________________________
a Section 25, so far as material, is set out at p 305 h j, post
b Section 19, so far as material, is set out at p 305 e, post

Held The expression make assessments in the context of s 19 of the 1976 Act meant the process by which the commissioner
carried out his statutory obligation to ascertain the amount on which tax was payable and the amount of tax. That process might
show up a positive figure or a nil or a negative figure, but in each case when that process was completed an assessment had been
made, and there was nothing in s 19 or the scheme of the 1976 Act to justify the conclusion that the commissioner only made an
assessment where he determined that there was tax payable. It followed therefore that the commissioners determinations to the
effect that there was no tax payable by the taxpayers for the years 1976 and 1977 constituted assessments for the purposes of s
25 of the 1976 Act, with the result that the commissioner had not been entitled to alter the determinations so as to increase the
amount of income tax for those years more than four years after they 303 were made. The appeal would accordingly be allowed
(see p 306 j, p 307 c to f, p 308 j to p 309 c and p 310 a b, post).

Notes
For assessments to tax and time limits for making assessments, see 23 Halsburys Laws (4th edn reissue) paras 1650, 1659.
Sections 29 and 34 of the Taxes Management Act 1970 make provision for the assessing procedure and ordinary time limits
for making assessments to tax in the United Kingdom. For ss 29 and 34 of the 1970 Act, see 42 Halsburys Statutes (4th edn)
298, 305.

Cases referred to in judgment

Batagol v Federal Comr of Taxation (1963) 109 CLR 243, Aust HC.
IR Comr v V H Farnsworth Ltd [1984] 1 NZLR 428, NZ CA.

Appeal
Lloyds Bank Export Finance Ltd (the taxpayers) appealed with leave of the Court of Appeal of New Zealand (Richardson,
Somers and Bisson JJ) given on 9 July 1990, from the decision of that court (Cooke P, Richardson and Hardie Boys JJ) ([1990] 2
NZLR 154) on 3 April 1990 allowing an appeal by the Commissioner of Inland Revenue from the decision of Tomkins J in the
New Zealand High Court sitting at Auckland (11 TRNZ 733) on 31 May 1988 that determinations made by the commissioner that
no tax was payable by the taxpayers for the years 1976 and 1977 constituted assessments for the purposes of s 19 of the New
Zealand Income Tax Act 1976 and that, because the four-year time limit within which the commissioner was entitled to increase
those assessments had expired, the commissioner was time-barred from making further assessments under s 25 of that Act. The
facts are set out in the judgment of the Board.

Sydney Kentridge QC and David Simcock (of the New Zealand Bar) for the taxpayers;
Peter Jenkin QC and Grant Pearson (both of the New Zealand Bar) for the commissioner.

19 June 1991. The following judgment was delivered.

LORD JAUNCEY OF TULLICHETTLE. This appeal involves the construction of certain sections of the New Zealand Land
and Income Tax Act 1954 which was consolidated in the Income Tax Act 1976. Before looking in detail at the relevant sections it
may be convenient to summarise the circumstances giving rise to the appeal. The fiscal year in New Zealand runs from and to 31
March, so that the year ending 31 March 1980 would be described as the 1980 year. The appellants, Lloyds Bank Export Finance
Ltd (the taxpayers), submitted the necessary returns for the years 1976 and 1977 showing small profits. However, because of
substantial losses in prior years which they were entitled to carry forward and set off, the respondent (the commissioner) made
determinations to the effect that no tax was payable by them in the two years in question. Some five years after the last of the
two determinations the commissioner sought to assess the taxpayers to tax in respect of the above two years. The taxpayers
challenged the assessments on the ground, inter alia, that they were statute-barred by reason of the provisions of s 24 of the 1954
Act. Tompkins J upheld the taxpayers objection to the assessments (see (1988) 11 TRNZ 733) but the Court of Appeal quashed
the orders made in the High Court and declared that the commissioner 304 was not barred by s 25 of the 1976 Act (the re-
enactment of s 24 of the 1954 Act) from making the assessments (see [1990] 2 NZLR 154). The judgment of the Court of
Appeal, which was delivered by Richardson J, found it convenient to refer to the provisions of the 1976 Act rather than to the
corresponding provisions of the 1954 Act and their Lordships are content to do likewise.
It is now necessary to examine the relevant provisions of the 1976 Act in detail. Section 9, which imposes the duty on a
taxpayer to make annual returns, is in the following terms:

Annual returns by taxpayers. Subject to this Act or any regulations under this Act, every taxpayer shall for the
purposes of the assessment and levy of income tax furnish to the Commissioner in each year a return or returns in the
prescribed form or forms setting forth a complete statement of all the assessable and non-assessable income derived by him
during the preceding year, together with such other particulars as may be prescribed.

Assessable income is defined by s 2 of the 1976 Act as income of any kind which is not exempted from income tax otherwise
than by way of a special exemption expressly authorised as such by this Act. In calculating assessable income, expenditure or
loss incurred in the production of that income may be taken into account (see s 104).
Section 19 of the 1976 Act, which imposes the duty on the commissioner to make assessments, is in the following terms:

Commissioner to make assessments. From the returns made as aforesaid and from any other information in his
possession the Commissioner shall in and for every year, and from time to time and at any time thereafter as may be
necessary, make assessments in respect of every taxpayer of the amount on which tax is payable and of the amount of that
tax.

Section 23 deals with amendment of assessments in the following manner:

Amendment of assessments.(1) The Commissioner may from time to time and at any time make all such alterations
in or additions to an assessment as he thinks necessary in order to ensure the correctness thereof, notwithstanding that tax
already assessed may have been paid.
(2) If any such alteration or addition has the effect of imposing any fresh liability or increasing any existing liability,
notice thereof shall be given by the Commissioner to the taxpayer affected.
Section 25, which is relied on by the taxpayers, provides:

Limitation of time for amendment of assessment.(1) When any person has made returns and has been assessed for
income tax for any year, it shall not be lawful for the Commissioner to alter the assessment so as to increase the amount
thereof after the expiration of 4 years from the end of the year in which the assessment was made.
(2) Notwithstanding subsection (1) of this section, in any case where, in the opinion of the Commissioner, the returns so
made are fraudulent or wilfully misleading or omit all mention of income which is of a particular nature or was derived
from a particular source, and in respect of which a return is required to be made, it shall be lawful for the Commissioner to
 alter the assessment (being an assessment made on or after the 1st day of April 1958) at any time so as to increase the
amount thereof.

Section 29 requires the commissioner to give notice to the taxpayer after an assessment has been made and is in the following
terms:
305

Notice of assessment to taxpayer. (1) As soon as conveniently may be after an assessment is made the Commissioner
shall cause notice of the assessment to be given to the taxpayer: Provided that where(a) The taxpayer has, in his return
to which the assessment relates, calculated the amount on which tax is payable or the amount of the tax; or ( b) The
assessment has been made on default by the taxpayer in furnishing any return for the year to which the assessment relates;
or (c) The Commissioner causes a separate statement in relation to the assessment to be given to the taxpayer setting forth
the amount on which tax is payable and the amount of the tax,it shall not be necessary to set forth in the notice of the
assessment any particulars other than particulars as to the amount of tax to be paid by the taxpayer or the amount of tax to
be refunded, as the case may require.
(2) The omission to give any such notice shall not invalidate the assessment or in any manner affect the operation
thereof.

The issue between the parties is whether the determinations, to use a neutral word, by the commissioner for the years 1976
and 1977 that no tax was payable by the taxpayers constituted assessments for the purposes of s 25(1). If they did, the
commissioner accepts that the later assessments were out of time and therefore ineffective. If they did not the later assessments
were not time-barred. The determinations in question took the following form.
(1) By what appears to be a printed form of letter the district commissioner on 5 April 1977 wrote to the taxpayers as
follows:

Dear
Your 1976 return of income has been checked. There is no refund, or further tax to pay.
Yours faithfully

Accompanying that letter was a document headed Income Tax Assessment Notice 1976, with a line drawn through the words.
The document included the following entries:

$
Assessable Income as returned
14,227.00
Loss bfwd
973,237.38
Losses to be cfwd
959,010.38
Balance of Tax
nil.
(2) On 6 March 1978 the district commissioner sent to the taxpayers an undated letter relating to the 1977 return in terms
identical to that which he had sent on 5 April 1977, save that the second sentence began with the words, On the basis of the
return furnished. Accompanying that letter was another document, dated 6 March 1978 and headed Income Tax Assessment
Notice 1977, with two lines drawn through the first three words. This document contained figures of assessable income, loss
brought forward, loss available to be carried forward and a nil balance of tax.
Mr Kentridge QC for the taxpayers submitted that the word assessment meant the process of determining the income of a
taxpayer, if any, of determining the allowable deductions or rebates and of ascertaining thereby the balance of income, if any, on
which tax is payable. This process might show up a positive figure, a nil figure or a negative figure, but in each case an
assessment had been made. Mr Jenkin QC for the commissioner on the other hand adopted the reasoning of the 306 Court of
Appeal in arguing that an assessment only took place when the foregoing process threw up taxable income, which is defined by s
2 as meaning the residue of assessable income, after deducting the amount of all special exemptions to which the taxpayer is
entitled. If no figure of taxable income was produced by the process no assessment had taken place. Mr Jenkin also relied on
the terms of three further sections to which their lordships will refer later.
Section 9 requires a taxpayer to make a return even though he may well know that he will be required to pay no tax. The
return required is of assessable income but such income is capable of producing nil taxable income by the deduction therefrom of
special exemptions. Section 19 imposes on the commissioner the duty to make assessments in respect of every taxpayer of the
amount on which tax is payable. This involves, inter alia, calculating the assessable income. If, as Mr Jenkin contended, the
process of assessment has not taken place until some taxable income has been ascertained, it means that the Commissioner will
not know until he has completed the whole exercise of examining the returns and relevant documents whether he has been
making an assessment or not, even though he has in that process calculated the assessable income. If he has not been making an
assessment what has he been doing and what is the statutory warrant therefor? Mr Jenkins contention also produces the
somewhat curious result that a determination by the Commissioner that $5 tax is payable is an assessment which cannot be
increased after the period specified in s 25(1) has run, whereas a determination that there is no taxable income or that there is a
loss can be revised at any time without limit.
Some support for Mr Kentridges argument is to be found in s 23(2), which, in the context of amendment of assessments,
uses the words imposing any fresh liability or increasing any existing liability. the reference to fresh liability suggests that the
section contemplated an alteration which imposed liability to tax where none existed before. Further support for the argument is
to be found in s 29(1), which clearly contemplates that a notice of assessment given after an assessment has been made shall in
certain circumstances contain a statement of the amount of tax to be refunded. In this situation the assessment would necessarily
have produced the result that not only was no tax payable by the taxpayer but that tax was repayable to him by the commissioner.
If an assessment is made in such a situation it is difficult to see why it is not also made when no tax is payable without a refund.
Mr Jenkin however argued that the consideration of three sections, namely ss 188(1), 38(2) and (3) and 21, showed that the
taxpayers argument was wrong. Section 188(1) and (2) is in the following terms:

(1) Losses incurred may be set off against future profits.For the purposes of this section any loss incurred by a
taxpayer shall be ascertained in accordance with the provisions of this Act for the calculation of assessable income.
(2) Any taxpayer who satisfies the Commissioner that he has, in any income year, incurred a loss shall, subject to this
section, be entitled to claim that the loss be carried forward and deducted from or set off against the assessable income
derived in the first income year after the income year in which the loss was incurred, so far as that income extends, and, so
 far as it cannot then be deducted or set off, be deducted from or set off against the assessable income derived in the next
income year, and so on.

It was as a result of the application of s 188(2) that the prior losses incurred by the taxpayers resulted in nil determinations in the
years 1976 and 1977. Mr Jenkin argued that the distinction between assessable income and taxable income was crucial to s
188(1). If s 188 had intended that a loss could be a subject of an 307 assessment, the set-off in sub-s (2) would have been against
taxable and not assessable income. Their Lordships consider that this argument is unsound and that in any event the terms of s
188 cannot assist in the proper construction of ss 19 and 25. It is purely fortuitous that the new determinations in this appeal
arose as a result of the application of s 188; they could equally well have arisen because the taxpayers had made a loss in the year
of assessment or because their assessable income had been exactly reduced to nil by the special exemptions.
Mr Jenkin next argued that s 38 contemplated that there could only be a year of assessment in relation to a taxpayer when he
had taxable income. Section 38, so far as relevant for this argument, is in the following terms:

(2) Subject to this Act, income tax shall be payable by every person on all income derived by him during the year
for which the tax is payable.
(3) The year in which income is so derived is in this Act referred to as the income year, and the year for which income
tax is payable is in this Act referred to as the year of assessment.

If income tax was not payable by a taxpayer for a particular year then that year could not be a year of assessment and therefore no
assessment had been made on it. Their Lordships reject this argument. Section 9 requires the taxpayer to make a return of all
income assessable or not derived during the preceding year, and s 38(3) draws a distinction between the years in which income is
derived and assessed. Income is derived in one year which is the income year and the tax is assessed in another year, probably
the following, which is the year of assessment. If in sub-s (2) the words during the year etc are read with shall be payable
rather than with income derived the whole thing falls into place and the subsections cannot bear the construction which Mr
Jenkin seeks to place on them. There can still be a year of assessment although the relevant income year produces no income on
which tax is payable.
Finally, Mr Jenkin referred to s 21, which provides, inter alia:

If any person makes default in furnishing any return [the commissioner] may make an assessment of the amount on
which in his judgment tax ought to be levied and of the amount of that tax, and that person shall be liable to pay the tax so
assessed, save in so far as he establishes on objection that the assessment is excessive or that he is not chargeable with tax.

He submitted that the final eight words of the section showed that if a person had a nil tax liability no assessment should be made
on it. Their Lordships do not so construe these words. They appear to have been intended to cover a situation where a person
was not a taxpayer at all within the definition in s 2 at the relevant time, eg because he had by then ceased to be an agent or
trustee or had never been such, and not to cover the situation where an admitted taxpayer has a nil taxable income.
Reference was also made to the Australian case of Batagol v Federal Comr of Taxation (1963) 109 CLR 243, where there
was a similar issue as to whether an assessment was time-barred. However, the wording of the statute under consideration was
significantly different and their Lordships agree with Tompkins J that it is not of assistance in this case.
Their Lordships have no doubt that the arguments for the taxpayers are to be preferred and that the Commissioners statutory
duties under s 19 in relation to a taxpayers return extend not only to the production of a result which produces taxable income
but also to results which produce a nil return or a loss. Any other construction would produce the anomalies and illogicalities
already referred to. Whichever of these three results the commissioner arrives at he has made an 308 assessment for the purposes
of s 19 and hence s 25. It is to be noted that the latter section uses the words assessed for income tax, that is to say for the
purposes of income tax, rather than to income tax. Their Lordships cannot do better than quote the following passage from the
judgment of Tompkins J:

In my opinion the expression make assessments in the context of s 17, means the process by which the
Commissioner carries out his statutory obligation to ascertain the amount on which tax is payable and the amount of tax. I
find nothing in the section, nor in the statutory scheme, to justify a conclusion that the Commissioner only makes an
assessment where he determines that there is tax payable. A conclusion that there is no amount on which tax is payable and
that as a consequence there is no tax payable involves making an assessment from the returns and other information in his
possession just as much as if the result of the assessment were to find that there was an amount on which tax was payable
and consequently there was tax payable.

(The reference is to s 17 of the 1954 act, which was later replaced by s 19 of the 1976 Act.)
In reaching this conclusion their Lordships are fortified by two further considerations. In the first place the purpose of s
25(1) is to achieve finality and to enable the taxpayer and the commissioner to close the books and dispose of their papers after
the stipulated period. The exercise required to be carried out by the commissioner in terms of s 19 is capable of producing three
different results namely: (1) that the taxpayer has taxable income; (2) that he has no taxable income; and (3) that he has a loss
which he may carry forward in terms of s 188. To accept the argument of Mr Jenkin and the reasoning of the Court of Appeal
would mean that only in the first instance would finality be achieved, whereas in the other two the commissioner could reopen his
determination at any time in the future, a result which would appear to be contrary to the spirit of s 25, to quote the words of
Cooke J in IR Comr v V H Farnsworth Ltd [1984] 1 NZLR 428 at 430.
In the second place the provisions of pt III of the 1976 Act, headed Objections to Assessments, envisage that such
objections will be dealt with by the Taxation Review Authority, a body particularly experienced in taxation matters. It would be
entirely logical that the legislature should have intended that all matters involving determinations by the commissioner
consequent on receipt of a taxpayers return as to tax payable or not payable should be dealt with by that body. Such a result
would follow from the conclusions which their Lordships have reached. If on the other hand Mr Jenkins argument were correct
it would mean that the determinations by the commissioner resulting in a nil payment of tax or in a loss could only be challenged
by a taxpayer in the ordinary courts by judicial review or some other legal process. This would appear to defeat substantially the
purpose of pt III.
It only remains to refer to one further matter to which the Court of Appeal had some regard, namely the amendment to s 19
occasioned by s 20 of the Income Tax Amendment Act 1980. The amendment of s 19 required the commissioner to make
determinations of losses and provided that such determinations were to be treated as assessments. This amendment, it was said,
reflected the common understanding in income tax practice that a letter confirming the assessment of the amount of a loss to be
carried forward under s 188 was not an assessment. It is noteworthy that the amendment does not deal with a situation where
there is no loss but simply no taxable income. Had the construction of the relevant section of the 1976 Act been in dubio it might
have been appropriate to turn to the 309 amendments for assistance. However, as their Lordships are of the opinion that the
construction and intention of those sections are clear, it follows that the construction cannot be affected by the later amending
Act.
 Their Lordships will therefore humbly advise Her Majesty that this appeal should be allowed, the order of the Court of
Appeal set aside and the order of Tompkins J restored. The commissioner must pay the taxpayers costs in the Court of Appeal
and before their Lordships Board.

Appeal allowed.

Solicitors: Linklaters & Paines; Allen & Overy.

Mary Rose Plummer Barrister.

[1991] 4 All ER 310

R v Civil Service Appeal Board, ex parte Cunningham

ADMINISTRATIVE

COURT OF APPEAL, CIVIL DIVISION

LORD DONALDSON MR, MCCOWAN AND LEGGATT LJJ
20 FEBRUARY, 4 MARCH 1991

Judicial review Duty to give reasons Civil Service Appeal Board Board deciding unfair dismissal claims by Crown servants
Whether board under duty to give reasons when deciding whether dismissal of Crown servant fair or unfair and, if unfair, when
assessing amount of compensation Employment Protection (Consolidation) Act 1978, s 146.

The applicant, a 45year-old prison officer, was dismissed from the prison service after he allegedly assaulted a prisoner. He
appealed against his dismissal to the Civil Service Appeal Board, which held that his dismissal was unfair and recommended that
he be reinstated. The Home Office, as it was entitled to do, refused to reinstate him and the board then assessed the compensation
for unfair dismissal at 6,500. Since the applicants employment was regarded as police service he was prevented by s 146 a of
Employment Protection (Consolidation) Act 1978 from appealing to an industrial tribunal, which would have assessed
compensation of between 14,240 and 16,374 in comparable circumstances. The board refused to give reasons for its award on
the ground that it employed simple and informal procedures and that to ensure a non-legalistic approach to the merits of each
individual case it had adopted a policy of not giving reasons for any award. The applicant applied for judicial review of the
boards decision on the grounds that the award was prima facie irrational and the boards refusal to give reasons was a breach of
natural justice. The judge granted the application because of the boards failure to give reasons. The board appealed. The
applicant cross-appealed from the judges finding that the award was not prima facie irrational.
310
________________________________________
a Section 146, so far as material, provides:
(2) Part V [relating to unfair dismissal] do[es] not apply to employment under a contract of employment in police service or to persons
engaged in such employment.
(3) In subsection (2), police service means service (a) as a member of any constabulary or (b) in any other capacity by virtue of which a
person has the powers or privileges of a constable

Held Having regard to the facts that the Civil Service Appeal Board carried out a judicial function and that an industrial
tribunal was required to give reasons in comparable circumstances when it made a decision on an unfair dismissal claim, natural
justice required the board to give reasons when deciding whether the dismissal of a person in Crown employment who was barred
from making a complaint to an industrial tribunal was fair or unfair and, if unfair, when assessing the appropriate amount of
compensation, so that its decision could be judged to be lawful or unlawful. It followed that the board was required to give
reasons for the way in which it had reached the award made to the applicant and in the absence of such reasons the award, when
compared to awards made by industrial tribunals in comparable circumstances, was so low as to be prima facie irrational. The
applicant was therefore entitled to judicial review of the boards award. Accordingly the boards appeal would be dismissed and
the applicants cross-appeal allowed (see p 316 e to g, p 317 h, p 318 h j, p 319 g, p 320 c to e, p 322 c to e h to p 323 b h j and p
324 d e j to p 325 a g to p 326 d, post).
Dictum of Lord Bridge in Lloyd v McMahon [1987] 1 All ER 1118 at 1161 applied.
Per curiam. The reasons given by the board need be no more than a concise statement of the way in which it arrived at its
decision and the figure awarded (see p 319 j, p 323 c and p 326 d, post).

Notes
For the obligation of a body carrying out a judicial function to give reasons for its decisions, see 1 Halsburys Laws (4th edn
reissue) para 99.
For the Employment Protection (Consolidation) Act 1978, s 146, see 16 Halsburys Statutes (4th edn) (1990 reissue) 374.

Cases referred to in judgments

Alexander Machinery (Dudley) Ltd v Crabtree [1974] ICR 120, NIRC.
Breen v Amalgamated Engineering Union [1971] 1 All ER 1148, [1971] 2 QB 175, [1971] WLR 742, CA.
Cooper v Wandsworth Board of Works (1863) 14 CBNS 180, 143 ER 414.
Council of Civil Service Unions v Minister for the Civil Service [1984] 3 All ER 935, [1985] AC 374, [1984] 3 WLR 1174, HL.
Lloyd v McMahon [1987] 1 All ER 1118, [1987] AC 625, [1987] 2 WLR 821, CA and HL.
Lonrho plc v Secretary of State for Trade and Industry [1989] 2 All ER 609, [1989] 1 WLR 525, HL.
Norton Tool Co Ltd v Tewson [1973] 1 All ER 183, [1973] 1 WLR 45, NIRC.
Public Services Board of New South Wales v Osmond [1987] LRC (Const) 681, (1986) 63 ALR 559, Aust HC.
R v Civil Service Appeal Board, ex p Bruce (A-G intervening) [1988] 3 All ER 686, DC; affd [1989] 2 All ER 907, CA.
R v Immigration Appeal Tribunal, ex p Khan (Mahmud) [1983] 2 All ER 420, [1983] QB 790, [1983] 2 WLR 759, CA.
R v Lancashire CC, ex p Huddleston [1986] 2 All ER 941, CA.
Wiseman v Borneman [1969] 3 All ER 275, [1971] AC 297, [1969] 3 WLR 706, HL.

Cases also cited

R v Panel on Take-overs and Mergers, ex p Guinness plc [1989] 1 All ER 509, [1990] QB 146, CA.
Westminster City Council v Great Portland Estates plc [1984] 3 All ER 744, [1985] AC 661, HL.
311

Appeal
The Civil Service Appeal Board appealed from the decision of Otton J on 25 May 1990 granting the application of Thomas
Cunningham for judicial review of the boards decision on 27 January to award Mr Cunningham the sum of 6,500 compensation
for the unfair termination of his employment as a prison officer and its refusal in a letter dated 15 February 1989 to give reasons
for the amount of the award, on the grounds that both the decision and the letter were ultra vires and unlawful. Mr Cunningham
cross-appealed from the judges finding that the award was not prima facie irrational. The facts are set out in the judgment of
Lord Donaldson MR.

John Laws and Robert Jay for the board.

David Pannick for Mr Cunningham.

Cur adv vult

4 March 1991. The following judgments were delivered.

LORD DONALDSON OF LYMINGTON MR.

The background
On 12 February 1988 Mr Cunningham was given notice of dismissal from the prison service following upon an alleged
assault on a prisoner. Although the incident was investigated by the police, Mr Cunningham was not prosecuted. He had been in
the prison service for 23 years, was aged 45 and was the physical education officer at one of HM detention centres. Mr
Cunningham appealed to the Civil Service Appeal Board, which on 8 November 1988 ruled that his dismissal had been unfair
and recommended that he be reinstated.
The Home Office, as it was entitled to do, declined to accept that recommendation. On or about 27 January 1989 the board
assessed the compensation due to Mr Cunningham at 6,500. Mr Cunningham had been in receipt of his full pay until 4 January
1989, but thereafter the only payment by the Home Office was 6,500 on 10 February 1989.
Mr Cunningham was understandably aggrieved at this award. His pay as a prison officer was at the rate of 16,900 pa.
Following the refusal to reinstate him, he had to seek other employment and it appears that the best which he has been able to
achieve is a part time post with a local authority at a salary of 8,300 pa. We were not told for how long he was unemployed, but
if these facts are correct, even after obtaining substituted employment, he has been suffering a continuing loss at the rate of
8,600 pa or 165 per week, quite apart from any loss of pension rights. Most people in Crown employment faced with such a
situation could complain to an industrial tribunal under the Employment Protection (Consolidation) Act 1978 and seek
compensation (see s 138). Unfortunately Mr Cunningham is in a select category of employment which is regarded as police
service and is excluded from the benefit of the relevant parts of the 1978 Act (see s 146(2) and (3)).
Mr Cunninghams dissatisfaction has been in no way assuaged by calculations which have been made by his legal advisers
as to what an industrial tribunal would be likely to have awarded by way of compensation. They advise him that he would have
been entitled to a basic award under s 73 calculated at the rate of one and a half weeks pay in respect of his last four years of
service, during which he was over the age of 41, subject to a maximum of 164 per week and at the rate of one weeks pay,
subject to the same maximum, in respect of the previous 31216 years service, there being a 20year overall limit. This would
have produced 3,608. In addition he would have been entitled to a compensatory award under s 74(1) of the 1978 Act. This at
the relevant time was subject to a maximum of 8,500. The basis upon which it is awarded is:

such amount as the tribunal considers just and equitable in all the circumstances having regard to the loss sustained
by the complainant in consequence of the dismissal in so far as that loss is attributable to action taken by the employer.

Given the difficulty which confronted Mr Cunningham in obtaining other employment, which was probably foreseeable, and the
degree of loss which he has in fact suffered consequent upon his unfair dismissal, his advisers not unreasonably calculated that he
could have expected a maximum award of 8,500. In considering his advice, it is necessary to have regard to s 74(6), which
provides:

Where the tribunal finds that the dismissal was to any extent caused or contributed to by any action of the complainant
it shall reduce the amount of the compensatory award by such proportion as it considers just and equitable having regard to
that finding

and to the similar section which applies to the basic award (s 73(7B)). However, as Mr David Pannick, who has appeared for Mr
Cunningham, pointed out, it would be difficult, although perhaps not impossible, to justify a reduction of a sufficiently high order
under this head in a case in which the board had recommended reinstatement. Absent such a reduction the basic and
compensatory award would have amounted to 12,108 and accordingly there would have to have been a reduction of nearly 50%.
Finally there is yet another award which he could have claimed, namely one under s 71(2), which applies where a tribunal has
ordered reinstatement and the employer refuses to comply with the order. Such an award is compensatory, but is subject to a
minimum of 13 weeks pay (2,132) and a maximum of 26 weeks pay (4,264) (see s 71(2)(b)(ii)). Aggregating these figures, it
is submitted that Mr Cunningham had reasonable grounds for thinking that an industrial tribunal would have awarded him
between 14,240 and 16,374 less the 6,500 already paid by the Home Office.

The application for judicial review

In these circumstances it is not surprising that Mr Cunningham should have sought some avenue of redress. There is no
right of appeal from the boards decision and accordingly in March 1989 he applied for, and Roch J granted him, leave to apply
for judicial review. His attack was two-pronged. First he attacked the decision to award him only 6,500 as compensation upon
the grounds that it was prima facie irrational and sought an order that it be reconsidered. Second he attacked the refusal by the
board to supply him with any reasons justifying the amount of the award and sought an order that the board give reasons. On
both grounds he sought a declaration that the board had exceeded its powers and acted unlawfully.
The application for judicial review was heard by Otton J, who on 25 May 1990 declared the decision of the board to award
compensation of 6,500 and its subsequent refusal to supply Mr Cunningham with reasons for the award to be unlawful and ultra
vires. In giving reasons for that decision, the learned judge made it clear that he rejected the attack upon the amount of the award
per se and rested his judgment upon the failure to give reasons either initially or upon request.
313

The appeal and cross-appeal

 The board now appeals upon the grounds that it is under no obligation to give any reasons for its award and Mr Cunningham
cross-appeals upon the grounds that the award is prima facie irrational. Although in a sense the appeal and cross-appeal are
independent of each other, both involve a consideration of the duty of the board to give reasons initially or, if not then, upon leave
to apply for judicial review being granted. These are issues of considerable general public importance in the field of public law
and for that reason, and in deference to the excellent arguments with which we were assisted by Mr John Laws, appearing for the
board, and by Mr David Pannick we took time to consider our decision and have put our judgments into writing.

The boards susceptibility to judicial review

This was accepted on this appeal. Previously it had been so decided by the Divisional Court in R v Civil Service Appeal
Board, ex p Bruce (A-G intervening) [1988] 3 All ER 686. There it was held that the board was a public law body, but in the
exercise of its discretion the court declined to give Mr Bruce any relief since he had available to him and was taking advantage of
the alternative remedy of applying for compensation to an industrial tribunal. On appeal to this court, the only relevant challenge
was to the exercise of that discretion (see [1989] 2 All ER 907).

The jurisdiction of the board

The boards jurisdiction is derived from the Civil Service Order in Council 1982, art 4 of which authorised the promulgation
by the Minister for the Civil Service of a Code for Civil Service Pay and Conditions of Service. Paragraph 14 was in these terms:

For the most part, the relationship between the civil servant and the Crown remains one regulated under the
prerogative and based on personal appointment. As such, a civil servant does not have a contract of employment
enforceable in the courts but rather a letter of appointment, and technically the Crown still retains the right to dismiss a
civil servant at pleasure. Recently, however, the legal position of civil servants has been radically changed by the growing
trend for legislation to apply to the Civil Service either directly, by the provisions of the Acts themselves or by government
assurances that the conditions applying to civil servants will not be less favourable than those applying to other
employees.

Paragraphs 10120 to 10137 give United Kingdom based civil servants under notice of dismissal or compulsory premature
retirement (other than on medical grounds) a right of appeal to the board subject to conditions as to minimum length of service
and age which are immaterial in the case of Mr Cunningham. The constitution of the board which hears appeals bears a striking
resemblance to that of an industrial tribunal, consisting of an independent chairman and two members, one drawn from a panel
nominated by the official side and one from a panel nominated by the staff side. It is provided by para 10134:

The Appeal Board will operate without undue formality. Its purpose is to decide whether the decision to retire
prematurely or to dismiss is fair. If the board decides that it is not, it may recommend to the head of the employing
department either that the appellant shall not be retired or dismissed; or that compensation, or additional compensation in a
case of premature retirement, should be paid.
314

Paragraph 10135 provides:

If a recommendation not to retire or dismiss is rejected by the department, the Appeal Board will consider whether to
recommend compensation, or additional compensation in the case of premature retirement.

Paragraph 10137 provides:

The employing department shall pay any compensation recommended by the Appeal Board.

Section 146 of the 1978 Act has the effect of disapplying to prison officers the provisions of s 54(1), which provides:

In every employment to which this section applies every employee shall have the right not to be unfairly dismissed by
his employer.

However, notwithstanding any contention that Crown employees may have their employment determined at pleasure, I do not
understand it to be contended that, where this is effected unfairly within the meaning of the 1978 Act, Crown employees
excluded from the benefits of the Act will not have a legitimate expectation that they will be compensated in the same way and to
the same extent as would be the case if the Act applied. Indeed this is implicit in the boards evidence contained in an affidavit
by its chairman. Whilst resolutely declining to depart from the practice of the board not to give reasons, he points out that the
average compensation award made by the board in 28 cases heard during 1988 was 2,201.56 compared with the median award
made by industrial tribunals in unfair dismissal cases in a comparable period, which was 1,865.

The cross-appeal
In R v Lancashire CC, ex p Huddleston [1986] 2 All ER 941 at 945 I expressed the view that we had now reached the
position in the development of judicial review at which public law bodies and the courts should be regarded as being in
partnership in a common endeavour to maintain the highest standards of public administration, including, I would add, the
administration of justice. It followed from this that, if leave to apply for judicial review was granted by the court, the court was
entitled to expect that the respondent would give the court sufficient information to enable it to do justice and that in some cases
this would involve giving reasons or fuller reasons for a decision than the complainant himself would have been entitled to.
Parker LJ and Sir George Waller did not share my unease at the limited disclosure made by the council in that case, but I do not
understand them to have disagreed with the principle.
Those of us with experience of judicial review are very much aware that the scope of the authority of decision-makers can
vary very widely and so long as that authority is not exceeded it is not for the courts to intervene. They and not the courts are the
decision-makers in terms of policy. They and not the courts are the judges in the case of judicial or quasi-judicial decisions
which are lawful. The public law jurisdiction of the courts is supervisory and not appellate in character. All this is very much
present to the minds of judges who are asked to give leave to apply for judicial review. Such leave will only be granted if the
applicant makes out a prima facie case that something has gone wrong of a nature and extent which might call for the exercise of
the judicial review jurisdiction. Whatever the initial position, the fact that leave to apply for judicial review has been granted
calls for some reply from the respondent. How detailed that reply should be will depend upon the circumstances of the particular
case. He does not have to justify 315 the merits of his decision, but he does have to dispel the prima facie case that it was
unlawful, something which would not arise if leave to appeal had been refused.
I am far from saying that the award of 6,500 to Mr Cunningham could never be justified in the sense of being shown to
have been not irrational. If the board had responded to the substance of Mr Cunninghams application for judicial review, it
might have said that rightly or wrongly it thought that he could obtain other employment as beneficial as that of prison officer
and could do so within a relatively short time. Any such conclusion would probably have been wrong, but it would have been a
decision reached in good faith within the scope of its authority. If the board had responded by saying that they would have
awarded X but had reduced it to 6,500 by an application (by analogy) of ss 74(6) and 73(7B) of the 1978 Act and had done so
after giving full consideration to the fact that in all the circumstances the members had felt it right to recommend that he be
reinstated, it would have been for consideration whether that, right or more probably wrong, was a decision which was open to
them. But the board has said nothing except that the level of its awards overall, including cases where reinstatements not
recommended, do not differ widely from the level of award by industrial tribunals. This is interesting, but is simply not
responsive to Mr Cunninghams complaint or to the courts inquiry, which is limited to the award in Mr Cunninghams case.
In fairness to the board it must be emphasised that it is not being unco-operative. It has been advised, mistakenly as I think,
that to attempt any justification of a particular award, however surprising that award might be, would be to concede the right of
every claimant to reasons. As I have sought to show, this is not so. The principles of public law will require that those affected
by decisions are given the reasons for those decisions in some cases, but not in others. A classic example of the latter category is
a decision not to appoint or not to promote an employee or office holder or to fail an examinee. But, once the public law court
has concluded that there is an arguable case that the decision is unlawful, the position is transformed. The applicant may still not
be entitled to reasons, but the court is.
In the present case in my judgment the award of 6,500 is so low in what appear to be the circumstances that it is prima
facie irrational and, in the absence of explanation, should be so regarded and quashed in order to enable the board to reconsider it.
If the board was minded to affirm its award, it would have to give Mr Cunningham further information in order to displace the
implication that it was still irrational. All this assumes that the board is correct in asserting that, absent leave being granted to
apply for judicial review of one of its awards, it is under no duty to give reasons and to that proposition I now turn.

The appeal
The essence of Otton Js reasons for his decision is contained in the following passage from his judgment:

In return for forfeiting the right [to apply to an industrial tribunal], he had been given a government assurance, as
recorded in para 14 of the code, that the conditions applying to civil servants will not be less favourable than those
applying to other employees. This, in my judgment, gave rise to a legitimate expectation that he would be so treated.
Thus, in Lord Denning MRs words, he was a man who had a legitimate expectation of which it would not be fair to
deprive him without reasons given, and those should be afforded to him (see Breen v Amalgamated Engineering Union
[1971] 1 All ER 3161148 [1971] 2 QB 175 at 191). In the words of Donaldson P (in Norton Tool Co Ltd v Tewson [1973]
1 All ER 183 at 187, [1973] 1 WLR 45 at 49), it is a corollary of the discretion conferred upon the board that it is their duty
to set out their reasoning in sufficient form to show the principles on which they have proceeded. Adopting Lord Lane CJs
observations (in R v Immigration Appeal Tribunal, ex p Khan (Mahmud) [1983] 2 All ER 420 at 423, [1983] QB 790 at
794795), the reasons for the lower amount is not obvious. Mr Cunningham is entitled to know, either expressly or
inferentially stated, what it was to which the board were addressing their mind in arriving at their conclusion. It must be
obvious to the board that Mr Cunningham is left with a burning sense of grievance. They should be sensitive to the fact
that he is left with a real feeling of injustice, that having been found to have been unfairly dismissed, he has been deprived
of his just desserts (as he sees them). He retains a lurking suspicion that the board still hold against him the fact that he
was in the dining hall during that riot and was accused of assaulting a prisoner. The stigma of the occasion still attaches to
him, and this influenced the sum awarded by the board. Thus, in the particular circumstances of this case, and without
wishing to establish any precedent whatsoever, I am prepared to spell out an obligation on this board to give succinct
reasons, if only to put the mind of Mr Cunningham at rest. I would therefore allow this application.

There are three possible bases for holding that the board should have given reasons for their award. The first is that there is
a general rule of the common law or, if that be different, a principle of natural justice that a public law authority should always or
even usually give reasons for its decisions. I am not sure to what extent this was advanced before Otton J, but he rejected it
decisively. Suffice it to say that the proposition is unarguable and it was not argued in this court. If authority be needed it is
provided by the decision of the High Court of Australia in Public Service Board of New South Wales v Osmond [1987] LRC
(Const) 681, and the English and other Commonwealth cases there cited. I would only comment that, although Gibbs CJ may be
right in saying (at 688) that s 12 of the Tribunals and Inquiries Act 1971 applied to the decisions of industrial tribunals exercising
their jurisdiction under the Industrial Relations Act 1971 as distinct from their jurisdiction under the Industrial Training Act 1964,
this never occurred to anyone at the time and the decisions in Norton Tool Co Ltd v Tewson [1973] 1 All ER 183, [1973] 1 WLR
45 and Alexander Machinery (Dudley) Ltd v Crabtree [1974] ICR 120 were not based on any such consideration.
The second is that a tribunal exercising a jurisdiction which mirrors that of the industrial tribunals which are required to give
reasons and further or alternatively a tribunal which is exercising a judicial function from which there is no appeal should give
sufficient reasons to enable a party to know why he has failed to secure any or, as the case may be, all of the relief which he
sought and above all to be satisfied that the decision was lawful. This Otton J rejected.
The third is that Mr Cunningham and others who resort to the board have a legitimate expectation that it will give reasons.
This, as I have shown, the judge accepted.
I take it as established that the remit and authority of the board is to adjudicate upon the issue of whether a dismissal was fair
or unfair and, if unfair, on the appropriate amount of compensation, applying the same approach as would be appropriate on an
application of the Employment Protection (Consolidation) Act 1978. No other basis for its decisions has been suggested and the
whole concept of an unfair dismissal and compensation for such dismissal is a creature of that 317 Act and its predecessors. That
being so, the issue is whether natural justice, or fairness in action as it has been called, requires that some and, if so, what
reasons be given for its decisions.
I accept at once that some judicial decisions do not call for reasons, the commonest and most outstanding being those of
magistrates. However, they are distinguishable from decisions by the board for two reasons. First, there is a right of appeal to
the Crown Court, which hears the matter de novo and customarily does give reasons for its decisions. Second, there is a right to
require the magistrates to state a case for the opinion of the High Court on any question of law. This right would enable an
aggrieved party to know whether he had grounds for raising any issue which would found an application for judicial review,
although his remedy would procedurally be different.
I accept that the various decisions requiring industrial tribunals to give reasons and indicating the extent of the reasons
appropriate have to be read in the context that Parliament has given the parties a right of appeal to the Employment Appeal
Tribunal (in succession to the National Industrial Relations Court) on questions of law and the reasoning is based upon the
entitlement of the parties to know whether a question of law arises.
I accept that many tribunals, including the Immigration Appeal Tribunal, are required by statute law to give reasons and to
that extent the position of the board is distinguishable.
I accept that however desirable it may be that decision-makers shall give reasons, and even more essential that they shall
have them and know what they are, that is not the same as being required by statute or the common law to communicate such
reasons to those affected. However, I do not accept that, just because Parliament has ruled that some tribunals should be required
to give reasons for their decisions, it follows that the common law is unable to impose a similar requirement upon other tribunals,
if justice so requires. As Lord Bridge put it in Lloyd v McMahon [1987] 1 All ER 1118 at 1161, [1987] 1 AC 625 at 702703:
 My Lords, the so-called rules of natural justice are not engraved on tablets of stone. To use the phrase which better
expresses the underlying concept, what the requirements of fairness demand when any body, domestic, administrative or
judicial, has to make a decision which will affect the rights of individuals depends on the character of the decision-making
body, the kind of decision it has to make and the statutory or other framework in which it operates. In particular, it is well
established that when a statute has conferred on any body the power to make decisions affecting individuals, the courts will
not only require the procedure prescribed by the statute to be followed, but will readily imply so much and no more to be
introduced by way of additional procedural safeguards as will ensure the attainment of fairness.

Accordingly, I take as my starting point a consideration of what is the character of the decision-making body. The answer
is that it is not domestic. In this it is to be distinguished from internal appeal bodies dealing with industrial relations problems,
including dismissals, in large companies or private organisations. Whether the board is dealing with prison officers, who do not
have access to industrial tribunals, or with other Crown employees who do, it is an independent public law body wholly divorced
from management, albeit established by the Crown. Nor is it in any way administrative or even quasi-judicial. It is a fully
judicial body.
318
I then have to consider the framework in which it operates. It is unaffected by statute. It gives decisions which in practice
determine rights as between the Crown and its employees. That some Crown employees may have additional rights is
immaterial. There is no appeal from its decisions on either fact or law, but it is obliged to exercise its functions in accordance
with the law and, for reasons which I have already given, in accordance with, albeit not under, the Employment Protection
(Consolidation) Act 1978.
I then ask myself what additional procedural safeguards are required to ensure the attainment of fairness. The answer is, I
believe, to be found in the judgment of Lord Lane CJ in R v Immigration Appeal Tribunal, ex p Khan (Mahmud) [1983] 2 All ER
420 at 423, [1983] QB 790 at 794795, which I do not believe owed anything to the fact that the Immigration Appeal Tribunal is
required by statute to give some reasons for its decisions:

The important matter which must be borne in mind by tribunals in the present type of circumstances is that it must be
apparent from what they state by way of reasons first of all that they have considered the point which is at issue between
the parties, and they should indicate the evidence upon which they have come to their conclusions. Where one gets a
decision of a tribunal which either fails to set out the issue which the tribunal is determining either directly or by inference,
or fails either directly or by inference to set out the basis on which it has reached its determination on that issue, then that is
a matter which will be very closely regarded by this court, and in normal circumstances will result in the decision of the
tribunal being quashed. The reason is this. A party appearing before a tribunal is entitled to know, either expressly stated
by it or inferentially stated, what it is to which the tribunal is addressing its mind. In some cases it may be perfectly
obvious without any express reference to it by the tribunal; in other cases it may not. Second, the appellant is entitled to
know the basis of fact on which the conclusion has been reached. Once again in many cases it may be quite obvious
without the necessity of expressly stating it, in other cases it may not.

Judged by that standard the board should have given outline reasons sufficient to show to what they were directing their
mind and thereby indirectly showing not whether their decision was right or wrong, which is a matter solely for them, but
whether their decision was lawful. Any other conclusion would reduce the board to the status of a free-wheeling palm tree.
The boards objection to giving reasons, which curiously is fully supported by both the official and the staff sides, is that this
would tend to militate against informality and would lead to an undesirable reliance upon a body of precedent. I find this totally
unconvincing. The evidence shows that those who advise applicants and departments do so frequently and must be well aware of
the boards previous decisions and of the circumstances in which they were made. There must therefore already be a body of
precedent. If the board have no regard to their previous decisions, they must be acting inconsistently and be failing to do justice
as between applicants. This I am loathe to believe. As to informality, no one has yet complained that the industrial tribunals lack
informality, yet they give reasons for their decisions. A complaint of legalism is another matter, but there is no reason why the
giving of brief reasons should lead to this most distressing of diseases.
This leaves only the ground upon which Otton J decided this case. Mr Laws submits that
319

Legitimate, or reasonable, expectation may arise either from an express promise given on behalf of a public authority
or from the existence of a regular practice which the claimant can reasonably expect to continue.

(See Council of Civil Service Unions v Minister for the Civil Service [1984] 3 All ER 935 at 944, [1985] AC 374 at 401 per Lord
Fraser.)
There has been no regular, or possibly any, practice of the board involving giving reasons and Mr Laws submits that the fact
that the board apply the 1978 Act does not give rise to any legitimate expectation that they will do so in the way in which
industrial tribunals do. Any duty to give reasons is, as he puts it, a free-standing duty.
I agree that the issue is what has been promised by the Minister for the Civil Service. It is that the conditions applying to
civil servants will not be less favourable than those applying to other employees. If this stood alone it might not suffice, but the
minister has interpreted this as entitling civil servants to a right to apply to a tribunal which is analogous to an industrial tribunal
and applies the same law as do those tribunals and has done so notwithstanding that some other employees have no access to an
industrial tribunal (see ss 141 to 146 of the 1978 Act). If the governments promise goes this far, as clearly it does, I cannot see
how it can be interpreted as not extending to a right to apply to a tribunal which, like an industrial tribunal, does give reasons.
Conditions of employment which give a right to apply to a tribunal which gives reasons are more favourable than conditions
which give a right to apply to one which does not and there are no countervailing advantages offered to those in Crown
employment.
I would therefore dismiss the appeal not only upon the ground of legitimate expectation on which Otton J rested his
decision, but also upon the broader ground that fairness requires a tribunal such as the board to give sufficient reasons for its
decision to enable the parties to know the issues to which it addressed its mind and that it acted lawfully.

McCOWAN LJ. The basic submission of Mr Laws, counsel for the Civil Service Appeal Board, before this court has been that
there was no obligation on the board to give reasons for its decision in the absence of a statutory requirement (and none is
suggested in this case) or of a legitimate expectation aroused either by a practice on the part of the board of giving reasons or of
an assurance that they would be given. There is no question of a practice of giving reasons: it is common ground that the board
has never given reasons. Hence, argues Mr Laws, the case comes down to whether any assurance had been given.
Mr Laws is, in my judgment, right in saying that the ratio of Otton Js decision is to be found in his judgment where he said:

In return for forfeiting the right [the judge is here referring to the right to go to an industrial tribunal], he had been
given a government assurance, as recorded in para 14 of the code, that the conditions applying to civil servants will not be
less favourable than those applying to other employees. This, in my judgment, gave rise to a legitimate expectation that
he would be so treated.
 I am bound to say that I find the learned judges phrase In return for forfeiting the right unsupported by the facts. There
was no evidence that Mr Cunningham or any other prison officer had agreed to forfeit a right to go to an industrial tribunal in
return for any government assurance. Indeed, as Mr Laws pointed 320 out, it cannot be appropriate to speak of a man forfeiting a
right which he has never had.
Mr Laws further drew to the courts attention that there are other groups of workers (not government employees) who are
not entitled to go to an industrial tribunal. This means that the right to go to an industrial tribunal applies neither to all civil
servants nor to all other employees. I am, therefore, unable to see how an assurance that the conditions applying to civil servants
will not be less favourable than those applying to other employees can be interpreted as meaning that a civil servant who is not
entitled to go to an industrial tribunal will be treated by the board in exactly the same way as if he had been so entitled. It would
be wrong, in any event, to take para 14 of the Civil Service Pay and Conditions of Service Code (which contains the words in
question) in isolation and ignore para 10136, dealing with recommendations of compensation by the board, which says: The
Secretary to the Appeal Board will notify the appellant of the Boards recommendation It does not add and the reasons
therefor. This is not suggestive of any promise that the board will give reasons.
Accordingly, I do not consider that anything that had occurred in the past gave Mr Cunningham a legitimate expectation that
the board would give him reasons for the amount of compensation recommended by it. That, submits Mr Laws, is the end of the
case. Mr Pannick argues, however, that he does not need to rely on legitimate expectation: it is sufficient if he makes out a case
of procedural unfairness.
For this proposition Mr Pannick relies chiefly on passages in the speeches of their Lordships in Wiseman v Borneman [1969]
3 All ER 275, [1971] AC 297. In that case the Inland Revenue Commissioners, having considered statutory declarations made by
the appellants, submitted them to the appropriate tribunal to determine whether there was a prima facie case for proceeding in the
matter. The registrar of the tribunal refused the appellants request to be represented by counsel at that determination and to be
given copies of the commissioners certificate and counter-statement. The appellants argued that this procedure was not in
accordance with natural justice. Their Lordships unanimously dismissed their appeal. Lord Reid said ([1969] 3 All ER 275 at
277, [1971] AC 297 at 308):

Natural justice requires that the procedure before any tribunal which is acting judicially shall be fair in all the
circumstances, and I would be sorry to see this fundamental general principle degenerate into a series of hard and fast rules.
For a long time the courts have, without objection from Parliament, supplemented procedure laid down in legislation where
they have found that to be necessary for this purpose. But before this unusual kind of power is exercised it must be clear
that the statutory procedure is insufficient to achieve justice and that to require additional steps would not frustrate the
apparent purpose of the legislation.

Lord Morris said ([1969] 3 All ER 275 at 278, [1971] AC 297 at 309):

The principles and procedures are to be applied which, in any particular situation or set of circumstances, are right and
just and fair. Natural justice, it has been said, is only fair play in action. Nor do we wait for directions from Parliament.
The common law has abundant riches: there may we find what BYLES, J., called the justice of the common law
(Cooper v. Wandsworth Board of Works ((1863) 14 CBNS 180 at 194, 143 ER 414 at 420)).

Lord Wilberforce added ([1969] 3 All ER 275 at 285, [1971] AC 297 at 317):

I am not, therefore, satisfied with an approach which merely takes the 321 relevant statutory provision (Finance Act
1960, s 28(4)), subjects it to a literal analysis and cuts straight through to the conclusion that Parliament has laid down a
fixed procedure which only has to be literally followed to be immune from attack. It is necessary to look at the procedure
in its setting and ask the question whether it operates unfairly to the taxpayer to a point where the courts must supply the
legislative omission.

In response, Mr Laws says that this authority is for two reasons of no assistance to the respondent. In the first place, he
argues, in the absence of a statutory provision there remains the necessity to establish a legitimate expectation based either on a
practice or an assurance. I cannot, however, find any trace of such a prerequisite in the speeches of their Lordships.
Secondly, Mr Laws submits that that case is to be distinguished, because it was about procedure at a hearing, whereas the
present is about the form of a determination given after the hearing. I cannot believe that procedure for these purposes ends
with final speeches. It would produce a most unsatisfactory situation if it did. To accord with natural justice a tribunal must
permit a party to state his case. But how will that avail him if he has no idea whether any attention has been paid by the tribunal
to what he said? Suppose, for the sake of argument, he argues that a particular matter is irrelevant and should be ignored by the
tribunal in arriving at its recommendation. How could he, in the absence of reasons, know that they had not rejected his
submission and taken the matter into account? How could he formulate a case on the point for judicial review? By that analysis I
unhesitatingly conclude that the form of the recommendation is part of the procedure of the hearing and no less subject to the
requirements of natural justice than any other part.
According to the evidence of Mr Forman, the chairman of the Civil Service Appeal Board:

The members of the CSAB are aware of the rules and guidelines adopted by the Industrial Tribunals when they are
assessing awards of compensation, and the CSAB has regard to the principles inherent in those rules as a framework for its
assessment of awards.

He goes on in his affidavit to show that in fact the average award made by the board is somewhat higher than that made by
industrial tribunals. Mr Pannick demonstrated to the court, without contradiction from Mr Laws, that had Mr Cunningham been
able to go to an industrial tribunal the maximum award which he could have received would have been more than twice the
award he actually received from the board. Taking account of his age, his length of service, the salary he was receiving at the
time of his dismissal and the recommendation from the board that he be reinstated, he could reasonably have expected to come
close to the maximum. To this day neither he, nor for that matter this court, has any idea why the board recommended that he
receive so little.
As Mr Pannick says, it cries out for some explanation from the board. As I would put it, not only is justice not seen to have
been done but there is no way, in the absence of reasons from the board, in which it can be judged whether in fact it has been
done. I find that a thoroughly unsatisfactory situation, in which this court should hold, if it can properly do so, that the board
ought to give reasons for its recommendation.
In reaching a conclusion as to the propriety of Otton Js order, I am influenced by the following factors.
1. There is no appeal from the boards determination of the amount of compensation.
322
2. In making that determination the board is carrying out a judicial function.
3. The board is susceptible to judicial review.
 4. The procedure provided for by the code, that is to say the provision of a recommendation without reasons, is insufficient
to achieve justice.
5. There is no statute which requires the courts to tolerate that unfairness.
6. The giving of short reasons would not frustrate the apparent purpose of the code.
7. It is not a case where the giving of reasons would be harmful to the public interest.
These considerations drive me to the view that this is a case where the board should have given reasons and I would,
therefore, dismiss the appeal.
I add only that I see no reason why the board need take more than a few simple sentences to state those reasons, or why the
necessity to do this should in any way prejudice the informality of the proceedings or, in Mr Formans words, lead to bodies of
precedent and legalistic concepts.

LEGGATT LJ. Mr Cunningham had served as a prison officer for 23 years when on 12 February 1988 he was unfairly
dismissed by notice which expired on 4 January 1989. Until then he received full pay at the rate of 16,900 pa. The Civil
Service Appeal Board (the board) recommended that he be reinstated, but he was not; and in January 1989, when he was 45 years
old, he was awarded compensation by the board in the sum of 6,500. He had in the meanwhile acquired a part-time job at a
salary of 8,300 pa. By letter of 15 February 1989 the board declined to explain how the sum awarded had been calculated,
saying:

It is not the practice of the Civil Service Appeal Board to enter into discussions about the amount of compensation
awarded. I can only assure you that the Board took fully into account all the relevant factors bearing on Mr Cunninghams
case and is satisfied that the amount of compensation awarded is fair and reasonable.

Otton J granted a declaration that both the letter awarding 6,500 and the letter refusing reasons were ultra vires and unlawful.
Against that order the board now appeals and Mr Cunningham cross-appeals.
Although non-statutory, the board was created by a minister of the Crown under prerogative power conferred by Order in
Council. Its relevant functions are of a public nature and judicial. The Home Office is bound to comply with its decisions on
compensation, and rightly so since the determination of the amount of compensation for unfair dismissal obviously affects the
means of livelihood of the individual concerned. In short, the board is a public law body amenable to judicial review at the
instigation of a person aggrieved.
I have not been much assisted by the articles relied on by Mr Pannick, distinguished though their authors are, because they
are recommending, advocating or protesting what the law ought to be: they are not intent on demonstrating what, in a context
such as the present, the law is. But it seems obvious that for the same reason of fairness that an applicant is entitled to know the
case he has to meet, so should he be entitled to know the reasons for an award of compensation, so that in the event of error he
may be equipped to apply to the court for judicial review. For it is only by judicial review that the boards award can be
challenged. Mr Cunningham has a right of appeal not by way of hearing de novo, as on appeal from a magistrates court, but
only if it can be shown that he has not been fairly treated by the board.
323
It is therefore pertinent to ask why the board refrains from giving reasons. In his affidavit Mr Forman, then chairman of the
board, sought to explain the boards view that the parties appearing before it are better served by the existing procedures,
saying:

The basis of the Boards view is that great value is attached to the existence of simple and informal procedures. It is
thought likely that the giving of reasons would lead to comparisons being drawn between cases, and as a result, bodies of
precedent and legalistic concepts would be deployed to a greater extent. This would be so because often the same union
officials or firms of solicitors appear before the Board on a regular basis. It is considered that the creation of a body of
precedent would detract from the non-legalistic approach taken by the Board to the merits of every individual case.

Mr Forman says that consistently with that policy it is also the Boards practice not to give reasons for the amount of any award
made.
Despite Mr Formans asseverations that the parties are better served by this process, the inadequacy of his explanations why
that should be so prompts the cynical suspicion that the board may be more affected by the fact that it is less trouble for the board
if reasons do not have to be given, that reasons render the inner workings of the board open to public scrutiny, and that reasons
may constitute hostages to fortune in a case such as this. I can see no force in any of Mr Formans excuses for not explaining
how the figure was arrived at. There is no reason why a body of precedent should detract from the non-legalistic approach taken
by the Board to the merits of every individual case. There need be nothing legalistic about the giving of reasons or the reasons
given; nor need the board cease to act in an informal atmosphere. While weighing the merits of every individual case, the board
should obviously pay regard, in the interests of consistency, to other comparable decisions of its own.
In his affidavit Mr Forman also said:

The members of the CSAB are aware of the rules and guidelines adopted by Industrial Tribunals when they are
assessing awards of compensation, and the CSAB has regard to the principles inherent in these rules as a framework for its
assessment of awards.

He then remarked that the average compensation award by the board during 1988 was 2,201.56, while in the year ended 31
March 1988 the median award made by industrial tribunals in unfair dismissal cases was 1,865.
Apart from the fact that the periods are different, statistically it is unhelpful to compare an average with a median figure, and
in any event it does nothing to dispel the belief that the compensation awarded to Mr Cunningham was, as his solicitors asserted,
meagre. Applying the rules and guidelines adopted by industrial tribunals, Mr Cunningham would have been entitled, as Lord
Donaldson MR has explained, to an award under ss 73(3) and 74(1) of the Employment Protection (Consolidation) Act 1978 of
12,108, without regard to any award of additional compensation under s 71(2)(b)(ii) of between 4,264 and 2,132.
Since the board recommended reinstatement it cannot be supposed that they arrived at their award of 6,500 by making a
reduction as under ss 74(6) and 73(7B) on the ground that the dismissal was caused or contributed to by any action of Mr
Cunningham.
Mr Laws argues that Mr Cunningham cannot succeed unless he can prove the existence of a statutory duty to give reasons or
a legitimate expectation that he would be given them. I do not accept that the courts powers are so circumscribed. 324The fact
that the boards principal function is to alleviate the rigour of summary dismissal does not mean that the person dismissed should
not be accorded natural justice or that the board need not deal fairly with him. Without an obligation to give reasons the boards
procedures cannot be checked, let alone challenged; and without reasons neither the person dismissed nor the court can tell
whether to apply for or to grant judicial review.
In relation to many, if not most, administrative decisions it may well be undesirable, for one reason or another, to give
reasons. But there are not here, as in certain contexts there are, any valid grounds for adhering to the general rule that there is no
duty to give reasons. On the contrary, there are here particular grounds for departing from the general rule. Mr Cunningham has
a legitimate grievance, because it looks as though his compensation is less than it should be, and yet he has not been told the basis
of assessment.
This is not a case in which the board was subject to any statutory duty to give reasons like that imposed on certain tribunals
by s 12(1) of the Tribunals and Inquiries Act 1971. Mr Cunningham could not have had any legitimate expectation by virtue of
any practice or promise of the board that it would follow industrial tribunals in giving reasons for the award of particular sums. It
is true that the practice of the board is obviously modelled on that of industrial tribunals. But that fact cannot carry with it any
assurance that in every respect the board will apply the practice of industrial tribunals, despite the fact that in particular in relation
to the giving of reasons it has never done so.
The minister has given an assurance that the conditions applying to civil servants will not be less favourable than those
applying to other employees. But since not all other employees are entitled to go to an industrial tribunal, that assurance cannot
mean that all civil servants who, like Mr Cunningham, are not entitled to go to an industrial tribunal can expect to be treated as
though they were, and so be in a better position than other employees who are not entitled to do so.
One of the main areas in which supervision has to be exercised by way of judicial review is over procedural requirements,
for the purpose of ensuring the right to a fair adjudication. The procedure of a public body is not only required to be fair in so far
as an individual affected by its decisions has a legitimate expectation that it will be. Nor does natural justice or fairness require
the giving of reasons for a decision only when an obligation to give them is imposed by statute.
The cardinal principles of natural justice are that no one shall be judge in his own cause and that everyone is entitled to a
hearing. But the subject-matter of the decision or the circumstances of the adjudication may necessitate more than that. An
award of compensation by the board concerns the applicants means of livelihood for the period to which the award relates. The
boards determination binds the Home Office, and also the applicant subject to his right to challenge it by applying for judicial
review. But that right is nugatory unless the award is so aberrant as to compel the inference that it must have been wrong, or
unless the board explains how the figure was arrived at, so as to enable the applicant to tell whether the award can be successfully
impugned.
Those two grounds for requiring reasons elide here. As Lord Bridge said in Lloyd v McMahon [1987] 1 All ER 1118 at
1161, [1987] AC 625 at 703:

the courts will readily imply so much and no more by way of additional procedural safeguards as will ensure
the attainment of fairness.

By additional Lord Bridge meant in addition to such as may be prescribed by statute. Here none were: but the principle
remains, and with added importance.
325
Since the board has elected as a matter of practice not to give reasons, and has given none to Mr Cunningham, it has been
bound by its own logic not to attempt to justify for the benefit of the court the figure awarded. In default of explanation Mr
Cunninghams award was so far below what, by analogy with the award of an industrial tribunal, he was entitled to expect as in
my judgment to compel the inference that the assessment was irrational, if not perverse. Because there was no general duty to
give reasons, the absence of reasons does not by itself entitle the court to hold that the award was not supportable. But the
unexplained meagreness of the award does compel that inference. As Lord Keith said in Lonrho plc v Secretary of State for
Trade and Industry [1989] 2 All ER 609 at 620, [1989] 1 WLR 525 at 539:

The only significance of the absence of reasons is that if all other known facts and circumstances appear to point
overwhelmingly in favour of a different decision, the decision-maker, who has given no reasons cannot complain if the
court draws the inference that he had no rational reason for his decision.

In my judgment the duty to act fairly in this case extends to an obligation to give reasons. Nothing more onerous is
demanded of the board than a concise statement of the means by which they arrived at the figure awarded. Albeit for reasons
which go wider than those relied on by the judge, I too agree that the appeal should be dismissed and the cross-appeal allowed.

Solicitors: Treasury Solicitor; Mishcon de Reya

Appeal dismissed. Cross-Appeal allowed. Application for leave to appeal to the House of Lords refused.

Frances Rustin Barrister.

326
[1991] 4 All ER 327

Norris v Checksfield
LANDLORD & TENANT; Tenancies

COURT OF APPEAL, CIVIL DIVISION

BALCOMBE, WOOLF AND STAUGHTON LJJ
16, 17 APRIL 1991

Licence Licence to occupy premises Employee Occupation in return for services Defendant employee permitted to reside
in employers house adjacent to employers business on condition that he obtained PSV licence Employee disqualified from
driving Employer dismissing employee and seeking possession of house Whether employee occupying house under service
tenancy or licence Whether statutory requirements as to giving of notice applying Protection from Eviction Act 1977, s 5(1A).

The defendant, a semi-skilled mechanic employed by the plaintiff, was permitted to reside in a house adjacent to the plaintiffs
garage and coach business on condition that he obtained a PSV licence so that he would be able to drive coaches for the plaintiff
and that his licence to occupy the house would cease forthwith on the termination of his employment. The defendant paid 5 per
week rent which was deducted from his salary. The defendant was in fact disqualified from driving but did not inform the
plaintiff of that fact. When the plaintiff discovered that the defendant was disqualified he dismissed him and ten days later gave
him notice to quit the house. A week later the plaintiff commenced proceedings in the county court for possession. The judge
granted the plaintiff possession. The defendant appealed, contending that an employee who was allowed to occupy premises
belonging to his employer when the occupation was not beneficial to his employment at the time he was allowed into occupation
was a tenant who was protected as such rather than a mere licensee and that a service occupancy was a periodic licence in
respect of which the requirements as to the giving of notice in s 5(1A) a of the Protection from Eviction Act 1977 applied.
________________________________________
a Section 5(1A) is set out at p 331 e f, post

Held Exclusive occupation of an employers residential premises by an employee in anticipation that the employees work
would at some time in the future be beneficial to his employment created a licence rather than a tenancy, notwithstanding that at
the time the occupation was entered into, the employees occupation of the premises was irrelevant to the employees existing
duties. Furthermore, the termination of a licence which was expressed to come to an end with the termination of the employees
employment did not have to comply with the requirements in s 5(1A) of the 1977 Act as to the giving of notice, since an
employment licence was not a periodic licence for the purposes of s 5(1A) of the Act. It followed that since the defendant had
gone into occupation in order better to perform his duties when he became a coach driver he had gone into occupation as a
licensee rather than a tenant and, furthermore, the plaintiff was not required to give the defendant notice to terminate his licence
since it came to an end when his employment was terminated. The plaintiff was therefore entitled to possession. The appeal
would accordingly be dismissed (see p 329 f to h, p 330 d h to p 331 c, p 333 b c g h and p 334 b, post).

Notes
For employee tenants, see 27 Halsburys Laws (4th edn) para 14.
For the Protection from Eviction Act 1977, s 5, see 23 Halsburys Statutes (4th edn) (1989 reissue) 314.
327

Cases referred to in judgments

AG Securities v Vaughan [1988] 3 All ER 1058, [1990] AC 417, [1988] 3 WLR 1205, HL.
Australian Blue Metal Ltd v Hughes [1962] 3 All ER 335, [1963] AC 74, [1962] 3 WLR 802, PC.
Fox v Dalby (1874) LR 10 CP 285.
Glasgow City Corp v Johnstone [1965] 1 All ER 730, [1965] AC 609, [1965] 2 WLR 657, HL.
Ivory v Palmer [1975] ICR 340, CA.
Lace v Chantler [1944] KB 368, CA.
Smith v Seghill Overseers (1875) LR 10 QB 422, [187480] All ER Rep 373, DC.
Street v Mountford [1985] 2 All ER 289, [1985] AC 809, [1985] 2 WLR 877, HL.

Cases also cited

Mellor v Watkins (1874) LR 9 QB 400.
Postcastle Properties Ltd v Perridge (1985) 18 HLR 100, CA.
Richardson v Koefod [1969] 3 All ER 1264, [1969] 1 WLR 1812, CA.
Royal Philanthropic Society v County (1895) 18 HLR 83, CA.
Scrimgeour v Waller (1980) 257 EG 61, CA.

Appeal
The defendant, Stephen Checksfield, appealed from the judgment of Judge Hammerton delivered at the Hastings County Court
on 24 April 1990 whereby he granted the plaintiff, Jesse William Norris (trading as J Davis & Son), an order for possession of the
premises at 2 Highfield Bungalow, Highgate, Hawkhurst, Kent. The fact are set out in the judgment of Woolf LJ.

Martin Seaward for the defendant.

Martyn Zeidman for the plaintiff.

17 April 1991. The following judgments were delivered.

WOOLF LJ (delivering the first judgment at the invitation of Balcombe LJ). This is an appeal from a decision of Judge
Hammerton at the Hastings County Court given on 24 April 1990 when he granted the plaintiff an order for possession of 2
Highfield Bungalow, Highgate, Hawkhurst, Kent.
The appeal raises two issues as to the occupation of premises belonging to his employer by an employee. The first issue is
whether an employee who has exclusive occupation of the premises and pays rent can be a licensee if his existing work does not,
although his future anticipated work would, benefit as a result of his being in occupation. The second issue is as to the
application of the requirements as to the giving of notice in s 5(1A) of the Protection from Eviction Act 1977 (the 1977 Act) as
amended by the Housing Act 1988 (the 1988 Act) to a licence which is expressed to come to an end with the employees
employment.

The facts
For the purposes of both issues I can summarise the facts quite briefly, basing myself on the note of the judgment of Judge
Hammerton. In 1988 the defendant worked for the plaintiff as a semi-skilled mechanic. In 1989 he was invited to resume that
employment and started in July 1989. At that time he was living in lodgings approximately one mile away. In August 1989 the
defendant was seen by the plaintiff and asked if he would like to reside at the bungalow, which was the subject of the
proceedings, which had previously been occupied by another 328 employee. The defendant wanted to occupy the premises and
he was allowed into possession on two specific terms which the plaintiff made clear. The first was not of any relevance. The
second was that the defendant would be able to drive coaches for the plaintiffs business and would apply for a PSV licence for
this purpose. In the plaintiffs opinion, for this work it was clearly desirable that the defendant should be in the bungalow since
this would make him readily available in an emergency or if there was urgent work. The judge found that it was on that
condition that occupancy of the bungalow was granted to the defendant.
Before the defendant moved into the premises he was asked to, and did, sign a document confirming the terms of his
occupation. That document referred to the defendant having a licence and so far as relevant provided:

It is a condition of your employment that you shall occupy [the premises] or such other alternative property as the
employer may provide and that on termination of your employment your licence to occupy such property shall cease
forthwith.

In addition it was arranged that the defendant would have the sum of 5 per week deducted from his salary in relation to his
occupation.
At a later date, 13 October 1989, the defendant was given a statement of the main particulars of his employment. These
showed that he was to be employed as a semi-skilled mechanic, his normal hours of work were eight to five, Monday to Friday,
Saturday if agreed. He was to give and receive one weeks notice to terminate the employment but could be dismissed instantly
for misconduct.
Possibly because he was unaware of this until October 1989, as he contended, the defendant did not tell the plaintiff that he
was disqualified from driving. About the same time the plaintiff learned that this was the situation from the police and this,
together with his no longer being a satisfactory employee, caused the plaintiff to dismiss the defendant summarily. About ten
days later, by letter delivered on 11 December 1989, the plaintiff informed the defendant that he was required to vacate the
bungalow. The proceedings for possession were instituted on 18 December 1989.
In relation to the thorny issue as to when an employee is a licensee and not a tenant of premises belonging to his employer
which he is allowed to occupy, Mr Seaward, who appears on behalf of the defendant, is prepared to accept Mr Zeidmans
submission on behalf of the plaintiff. Mr Zeidman submitted that an employee can be a licensee, although his occupation of the
premises is not necessary for the purposes of the employment, if he is genuinely required to occupy the premises for the better
performance of his duties.
In my judgment this submission accurately reflects the law. We have been referred to a number of authorities which set out
different tests. The most helpful decision is that of the House of Lords in Glasgow City Corp v Johnstone [1965] 1 All ER 730,
[1965] AC 609. In that case Lord Reid (with whose speech Lord Wilberforce agreed) said ([1965] 1 All ER 730 at 732, [1965]
AC 609 at 618):

So if necessity were the criterion the appeal would succeed; but if it is sufficient for the respondents to show that their
servant is bound to reside there, and that his residing there is of material assistance to them in the carrying out of their
activities then the appellants must fail on this point.

Lord Reid then went on to examine a number of English authorities and concluded this part of his speech by saying ([1965] 1 All
ER 730 at 733, [1965] AC 609 at 619):
329

In requiring that the occupation should be necessary I think that MELLOR, J.s judgment [in Smith v Seghill
Overseers (1875) LR 10 QB 422, [187480] All ER Rep 373] is out of line with the other authorities, and the authorities on
this topic appear to me to support the respondents contention in the present case.

Lord Reid was therefore of the opinion that it would be sufficient if the employees occupation was of material assistance
to his employment. It need not be necessary for his employment. The same view was taken by Lord Evershed and Lord
Hodson. Lord Guest stated the position which must exist for there to be a licence in the following terms ([1965] 1 All ER 730 at
739740, [1965] AC 609 at 629):

The residence must be ancillary to the duties which the servant has to perform (Smith v. Seghill Overseers ((1875) LR
10 QB 422, [187480] All ER Rep 373)) or put in another way the requirement must be with a view to the more efficient
performance of the servants duties (Fox v. Dalby ((1874) LR 10 CP 285)).

As Mr Seaward correctly submitted, it would not suffice if the occupation was a fringe benefit or merely an inducement to
encourage the employee to work better.
Unless the occupation fulfilled this test, the fact that the employee had exclusive possession and paid rent would almost
inevitable establish a service tenancy: see generally Street v Mountford [1985] 2 All ER 289, [1985] AC 809 and AG Securities v
Vaughan [1988] 3 All ER 1058 at 1065, [1990] 1 AC 459 per Lord Templeman.
If in this case, as was contemplated, when the defendant went into occupation he had obtained a PSV licence and had
changed the nature of his job so that he became a coach driver, the judge would undoubtedly have been entitled to regard the
defendant as a licensee. He would then have entered into occupation under a document which described the relationship in terms
of a licence and the occupation would be beneficial to the defendants employment on the judges findings. His occupation
would enable him to assist his employer in cases of emergency or on short notice.
However, Mr Seaward submits that the employment situation which has to be considered is that which existed in fact at the
time the licence was entered into. Not the situation which might exist in the future. The situation which existed at the time the
licence was entered into was that the defendants occupation of the premises was irrelevant to the defendants employment as a
semi-skilled mechanic. In that employment he was not required to assist with emergencies and he could perform the work
equally as well from the lodgings at which he was previously living or indeed from any other address which was within travelling
distance to his place of work. Occupation was beneficial to the defendant but not beneficial to his employment.
There is no previous decision of the courts which directly conflicts with Mr Seawards approach. However, I have no
hesitation in coming to the conclusion that notwithstanding this argument the judge was entitled to come to the conclusion that
the defendant was a licensee. Although the defendant was unable to obtain the necessary PSV licence to drive coaches, he was
on the judges finding only allowed into occupation on the basis that he would obtain the necessary qualifications and work as a
coach driver. In my judgment it would not be sensible, unless compelled to do so, to restrict an employers ability to grant a
licence to situations where the employment which would be benefited by the employee taking up occupation commenced
simultaneously with or prior to the occupation of the premises. There may be many circumstances where it would 330 be
desirable for the employee to take up occupation before the relevant work commenced. What is required is that there should be a
sufficient factual nexus between the commencement of the occupation of the premises and the employment which would benefit
from that occupation. If for some reason it becomes apparent that the employee is not going to be able to fulfil the requirements
of that employment within a reasonable time, then the position may be different. However, if the situation is one where it is
contemplated, as was the position here, that the employee would, within a reasonable time, be able to take up the relevant
employment, that will suffice. The fact that the employee during the intervals may be performing some other duties which are
not affected by the occupation of the premises does not prevent a licence coming into existence.
On the facts found by the judge in this case, this was therefore a case where it was proper to regard the defendant as going
into occupation as a licensee in order better to perform his duties when he became a coach driver.

The second issue

Section 5 of the Protection from Eviction Act 1977, as amended, provides:

(1) Subject to subsection (1B) below no notice by a landlord or a tenant to quit any premises let (whether before or
after the commencement of this Act) as a dwelling shall be valid unless( a) it is in writing and contains such information
as may be prescribed, and (b) it is given not less than 4 weeks before the date on which it is to take effect.
(1A) Subject to subsection (1B) below, no notice by a licensor or licensee to determine a periodic licence to occupy
premises as a dwelling (whether the licence was granted before or after the passing of this Act) shall be valid unless( a) it
is in writing and contains such information as may be prescribed, and (b) it is given not less than 4 weeks before the date
on which it is to take effect.
 (1B) Nothing in subsection (1) or subsection (1A) above applies to(a) premises let on an excluded tenancy which is
entered into on or after the date on which the Housing Act 1988 came into force unless it is entered into pursuant to a
contract made before that date; or (b) premises occupied under an excluded licence.
(2) In this section prescribed means prescribed by regulations made by the Secretary of State by statutory instrument,
and a statutory instrument containing any such regulations shall be subject to annulment in pursuance of a resolution of
either House of Parliament.
(3) Regulations under this section may make different provision in relation to different descriptions of lettings and
different circumstances.

No notice was given to the defendant which complies with sub-s (1A). However, that subsection is only contravened where
a notice, which does not comply with the subsection, is given to determine a period licence. If no notice is required, the
subsection has no application. It is contended on behalf of the plaintiff that the defendants licence was not a periodic licence and
that it did not require a notice of termination but automatically came to an end as a result of the cessation of the defendants
employment. Although the document which the defendant signed before entering into possession was not a complete record of
the terms on which he was allowed into occupation (for example, it did not mention the rent), it clearly states that the licence was
to cease forthwith on termination of the defendants employment.
The draftsmans reference to a periodic licence in sub-s (1A) creates so far as I 331 am aware a new animal. Periodic
tenancies referred to in sub-s (1) are well known but I am not aware of any previous reference to a periodic licence to occupy
premises. Clearly the draftsman in sub-s (1A) was creating a parallel situation to that in sub-s (1) but wished to restrict it not
only to licences which were required to be determined by notice but also to those licences which could be properly described as
periodic.
There is no definition of a periodic licence in either the 1977 Act or the amending Housing Act 1988. However, in s 45(1) of
the Housing Act 1988 a fixed term tenancy is defined as meaning any tenancy other than a periodic tenancy. Mr Seaward draws
attention to the contrast between a fixed term tenancy and a periodic tenancy which this interpretation provision identifies. He
also referred the court to Lace v Chantler [1944] KB 368 where this court held that a tenancy for the duration of the war did not
create a leasehold interest because it was impossible to say at the outset how long the tenancy would last and therefore it was not
of a sufficiently certain duration. Although Staughton LJ, with his intimate knowledge of the arcane areas of landlord and tenant
law, was able to point out that Lace v Chantler has been overtaken by subsequent statutory intervention (the Validation of War
Time Leases Act 1944), Mr Seaward submits that the decision in that case should still be applied in this case because the date on
which the defendants employment would cease was equally incapable of identification at the commencement of the occupation
in this case as it was in Lace v Chantler.
He submits that it is desirable in the case of a service occupancy that the statutory restriction on the period of notice required
to determine the licence should apply, so as to protect the position of a former employee. He also submits that for the statutory
requirement to apply in this sort of case would be beneficial because the prescribed particulars which are required to be given by
s 5(2) of the 1977 Act would provide a valuable safeguard for the employee. (The prescribed information which has to be given
includes a reference to the desirability of obtaining advice from a solicitor and the ability to obtain legal advice and assistance
under the legal aid scheme.)
While I recognise the benefits which could follow for former employees if Mr Seaward is correct, I am unable to accept his
argument and see real disadvantage in practice if he were correct.
Before the 1977 Act was amended, a licence which was expressed to be terminable on an employees employment coming to
an end would come to an end without the requirement of any notice. That this is the position is supported by the decision of this
court in Ivory v Palmer [1975] ICR 340. In that case it was held that a contractual licence which was ancillary to a contract of
employment came to an end when the contract of employment was terminated even though the termination was wrongful. It was
argued that that case can be distinguished from the situation here because no rent was payable for the occupation and the
contractual licence was interwoven with the contract of employment. I cannot see why the fact that there is only one contract
instead of two should make any difference to the situation as long as the contract dealing with the right to occupation makes it
clear that it is to come to an end with the employment. The fact that rent is payable with reference to a period of time such as a
week would only be of significance if there was no other express or implied event which terminates the licence. In that situation
the period in relation to which the rent is payable may provide guidance as to the length of notice which would be reasonable
before the licence could be terminated. If no notice is required, then the fact that the rent was payable periodically is not relevant
as to when the licence terminates.
332
The question whether a requirement of reasonable notice is to be implied in a licence has to be answered in the light of the
circumstances existing when the licence is created: see Australian Blue Metal Ltd v Hughes [1962] 3 All ER 335 at 342, [1963]
AC 74 at 99 per Lord Devlin. In this case therefore, in my judgment, no notice was required to terminate the licence. The
employment could be ended summarily if appropriate or on a weeks notice and when the employment came to an end so did the
licence. That being the position, s 5(1A) of the 1977 Act can have no application. There is no notice which is needed which is
relevant for the purposes of that subsection. Further, even if that approach is not correct, the question remains as to whether or
not this was a periodic licence. In my judgment it was not. This was a licence for a single period, namely, the period of
employment. The subsection in referring to a periodic licence confines its operation to those licences which continue for a series
of periods until terminated by a notice. The analogy is with weekly, monthly, or quarterly tenancies. Having regard to the
document which the defendant signed before he went into occupation, the fact that a weekly deduction was made from his wages
by way of rent is not sufficient to turn this licence into a periodic licence.
The approach adopted above means that s 5 of the 1977 Act, as amended, will not apply to the great majority, but not
necessarily all, employment licences. Those licences will usually end with the employment. This appears to me to make good
sense. If the premises are required to be occupied by an employee for the better performance of his employment, it is sensible
that the premises should be required to be vacated as soon as the employment comes to an end so that they can be occupied by
another employee. It is not difficult to envisage circumstances where greater inconvenience could be caused even by a delay of
four weeks after the end of a period of employment. A degree of support for this approach is provided by s 8(2) of the 1977 Act.
That subsection provides:

For the purposes of Part I of this Act a person who, under the terms of his employment, had exclusive possession of
any premises other than as a tenant shall be deemed to have been a tenant and the expressions let and tenancy shall be
construed accordingly.

This subsection does not apply to s 5 because that section is in Pt II and not in Pt I of the 1977 Act. As s 8 has been
amended by the 1988 Act, if the arguments advanced on behalf of the defendant are correct, and Parliament intended s 5, as
amended, to apply to the situation here under consideration, then that object could have been achieved by amending s 8(2) so that
it applied to Pt II of the Act as well. Section 5 is the only section in Pt II of the 1977 Act. In fact, Parliament did not amend sub-s
(2).
No notice being required to terminate the defendants licence, I would dismiss this appeal.
STAUGHTON LJ. I agree that this appeal should be dismissed for the reasons so clearly given by Woolf LJ. I was at one time
troubled by a single sentence in the judgment of Lush J in Smith v Seghill Overseers (1875) LR 10 QB 422 at 431, [187480] All
ER Rep 373 at 376. In that case Smith was a mineworker and lived in a house which belonged to his employers. His occupation
was to cease at the time when his employment ceased. Lush J said: It is true that the holding is not for any fixed term If
one reads that with s 45(1) of the Housing Act 1988, one finds there that fixed term tenancy means any tenancy other than a
periodic tenancy. It would follow that if the definition given by Lush J also applies, then a tenancy which is to expire when the
employment expires is a periodic tenancy. However, it seems to me that in the Housing Act 1988 Parliament provided a 333
different rule to that which had found favour with Lush J in 1875. Parliament decided that any tenancy which was not a periodic
tenancy was a fixed term tenancy, although Lush J in 1875 thought that a tenancy for the duration of employment was not of that
description. That has allayed my doubts on that aspect of the case, and I agree that the appeal must be dismissed.

BALCOMBE LJ. I agree that this appeal should be dismissed for the reasons given by Woolf and Staughton LJJ.

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

Solicitors: Holden & Co, Hastings; Menneer Idle & Brackett, St Leonards-on-Sea.

Raina Levy Barrister.

[1991] 4 All ER 334

Re Harrods (Buenos Aires) Ltd

CIVIL PROCEDURE

COURT OF APPEAL, CIVIL DIVISION

DILLON, STOCKER AND BINGHAM LJJ
29, 30 NOVEMBER, 19 DECEMBER 1990

Practice Stay of proceedings Jurisdiction Appropriate forum Company domiciled in England and Argentina Companys
issued share capital owned by two Swiss companies Minority shareholder presenting petition in English courts for order that
majority shareholder purchase its shares in company Majority shareholder applying for stay of proceedings on ground of
forum non conveniens Whether English court having jurisdiction to stay proceedings Whether domicile rule in Convention on
Jurisdiction and the Enforcement of Civil and Commercial Judgments removing English courts discretion to stay action on
ground of forum non conveniens Civil Jurisdiction and Judgments Act 1982, s 49, Sch 1, art 2.

Two Swiss companies, I and L, owned 51% and 49% respectively of the issued share capital of a company incorporated in
England. The companys registered office was in England but its business was carried on and it was managed and controlled
exclusively in Argentina. In 1989 L, the minority shareholder, claimed that the companys affairs were being conducted in a
manner unfairly prejudicial to it and presented a petition seeking an order under s 459 of the Companies Act 1985 directing I, the
majority shareholder, to purchase its shares or, alternatively, that the company be wound up compulsorily under the Insolvency
Act 1986. L obtained leave to serve the petition on I out of the jurisdiction. I subsequently sought an order that the petition and
all proceedings be stayed on the ground that Argentina was the appropriate forum for the trial of the issues. The judge dismissed
Is claim, holding that the English court and not the Argentine court was the appropriate forum for the trial of the issues. I
appealed. On appeal L raised a preliminary issue on jurisdiction contending that, although s 49 a of the Civil Jurisdiction and
Judgments Act 1982 preserved the power of the English court to stay or dismiss proceedings where to do so was not inconsistent
with the 1968 Convention on Jurisdiction and the Enforcement of Civil and Commercial 334 Judgments (which had the force of
law in the United Kingdom by virtue of s 2(1) of the 1982 Act and was set out in Sch 1 to that Act), the court had no jurisdiction
to refuse to decide the issues on the ground of forum non conveniens since the company was domiciled in England (albeit it was
also domiciled in Argentina) and under art 2 b of the convention persons domiciled in a convention country were required to be
sued in that country, whatever their nationality. I contended that art 2 did not have the wide mandatory effect proposed by L
where the only conflict was between the courts of a convention country and the courts of a non-convention country.
________________________________________
a Section 49 provides: Nothing in this Act shall prevent any court in the United Kingdom from staying, sisting, striking out or dismissing any
proceedings before it on the ground of forum non conveniens or otherwise, where to do so is not inconsistent with the 1968 Convention.
b Article 2, so far as material, is set out at p 338, d, post

Held The court had a discretionary jurisdiction under the 1968 convention to stay or dismiss proceedings properly served on a
defendant domiciled in England on the ground that the case would be more appropriately heard elsewhere in circumstances where
the conflict of jurisdiction was between the English courts and the courts of a non-convention country, since, on its true
construction and in view of its object of establishing an expeditious, harmonious and certain procedure for securing the reciprocal
recognition and enforcement of judgments as between convention countries, the convention was intended and designed to
regulate relations only as between convention countries. Consequently the domicile rule in art 2 did not have the wide mandatory
effect of requiring the courts of a convention country to hear and determine proceedings commenced in that country on the basis
of the defendants domicile irrespective of whether the only conflict was between the courts of a single convention country and
those of a non-convention country. It followed that the court retained jurisdiction under s 49 of the 1982 Act to stay or dismiss
Ls petition on the ground of forum non conveniens if it determined that the Argentine court was the more appropriate forum to
decide the issues (see p 339 c to e, p 341 h to p 342 a, p 343 a to d j to p 344 b, p 345 d e g and p 347 b to g, post).
S & W Berisford plc v New Hampshire Insurance Co [1990] 2 All ER 321 and Arkwright Mutual Insurance Co Ltd v
Bryanston Insurance Co Ltd [1990] 2 All ER 335 overruled.

Notes
For stay of proceedings on ground of forum non conveniens, see 37 Halsburys Laws (4th edn) para 444.
For jurisdiction of the English courts in respect of the 1968 convention, see Supplement to 8 Halsburys Laws (4th edn) para
768B.
For the Civil Jurisdiction and Judgments Act 1982, ss 2, 49, Sch 1, art 2, see 11 Halsburys Statutes (4th edn) 909, 924, 929.
Cases referred to in judgments
Abidin Daver, The [1984] 1 All ER 470, [1984] AC 398, [1984] 2 WLR 196, HL.
Arkwright Mutual Insurance Co v Bryanston Insurance Co Ltd [1990] 2 All ER 335, [1990] 2 QB 649, [1990] 3 WLR 705.
Berisford (S & W) plc v New Hampshire Insurance Co [1990] 2 All ER 321, [1990] 2 QB 631, [1990] 3 WLR 688.
Lufttransportunternehmen GmbH & Co KG v Eurocontrol Case 29/76 [1976] ECR 1541.
Spiliada Maritime Corp v Cansulex Ltd, The Spiliada [1986] 3 All ER 843, [1987] AC 460, [1986] 3 WLR 972, HL.
335

Cases also cited

Arab Monetary Fund v Hashim (No 3) [1990] 1 All ER 685, [1991] AC 114; rvsd in part [1990] 2 All ER 769, [1990] 2 AC 114,
CA; rvsd [1991] 1 All ER 871, [1991] 2 AC 114, HL.
Deichland, The [1989] 2 All ER 1066, [1990] 1 QB 361, CA.
Kalfelis v Bankhaus Schrder Munchmeyer Hengst und Co (trading as Hema Beteiligungsgesellschaft GmbH and ors) Case
189/87 [1988] ECR 5565.
Overseas Union Insurance Ltd v New Hampshire Insurance Ltd (1988) Times, 27 September.

Preliminary issue
Intercomfinanz SA, a Swiss company owning 51% of the issued share capital of Harrods (Buenos Aires) Ltd, a company
incorporated in England, appealed with the leave of Nicholls LJ given on 14 June 1990 from a decision of Harman J made on 5
April 1990 ([1991] BCLC 69) dismissing a summons issued by Intercomfinanz on 20 November 1989, seeking, inter alia, an
order that a petition brought under s 459 of the Companies Act 1985 and the Insolvency Act 1986 by the respondent, Ladenimor
SA, another Swiss company, which owned the remaining 49% of the shares in Harrods (Buenos Aires) Ltd, be stayed on the
ground that Argentina was a more appropriate forum for the trial of the issues raised. On appeal Ladenimor raised a preliminary
issue, namely that as a result of the Convention on Jurisdiction and the Enforcement of Judgments in Civil and Commercial
Matters 1968 the English court had no jurisdiction to refuse to decide the issues on the ground of forum non conveniens since the
company was domiciled in England, albeit that it was also domiciled in Argentina. The hearing of the substantive appeal was
adjourned to a later date. The facts are set out in the judgment of Dillon LJ.

Alan Boyle for Intercomfinanz.

Michael Briggs for Ladenimor.

Cur adv vult

19 December 1990. The following judgments were delivered.

DILLON LJ. This case comes before this court on appeal from a decision of Harman J in the Chancery Division of 5 April 1990
(see [1991] BCLC 69).
The proceedings in which the appeal is brought are entitled In the matter of Harrods (Buenos Aires) Ltd. That company
was incorporated in England in 1913 under the Companies Act 1908 and 1913, and its registered office is and has always been in
England. But its business is and has always been exclusively carried on in Argentina and its central management and control is
exercised in Argentina; its principal activity is to carry on a department store or general store in Buenos Aires.
Since 1979, the company has had two shareholders only, both of which are companies incorporated in Switzerland and
whose central management and control is exercised in Switzerland, viz the present appellant, Intercomfinanz SA, which owns
51% of the issued share capital of the company and the present respondent, Ladenimor SA, which owns the remaining 49%.
The present proceedings were commenced on 7 July 1989 by the presentation by Ladenimor in the Companies Court of a
petition under the Companies Act 1985 and the Insolvency Act 1986. The primary case put forward by Ladenimor is that the
affairs of the company have been and are being conducted by the present management in a manner which is unfairly prejudicial
to Ladenimor 336 within the meaning of s 459 of the Companies Act 1985, and the primary relief sought is an order that
Intercomfinanz purchase Ladenimors shares in the company at a price representing 49% of the value of the company and upon
the basis that there be added back to the value of the company such loss as may be found to have been caused to the company by
the matters complained of in the petition. In the alternative, however, it is submitted in the petition that it is just and equitable
that the company should be wound up, and a compulsory winding-up order is sought under the Insolvency Act 1986. It is not in
doubt that the company is solvent.
Under the relevant statutory rules, the company was a necessary party to the proceedings, whether the relief sought was a
winding-up order, or merely an order against Intercomfinanz under s 459 of the 1985 Act, and there was of course no difficulty in
serving the company at its registered office in England. In addition on an ex parte application Ladenimor obtained from Mr
Registrar Buckley on 12 July 1989 an order under RSC Ord 11 giving leave to Ladenimor to serve the petition on Intercomfinanz
out of the Jurisdiction.
The upshot of that was that Intercomfinanz, by its English solicitors, issued a summons on 20 November 1989 claiming: (1)
an order that the order of Mr Registrar Buckley giving leave to serve the petition on Intercomfinanz be set aside; (2) an order that
the service of the petition on Intercomfinanz be set aside; and (3) an order that the petition and all proceedings thereon be stayed,
on the grounds that there is another forum (namely Argentina) having competent jurisdiction which is the appropriate forum for
the trial of the issues raised by the petition.
That summons came before Harman J and by his order now under appeal he dismissed it. He held, in effect, firstly, that
leave under Ord 11 to serve the petition out of the jurisdiction was never required, on a true appreciation of the statutory position
with the consequence that any lack of proper disclosure in the affidavit which was put before Mr Registrar Buckley was
immaterialand, secondly, that the English court, and not the Argentine court, was the appropriate forum for the trial of the
issues raised by the petition.
Harman J refused Intercomfinanz leave to appeal against his order, but leave to appeal was granted by Nicholls LJ on 14
June 1990. He commented:

Although the company was incorporated in England and although a decision on whether or not to grant a stay is a
matter of discretion for the judge, Intercomfinanz SA has a seriously arguable case on the application of the Spiliada
principles in the unusual circumstances present here [see Spiliada Maritime Corp v Cansulex Ltd, The Spiliada [1986] 3 All
ER 843, [1987] AC 460].

In this court a preliminary issue of importance has been taken on behalf of Ladenimor. It is submitted that as the result of
the Convention on Jurisdiction and the Enforcement of Judgments in Civil and Commercial Matters between the original member
states of the EEC, to which the United Kingdom, Denmark and Ireland acceded in 1978 after joining the EEC, the English court
has no jurisdiction to refuse on the grounds of forum non conveniens to decide the issues raised by the petition or to stay the
petition since the company is for the purposes of the 1968 convention domiciled in England (albeit also domiciled in Argentina).
 The terms of the convention are set out in Sched 1 to the Civil Jurisdiction and Judgments Act 1982, and under s 2 of that
Act, the convention has the force of law in the United Kingdom.
The preamble to the convention sets out the genesis of the convention in the following terms:
337

The High Contracting Parties to the Treaty establishing the European Economic Community,
Desiring to implement the provisions of Article 220 of that Treaty by virtue of which they undertook to secure the
simplification of formalities governing the reciprocal recognition and enforcement of judgments of courts or tribunals;
Anxious to strengthen in the Community the legal protection of persons (therein established;
Considering that it is necessary for this purpose to determine the international jurisdiction of their courts, to facilitate
recognition and to introduce an expeditious procedure for securing the enforcement of judgments, authentic instruments
and court settlements;
Have decided to conclude this Convention

The scope of the 1968 convention is prescribed in art 1 in Title I. With exceptions which are immaterial to the present case
it is to apply in civil and commercial matters whatever the nature of the court or tribunal.
Title II, comprising arts 2 to 24, is headed Jurisdiction. Section 1 of the Title, comprising arts 2 to 4 is headed General
provisions.
Article 2 provides:

Subject to the provisions of this Convention, persons domiciled in a Contracting State shall, whatever their nationality,
be sued in the courts of that State

That is the article fundamental to the preliminary issue.

It is not in doubt that the company is domiciled in the United Kingdom, although also domiciled in Argentina, and that
Intercomfinanz and Ladenimor are domiciled in Switzerland; see s 42(3) and (6) of the 1982 Act.
Article 3 of the 1968 convention provides that persons domiciled in a contracting state may be sued in the courts of another
contracting state only by virtue of the rules set out in ss 2 to 6 of Title II. The second paragraph of art 3 then lists particular
provisions of the laws of the various contracting states including the United Kingdom which are not to be applicable as against
persons domiciled in other contracting states; the details are not relevant.
Article 4 then provides:

If the defendant is not domiciled in a Contracting State, the jurisdiction of the courts of each Contracting State shall,
subject to the provisions of Article 16, be determined by the law of that State. As against such a defendant, any person
domiciled in a Contracting State may, whatever his nationality, avail himself in that State of the rules of jurisdiction there in
force, and in particular those specified in the second paragraph of Article 3, in the same way as the nationals of that State.

There are then further articles setting out detailed provisions, many of which in various respects qualify art 2. I shall have to
refer to some of these later. There are also, under Title III, detailed articles (arts 25 to 49) dealing with the recognition and
enforcement of judgments.
It is in particular to be noted that the doctrine of forum conveniens under English and Scottish law, as elaborated by Lord
Goff of Chieveley in The Spiliada [1986] 3 All ER 843, [1987] 1 AC 460, is not a recognised basis for jurisdiction under any of
the articles of the 1968 convention, where the contest is between the jurisdiction of contracting states. As between the
contracting states the general principle of the convention is that the court first properly seised of a cause of 338 action under the
convention shall exercise jurisdiction. Thus arts 21 and 23 provide as follows:

ARTICLE 21

Where proceedings involving the same cause of action and between the same parties are brought in the courts of
different Contracting States, any court other than the court first seised shall of its own motion decline jurisdiction in favour
of that court

ARTICLE 23

Where actions come within the exclusive jurisdiction of several courts, any court other than the court first seised shall
decline jurisdiction in favour of that court.

Against that background s 49 of the 1982 Act provides that nothing in the Act shall prevent any court in the United Kingdom
from staying, sisting, striking out, or dismissing any proceedings before it on the ground of forum non conveniens or otherwise
where to do so is not inconsistent with the convention. It is implicit in that section, in my judgment, that the court cannot stay or
strike out or dismiss any proceedings on the ground of forum non conveniens where to do so would be inconsistent with the
convention, and that covers all cases where the defendant in proceedings in England is domiciled in England and the conflict of
jurisdiction is between the jurisdiction of the English court and jurisdiction of the courts of some other contracting state.
The crucial question in the present case is whether the English court can stay, strike out or dismiss proceedings on the
ground of forum non conveniens, where the defendant in the English proceedings is domiciled in England, but the conflict of
jurisdiction is between the jurisdiction of the English court and the jurisdiction of the courts of a state which is not a contracting
state, no other contracting state being involved.
That question came before the Commercial Court in S & W Berisford plc v New Hampshire Insurance Co [1990] 2 All ER
321, [1990] 2 QB 631. In that case the second plaintiff, which was the relevant plaintiff, was an American company based in
New York. The defendant was an American insurance company domiciled in New Hampshire, but the disputes arose out of the
operations of the defendants London branch, and consequently the defendant was deemed, for the purposes of the convention, to
be domiciled in the United Kingdom. It was held by Hobhouse J in those circumstances (a) that since the parties had not agreed
that the courts of any other contracting state should have jurisdiction, art 2 of the convention required that the defendant should
be sued in the United Kingdom, (b) that to stay the proceedings on the ground of forum non conveniensviz that the courts of
New York were the more appropriate forumwould be inconsistent with the convention and (c) that accordingly the English
court had no jurisdiction under s 49 of the 1982 Act to stay the action.
The ratio of the judgment of Hobhouse J is to be found in his judgment [1990] 2 All ER 321 at 331332, [1990] 2 QB 631 at
700701. The crux is, in my judgment, to be found where the judge said ([1990] 2 All ER 321 at 332, [1990] 2 QB 631 at 701):

It is clear that the convention is designed (subject to art 4) to achieve uniformity and to harmonise the relevant
procedural and jurisdictional rules of the courts of the contracting states. The convention leaves no room for the
application of any discretionary jurisdiction by the courts of this country; the availability of such a discretion would destroy
 the framework 339 of the convention and create lack of uniformity in the interpretation and implementation of the
convention.

That decision of Hobhouse J was followed by Potter J in Arkwright Mutual Insurance Co v Bryanston Insurance Co Ltd
[1990] 2 All ER 335, [1990] 2 QB 649. In that case the plaintiff, an American insurance company, had a claim on London
reinsurers who disputed the claim on the ground that the loss was not covered by the policy. The reinsurers commenced
proceedings against the plaintiff in New York for a declaration that they were not liable. The plaintiff then commenced an action
in London against the reinsurers claiming payment, and the reinsurers applied to stay the English proceedings on the ground of
forum non conveniens and lis alibi pendens. They contended that the New York court was the more appropriate court to decide
the issue.
The arguments in favour of a stay were summarised by Potter J under eight heads. Heads (1) to (6) are as follows ([1990] 2
All ER 335 at 345, [1990] 2 QB 649 at 715):

(1) The convention, being concerned, or principally concerned, to govern relations between contracting states, which
thereby adopted mutual obligations and accepted regulation of their own potentially competing jurisdictions, should not
readily be construed as operating so as to deprive or inhibit non-contracting states in relation to cases where the jurisdiction
of such states would otherwise plainly be most appropriate for determination of the dispute in question. The convention
being concerned to decide which of the contracting states should assume jurisdiction in cases of competition inter se, no
violence is done or inconsistency effected by one contracting state staying proceedings in its courts in favour of a non-
contracting state.
(2) The general rule as to domicile imposed by art 2 is not to be regarded as so overwhelming or all-pervading as to
preclude stay in all cases where it is not expressly required or permitted by the convention. The rule of domicile is the
prima facie rule only, within a sophisticated framework of provisions which recognise a number of exceptions in individual
situations, the most logical and compelling of which are those dealt with in arts 5 to 6A (special jurisdiction), art 16
(exclusive jurisdiction) and art 17 (foreign jurisdiction clauses).
(3) Any English court should be slow so to construe the convention as to inhibit the valuable and important jurisdiction
of stay on grounds of forum non conveniens, which is designed to promote comity, to encourage efficiency in the
resolution of disputes, to prevent duplication of time and cost in litigation, and to avoid inconsistent judgments in two
jurisdictions.
(4) Albeit arts 21 to 23 constitute a more limited and rigid scheme for allotment of jurisdiction than that achieved by
application of a general principle of forum non conveniens they are concerned to give effect to the network of provisions in
arts 2 to 20 and to avoid the risk of inconsistent judgments in two or more contracting states, by requiring dismissal or stay
of actions in favour of the court of the contracting state first seised. If there is no jurisdiction for a contracting state in
which a defendant is domiciled or otherwise properly sued to decline jurisdiction, or to stay, in favour of the courts of a
non-contracting state, that creates the remarkable situation whereby the convention determines the appropriate forum
(according to its own provisions) for the competing jurisdictions of contracting states, but requires entertainment of suit in
the domicile of the defendant (without the application of any test of appropriateness) where a non-contracting state is
concerned.
340
(5) Even if the Berisford case is right in respect of the broad principle of forum non conveniens, it need and should not
be applied in respect of the more limited case of lis alibi pendens, the very ground of stay contemplated by art 21 in respect
of contracting states.
(6) Given that the purposes of the convention are avoidance within the courts of the Community of inconsistent
judgments and simplification of enforcement of judgments within those courts, neither purpose will be disturbed by the
exercise of a jurisdiction to stay on grounds of forum non conveniens and/or lis alibi pendens in favour of the courts of a
non-member state.

These arguments, however, though recognised as powerful, were rejected by Potter J on the ground that he agreed with the
decision of Hobhouse J in Berisford and preferred the logic of the Berisford case.
The answer to the question depends on the true construction of the 1968 convention and that is a matter of European law.
The Court of Justice of the European Communities has jurisdiction to give rulings on the interpretation of the convention under
the Protocol on the Interpretation of the 1968 Convention by the European Court signed at Luxembourg in June 1971. The text
of the 1971 protocol is set out as Sch 2 to the 1982 Act, and that specifies the courts which may request the Court of Justice to
give preliminary rulings on questions of interpretation; they include the courts of the contracting states when they are sitting in an
appellate capacity.
In addition the 1982 Act provides by s 3(1) that any question as to the meaning or effect of any provision of the convention
shall, if not referred to the European Court in accordance with the 1971 protocol, be determined in accordance with the principles
laid down by and any relevant decision of the Court of Justice.
It is further provided that in ascertaining the meaning or effect of any provision of the convention the courts may consider
the reports of M P Jenard and Professor Peter Schlosser and shall give them such weight as is appropriate in the circumstances
(for these reports see (1979) OJ C59, pp 1, 66, 71). These reports are both referred to in the judgments of Hobhouse J in
Berisford and Potter J in Arkwright and in this court we have had copious citation from both reports. For my part, I find it
difficult to give much weight to the reports in relation to the question with which we are concerned because I do not think that M
Jenard or Professor Schlosser had that question in contemplation. There are general statements in the reports which can be used
as pointers either way, without themselves solving the question in issue. Moreover at the time even of the Schlosser report, the
English doctrine of forum non conveniens was considerably less fully developed than it is now; the decisions in The Abidin
Daver [1984] 1 All ER 470, [1984] AC 398 and even more, The Spiliada [1986] 3 All ER 843, [1987] AC 460 came later.
As I see it the starting point in approaching the construction of the convention, must be art 220 of the EEC Treaty, since the
preamble to the convention shows as the starting point the desire of the parties to implement that article. The object of art 220
was to secure the simplification of formalities governing the reciprocal recognition and enforcement of judgments of courts or
tribunals between the member states of the community.
To achieve such recognition and enforcement it was evidently decided that the contracting states should have a common
basis of international jurisdictionor jurisdiction in the international orderin the matters which fall within the scope of the
convention. But the common basis of jurisdiction envisaged does not apply worldwide since under art 4 if a defendant is not
domiciled in a contracting state 341 the jurisdiction of the courts of each contracting state are to be determined by the national
law. The desideratum expressed in para 78 of Professor Schlossers report that A plaintiff must be sure which court had
jurisdiction. He should not have to waste his time and money risking that the court concerned may consider itself less competent
than another (see (1979) OJ C59, p 97) is thus very obviously not met where the defendant is not domiciled in a contracting
state. Indeed the following passages in para 78 to show that Professor Schlosser was only concerned in that paragraph with the
protection of persons domiciled in the contracting states and with choices, which should not be on the ground of forum
conveniens, between the courts of several contracting states having jurisdiction. That is in line with references in the Jenard
report, eg the reference to an autonomous system of international jurisdiction in relations between the Member States and the
statement that
 the purpose of the Convention is also, by establishing common rules of jurisdiction, to achieve, in relation between the
Six and in the field which it was required to cover, a genuine legal systemization which will ensure the greatest possible
degree of legal certainty.

(See (1979) OJ C59, pp 7, 15.)

For the English court to refuse jurisdiction, in a case against a person domiciled in England, on the ground that the court of
some non-contracting state is the more appropriate court to decide the matters in issue does not in any way impair the object of
the convention of establishing an expeditious, harmonious, and, I would add, certain procedure for securing the enforcement of
judgments, since ex hypothesi if the English court refuses jurisdiction there will be no judgment of the English court to be
enforced in the other contracting states. Equally and for the same reason such a refusal of jurisdiction would not impair the
object of the convention that there should, subject to the very large exception of art 4, be a uniform international jurisdiction for
obtaining the judgments which are to be so enforced.
But if the English court as a result of art 2 of the convention does not have the power to decline jurisdiction to entertain an
action against a person domiciled in England on the ground that the courts of a non-contracting state are the more appropriate
forum, the English court must equally have no power to refuse to entertain such an action on the ground of lis alibi pendens, if the
lis is pending in the courts of a non-contracting state. Articles 21 and 22 of the convention are only concerned with the position
where proceedings involving the same cause of action and between the same parties, or where related actions are brought in the
courts of different contracting states. There is nothing at all in the convention to deal with the situation where there is one lis
pending in a court of a contracting state against a person domiciled in that state and another, and possibly earlier, lis pending, in
proceedings involving the same cause of action or in a related action, in the courts of a non-contracting state.
Again art 17 of the convention provides that if the parties have agreed that the courts of a particular contracting state shall
have exclusive jurisdiction to settle any disputes which may arise in connection with a particular legal relationship, then the
courts of that state shall have exclusive jurisdiction to settle such disputes. There is nothing at all in the convention to deal with
the situation where the parties have agreed that the courts of a non-contracting state shall have exclusive jurisdiction to resolve
their disputes. But if art 2 has the full mandatory effect which Hobhouse J thought it has, the English courts would be bound to
hear and decide an action against a person domiciled in England even though both parties 342 to the action had agreed that the
courts of some non-contracting statebe it New York or Argentinashould have exclusive jurisdiction.
Such results would, in my judgment, be contrary to the intentions of the convention. Since the convention is merely an
agreement between the contracting states among themselves, I do not agree with Hobhouse J that the framework of the
convention would be destroyed if there were available to the English court a discretion to refuse jurisdiction, on the ground that
the courts of a non-contracting state were the appropriate forum, in a case with which no other contracting state is in any way
concerned. I do not accept that art 2 has the very wide mandatory effect which Hobhouse J would ascribe to it where the only
conflict is between the courts of a single contracting state and the courts of a non-contracting state.
Respectfully differing, therefore, from the rulings of Hobhouse J and Potter J in Berisford and Arkwright, I would reject the
preliminary issue raised by Ladenimor, and I would hold that the English court has jurisdiction to stay or dismiss the petition on
the ground of forum non conveniens if the English court holds that the courts of Argentina are the more appropriate forum to
decide the issues.
I would add that it is not appropriate, in my judgment, for this court to request the European Court of Justice to give a ruling
on this issue.

STOCKER LJ. I have read the judgments of Dillon and Bingham LJJ, which I agree with, and have nothing to add.

BINGHAM LJ. Before the learned judge it was common ground that he had a discretion to stay Ladenimors proceedings
against Harrods (Buenos Aires) Ltd on the ground of forum non conveniens if he was of the opinion that, applying the Spiliada
test in this rather novel situation, good reason for doing so existed (see Spiliada Maritime Corp v Consulex Ltd, The Spiliada
[1986] 3 All ER 843, [1987] AC 460). The question in issue was whether the judge should exercise that discretion in favour of
the Argentinian court on the ground that it was the appropriate forum for trial of the proceedings.
In this court Mr Briggs for Ladenimor contended that the judge had no such discretion. He based this argument on the Civil
Jurisdiction and Judgments Act 1982 and the conventions to which that Act gave the force of law in the United Kingdom. His
submission was, in brief, that since the company was, by virtue of s 42 of the 1982 Act, domiciled here, the conventions required
the English court to accept jurisdiction and forbade it to decline jurisdiction in favour of the Argentinian court whether that was
judged to be the appropriate forum or not. Mr Briggs accepted that, despite the Act and the conventions, the judge retained a
discretion to stay Ladenimors proceedings against Intercomfinanz, which is not on any showing domiciled here, but he
submitted that Intercomfinanzs application to stay had to be judged on the basis that the proceedings against the company would
continue in any event. The argument thus raised is of some obvious general importance.
In interpreting the 1982 Act our task is, as always, to ascertain the intention of Parliament and give effect to it. But insofar
as the Act is intended to give legal effect to the conventions and to implement the United Kingdoms international obligation to
give legal effect to the conventions, we must assume (in the absence of a clear indication to the contrary, which is not to be found
here) that Parliament intended the conventions to be incorporated into English law so as faithfully to reflect the international
consensus embodied in them. The conventions themselves are in part set out in schedules to the Act, but it cannot be doubted that
in 343 interpreting them we are required first to consider the objectives and scheme of the conventions and secondly the general
principles which stem from the corpus of the national legal systems of the contracting states (see Lufttransportunternehmen
GmbH & Co KG v Eurocontrol Case 29/76 [1976] ECR 1541). For this purpose we must adopt an international and
communautaire, not a national and chauvinistic, approach. Although these conventions do not expressly provide, like art 18 of
the Rome Convention (set out in the Schedule to the Contracts (Applicable Law) Act 1990), that In the interpretation and
application of the preceding uniform rules, regard shall be had to their international character and to the desirability of achieving
uniformity in their interpretation and application, it is plain that that is the basis upon which we should act.
As the preamble to the 1968 convention and the Jenard report make clear, that convention was negotiated pursuant to the
obligation undertaken by the original member states in art 220 of the EEC Treaty to enter into negotiations with each other with a
view to securing for the benefit of their nationals

the simplification of formalities governing the reciprocal recognition and enforcement of judgments of courts or
tribunals and of arbitration awards.

When instigating the negotiations which led to the 1968 convention, the EC Commission observed:

As jurisdiction in both civil and commercial matters is derived from the sovereignty of Member States, and since the
effect of judicial acts is confined to each national territory, legal protection and, hence, legal certainty in the common
market are essentially dependent on the adoption by the Member States of a satisfactory solution to the problem of
recognition and enforcement of judgments.

(See the Jenard report (1979) OJ C59, p 3.)

 If member states were to recognise and enforce each others judgments virtually on the nod, it was plainly desirable, so far
as possible, to agree on a common basis for accepting jurisdiction, so as to minimise the number of occasions on which state A
would have to recognise and enforce a judgment given by state B in circumstances where state A would not itself have accepted
jurisdiction. Given the reference in art 220 to the benefit of their nationals, one might have expected the common basis of
jurisdiction to be founded on nationality, as the Jenard report acknowledges (see (1979) OJ C59, p 14). But instead the common
basis of jurisdiction was firmly founded on the domicile of the defendant. The Jenard report explains the intentions of the
original negotiators (p 13):

Underlying the Convention is the idea that the Member States of the European Economic Community wanted to set up
a common market with characteristics similar to those of a vast internal market. Everything possible must therefore be
done not only to eliminate any obstacles to the functioning of this market, but also to promote its development. From this
point of view, the territory of the Contracting States may be regarded as forming a single entity: it follows, for the purpose
of laying down rules on jurisdiction that a very clear distinction can be drawn between litigants who are domiciled within
the Community and those who are not.

The domicile of the Community-based defendant is not in all cases a determinative test. It was necessary to make special
provision for agreements conferring exclusive jurisdiction on a specific court, a matter which became of greatly increased
importance on the accession of the United Kingdom owing to 344 the frequency with which jurisdiction is conferred upon
United Kingdom courts in international trade (Schlosser report (1979) OJ C59, p 124, para 177), and cases of dual domicile
(discussed in the Schlosser report pp 9697, 120, 125, paras 75, 162 and 181): see arts 17 and 21 of the 1968 convention. But
for the Community-domiciled defendant the state of domicile is the state upon which jurisdiction is primarily conferred. For that
reason Ireland and the United Kingdom cannot found jurisdiction on service during temporary presence in the country nor
Scotland on the grounds listed in paras (b) and (c) of art 3(2): see art 3 and the Schlosser report pp 99100, paras 85 and 86.
Further, the jurisdiction of English courts in respect of persons domiciled in the Community can no longer be based on the
ground that the claim concerns a contract which was concluded in England or is governed by English law (Schlosser report p
100, para 87).
As the extract from the Jenard report (1979) OJ C59, p 13 quoted above makes clear, however, there is a clear and
fundamental distinction between the position of the Community-domiciled defendant and the defendant domiciled elsewhere. In
respect of the latter, contracting states may, by virtue of art 4 of the 1968 convention, continue to apply their traditional rules: the
French may assert their exorbitant jurisdiction under arts 14 and 15 of the Civil Code (Jenard report, pp 19, 20); the Scots on the
bases specified in sub-paras (b) and (c) of the second para of art 3; the English on the basis of service during temporary residence
or because the contract was made here or was governed by English law. Thus in the present case, Intercomfinanz being
domiciled in none of the contracting states, it would not violate the letter or the spirit of the conventions if the English court were
to assume jurisdiction over it on any of the traditional grounds, however exorbitant. For the purposes of recognition and
enforcement no distinction is drawn between judgments against defendants domiciled within and judgments against defendants
domiciled outside contracting states. While, therefore, the conventions reduce the number of cases in which state A will have to
recognise and enforce judgments given by state B in circumstances where state A would not itself have accepted jurisdiction, they
do not eliminate such cases altogether.
In contending that the English court was not only entitled but bound to accept jurisdiction in Ladenimors proceedings
against the company, Mr Briggs relied in particular on the wide unambiguous and mandatory language of art 2. He also relied on
the third recital in the preamble to the 1968 convention as showing that the purpose of the convention was to determine the
international jurisdiction of the courts of the contracting states. It is, however plain, adopting the approach to interpretation
which I have outlined above, that art 2 must be interpreted so as to reflect the purpose and scheme of the convention as a whole.
The reference to international jurisdiction in the preamble is, in my view, intended to make clear that the convention is in no way
concerned with the national jurisdiction of the courts of the contracting states, ie with cases lacking any international element (see
the Jenard report (1979) OJ C59, p 8).
Mr Boyle for Intercomfinanz accepted that, since the company is domiciled here, and since there is no exclusive jurisdiction
clause, and since no proceedings had been first started in another contracting state, the English court would have to accept
jurisdiction if the alternative forum alleged to be appropriate were, instead of Argentina, the court of any other contracting state.
In any choice of jurisdiction between the courts of contracting states, he accepted that the conventions provide a mandatory and
comprehensive code. But he submitted that the conventions were directed and directed only to control of relations between
contracting states among themselves. If this court were to decline jurisdiction in favour of the Argentinian court, how could that
possibly prejudice 345 any Community interest which the conventions were designed to protect or promote? If, as he contended,
the answer was that it could not, since the enforceability of an Argentinian judgment in any contracting state would depend on
bilateral arrangements between Argentina and that state and it was very unlikely that an Argentinian judgment would be more
readily enforceable than an English judgment, that was a sure sign that the conventions were not intended to apply in such a
situation.
Both parties made references to excerpts from the Jenard and Schlosser reports, while urging us to read more extensively in
the reports. I think there is an obvious danger in seizing on occasional passages here and there in these long and closely-reasoned
reports to support one view or the other when it is acknowledged that the present question was never squarely addressed. I have
read the reports much more extensively than the reasonable bounds of oral argument permitted to counsel and am in the result of
opinion that the thrust of the reports gives much more support to Mr Boyles argument for Intercomfinanz than to Mr Briggs for
Ladenimor. I give one example. Both reports consider in detail the existence of earlier bilateral or trilateral conventions between
contracting states, some of which are indeed listed in art 55 of the 1968 convention. Yet save for an isolated (and I think
irrelevant) reference to a convention between France and Switzerland (see the Jenard report, p 14), there is (so far as I can trace)
no reference to any convention between any contracting state and any non-contracting state. On Mr Boyles argument this is
understandable: in the absence of any conflict or potential conflict of jurisdiction between contracting states, the conventions
have no role. If, however, the conventions govern relations between a contracting state and a non-contracting state even when
there is no conflict or potential conflict between contracting states one would expect all conventions to fall for consideration and
examination.
Mr Briggs was able to rely on two recent authorities as supporting his submission. The first, a reserved decision of
Hobhouse J, was S & W Berisford plc v New Hampshire Insurance Co [1990] 2 All ER 321, [1990] 2 QB 631. In that case the
effective plaintiff was a New York company and the defendant, although a New Hampshire company, carried on business and was
served at an office in the City of London. The defendant sought a stay, contending that New York was the appropriate forum.
The plaintiff resisted, contending that by virtue of the Act and the conventions the court had no discretion to grant a stay and that
in any event the grounds for granting a stay were not made out. The judge agreed with the plaintiff on both these points. The
argument addressed to us by Intercomfinanz, if correct, would have ensured the defendants success on the first of these points,
but the argument was not put. Thus the judge did not have to rule on it expressly. But the tenor of his judgment strongly suggests
that if he had had to rule on it he would have rejected it.
Such was the inference drawn, in my view rightly, by Potter J in the second case, Arkwright Mutual Insurance Co v
Bryanston Insurance Co Ltd [1990] 2 All ER 335, [1990] 2 QB 649. In those proceedings the plaintiff was a Massachusetts
insurer and the defendants were English reinsurers resisting a claim under policies of reinsurance. Before the English
proceedings began, the reinsurers had issued proceedings against the insurer in New York for a declaration that they were not
liable to the insurer. After issue of the proceedings here the reinsurers asked the court to stay them in the exercise of its discretion
on the grounds of forum non conveniens and lis alibi pendens. The insurer, relying on the 1982 Act and the conventions,
contended that the court no longer had such a discretion to exercise. Counsel for the reinsurers took issue with that proposition
on a number of grounds which are quoted in the judgment of Dillon LJ.
346
The learned judge, in a reserved judgment, rejected the reinsurers submission and upheld the insurers submission, founded
on the decision of Hobhouse J, that, for the English court to retain its former wide discretion in respect of the doctrine of forum
non conveniens would be inconsistent with the convention (see [1990] 2 All ER 335 at 349, [1990] 2 QB 649 at 662). I do not
however think that the judge specifically addressed himself to counsels arguments which I have quoted, which seem to me
powerfully persuasive.
Ladenimors argument is of course strengthened by these two first-instance judgments which, although not binding on us,
are entitled to respect. They have, however, provoked a critical note bearing the very considerable authority of Mr Lawrence
Collins, Forum Non Conveniens and the Brussels Convention (1990) 106 LQR 535. I would for my part adopt his conclusion
(at 538539):

When the European Court comes to consider the application of the Convention to non-Contracting States, it should
seek the answer in treaty interpretation, and ultimately in public international law. The Convention was intended to
regulate jurisdiction as between the Contracting States. Thus the Convention provides that in principle domiciliaries of a
Contracting State should be sued in that State, subject to important and far-reaching exceptions, and not in other
Contracting States. Once a court in a Contracting State has jurisdiction it is entitled, vis--vis other states, to exercise that
jurisdiction and other courts cannot. But the States which were parties to the Convention had no interest in requiring a
Contracting State to exercise a jurisdiction where the competing jurisdiction was in a non-Contracting State. The
Contracting States were setting up an intra-convention mandatory system of jurisdiction. They were not regulating
relations with non-Contracting States. (Mr Collinss emphasis.)

Section 49 of the Act preserves the power of the English court to stay or dismiss any proceedings before it, on the ground of
forum non conveniens or otherwise, where to do so is not inconsistent with the 1968 convention. The ultimate question,
therefore, is whether exercise of the discretionary power here in issue in the present situation (where the only alternative forum is
in a non-contracting state) is inconsistent with the 1968 convention. I conclude that it is not and accordingly accept the argument
of Intercomfinanz on this point.
Since preparing this judgment I have had the advantage of reading in draft the judgment of Dillon LJ, with which I am in
full agreement. Like him, I do not think it necessary to request the Court of Justice to rule on the question of interpretation of the
1968 convention raised in this case to enable this court to give judgment on it.

Preliminary issue raised by Ladenimor decided accordingly.

Solicitors: Frere Cholmeley; Bower Cotton & Bower.

Carolyn Toulmin Barrister.

347
[1991] 4 All ER 348

Re Harrods (Buenos Aires) Ltd (No 2)

CIVIL PROCEDURE

COURT OF APPEAL, CIVIL DIVISION

DILLON, STOCKER AND BINGHAM LJJ
6, 7, 8 FEBRUARY, 13 MARCH 1991

Practice Service out of jurisdiction Action relating to English company Leave English company operating exclusively in
Argentina Minority shareholder of company seeking buy-out order against majority shareholder on basis of unfair prejudice
Whether minority shareholder requiring leave to serve unfair prejudice petition out of jurisdiction RSC Ord 11, r 1 (2)(b)
Companies (Unfair Prejudice Applications) Proceedings Rules 1986, r 4(2).Practice Stay of proceedings Exercise of
discretion Appropriate forum Forum with which action having most real and substantial connection Balance of fairness
and convenience Action relating to English company English company operating exclusively in Argentina Minority
shareholder of company seeking buy-out order against majority shareholder on basis of unfair prejudice All economic and
management considerations connected with Argentina All witnesses and documents in Argentina Buy-out remedy not
available in Argentina Minority shareholder entitled to damages in Argentina for loss caused by majority shareholder deceit or
negligence Whether absence of identical relief in foreign forum preventing plaintiff/petitioner from obtaining substantial justice
in foreign forum Whether English court proper forum to decide affairs of company incorporated in England.

Two Swiss companies, I and L, owned 51% and 49% respectively of the issued share capital of a company incorporated in
England. The companys registered office was in England but its business was carried on and it was managed and controlled
exclusively in Argentina. In 1989 L, the minority shareholder, claimed that the companys affairs were being conducted in a
manner unfairly prejudicial to it and presented a petition under ss 459 and 461 of the Companies Act 1985 seeking orders
directing I, the majority shareholder, to purchase its shares in the company or, alternatively, that the company be wound up
compulsorily under the Insolvency Act 1986. L obtained leave under RSC Ord 11, r 1(1) to serve the petition on I out of the
jurisdiction. I applied for the order giving L such leave and the consequent service of the petition to be set aside and for the
proceedings on the petition to be stayed on the ground that Argentina was the natural forum for the trial of the issues raised in
view of the strong connection the case had with Argentina, as demonstrated by the fact that all the relevant events took place in
Argentina, all the witnesses and documents were located in Argentina and all the evidence would be in Spanish. The judge
dismissed Is application, holding (i) that leave to serve the petition out of the jurisdiction was not required since Ord 11, r 1(2)
(b)a permitted service out of the jurisdiction without leave in petitions under ss 459 and 461 of the 1985 Act, which the court had
power to hear and determine notwithstanding that the person against whom the claim was made was not within the jurisdiction or
that the wrongful act, neglect or default giving rise to 348 the petition did not take place within the jurisdiction, or, alternatively,
the mandatory requirement in r 4(2) b of the Companies (Unfair Prejudice Applications) Proceedings Rules 1986 obliging the
petitioner to serve a s 459 petition on every respondent named in the petition as well as on the company overrode Ord 11, r1(1),
and (ii) that England was the appropriate forum for the trial of the issues because the company was incorporated in England and
the proceedings were by petition in the Companies Court and sought relief under the English companies legislation in respect of
the affairs of an English company and L would not be able to obtain substantial justice in Argentina if the case were tried there
because, under Argentine law, L would not be able to obtain an order for the purchase of its shares by I at a price uplifted to take
account of the loss caused by Is conduct or any other remedy which would fully compensate L for its loss. I appealed,
contending, in respect of the procedural issue, that the requirement of obtaining leave under Ord 11, r 1(1) to serve the petition on
I out of the jurisdiction was not excluded by Ord 11, r 1(2)(b) or r 4(2) of the 1986 rules and, in respect of the substantive issue,
that the discretion exercised by the judge in refusing to stay the English proceedings should be set aside because he had
misdirected himself as to the two-stage test to be applied in forum non conveniens cases.
________________________________________
a Order 11, r 1(2)(b) is set out at p 358 c d, post
b Rule 4(2) provides: In the case of a petition based upon section 459 of the Act, the petitioner shall also, at least 14 days before the return
day, serve a sealed copy of the petition on every respondent named in the petition.

Held (1) On their true construction neither RSC Ord 11, r 1(2)(b) nor r 4(2) of the 1986 rules authorised a petition under s 459
of the 1985 Act to be served out of the jurisdiction without the leave of the court. In order to fall within Ord 11, r 1(2)( b) an
enactment, if it did not use the precise wording in the rule, at least had to indicate on its face that it was expressly contemplating
proceedings against persons who were not within the jurisdiction of the court or where the wrongful act, neglect or default giving
rise to the claim did not take place within the jurisdiction and it was not enough that the enactment, like the Companies Act 1985,
gave a remedy in general cases without any express contemplation of a foreign element. Similarly, there was no express
exclusion of Ord 11, r 1(1) in the 1986 rules and the general words in r 4(2) requiring service of a s 459 petition on every
respondent named in the petition were insufficient warrant for excluding Ord 11, r 1(1), which accordingly applied by virtue of
the express provision in r 2(2) c that the Rules of the Supreme Court and the practice of the High Court were to apply to
proceedings under the 1985 Act. It followed that L had required leave to serve the petition on I out of the jurisdiction and that the
burden lay on L to show that England was clearly the more appropriate forum for the trial of the issues raised in the petition
rather than on I to show that Argentina was more appropriate (see p 359 b to c f to h, p 361 c d and p 365 c d, post).
________________________________________
c Rule 2(2) is set out at p 358 a, post

(2) (Dillon LJ dissenting) Where there was a conflict of jurisdiction between an English court and the courts of another
country, the appropriate forum for the trial of the action had to be decided according to the suitability for the interests of all the
parties and the ends of justice and the court, in making that decision, had to look first at such connecting factors as convenience,
expense, availability of witnesses, governing law, place of residence and place of business and, if they indicated that the case had
its closest and most real connection with the foreign 349 court, the English court would then consider whether or not substantial
justice could be obtained in the foreign forum through local remedies, irrespective of whether those remedies differed from
English remedies. On the facts, the appropriate forum for the trial of the action was Argentina and, having regard to the question
whether the minority shareholder L could obtain justice in Argentina, it was clear that although the Argentine courts had no power
identical to that under ss 459 and 461 of the 1985 Act to order the majority shareholder, I, to purchase Ls shares, the Argentine
courts powers to wind up the company on the equivalent of just and equitable grounds and to award damages for negligent
and/or unlawful handling of the companys business indicated that L could obtain substantial justice in Argentina. Accordingly,
since the judge had made no attempt to weigh the factors connecting the case with Argentina and had misdirected himself
regarding the issue of whether L could obtain substantial justice in Argentina, the court was free to exercise its own discretion and
would grant the stay of proceedings sought by I. The appeal would accordingly be allowed (see p 363 j to p 364 b e to p 365 b, p
366 g to p 367 c g and p 368 a f h to p 369 d, post); Spiliada Maritime Corp v Cansulex Ltd, The Spiliada [1986] 3 All ER 843
and dictim of Lord Goff in de Dampierre v de Dampierre [1987] 2 All ER 1 at 12 applied.

Notes
For service out of the jurisdiction generally, see 37 Halsburys Laws (4th edn) para 171, and for cases on the subject, see 37(2)
Digest (Reissue) 278282, 17911813.
For stay of proceedings on the ground of forum non conveniens, see 37 Halsburys Laws (4th edn) para 444.
For the protection of company members against unfair prejudice, see 7(2) Halsburys Laws (4th edn reissue) paras 1236
1240.
For the Companies Act 1985, s 459, see 8 Halsburys Statutes (4th edn) (1991 reissue) 531.
For the Insolvency Act 1986, see 4 Halsburys Statutes (4th edn) (1987 reissue) 717.
For the Companies (Unfair Prejudice Applications) Proceedings Rules 1986, rr 2, 4, see 3 Halsburys Statutory Instruments
(1991 reissue) 506.

Cases referred to in judgments

Abidin Daver, The [1984] 1 All ER 470, [1984] AC 398, [1984] 2 WLR 196, HL.
de Dampierre v de Dampierre [1987] 2 All ER 1, [1988] AC 92, [1987] 2 WLR 1006, HL.
Ebrahimi v Westbourne Galleries Ltd [1972] 2 All ER 492, [1973] AC 360, [1972] 2 WLR 1289, HL.
Harmer (H R) Ltd, Re [1958] 3 All ER 689, [1959] 1 WLR 62, CA.
Scottish Co-operative Wholesale Society Ltd v Meyer [1958] 3 All ER 66, [1959] AC 324, [1958] 3 WLR 404.
Sim v Robinow (1892) 19 R (Ct of Sess) 665.
Spiliada Maritime Corp v Cansulex Ltd, The Spiliada [1986] 3 All ER 843, [1987] AC 460, [1986] 3 WLR 972, HL.

Cases also cited or referred to in skeleton arguments

Arkwright Mutual Insurance Co v Bryanston Insurance Co Ltd [1990] 2 All ER 335, [1990] 2 QB 649.
350
Berisford (S & W) plc v New Hampshire Insurance Co [1990] 2 All ER 321, [1990] 2 QB 631.
Company, Re a (No 004377 of 1986) [1987] BCLC 94.
Hagen, The [1908] P 189, CA.
Overseas Union Insurance Ltd v New Hampshire Insurance Ltd (1988) Times, 28 September.
Socit du Gaz de Paris v Socit Anonyme de Navigation Les Armateurs Francais 1926 SC (HL) 13.

Interlocutory appeal
Intercomfinanz SA, a Swiss company owning 51% of the issued share capital of Harrods (Buenos Aires) Ltd, a company
incorporated in England, appealed with the leave of Nicholls LJ given on 14 June 1990 from a decision of Harman J ([1991]
BCLC 69) given on 5 April 1990 by which the judge (i) dismissed a summons issued by Intercomfinanz on 20 November 1989
seeking to have the order of Mr Registrar Buckley made on 12 July 1989 giving Ladenimor SA, another Swiss company which
owned the remaining 49% of the shares in the English company, leave to serve a petition brought under ss 459 and 461 of the
Companies Act 1985 and the Insolvency Act 1986 out of the jurisdiction on Intercomfinanz and the consequent service set aside
and to have the petition proceedings stayed on the ground that Argentina was the natural forum for the trial of the issues and (ii)
held that England was the more appropriate forum for the resolution of the dispute between the parties. The facts are set out in
the judgment of Dillon LJ on a preliminary issue raised by Ladenimor in respect of which the Court of Appeal held that it had
jurisdiction to stay, strike out or dismiss the proceedings on the ground of forum non conveniens (see [1991] 4 All ER 334,
[1991] 3 WLR 397).

Alan Boyle for Intercomfinanz.

Michael Briggs for Ladenimor.

Cur adv vult

13 March 1991. The following judgments were delivered.

DILLON LJ. The background to this appeal, down to the granting of leave to appeal by Nicholls LJ, is set out in my judgment,
handed down on 19 December 1990, on a point argued as a preliminary issue in the appeal (see [1991] 4 All ER 334, [1991] 3
WLR 397). I do not need to repeat it here.
We are now concerned with the substantive issue on the appeal, viz the decision of Harman J that the English court and not
the Argentine court was the appropriate forum for the trial of the issues raised by the petition (see [1991] BCLC 69). This led
him to dismiss Intercomfinanzs summons of 20 November 1989 whereby Intercomfinanz had claimed to have the order of Mr
Registrar Buckley giving leave to serve the petition on Intercomfinanz, and the consequent service, set aside and had claimed also
to have the petition and all proceedings thereon stayed on the ground that the Argentine court was the appropriate forum for the
trial of the issues raised by the petition.
Any question which of two countries courts is the appropriate forum for the trial of proceedings has to be decided according
to Spiliada principles: see Spiliada 351 Maritime Corp v Cansulex Ltd, The Spiliada [1986] 3 All ER 843, [1987] AC 460. The
question is therefore to be decided at the discretion of the judge at first instance, and it is well known that the grounds on which
the appellate court may interfere with the exercise of the judges discretion are very limited. Lord Templeman in Spiliada [1986]
3 All ER 843 at 846847, [1987] AC 460 at 465 stressed that in such a case an appeal should be rare and the appellate court
should be slow to interfere. The question whether this court is entitled to interfere is to my mind the most difficult question on
the appeal.
As I see it, in the context of this particular case what we have to consider first, if there is to be any possibility of this court
interfering with the decision of Harman J, is whether the judge asked himself the right questions. That involves considering (a)
what he should have asked himself and (b) what he actually asked himself, and comparing the two. If he did not ask himself the
right questions, we have to consider what the consequence is.
Before I turn to that, I can dispose of one subsidiary point. In Spiliada [1986] 3 All ER 843 at 856859, [1987] AC 460 at
478482 Lord Goff of Chieveley devotes a section of his speech to considering how the principle of Spiliada is applied in cases
where the court exercises its discretionary power under RSC Ord 11. It so happens that the applicability of Ord 11 to this petition
raises a question of some difficulty to which I shall have to come. Ladenimors solicitors applied to Mr Registrar Buckley for,
and obtained, leave under Ord 11 to serve the petition on Intercomfinanz out of the jurisdiction. But Ladenimor accepts that there
was material non-disclosure to the court on its part on that application. Harman J held that on the true construction of the various
rules in issue the leave sought under Ord 11 was not needed, and so the non-disclosure was immaterial. But he also said that, had
leave been needed, the defects in the affidavit in support of the application under Ord 11 would have led him at least to set aside
the order for service out without more ado on the ground that it had been obtained without proper disclosure. In this court, many
months later, neither side asks us to take such a summary course which would merely lead to a fresh application for leave. Both
parties have put in all their evidence, and both ask us to decide the substantive issue on that evidence.
As I understand the speech of Lord Goff in Spiliada, what the court has to look for is the forum, having competent
jurisdiction, in which the case may be tried more suitably for the interests of all parties and for the ends of justice; see the test of
Lord Kinnear in Sim v Robinow (1892) 19 R (Ct of Sess) 665. To that endif questions of onus and the effect of Ord 11 are for
the moment left to the sidethe court looks first for the appropriate or natural forum, being that with which the action has the
most real and substantial connection (see Spiliada [1986] 3 All ER 843 at 856, [1987] AC 460 at 478).
It is therefore natural to ask what the case or action is, as Harman J did. At this point I have reservations about Harman Js
approach. He seems to have accepted a submission from Mr Briggs for Ladenimor that proceedings within the trust or company
jurisdiction of the Chancery Division were to be distinguished from proceedings in the Commercial Court which were truly
litigation inter partes. Thus Harman J sets out in his judgment that cases in the Commercial Court, to which many international
cases are brought, are all matters of true litigation inter partes (see [1991] BCLC 69 at 76). But he then goes on to contrast
applications by trustees in the Chancery Division for directions in relation to their trust. His conclusion seems to be that only the
English High Court here in London can regulate the affairs of an English trust. In line with this approach and with Mr Briggs
argument, the judge, when he comes to formulate the crucial 352 question, says that the question must always be: how is this
company properly to be regulated? ([1991] BCLC 69 at 77).
In my judgment, however, the petition in the present case bears no resemblance whatsoever to an application to the court by
trustees for directions or guidance. It is litigation inter partes, between Ladenimor and Intercomfinanz, just as much as any action
in the Commercial Court.
In considering the connection of the proceedings with each forum, the court is plainly not limited to factors of convenience
in the preparation for and conduct of a trial. But equally the court must not ignore such factors. It must also consider any issues
of law that arise in the case, and any special factor independent of the parties which may make trial in one forum rather than the
other more appropriate, such as the Cambridgeshire factor in Spiliada.
So far as factors of law are concerned the fundamental point to my mind in this case is that this company has a twofold
position.
On the one hand it was incorporated in England and so is subject to the winding-up jurisdiction of the English court under
the Insolvency Act 1986, and subject to the general jurisdiction of the English court under the Companies Act 1985. It has made
all returns to the Companies Registry here that are required by United Kingdom law, has a registered office here and has regularly
held its annual general meetings here, albeit for formal business only since the shares were acquired by Ladenimor and
Intercomfinanz in 1979. Its accounts continue to be made up in accordance with the requirements of United Kingdom law as to
the payment of dividends; in particular on the advice of English solicitors it abstained from paying dividends out of current
trading profits at a time when it still had accumulated trading losses from past years.
On the other hand, the companys business has always been carried on in Argentina and nowhere else. It has a registered
office in Argentina and complies with all requirements of Argentine law. It is common ground that under art 124 of the Argentine
Company Law the company falls to be considered as a local company formed and registered in Argentina; it is thus subject to the
winding up jurisdiction of the Argentine court. There is nothing surprising in this; if the roles were reversed and the company
had been incorporated in Argentina but had always carried on all its business activities in England, it would have had to have had
an office for service of process here and would have been subject to the winding up jurisdiction of the English court as well as to
that of the Argentine court.
 The case put in the petition is that it is alleged by Ladenimor (1) that the affairs of the company have been, are being and for
as long as the same remain under the control of a Mr Atilio Gibertoni (who, it is alleged, beneficially owns and controls
Intercomfinanz) will be conducted in a manner which is unfairly prejudicial to the interests of Ladenimor and further or
alternatively (2) that it is just and equitable that the company should be wound up. The matters of fact relied on in support of that
case are almost entirely concerned with the management of the company in Argentina, and with what has happened in Argentina.
It is said, for instance, that under Mr Gibertonis control and by his procurement the following matters took place.
(i) The company entered into the business of cattle breeding in Argentina. The herds owned by the company have been
mixed with the herds owned by other Argentine companies which Mr Gibertoni controls, and all calves born to the mixed herds
have been attributed to those other Argentine companies to the exclusion of the company. Thus the companys share of the
profits of the cattle-breeding has been diverted to Mr Gibertonis other companies.
353
(ii) From 1984 to the present time the company has made loans to Argentine companies owned or controlled by Mr
Gibertoni which (a) were not made for the benefit of the company and detracted from the companys ability to develop its
primary department store business or (b) fell short of the best commercial investment of any capital surplus to the companys
working requirements then reasonably obtainable within Argentina and (c) were in several cases made in favour of companies
with deteriorating balance sheets representing a risk of default.
(iii) The company in October 1983 and again in 1987 acquired, from Argentine companies owned or controlled by Mr
Gibertoni and at vastly excessive prices, shares constituting a minority interest in another Argentine company, Timbo SA, which
was in the majority ownership and control of Mr Gibertoni.
(iv) When it was decided that because the company could not, under United Kingdom law, lawfully pay dividends out of its
trading profits, loans should be made to their shareholders in proportion to their shareholdings, the amounts attributable to
Ladenimors shares were not paid to Ladenimor but, it would seem, to a bank account in Lugano which it is said was under the
control of Mr Gibertoni.
It is also said that the Miserocchi family, who are Italian and control Ladenimor, have been excluded by Intercomfinanz/Mr
Gibertoni from all participation in the management of the company.
It follows that all contemporary documents relating to the matters which will have to be investigated at the trial of the issues
raised in the petition will have been written in Spanish, or possibly, in the case of correspondence with the Miserocchis, in Italian
and will have to be translated into English if the trial is in England. Moreover, most of the witnesses will be Spanish-speaking
people who do not know English and will have to give evidence through interpreters if the trial is in England. That would
necessarily make it more difficult for a judge to assess the truthfulness and honesty of witnesses. Mr Briggs rightly pointed out
that the extent to which oral evidence would be needed at the trial would depend on how far it was possible for the parties to
agree the facts after exchange of witness statements. But he conceded that if the trial of the petition took place in England it
would be in his words, a pretty ghastly trial.
There is a further minor factor that, as I understand the position, there have been other proceedings launched by Ladenimor
or the Miserocchi family in relation to other Argentine companies, in which allegations similar to those raised in the petition have
been made.
Mr Briggs urges that the relationship between the shareholders in the company is governed by the memorandum and articles
of association which are governed by English law. But the allegations in the petition do not depend on the construction of the
memorandum and articles. He also seeks to place some reliance on the fact that when Intercomfinanz and Ladenimor bought the
share capital of the company in 1979, they bought from an English bank, Grindley Brandts Ltd, under a contract which is
governed by English law. Nothing turns, however, on their obligations qua Grindley Brandts. Though they of course knew that
they were buying the share capital of a company incorporated in England, they also knew that it was a company whose whole
business was in Argentina and which was subject to Argentine law.
Harman J plainly appreciated that the factual issues in dispute favoured trial in Argentina (see [1991] BCLC 69 at 77). He
commented that there is no doubt that all the principal witnesses are Argentinianan overstatement in that the 354 Miserocchis
are Italian. But in considering which was the more appropriate forum he seems to have put the factual issues to one side, and
concentrated only on the fact that the remedies sought by Ladenimor by the petition were remedies made available by English
statutes in respect of a company incorporated in England.
Thus he says, putting what he saw as the crucial question (at 77):

None the less, as it seems to me, the question must always be: how is this company properly to be regulated?

He then goes on:

When one is looking at a company incorporated in England, which has its life and being only by virtue of the act of the
English law creating this artificial person, it is to my mind extremely difficult to see that it can be appropriate to hold that
the forum appropriate to decide that sort of matter is any forum other than the forum of the English court. It is, as Mr
Briggs submitted, in my view blindingly obvious what the answer to the question is once the question is posed.
(Harman Js emphasis.)

With every respect to the judge, the answer is only blindingly obvious to him because of the premises which are built into
the way he has posed his question. These are in part, as I read the judgment as a whole, his analogy of an application to the
English court for directions in respect of an English trust. But more seriously in my judgment he has failed to keep in mind at
this crucial stage in his judgment that this company is by Argentine law to be considered as a local, Argentinian company. I do
not regard it as at all blindingly obvious that relief for the dishonest management of an Argentinian company in the Argentine
should be granted by a court other than the Argentinian court. That illustrates that the question formulated may by limiting the
premises on which it is formulated dictate the answer. That is in my respectful view what the judge has done here, instead of
concentrating on the question as put in Spiliada itself.
One can test the matter further by an analogy. Let it be assumed, contrary to the fact, that the only relief claimed in the
petition is a compulsory winding-up order on just and equitable grounds. (I fully appreciate that that is very far from being
Ladenimors preferred alternative, since a winding-up order would not, without subsequent misfeasance proceedings, compensate
Ladenimor for the wrongs which, if Ladenimor is right, it has suffered from Mr Gibertonis management of the company.) The
evidence of Argentine law before this court is scanty but not disputed. It consists of an affidavit by a Dr Bomchil, a partner in a
Buenos Aires law firm who has been a practising lawyer in Argentina since 1973 and is one of the three directors of the company,
and an affidavit by a Mr Seitun, who was enrolled as an advocate in Argentina in 1985 and has for several years advised Mr
Gibertoni and a number of the companies referred to in the petition.
It appears from their evidence that under art 94(4) of the Argentine Company Law, a company can be wound up by the
Argentine court if the fulfilment of the corporate object is impossible. Dr Bomchil states that this applies in companies and
partnerships where disagreement between the members on how the entitys business should be conducted has turned the
fulfilment of its object into an impossible achievement. He continues:

In the case of companies there have been several cases in which the courts have considered the affectio societatis
(the willingness of the shareholders 355 to do business together) to be an essential element of the companys continued
 existence, particularly in companies with small numbers of shareholders, and consequently have ruled that a lack of the
same justifies an order winding up the Company.

That approach seems to bear resemblances to the position on just and equitable winding-up petitions which the English
courts reached by the decision of the House of Lords in Ebrahimi v Westbourne Galleries Ltd [1972] 2 All ER 492, [1973] AC
360 after an earlier divergence of judicial opinion. Since Ladenimor has not troubled to put in any relevant evidence of Argentine
law, I do not think that we can at this stage reject the evidence of Dr Bomchil and Mr Seitun because they have not spelt out in
detail how the jurisprudence in Argentina has developed on a topic which the English courts, before Westbourne Galleries, found
difficult.
Accordingly, accepting their uncontradicated evidence for present purposes, I would have no doubt that, if the only relief
sought by the petitioner was a winding up of the company on just and equitable grounds, the Argentine court would be the court
with which the action/dispute had the most real and substantial connection, and the Argentine court would be the court in which
the case would be tried more suitably for the interests of all parties and for the ends of justice. This is perhaps underlined by the
fact that the evidence raises a doubt whether a winding-up order made against the company by the English court would be
recognised by the Argentine courts; as the assets are in Argentina a winding-up order made by the English court would be of very
limited use if it was not recognised in Argentina.
The crucial factor in the present appeal is therefore that the primary relief which Ladenimor seeks is the order under ss 459
and 461 of the Companies Act 1985 that Intercomfinanz purchase Ladenimors shares in the company at a price representing 49%
of the value of the company and upon the basis that there be added back to the value of the company such loss as may be found to
have been caused to it by the matters complained of in the petition.
It is clear from Mr Seituns affidavit that a compulsory acquisition of Ladenimors shares such as that sought in the petition
is not available in Argentina. What is available in Argentina is, as I understand the evidence, firstly, a winding-up order, which
would lead to the realisation of the remaining assets of the company and distribution of the net proceeds among the shareholders
and, secondly and additionally, a claim for damages under art 54 of the Argentine Company Law.
In Mr Seituns translation, art 54 provides as follows:

Article 54: The partners or controlling entities who fraudulently or with negligence cause damages to a company are
jointly and severally liable to repair such damages, and cannot pretend to compensate with the profit that they may have
generated in other business. The partner or controlling entity that applies funds of the company to his own use or business
or that of third parties must bring to the company any resulting profit, but he will bear any loss. Any Company activity that
hiddenly procures objectives foreign to the company, that is just a way to violate the law, the public order or to frustrate
rights of third parties, will be directly attributable to the members or controlling parties who made it possible, who will
respond jointly and severally and without limitation for damages caused.

Dr Bomchil says, and it has not been challenged, in relation to art 54:
356

Any shareholder may sue other shareholders based on this provision. In effect Article 54 makes the controlling
shareholders liable for a negligent or unlawful handling of the companys business.

We do not know how the Argentine jurisprudence has developed in relation to art 54, and Mr Briggs submits that it is very
far from clear that Ladenimor would be able to recover damages against Intercomfinanz under art 54 in respect of Ladenimors
losses occasioned by the matters alleged in the petition, assuming them to be established. He says additionally that art 54 could
not compensate Ladenimor for the loss it would suffer if as a result of the matters complained of in the petition there is a
winding-up order and a forced sale by the liquidator of the companys remaining assets. As I see it, any sale by a liquidator of the
companys main asset, the department store, would be likely to be a sale of it as a going concern, unless a higher price could be
achieved by a sale for redevelopment, and not a sale on a break up. But a sale by the liquidator of the department store as a going
concern might yet be a forced sale in that the liquidator might not be selling at the best time; one cannot usefully speculate.
Before considering how the claim for relief under s 459 of the Companies Act 1985, and the difference in that field between
English and Argentinian relief, affects the application in this case of Spiliada principles I find it appropriate to consider the
position under Ord 11, since in Spiliada [1986] 3 All ER 843 at 858, [1987] AC 460 at 480 Lord Goff stated that in the Ord 11
cases the burden of proof rests on the plaintiff whereas in the forum non conveniens cases that burden rests on the defendant.
Under the Companies Act 1948, the same statute contained both the provisions for the compulsory winding up of a company
on just and equitable grounds on the petition of a contributory, and, in s 210, a provision rather more limited in its scope than the
present s 459 for relief against oppression. Applications under either head were governed by the same set of rules, the
Companies (Winding Up) Rules 1949, SI 1949/330. Those rules required the petition to be served on the company, but do not
appear to have required service on anyone else. The practice which developedprobably inevitably in view of the way s 210
was draftedwas that a petitioner who wanted his shares to be bought from him under s 210 by, eg an oppressive majority,
would ask in the one petition in the alternative for a purchase order under s 210 or a winding-up order on just and equitable
grounds.
Section 210 was replaced by provisions in the Companies Act 1980 in the same terms as those now to be found in ss 459 and
461 of the Companies Act 1985. But while those provisions, relating to what are for convenience called unfair prejudice
applications remain in a Companies Act, the 1985 Act, the statutory provisions for the winding up of companies, including the
winding up of a solvent company on a contributorys petition on just and equitable grounds, are now to be found in a different
statute, the Insolvency Act 1986. The consequence is that where, as here, a petitioner combines in one petition an application for
relief for unfair prejudice under s 459 and an application for a winding-up order on just and equitable grounds, there are two
different sets of rules applicable to the alternative applications.
These are the Companies (Unfair Prejudice Applications) Proceedings Rules 1986, SI 1986/2000, and the Insolvency Rules
1986, SI 1986/1925.
Both these sets of rules were made under the same statutory provision, namely s 411 of the Insolvency Act 1986 (as to which
see s 461(6) of the 1985 Act as amended) by the same rule-making authority, namely the Lord Chancellor with 357 the
concurrence of the Secretary of State after consulting the Insolvency Rules Committee referred to in s 413 of the Insolvency Act
1986. They were made within the same month, though not on the same day, and came into operation/force on the same date, 29
December 1986. But it is far from clear that they have the same effect in relation to Ord 11.
In the Insolvency Rules 1986, which cover a very wide range of matters in detail, it is expressly provided in r 12.12 that Ord
11 and the corresponding County Court Rules do not apply in insolvency proceedings. Insolvency proceedings are defined in r
13.7 as meaning any proceedings under the 1986 Act or the Insolvency Rules. In lieu it is provided by rule 12.12(3) that:

Where for the purposes of insolvency proceedings any process or order of the court, or other document, is required to
be served on a person who is not in England and Wales, the court may order service to be effected within such time, on
such person, at such place and in such manner as it thinks fit
 By contrast, in the Unfair Prejudice Applications Rules 1986, which are a very short set of rules, there is no reference to Ord
11. But it is provided in r 2(2) that:

Except so far as inconsistent with the Act and these Rules, the Rules of the Supreme Court and the practice of the High
Court apply to proceedings under Part XVII of the Act in the High Court

with an appropriate alternative provision in relation to county courts. The Act here is the Companies Act 1985 and Pt XVII of it
includes ss 459 and 461.
Harman J held that Ord 11 nonetheless did not apply to an application under ss 459 and 461. He reached that conclusion for
two reasons.
One was that he held that the position was covered by Ord 11, r 1(2)(b) and service out of the jurisdiction without leave of
the court was thereby permitted. Rule 1(2)(b) provides that:

(2) Service of a writ out of the jurisdiction is permissible without the leave of the Court provided that each claim made
by the writ is (b) a claim which by virtue of any other enactment [sc other than the Civil Jurisdiction and Judgments Act
1982] the High Court has power to hear and determine notwithstanding that the person against whom the claim is made is
not within the jurisdiction of the Court or that the wrongful act, neglect or default giving rise to the claim did not take place
within its jurisdiction.

As to that, we have had the advantage, which the judge did not have, of research by counsel into the antecedents of the rule.
It was first introduced in, for practical purposes, its present form, by para 5 of the Rules of the Supreme Court (No 2) Order
1963, SI 1963/1989. It seems plain that the reason for its introduction was the enactment of the Civil Aviation (Eurocontrol) Act
1962. That Act was enacted to give effect to an international convention concluded at Brussels (the International Convention
relating to Co-operation for the Safety of Air Navigation 1960) and s 7(3) provides as follows:

A court in any part of the United Kingdom shall have jurisdiction(a) to hear and determine a claim for charges
payable to the Minister by virtue of regulations under section four of this Act, notwithstanding that the person against
whom the claim is made is not resident within the jurisdiction of the court; (b) to hear and determine a claim against the
Organisation [the European Organisation for the Safety of Air Navigation] for damages in 358 respect of any wrongful act,
neglect or default, notwithstanding that that act, neglect or default did not take place within the jurisdiction of the court or
that the Organisation is not present within the jurisdiction of the court: Provided that a court shall not have jurisdiction by
virtue of paragraph (b) of this subsection in respect of damage or injury sustained wholly within or over a country to which
this Act does not extend.

That is the wording picked up in Ord 11, r 1(2)(b).

It appears, however, that r 1(2)(b) may have been intended to have a wider scope than only applying where its actual
wording has been used in a statute, as in s 7(3) of the 1962 Act. There are some Acts, such as the Carriage by Air Act 1961 and
the Carriage of Goods by Road Act 1965, which were enacted to make the terms of certain international conventions to which the
United Kingdom had acceded part of United Kingdom law. Actions brought under these Acts were at one time listed in Ord 11, r
1(1) as among the cases in which leave to serve out of the jurisdiction could be obtained under Ord 11. But they are no longer so
listed. It may have been thought that as the jurisdiction provisions of the conventions, laying down in what courts proceedings
can be brought, are now part of the statutes and have force in this country by virtue of the statutes, leave under Ord 11 is not
necessary because of Ord 11, r 1(2)(b) and so these statutes should not be listed in Ord 11, r 1(1).
But in my judgment to be within Ord 11, r 1(2)(b) an enactment must, if it does not use the precise wording in the rule, at
least indicate on its face that it is expressly contemplating proceedings against persons who are not within the jurisdiction of the
court or where the wrongful act, neglect or default giving rise to the claim did not take place within the jurisdiction. It is not
enough, in my judgment, that the enactment, like the Companies Act 1985, gives a remedy in general casesagainst other
members of the companywithout any express contemplation of a foreign element. Indeed if the judges reasoning on this
point were right it would seem that any proceedings to claim an injunction could be brought, without leave under Ord 11, against
a person who is not within the jurisdiction of the court and could proceed to trial without any such leave because under an
enactment, s 37 of the Supreme Court Act 1981, the High Court has power by order (whether interlocutory or final) to grant an
injunction in all cases in which it appears to the court to be just and convenient to do so.
Harman Js alternative reason for holding that an application under Ord 11 was not necessary where it was desired to serve a
petition under s 459 on a person who was not within the jurisdiction of the court was founded on r 2(2) of the Unfair Prejudice
Applications Rules 1986. He considered that it was inconsistent with the Companies Act 1985 and those rules that Ord 11 should
apply to such a petition. He considered in particular that service was comprehensively dealt with by r 4 of the Unfair Prejudice
Applications Rules 1986, which required service of a petition under s 459 on every respondent named in the petition as well as on
the company. He considered that it would be curious if the rule mandatorily obliged the petitioner to serve respondents named in
the petition, but yet the petitioner had to get leave to effect such service; he concluded that there would be an inevitable conflict
between the two rules.
I am afraid that I do not agree. It is a commonplace that a plaintiff has to serve all the defendants named in his proceedings
but if defendants are not within the jurisdiction of this court he has to get leave under Ord 11 to do so, so that it can be tested
whether the foreigner should be brought before this court. I do not therefore see any inconsistency or inevitable conflict.
359
I do not know why it was thought fit to disapply Ord 11 in the Insolvency Rules 1986 and not, at any rate in plain terms, in
the Unfair Prejudice Applications Rules 1986. Indeed I do not know if anyone ever gave conscious attention to that question.
But the provision in r 2(2) of those rules and the practice of the High Court applicable to proceedings under Pt XVII of the
Companies Act 1985 in the High Court has the effect, in my judgment, that Ladenimor needed to obtain leave under Ord 11
before it could serve the petition on Intercomfinanz in so far as the petition claimed relief against Intercomfinanz under ss 459
and 461. Consequently the burden of showing that relief should be sought here rather than in Argentina rests on Ladenimor.
Against this background, somewhat lengthily set out, my view is that Harman J misdirected himself as to the nature of these
English proceedings by petition in the Companies Court and partly for that reason asked himself the wrong question at the crucial
stage in his judgment. That led him directly to the answer he gave to the summons before him. He also misdirected himself in
relation to Ord 11, but since he did not decide the case on onus that was not material to his conclusion.
My own view is that in all the circumstances, and even in the light of the claim for relief under ss 459 and 461, the Argentine
court is the court with which the dispute has the most real and substantial connection. Even so, it remains to consider whether
Ladenimor can nonetheless show that the loss of the procedural benefit in this country of the availability as a form of relief of a
purchase order under ss 459 and 461 is so serious that leave to proceed in this country should be given and the service under Ord
11 should be allowed to stand because in the absence of that form of relief substantial justice will not be done in the appropriate
forum, viz Argentina: see Spiliada [1986] 3 All ER 843 at 859, [1987] AC 460 at 482.
Protecting ordinary shareholders against aggression by the majority has always been a problem in company law. See the
turgid history of the minority shareholders action, apart from the problems of a just and equitable winding-up petition before
Ebrahimi v Westbourne Galleries Ltd [1972] 2 All ER 492, [1973] AC 360. Section 210 of the Companies Act 1948 was
therefore when introduced a significant step forward. But in England, as opposed to Scotland, difficulty was experienced in
applying the section. Jenkins LJ recorded in Re H R Harmer Ltd [1958] 3 All ER 689 at 698, [1959] 1 WLR 62 at 75 that there
was no English case before Harmer on which an order had been made under the section. He then referred to Scottish decisions,
including a decision in the House of Lords in Scottish Co-operative Wholesale Society Ltd v Meyer [1958] 3 All ER 66, [1959]
AC 324, which had pointed the way forward. Even so, however, for several years before the enactment of the Companies Act
1980 which introduced the provisions, now to be found in ss 459 and 461 of the 1985 Act, it was generally known that more
extensive provisions than s 210 had been introduced by legislation in other English-speaking jurisdictions where the company
law had been derived from English company law and, ultimately, from the Companies Act 1862.
I therefore regard ss 459 and 461 as very important and desirable safeguards for shareholders against a very real wrong.
In Spiliada [1986] 3 All ER 843 at 860, [1987] AC 460 at 483 Lord Goff suggested that in some cases it may be possible to
reconcile the procedural advantages available to one party under one of the competing jurisdictions with the closer ties between
the case and the other jurisdiction by imposing conditions on a grant of leave to bring proceedings here or on a stay of
proceedings here. In 360 the present case, however, I cannot see any possible reconciliation; conditions imposed by the English
court cannot give the Argentine court jurisdiction to make a purchase order against Intercomfinanz of Ladenimors shares.
It is, therefore, a question of weighing the extent by which the remedy for oppression available in England under s 459 is
better than the combined remedies of a winding-up order and an award of damages under Argentine law against the very close
ties between the case and Argentina and the huge advantages of having the trial in Argentina. I personally regard the remedy
under s 459 as significantly preferable to the combination of remedies in Argentina. Indeed, it was because the remedies
previously available in England, which would have included a combination of a winding-up order and subsequent misfeasance
proceedings in the liquidation, were unsatisfactory that the predecessor of ss 459 and 461 was enacted in the Companies Act
1980. I therefore personally find the balancing exercise difficult. I could not say that the conclusion the judge reachedby
whatever routewas a conclusion obviously wrong.
Is the result that Ladenimor has failed to discharge the onus on it in an Ord 11 case of showing not merely that England is
the appropriate forum for the trial but that this is clearly so? (See Spiliada [1986] 3 All ER 843 at 858, [1987] AC 460 at 481.).
Or is the result that for this court to decide the balancing exercise in favour of Argentina would simply be for this court to form a
different view of the weight to be given to the factors which the judge had in mind and so would not be a permissible course for
an appellate court? (See Spiliada [1986] 3 All ER 843 at 861, [1987] AC 460 at 486.)
After some hesitation, I have formed the view that the latter is the correct assessment of the position, and that, though I
disagree with the route by which the judge reached his conclusion, this court cannot interfere with that conclusion.
Accordingly, I would dismiss this appeal.

STOCKER LJ. I have had the benefit of reading in draft the judgments of Dillon and Bingham LJJ. They reach different
conclusions, although in agreement that in some respects the learned judge seems to have incorrectly applied the principles
enunciated in the House of Lords in Spiliada Maritime Corp v Cansulex Ltd, The Spiliada [1986] 3 All ER 843, [1987] AC 460.
Both are in agreement with regard to the construction of RSC Ord 11, r 1(2)(b) and of the Insolvency Rules 1986, SI 1986/1925,
and the Companies (Unfair Prejudice Applications) Proceedings Rules 1986, SI 1986/2000, and I do not propose in this judgment
to add any comment of my own on these matters, save to say that I agree with their views.
I therefore confine this judgment to the question whether or not the judge correctly applied the principles of Spiliada to the
facts of this case, and if he did not whether this court is entitled to interfere with the judges exercise of his discretion. It seems to
me that it was mainly upon the resolution of the latter question that Dillon and Bingham LJJ reached different conclusions as to
the outcome of this appeal.
The basic principle enunciated by Lord Goff of Chieveley in Spiliada [1986] 3 All ER 843 at 854, [1987] AC 460 at 476
reads:

In my opinion, having regard to the authorities (including in particular the Scottish authorities), the law can at present
be summarised as follows. (a) The basic principle is that a stay will only be granted on the ground of forum non
conveniens where the court is satisfied that there is some other 361 available forum, having competent jurisdiction, which
is the appropriate forum for the trial of the action, ie in which the case may be tried more suitably for the interests of all the
parties and the ends of justice.

As to the proper method by which a court should apply this basic principle in cases of stay of proceedings, Lord Goff cites
Lord Keith of Kinkel in The Abidin Daver [1984] 1 All ER 470 at 479, [1984] AC 398 at 415:

the natural forum as being that with which the action had the most real and substantial connection.

(See [1986] 3 All ER 843 at 856, [1987] AC 460 at 478).

Lord Goff continued:

So it is for connecting factors in this sense that the court must first look; and these will include not only factors
affecting convenience or expense (such as availability of witnesses), but also other factors such as the law governing the
relevant transaction and the places where the parties respectively reside or carry on business.

And he also said:

If however the court concludes at that stage that there is some other available forum which prima facie is clearly more
appropriate for the trial of the action, it will ordinarily grant a stay unless there are circumstances by reason of which
justice requires that a stay should nevertheless not be granted. In this inquiry, the court will consider all the circumstances
of the case, including circumstances which go beyond those taken into account when considering connecting factors with
other jurisdictions. One such factor can be the fact, if established objectively by cogent evidence, that the plaintiff will not
obtain justice in the foreign jurisdiction

These are principles of general application.

The questions, as it seems to me, which arise on this appeal are: (i) did the judge correctly apply these principles in reaching
his conclusion; (ii) if he did not, was his discretion correctly exercised nonetheless; (iii) if it was not, is this court entitled to
substitute its own discretion for that of the judge; and (iv) if so, what is the consequence of the exercise of that discretion by this
court?
The first question involves examination of the approach adopted by the judge. He cites Lord Goffs dictum already cited
that the natural forum is that with which the action had the most real and substantial connection, and his further statement it is
for connecting factors that the court must first look (see [1991] BCLC 69 at 76). Thus far, it would appear that the judge had
the Spiliada approach to the problem in mind. However, he does not then proceed to consider the connecting factors. In fact, he
goes on to draw a distinction between the type of action with which the Spiliada case was concerned and non-adversarial
proceedings in the Chancery Division, and seems to have found that different principles may be appropriate in such
circumstances, for he says ([1991] BCLC 69 at 76):
 Here in this present case, again, one has a matter which is very far from the formulations adopted by Lord Goff.

And he continues:

Here one has an application by a member of an English company, pursuant to an express right given by an English
statute, in respect of a 362 matter where the English law gives a particular remedy by s 461 of the 1985 Act as a matter of
discretion, enabling it to effect what Mr. Briggs rather neatly described as corporate divorce. The order made requires a
buy-out by one side of the other, and it may be by the petitioner of the respondent, or by the respondent of the petitioner, or
it may in many cases be by the company of the petitioner. That will alter the future conduct of the affairs of the company,
which will affect many people other than the two major protagonists in their future rights and entitlements. All such
matters are plainly matters where the English law applies to the English artificial entity which has been created. None of
that has much resemblance to a lis inter partes in the Commercial Court.

He has not at that stage considered the connecting factors in deciding what is the most appropriate forum, but having posed
this question to himself, answers it by reference to the question What is this action?, and he answers his question as follows
([1991] BCLC 69 at 77):

I have, therefore, to ask: what is the appropriate forum for the trial of this action? To answer that question I have to
pose another: what is this action? This action is a petition, in my judgment, for relief against the conduct of the companys
business in a manner unfairly prejudicial to some part at least of its members, including the petitioner. The court will hear
a whole series of instances of things that have been done, acts that have been committed, and it will have to decide whether
the allegation that this or that was done is true or false. But in the end what the court, in my judgment, has to do in these
matters is reach an overall conclusion: has the petitioner suffered by reason of the conduct of the companys affairs in such
a manner as to be unfairly prejudicial to him? That is a general conclusion, but it is the essential conclusion and the
foundation for the jurisdiction. (Harman Js emphasis.)

This answer seems to me to beg the question, and I agree with the comment of Bingham LJ that the question the judge posed
to himself cannot properly be answered by reference to the relief claimed. This seems to be an error compounded by the fact that
I cannot agree that the proceedings with which this court is concerned are of the non-adversarial type which the judge suggests
they are. The whole issues which the court of trial will have to resolve turn upon the resolution of disputed issues of fact
requiring lengthy and complicated investigation of these facts. The issue before the parties, so far as the buy-out relief under ss
459 and 461 of the Companies Act 1985 is concerned is, at least in this case, essentially adversarial, and the Spiliada principles
are very relevant and the starting point ought to have been consideration of the connecting factors in order to ascertain the most
appropriate forum. The judge then makes a short, if not cursory, reference to the fact that the issues before the court at trial will
involve investigation of a whole series of acts committed in Argentina, but does not otherwise at this stage analyse what will be
involved in such an investigation (see [1991] BCLC 69 at 77). Indeed, he seems to discount the difficulties involved in this
process. He then poses to himself the question: how is this company properly to be regulated?, a question which seems to me
to pre-empt the conclusion, having regard to the judges general approach to the problem. He answers the question as follows
([1991] BCLC 69 at 7778):

When one is looking at a company incorporated in England, which has its life and being only by virtue of the act of the
English law creating this 363 artificial person, it is to my mind extremely difficult to see that it can be appropriate to hold
that the forum appropriate to decide that sort of matter is any forum other than the forum of the English court. It is, as
Mr Briggs submitted, in my view blindingly obvious what the answer to the question is once the question is posed
when I am asked to stay a petition and drive from the English seat of justice a person entitled by English statute to a
remedy which it is conceded is not available anywhere else, it is impossible, that being a relationship governed by English
law, for one to come to a conclusion that another forum will be the better or the more appropriate forum.

In my view, the approach of the learned judge with regard to the first stage laid down by Lord Goff in Spiliada was seriously
flawed.
I will not set out in detail the multifarious issues which will arise, and which point to a very strong connection with
Argentina. They appear from the terms of the petition, which has been set out in the judgment of Dillon LJ. All the witnesses
will have to give their evidence in Spanish. All the documents and relevant books of account, not only of this company, but other
companies the consideration of which may be involved, are in Argentina. The evidence of the documents will require them to be
translated. The relevant events all took place in Argentina. The difficulties of a trial in this country are such that it is not easy to
see how such a trial is to be conducted. At the very least, it will present a formidable task for a trial judge.
For these reasons, I would, without hesitation, reach the conclusion that at the end of the first stage of Spiliada the
appropriate forum would be Argentina. At this point the second stage of Spiliada fell to be considered, that is to say that even if
the connecting factors indicate that the appropriate forum would be Argentina, if there are circumstances by reason of which
justice requires that a stay should nevertheless not be grantedie that it can be established by cogent evidence that the plaintiff
will not obtain justice in a foreign jurisdictionthen a stay should not be granted. This is an overriding consideration, so that
even if the judge is in error with regard to the appropriate forum, he will nevertheless have reached the correct conclusion in the
exercise of his discretion if he made a reasonable appraisal of the factors and drew a conclusion from that appraisal which could
properly be supported. The judge did not specifically consider this aspect of the matter as the second stage of the Spiliada test.
He expressed his conclusion in these terms ([1991] BCLC 69 at 79):

The result of that would be that the petitioner could not obtain, according to the undoubted and uncontroverted
evidence before me, the remedy which it primarily seeks, the corporate divorce or buy-out. It could, perhaps, obtain a
winding up on grounds that seem not at all dissimilar to a just and equitable winding up, but the petition is quite plainly
aimed, and Mr Briggs asserted justifiably that it was, primarily at obtaining a buy-out on the proper basis of valuation,
giving the petitioner all the value which it was entitled to. That, in Argentina, cannot be obtained. That, by English
standards applying to this English company, is a right that Parliament has granted. That right I would be defeating if I were
to grant a stay in this case.

In my view the proper test is whether or not the petitioner can obtain justice in Argentina. There is no requirement that he
should be able to obtain the identical relief. Lord Goff said in de Dampierre v de Dampierre [1987] 2 All ER 1 at 12, [1988] AC
92 at 110:
364

I find it impossible to conclude that, objectively speaking, justice would not be done if the wife was compelled to
pursue her remedy for financial provision under such a regime in the courts of a country which provide, most plainly, the
natural forum for the resolution of this matrimonial dispute.
 It is true that the Argentine courts cannot make a buy-out order under s 459. This is not, in my view, decisive of the matter
as the learned judge considered that it was. The judge did not consider whether the remedydamageswas such as to provide
the petitioner with substantial justice, even though the cause of action by which this was to be obtained differed from the
statutory provision available in this country. The Argentinian courts can make a winding-up order on the equivalent of a just and
equitable ground, and such an order might be advantageous to the petitioner since a winding-up order obtained in this country
might not be recognised in Argentina. Argentinian law with regard to the scope of the remedy in damages was uncontroverted for
the purpose of this application before the court, and would seem to be apt to include compensation for any loss sustained through
the fact of winding up, and consequent sale of the assets or of the business as a going concern if this was due to the conduct of the
majority shareholder. It was not, in my mind, established that the remedy available in Argentina was significantly of less value
than the remedy available in this country under s 459.
Thus, the question for this court is whether or not the discretion exercised by the judge should be set aside on established
grounds, since if it cannot this court cannot interfere or exercise its own discretion afresh. The judge did not correctly apply the
Spiliada test in order to ascertain the appropriate forum, and in my view, in failing to do so, he reached a manifestly wrong
conclusion. He did not apply the correct test as to whether or not substantial justice could be obtained in Argentina. These
matters seem to me to be so fundamental to the proper exercise of discretion that this court is entitled to set that discretion aside
and exercise its own discretion. In the exercise of that discretion, I would, for my part, grant a stay. I do so for the reasons I have
given, and for those expressed by Bingham LJ.
Accordingly, I would allow this appeal.

BINGHAM LJ. On the construction of RSC Ord 11, r 1(2)(b), the Insolvency Rules 1986, SI 1986/1925, and the Companies
(Unfair Prejudice Applications) Proceedings Rules 1986, SI 1986/2000, I am in complete agreement with the judgment of Dillon
LJ, which I have had the benefit of reading in draft. Although we are differing from the judge, there is nothing I can usefully add.
It follows that our approach to onus must also differ from that of the judge. But it is common ground that the outcome of this
appeal cannot turn on fine questions of onus. The judge did not rule against Intercomfinanz because it had failed to discharge the
onus which (as he held) lay on it, but because the greater appropriateness of the English forum was in his judgment blindingly
obvious (see [1991] BCLC 69 at 77). The substantial issue on the appeal is whether that judgment is shown to be wrong. I am
therefore content to approach the case as if the burden lay on Intercomfinanz, although in truth it lay on Ladenimor.
Before applying the test in Spiliada Maritime Corp v Cansulex Ltd, The Spiliada [1986] 3 All ER 843, [1987] AC 460, the
learned judge posed the question: What is this action? ([1991] BCLC 69 at 77.) That was a very pertinent question. One
cannot decide where a matter should be most appropriately and justly tried without being clear what is to be tried. But I do not
think the question should be 365 answered simply by reference to the relief claimed, since in an English action the relief claimed
will almost inevitably be framed in English terms, particularly where it is statutory. An English pleader will not claim triple
damages or dommage-intrt, appropriate as such relief may be elsewhere. Thus when the judge answered the question by
quoting part of the language of s 459 of the Companies Act 1985 he was unconsciously building in a bias towards the choice of
an English forum.
I regard this case as one in which the minority shareholder complains that the majority shareholder, through Mr Gibertoni,
has abused its power as majority shareholder and caused the company to pursue objects outside its corporate objects, to lend
money to and invest in companies connected with Mr Gibertoni, to divert money which should have been advanced to the
minority shareholder and to deny board representation to the minority shareholder, in each case to the prejudice of the company
and the minority shareholder. The minority shareholder seeks an order that the majority shareholder buy its shares at a price
uplifted to make good the depreciation which the majority shareholders conduct has caused to the actual value of the shares.
Thus the minority shareholder seeks severance of its relations with the majority shareholder and the company with full
compensation for the majority shareholders wrongdoing. Alternatively, the minority shareholder seeks an order that the
company be wound up. This is all relief which the English court can give if the minority shareholder makes good its complaints.
It is no doubt true, as the learned judge pointed out, that the Spiliada test must be applied having due regard to the nature of
the proceedings in question, and in the Spiliada case itself the House of Lords may well have had ordinary adversarial litigation
primarily in mind because that is what it was dealing with and what most of the antecedent cases were concerned with. The
principles laid down by Lord Goff in the Spiliada were, however, entirely general in their terms and de Dampierre v de
Dampierre [1987] 2 All ER 1, [1988] AC 92 makes plain that their application is not limited to ordinary adversarial litigation.
The essential test remains the same, as the judge recognised when he set out to apply it.
The starting point must be the basic principle formulated by Lord Goff in Spiliada [1986] 3 All ER 843 at 854, [1987] AC
460 at 476:

that a stay will only be granted on the ground of forum non conveniens where the court is satisfied that there is
some other available forum, having competent jurisdiction, which is the appropriate forum for the trial of the action, ie in
which the case may be tried more suitably for the interests of all the parties and the ends of justice.

The words I have emphasised make clear, as does the reference to justice, that a broad overall view must be taken: the primary
task is not to decide which forum is advantageous or disadvantageous to any particular party. The court should look first to see
what factors there are, taking this broad overall view, which point in the direction of another forum: at that stage it is connecting
factors (including convenience, expense, availability of witnesses, governing law, place of residence and place of business) which
must be considered (see [1986] 3 All ER 843 at 856, [1987] AC 460 at 477478). If it is shown that there is some other available
forum which prima facie is clearly more appropriate for the trial of the action a stay will ordinarily be granted unless on a
consideration of all the circumstances justice requires that a stay should not be granted ([1986] 3 All ER 843 at 856, [1987] AC
460 at 478). If a plaintiff can show that he will not obtain justice in the foreign 366 jurisdiction, that is of course a powerful
reason for refusing a stay, since in such a case the foreign forum can scarcely be a more suitable forum for the interests of all the
parties and for the ends of justice ([1986] 3 All ER 843 at 856, [1987] AC 460 at 478).
It is common ground that the factors connecting this action with the Argentine forum are strong and obvious. All the
economic, logistical and management considerations which loom large in any substantial action point strongly towards Argentina.
The company carried on business, and the acts complained of were done, there not here. The witnesses are there, not here, and in
the main speak Spanish, not English, a significant matter in an action where credibility is very much in issue. The documents and
records are there, not here, and are in Spanish, not English. The court there would bring to the evaluation of factual evidence a
familiarity with local conditions which a court here would necessarily lack. Expert evidence would be needed here which would
not be needed there. The court there would be much better placed to assess the significance of related proceedings which have
already taken place there. While an English court called on to try this case would no doubt do so as best it could, the difficulties
would in my view be such as to make the reliability of the outcome problematical.
The factor which is relied on as connecting this action with England is the incorporation of the company here. This has
certain formal consequences inasmuch as it has a registered office here, annual meetings are held here, the companys local
accounts are translated into sterling and the minute book of general meetings is kept here. It has also had certain practical
consequences: the evidence shows that legal advice was taken in London to ensure that English company law rules were not
infringed when a distribution to shareholders was to be made. But the point which Mr Briggs, for Ladenimor, stressed in
argument, and which I think impressed the judge, was that the relationship of the three parties involved in this action (Ladenimor,
Intercomfinanz and the company) is by virtue of the companys English incorporation an English law relationship. The
companys constitution, contained in its memorandum and articles, is framed with reference to English company law, which
accordingly governs the rights and obligations of the parties among themselves. Now, when it is alleged that the relationship has
broken down, the English court is said to be the obvious forum to resolve the dispute as the forum most familiar with the
governing law and practice.
These are not negligible considerations. The only question is whether they can bear the preponderant weight which the
learned judge gave to them. I am of opinion that they cannot, and for two main reasons.
(1) While we know little or nothing of the history of the company before 1979, it seems highly improbable that the present
shareholders, if promoting the company today (or in 1979) would choose or have chosen to incorporate it in England. It is hard
to think of a reason why they should wish to incorporate the company in a place so far removed geographically, economically and
culturally from its commercial base and management. If this is so, the English incorporation of the company may fairly be
regarded as an anomalous historical survival. The situation is not closely analogous with that in which parties to a contract
deliberately choose to subject their bargain to the provisions of a given law.
(2) In parallel with its somewhat ghostly legal existence in England the company has a legal, in addition to a robust
corporeal, existence in Argentina. That the effect of Argentine law is to treat the company as if it were an Argentine corporation
is no longer in controversy. Thus while English law treats the company as English, Argentine law treats the company as
Argentine.
367
In a case where nothing appears to turn on the details of the companys constitution, the ultra vires rule being apparently the
same in both jurisdictions, these considerations seem to me to deprive the companys English incorporation of almost all the force
it might otherwise have.
At the first stage of the Spiliada test I reach a conclusion almost as strong as that of the judge but to the opposite effect. It
seems to me clear on the evidence that the Argentine court has jurisdiction to entertain this action (although the relief it can give
is different, as considered below) and that it is the forum in which the action may be tried much more suitably for the interests of
all the parties and the ends of justice.
The judge was powerfully impressed by the fact that the Argentine court cannot afford the buy-out relief claimed by the
minority shareholder under s 459 of the 1985 Act. As I understand him, he regarded this as a very weighty factor connecting this
action with the English forum. I think this matter more properly falls for consideration at the second stage of the Spiliada test
when (the greater appropriateness of another forum having been established) it is necessary to consider whether justice requires
that a stay should not be granted and whether it appears that one party cannot obtain justice in the foreign forum. In applying this
test it cannot of itself be enough that some difference exists between English law or procedure and those of the foreign forum
because such will always be the case (and was, for example, in de Dampierre v de Dampierre [1987] 2 All ER 1, [1988] AC 92).
The test must be applied as one of substance, not legal technicality.
If I have correctly characterised the substance of this action, it seems to me exaggerated to hold that the minority shareholder
cannot obtain substantial justice in Argentina. If successful, it will not obtain an order for purchase of its shares by the majority
shareholder at a price uplifted to take account of loss caused by the majority shareholders conduct. Uncontradicted evidence of
Argentine law does, however, establish that the minority shareholder may if successful recover against the majority shareholder
damages for loss caused by the majority shareholders deceit or negligence. The majority shareholder is directly liable for
negligent or unlawful handling of the companys business. There is nothing in the evidence to suggest that the damages
recoverable by the minority shareholder would not include compensation for loss sustained on sale of the companys business or
assets during winding up, even though the minority shareholder had asked for the company to be wound up, if the request for
winding up were shown to be a direct result of the majority shareholders conduct. Nor, as it seems to me, is there evidence to
support the judges proposition (however true in this country) that sale of a companys assets by a liquidator would be likely to
produce a depreciated price in Argentina; much might turn on an Argentine liquidators power to continue the companys
business until it could be profitably sold as a going concern. On the facts of this case, I can see no reason why the relief
obtainable in England is significantly better than the relief obtainable in Argentina and the evidence falls far short of showing that
it would be unjust to confine the minority shareholder to its remedies in Argentina. The alternative relief sought by the minority
shareholder in its petition, the winding up of the company, may be granted in either forum; the only difference is that an English
order will be ineffective in Argentina (where it matters) whereas an Argentine order will be effective there. And an Argentine
winding-up order will of course sever the minority shareholders relations with the majority shareholder and the company.
Assuming, as the judge held, that the onus of showing that a stay should be granted lay on the majority shareholder, I
consider that it has comfortably 368 discharged that onus. But the Court of Appeal must be very slow to interfere, and to reach a
different conclusion is not good ground for doing so in a discretionary field unless the judges exercise of discretion can be
impugned on the familiar grounds. I consider it can. In posing as the question to be answered How is this company properly to
be regulated?, the judge did not direct himself in accordance with the Spiliada case and moreover put the question in a way
which pre-empted the answer, since he plainly regarded the Spiliada test as not altogether apt where a case fell within the
supervisory jurisdiction of the Companies Court or the Chancery Division. In my view, this is in all essentials adversarial
litigation (as evidenced by the fact that the company has not been represented before us) and the judge erred in regarding it
otherwise, as he did in finding any analogy with the administration of a trust. I do not think the judge attempted to weigh
(although he did briefly mention) the factors connecting this action with Argentina, nor did he pay due regard to the companys
legal as well as factual existence in Argentina. He did not adequately consider how, in substance, the relief available to the
minority shareholder in Argentina fell short of the relief available here, and made no mention of the minority shareholders right
to damages, a very important feature of the relief available in Argentina. In short, the judge clearly felt that only the Companies
Court could be the proper forum in which to resolve a dispute of this kind involving an English company. That approach may be
understandable, but it is not in my view the approach laid down by the Spiliada case.
I accordingly conclude that the learned judge misdirected himself and that it is for this court to exercise its discretion afresh.
Doing so, I would allow the appeal and grant Intercomfinanz the stay it seeks.

Appeal allowed. Leave to appeal to the House of Lords granted.

Solicitors: Frere Cholmeley; Bower Cotton & Bower.

Carolyn Toulmin Barrister.

369
[1991] 4 All ER 370

McMenamin (Inspector of Taxes) v Diggles

TAXATION; Income Tax, Emoluments from office or employment

CHANCERY DIVISION
SCOTT J
6, 7 JUNE 1991

Income tax Emoluments from office or employment Office Barristers clerk Taxpayer employed as barristers senior clerk
Taxpayer entering into new contractual arrangement with members of chambers Taxpayer agreeing to provide full clerking
services to chambers in return for percentage of barristers fees Taxpayer assessed to income tax on emoluments from office or
employment Whether taxpayer holding office of barristers head clerk Income and Corporation Taxes Act 1970, s 181 (1)
(Sch E).

In 1964 the taxpayer became a junior clerk to a set of barristers chambers. In 1970 he became the senior clerk under a contract
of employment and was assessable to income tax under Sch E as an employee. In 1985 new contractual arrangements were
brought into effect between the taxpayer and each member of chambers whereby the taxpayer agreed to provide at his own cost
and expense a full clerking service in return for a specified percentage of the gross income of each member. Under the
agreement the taxpayer could either himself act as head clerk or provide some other suitably qualified and experienced person to
act as one. In the event the taxpayer acted as head clerk himself and discharged his contractual obligations under the agreement
by providing all the traditional services provided by a head clerk to barristers chambers. The taxpayer was assessed to income
tax under Sch E for the years 198586 to 198788 on emoluments from an office or employment. He appealed to the Special
Commissioners against the assessments, contending that he was neither employed nor the holder of an office but was self-
employed and that the assessments should therefore have been made under Sch D on the profits of a trade, profession or vocation.
The commissioners concluded that the taxpayer was not the holder of an office but was self-employed. The Crown appealed,
contending that the structure of the profession of barrister envisaged that each barrister should have the services of a person
occupying the office of clerk to chambers.

Held The question whether a particular occupation followed by a taxpayer during the relevant taxing period constituted an
office for the purpose of Case 1 of Sch E in s 181(1) a of the 1970 Act involved an issue of mixed law and fact: it involved law
to the extent that the meaning to be given to the word office was a matter of construction, and it involved fact because the nature
and incidents of the occupation in question were essentially matters of fact. Although in many cases offices involved a public
element and appointment thereto was made in a formal manner, eg by letters patent or under the sign manual, formal appointment
and a public element were not essential requirements for an office. On the other hand, although it was implicit in the Bars
code of conduct that every set of barristers chambers was expected to have a clerk, since otherwise a barrister could not comply
with the code, and thus the structure of the profession of barristers envisaged that each barrister should have the services of a
person occupying the office of clerk to chambers, it did not follow that a clerk to barristers chambers held an office within s
181. On its true construction the 1985 agreement left it open to the taxpayer, in rendering the full clerking services to each of
the barristers with whom he had contracted, either himself to act as head clerk or to 370 provide some other suitably qualified or
experienced person to do so while none the less remaining entitled to receive the emoluments due to him under the agreement.
The taxpayer was not appointed to the position of senior clerk by the 1985 agreement; rather, his assumption of the role of senior
clerk was the result of his own decision to fill that role, that being the means most convenient to him for the discharge of the
contractual obligations owed by him to the individual barristers under that agreement, and it was very difficult to regard the
position filled by him as a consequence of his decision thus to discharge his contractual obligations as an office. In the
circumstances the Crown had been unable to show that the Special Commissioners had misdirected themselves in law, and the
appeal would accordingly be dismissed (see p 380 h j, p 381 j to p 382 b e, p 383 b to d and p 384 a to f, post).
________________________________________
a Section 181(1), so far as material, is set out at p 380 g, post

Notes
For the meaning of office for income tax purposes, see 23 Halsburys Laws (4th edn reissue) para 666, and for cases on the
subject, see 28(1) Digest (2nd reissue) 461464, 22262235.
In relation to tax for the year 198889 and subsequent years of assessment s 181 of the Income and Corporation Taxes Act
1970 was replaced by s 19 of the Income and Corporation Taxes Act 1988. For s 19 of the 1988 Act, see 44 Halsburys Statutes
(4th edn) 57.

Cases referred to in judgment

Edwards (Inspector of Taxes) v Bairstow [1955] 3 All ER 48, [1956] AC 14, [1955] 3 WLR 410, HL.
Edwards (Inspector of Taxes) v Clinch [1981] 3 All ER 543, [1982] AC 845, [1981] 3 WLR 707, HL; affg [1980] 3 All ER 278,
[1981] Ch 1, [1980] 3 WLR 521, CA; rvsg [1979] 1 All ER 648, [1979] 1 WLR 338.
Great Western Rly Co v Bater (Surveyor of Taxes) [1920] 3 KB 266.

Case stated
1. On 21, 22, 23 and 26 February 1990 two of the Commissioners for the Special Purposes of the Income Tax Acts heard
appeals by Stephen John Diggles (the taxpayer) against assessments to income tax under Sch E, each in the sum of 35,000, for
198586, 198687 and 198788.
2. Shortly stated the question for the commissioners decision was whether, in those years, the taxpayers remuneration as a
barristers clerk was properly taxable under Sch E as emoluments from an office or employment.
3. The commissioners heard oral evidence from the taxpayer, Mr B Maddocks, barrister, and Mr F Taylor, an inspector of
taxes (retired). [The agreed documents which were put in evidence were then listed.]
4. In addition to the cases referred to in the commissioners decision they were referred to the following:
Ellis (Inspector of Taxes) v Lucas [1966] 2 All ER 935, [1967] Ch 858, [1966] 3 WLR 382.
Fall (Inspector of Taxes) v Hitchen [1973] 1 All ER 368, [1973] 1 WLR 286.
Hill v Beckett [1915] 1 KB 578, DC.
IRC v Brander & Cruickshank [1971] 1 All ER 36, [1971] 1 WLR 212, HL.
McMillan v Guest [1942] 1 All ER 606, [1942] AC 561, HL.
Magraw v Havers (10 May 1978; Case 29915/77/A), Industrial Tribunal.
Mitchell (Inspector of Taxes) v Ross [1961] 3 All ER 49, [1962] AC 814, [1961] 3 WLR 411, HL.
371
Nethermere (St Neots) Ltd v Gardiner [1984] ICR 612, CA.
OKelly v Trusthouse Forte plc [1983] 3 All ER 456, [1984] QB 90, [1983] 3 WLR 605, CA.
Robinson v Hill [1910] 1 KB 94, DC.
Sidey v Phillips (Inspector of Taxes) [1987] STC 87.
Walls v Sinnett (Inspector of Taxes) [1987] STC 236.
The tribunals decision in Magraw v Havers contained a list (a) of the duties undertaken by the senior clerk and (b) of his powers
and responsibilities, which the taxpayer considered to be broadly applicable to his case.
5. The commissioners reserved their decision and gave it in writing on 29 March 1990, allowing the appeals and
discharging the assessments. A copy of the decision, which set out the facts, the contentions of the parties and the reasons for
their conclusion, was annexed to and formed part of the case.
6. The inspector immediately after the determination of the appeal declared to the commissioners his dissatisfaction
therewith as being erroneous in point of law and on 20 April 1990 required them to state a case for the opinion of the High Court
pursuant to the Taxes Management Act 1970, s 56.
7. The question of law for the opinion of the court was whether the commissioners had erred in law in holding that the
taxpayer performed the duties of a barristers clerk as an independent contractor and not as the holder of an office nor as an
employee during the years in question.

DECISION
The appellant, Mr Diggles (the taxpayer), appeals against assessments to income tax under Sch E for 198586, 198687 and
198788.
The taxpayer is the senior clerk to the barristers chambers known as St Jamess Chambers, 68 Quay Street, Manchester and
the question for decision is whether he is properly assessed under Sch E on emoluments from an office or employment or
whether, as he contends, the assessment should be made under Sch D on the profits of a trade, profession or vocation. The
following facts are agreed.
1. This set of chambers has been in existence for over 70 years, originally at 3 St Jamess Square, Manchester and from
1984 at their present address, where they adopted the name St Jamess Chambers. The head of chambers then was Mr L J
Porter, who retired in March 1987 and was succeeded by Mr B C Maddocks. The original premises were held under successive
tenancies at full market rents. The present building was purchased by four members as trustees for the members in 62 shares held
in varying proportions, the arrangement being that new members purchase the shares of retiring members.
2. The taxpayer became a junior clerk to the chambers in January 1964 at the age of 17. The senior clerk then was Mr R C
Randall. At that time there were some nine members. The senior clerk was rewarded in the traditional manner by the clerks fee
collected from the solicitor client along with the fee in guineas payable to the barrister. Thus a fee note for a conference would be
2 7s being two guineas for the barrister and five shillings for the clerk. He did not receive the shilling in the guinea (a practice
in some chambers), but some junior members paid an additional sum of 10s or 1 per week to the clerk.
3. This system was abolished with decimalisation in 1971, following which the senior clerk was paid a commission at an
agreed percentage of all fees collected.
4. The taxpayer became senior clerk on 20 April 1970 when Mr Randall retired. There were then ten members of the
chambers. His initial commission was 5% of gross fees earned by the members. It was increased to 5 1/2% in January 1972 and
then to 61/2% in February 1974.
372
5. On 28 April 1970 the then head of chambers, Mr R J Hardy, gave the taxpayer a written statement of his terms of
employment under s 4 of the Contracts of Employment Act 1963. That statement set out the basis of his remuneration, his
normal hours of working, his holiday entitlement and his right to payment during sickness or incapacity through injury. It
provided that the employment could be terminated by three months notice on either side. The statement was signed by Mr Hardy
on behalf of himself and the other members of the chambers.
6. Between August 1978 and October 1985 the taxpayer paid a contribution towards chambers expenses calculated as a
percentage of his commission in the same way as the members.
7. Down to 7 October 1985 the taxpayer was treated as an employee for the purposes of income tax and national insurance
and value added tax, paying income tax under Sch E by way of assessment, following the practice then and now generally
applied by the Revenue to barristers senior clerks.
8. Immediately before that date there were two junior clerks to the chambers, Miss Paula Magnall (now Mrs Garlick), who
was first employed in the year 1980, and Miss Susan Barnes (now Mrs Bamberger), who was first employed in the year 1981.
They were both paid salaries by the chambers, which deducted tax under the PAYE system.
9. On 7 October 1985 an agreement was signed between the taxpayer and the 20 barristers who were then members of the
chambers whereby, as a separate contract between each of the barristers of the one part and the taxpayer of the other part, the
taxpayer agreed to provide at his own cost and expense for each barrister a Full Clerking Service in return for 83% of the
barristers gross earnings (defined to include remuneration from a part-time legal appointment as well as professional fees).
10. The expression Full Clerking Services was stated to include:

(a) The provision of the services of a full-time Head Clerk of not less than 10 years experience in that capacity being
either Mr Diggles or some other Clerk with that qualification. (b) The provision of a Junior Clerk or Junior Clerks and
other ancillary staff (but not including any typists) whose services may be reasonably necessary to enable the Head Clerk to
render efficiently the Full Clerking Services.

And to enable the head clerk and other staff supplied by the taxpayer to render the full clerking services efficiently they were to
be provided with an adequate clerks room and facilities at the chambers.
11. The taxpayer was to render an account of the barristers gross earnings for the preceding month on the first day of every
month and the barrister was to pay the sum due to the taxpayer within seven days of the delivery of the account.
12. The agreement was to continue until determined by either party on 12 months written notice, or 6 months in the case of
a barrister who was retiring from practice; and it would terminate forthwith if a barrister obtained a full-time judicial
appointment. After termination the taxpayer would do his best to collect outstanding fees and he would be entitled to his
commission on them.
13. As from 7 October 1985 the taxpayer was registered for value added tax and made his quarterly value added tax returns
as a person in business on his own account, making taxable supplies of services, on which he charged and collected value added
tax.
14. As from the same date and in accordance with the agreement, the taxpayer engaged Miss Magnall and Miss Barnes as
junior clerks and he also engaged an assistant, Mr Liam Mooney, and occasional casual helpers. Miss Magnall (Mrs 373 Garlick)
left in June 1989 to have a child and was paid statutory maternity pay by the taxpayer, who engaged a new junior clerk, Miss
Helen Berkley, with effect from 29 March 1989. Written statements of terms required by the Employment Protection
(Consolidation) Act 1978 (as amended) were signed by the taxpayer as employer in respect of Miss Magnall, Miss Barnes, Mr
Mooney and Miss Berkley.
15. The work of the junior clerks covers the full range of the senior clerks responsibilities and is allocated to them by the
taxpayer as required. But in general the negotiation of fees on privately paid work is carried out by the senior clerk personally.
16. At all material times the Code of Conduct for the Bar of England and Wales (3rd edn, 1985) (the rules) required that a
barrister might not practice unless he were a member of (or temporarily permitted the use of) professional chambers and that he
must have the services of the clerk of chambers. The rules also provide that a partnership is not permissible between practising
barristers, but they may agree to share expenses.
17. The expenses of chambers (apart from rates apportioned according to occupation) are apportioned between the members
rateably according to income. Subject to that sharing of expenses, each member is in practice on his own account and in
competition with other barristers including other members of chambers. He may, and not infrequently does, appear in court
against another member and advises and acts for a client against the client of another member.
18. At all material times the taxpayers name was exhibited on the exterior of the St Jamess Chambers beside the
description clerk and the words Clerk S J Diggles appeared at the foot of the list of barristers at the St Jamess Chambers in
entries for Waterlows Solicitors and Barristers Directory and Diary.
19. The taxpayer was at all material times a qualified member of the Barristers Clerks Association.
We heard oral evidence of the taxpayer and of Mr Maddocks from which we find that the proposal to give the taxpayer self-
employed status came from the head of the chambers. Changes in the national insurance regulations in 1984 had substantially
increased the employers class 1 contribution in respect of a well-paid employee by removing the top limit of salary at which
contributions had previously ceased. Even before that the position of the senior clerk had been seen as somewhat hybrid, capable
of being treated as employment or as self-employment. Mr Porter in particular had thought it unsatisfactory that the senior clerk
should be paid on a commission basis for providing his services as clerk while the chambers paid the junior staff to assist him.
Mr Porter and Mr Maddocks decided that it would be better to make him responsible for providing all clerking services on a self-
employed basis. But they preferred to keep the typists in their employment since typing services were rendered directly to the
members of chambers.
The taxpayer was at first reluctant to make the change because he would lose the security of employment, including the right
to a redundancy payment if things went wrong, and he would assume the responsibilities of an employer towards the junior
clerks. But he realised that self-employed status would have some advantages. He would have 12 months notice of termination;
he could take his holiday when he chose; and he would be free to take on staff as he wished without consulting anyone. The right
to put in a substitute as head clerk might also be useful if he were sick or, later on, if he should want to ease up as he approached
retirement. On reflection he was content to accept the change. So far as he knew the option of keeping his employed status was
not available to him.
The term full clerking services was not defined in the new agreement because 374 it was thought that all concerned would
know what it meant and any attempt to define it was likely to do more harm than good. The taxpayer has continued to manage
the chambers as before and does his best to further the practice of each member. But since his personal stake in maintaining the
chambers income is now higher he would feel more independent if he had to answer criticism from members (which in fact he
has not) about matters such as the distribution of work. He now manages the clerking arrangements entirely on his own without
consultation. In 1988, for example, he took on and paid some temporary staff to assist in putting the chambers records onto a
computer.
The taxpayer submits a monthly account of clerking fees, plus value added tax, to each member of chambers and this should
be paid within seven days. For one reason or another, however, he may be owed at any one time something between 3,000 and
6,000 by a member of chambers. Since he has to meet all the expenses of employing staff out of his fees, as well as meeting
some chambers expenses for which he is entitled to be reimbursed, he may run into cash flow problems which he did not
experience before October 1985. He estimates that he needs to hold about 15,000 of his own money available to fund his
financial obligations under the agreement.
The attention of each witness was directed in cross-examination to passages in the Bar Councils Code of Conduct as in
force from 1985 onwards. Each acknowledged that the work of everyone in chambers, including clerks and typists, may involve
matters for which the head of chambers has responsibility under the Code of Conduct. He must, for example, take all reasonable
steps to ensure that the chambers are administered competently and efficiently and in a manner which is fair and equitable for all
members and pupils, and to ensure that the clerks and other staff carry out their duties in a correct and efficient manner. The
Code of Conduct also places obligations on each individual barrister, not to allow touting on his behalf, for example, nor to
communicate confidential information entrusted to him by his lay client, and he is made responsible for the actions of his clerks.
The Barristers Clerks Association issues its own code of conduct but its contents were not in evidence.
The taxpayers remuneration was fixed at 83% of gross earnings under the agreement on the basis of figures prepared by
Thornton Baker, chartered accountants. The object was to remunerate him at much the same level as before, bearing in mind that
in future he would have to pay the junior clerks but would not be contributing to the general chambers expenses.
The first question which arises on those facts is whether the taxpayers remuneration came from an employment, or perhaps
from a number of employments (which would lead to the same result for tax purposes).
We were referred, as is usual in cases of this kind, to a number of authorities in which the distinction has had to be drawn
between a contract for services and a contract of service. In some of them the question has arisen in relation to a series of short
engagements, as in Market Investigations Ltd v Minister of Social Security [1968] 3 All ER 732, [1969] 2 QB 173 (where part-
time interviewers were held to be employed under contracts of service) and in W F & R K Swan (Hellenic) Ltd v Secretary of
State for Social Services (18 January 1983, unreported; QBD) (where tour managers were held to be engaged under contracts for
services). And there is Davies (Inspector of Taxes) v Braithwaite [1931] 2 KB 628, [1931] All ER Rep 792, in which a series of
acting engagements constituted the exercise of a profession. That is not the situation in the present case, since the taxpayer has
been clerk to the same chambers for a number of years but Mr Oliver QC, who represents him, claims some support nevertheless
from cases such as Braithwaite. In general, he 375 says, a number of separate contracts indicates professional activity rather than
employment; and he points out that the taxpayer had a separate contract with each member of the chambers, about 20 in all.
Closer to the facts of this case are Massey v Crown Life Insurance Co [1978] 2 All ER 576, [1978] 1 WLR 676, in which the
branch manager of an insurance company entered into a new agreement designed to give him self-employed status while
continuing to perform the same duties as before, and Ready Mixed Concrete (South East) Ltd v Minister of Pensions and
National Insurance [1968] 1 All ER 433, [1968] 2 QB 497, in which persons previously employed by the company in a different
capacity were invited to become owner-drivers and deliver concrete on the companys behalf as independent contractors. In both
of those cases the facts were found to justify the conclusion that the legal relationship accorded with the parties declared
intention. In Ferguson v John Dawson & Partners (Contractors) Ltd [1976] 3 All ER 817, [1976] 1 WLR 1213 on the other hand
the true legal relationship was held to be that of employer and employee although the plaintiff had specifically been taken on as a
labour-only sub-contractor.
In the search for guiding principles one usually starts from the judgment of MacKenna J in the Ready Mixed Concrete case
[1968] 1 All ER 433 at 439440, [1968] 2 QB 497 at 515:

A contract of service exists if the following three conditions are fulfilled: (i) The servant agrees that in consideration
of a wage or other remuneration he will provide his own work and skill in the performance of some service for his master.
(ii) He agrees, expressly or impliedly, that in the performance of that service he will be subject to the others control in a
sufficient degree to make that other master. (iii) The other provisions of the contract are consistent with its being a contract
of service.

His Lordship emphasised in relation to his first condition the servants obligation to provide his own work and skill, for he added:
 Freedom to do a job either by ones own hands, or by anothers is inconsistent with a contract of service, though a
limited or occasional power of delegation may not be

In the Swan (Hellenic) case McCullough J went through a check-list, first compiled by Waterhouse J in Addison v London
Philharmonic Orchestra Ltd [1981] ICR 261 at 271, of ten, or possibly eleven, aspects of the relationship between parties which,
in the light of the authorities, may prove to be of significance in resolving questions of this kind. He found none of them decisive
and concluded in the end that the only factor of major significance was the intention of the parties as deduced from the terms
which they agreed as to tax and national insurance. We do not propose to run through the whole of the check-list but we shall
refer to some items from it as we consider the rival arguments.
Mr Oliver, applying the control test which, although no longer regarded as decisive, remains a relevant factor, says that the
taxpayer was not under the control necessary for an employment. He had wide discretion as to the way in which he provided
clerking services, with no fixed hours of work and no obligation to obey orders. He had to avoid breaches of the Code of
Conduct because he was supplying services to barristers who were bound by that Code of Conduct but that does not mean that he
was controlled in the sense required for a contract of service. Applying another test from the check-list, Mr Oliver submits that
the taxpayer was carrying on business on his own account and not for a master or masters. By his efforts he could increase the
fees coming into the chambers, and thereby increase his income, and he had a financial stake in the provision of 376 clerking
services. He had to bear the cost of hiring junior clerks and he had 15,000 of his own money committed to the business. He
intended to provide services, not necessarily his own, as an independent contractor and that is precisely what he did. Admittedly
the chambers provided the premises and equipment for him and his employees to use but that is not a significant factor since his
function was to provide management services only.
Mr Cotton, for the Crown, contends that the agreement of 7 October 1985 effected no change in the taxpayers status. He
has remained an employee, albeit now serving 20 masters under separate contracts of employment. The relationship between a
barrister and his senior clerk involves a degree of control by the barrister which necessarily makes the clerk an employee because
the clerks duties have to be performed in such a way as to comply with the Code of Conduct and the barrister is responsible for
his actions. The same is true of the junior clerks and if the senior clerk engages them he must do so as agent for the chambers.
All the conditions set out in the Ready Mixed Concrete case are satisfied. As to (1), the provision of personal services, the
taxpayer does not have unlimited power to delegate his functions. He can put in another head clerk but the agreement puts some
obligations on him personally.
If one asks whether the taxpayer is in business on his own account the answer must be No, in the Crowns submission. He
provides no equipment and only some of the junior staff who assist him, assuming for the moment that the clerks are his servants.
His ability to increase his profits by his own efforts is limited because he has to provide clerking services within the established
framework of the chambers. By attracting work to the chambers he can increase his remuneration but that was equally so before
October 1985 and it is true of any employee remunerated on a commission basis. Applying another test from the check-list, taken
from the judgment of Denning LJ in Bank voor Handel en Scheepvaart NV v Slatford [1952] 2 All ER 956 at 971, [1953] 1 QB
248 at 295, he is inescapably part and parcel of the chambers organisation and in its service. The parties may have intended to
change his status but they could not effectively do so. Even if the agreement had stated in terms that the taxpayer should provide
clerking services as an independent contractor, which it did not, it would not have been conclusive because the parties may
misdescribe their relationship, as in Ferguson v John Dawson & Partners (Contractors) Ltd.
There is some force in the Crowns contentions and they were cogently presented, but we have come to the conclusion that
they should not succeed. The part and parcel test, though possibly decisive in some cases, is not always so. McCullough J
found it unhelpful in the Swan (Hellenic) case. The decisive factors here are, in our opinion, the intention of the parties to change
the status of the senior clerk and the terms of the agreement of 7 October 1985 which was designed to give effect to that
intention. The agreement was drawn in broad terms, with little provision for matters of detail, but it covered the main features,
that the taxpayer should provide full clerking services for each barrister at his own cost, that he could render those services
through a suitably qualified head clerk other than himself if he chose and that he was to employ the junior clerks whom he
needed to assist him. Those features point to a contract for services rather than a contract of service and the existence of 20
separate contracts does, we think, point to the same conclusion, even though not conclusively.
The Crowns argument says, in effect, that the relationship between a barrister and his clerk can be conducted only on a
master and servant basis; but we are not convinced that that is right. The barristers responsibility for the actions of his clerks
under the Code of Conduct is a matter between himself and the Bar Council, which does not dictate the terms on which the clerks
(senior and junior) are 377 engaged. His remedy, if the Code of Conduct is breached, is surely to dismiss an employed clerk or
terminate the contract of an independent contractor. Nor does it seem to us that the obligations imposed on the taxpayer by the
agreement are necessarily those of an employed person, requiring him to render personal services under the control of a master.
We accept that the solution to the question does not lie simply in the minds of the parties. As McCullough J said in the
Swan (Hellenic) case:

I have to determine the nature of the obligations of the parties to one another. This depends on the terms which they
expressly agreed and on such further terms as are to be implied. One asks: what was their intention? This does not mean
what was the relationship they wanted to create, nor what was the relationship they thought they had created. The only
relevant intention is that which is to be inferred from the agreed terms.

But in this case we find that the agreed terms reflected the parties intention to put the senior clerk onto a self-employed footing
and we are satisfied on the evidence that those agreed terms were given practical effect. We conclude that the taxpayer has not
been in the employment of the chambers or of any member of those chambers since 7 October 1985. And we move on to
consider whether he held an office within the meaning of that term in s 181 of the Income and Corporation Taxes Act 1970.
In Edwards (Inspector of Taxes) v Clinch [1981] 3 All ER 543, [1982] AC 845 the House of Lords reconsidered Rowlatt Js
definition of an office in Great Western Rly Co v Bater (Surveyor of Taxes) [1920] 3 KB 266 at 274 as something

which was a subsisting, permanent, substantive position, which had an existence independent of the person who filled
it, and which went on and was filled in succession by successive holders

and gave it broad approval, although the wording is not to be treated as sacrosanct and it is not to be applied too rigidly. Lord
Wilberforce said ([1981] 3 All ER 543 at 546, [1982] AC 845 at 861):

For myself I would accept that a rigid requirement of permanence is no longer appropriate, nor is vouched by any
decided case, and continuity need not be regarded as an absolute qualification. But still the word must involve a degree
of continuance (not necessarily continuity) and of independent existence: it must connote a post to which a person can be
appointed, which he can vacate and to which a successor can be appointed.

Mr Oliver submits, in reliance on a passage from the judgment of Buckley LJ in the same case ([1980] 3 All ER 278 at 281,
[1981] Ch 1 at 6), that to satisfy the requirement of an independent existence an office must owe its existence to some
constituent instrument, whether it be a charter, statute, declaration of trust, contract (other than a contract of personal service) or
instrument of some other kind. While we think it probable that most offices will be created by some such instrument (and the
list is an extensive one) we do not find sufficient authority for that statement to add it as a necessary requirement of an office in
all cases.
Mr Oliver also submits that an office must contain a public element: an office-holder must be a person to some extent in
the public domain, although he concedes that the degree of publicity required is incapable of precise definition. This element was
stated most clearly by Lord Bridge in his dissenting speech in Clinch [1981] 3 All ER 543 at 563, [1982] AC 845 at 881 where he
relied on a dictionary definition of office as: A position or place to which certain duties are 378 attached, esp one of a more or
less public character , but the majority of their Lordships found dictionary definitions unhelpful. Again it seems to us that
this may be a relevant factor, since an office will more often than not contain some public element, but the authorities do not
establish that it is an essential requirement, or at any rate not one that can be usefully quantified.
The Crown contends in this case that the taxpayer holds an office, or possibly a number of separate offices, as clerk to the St
Jamess Chambers, a recognised post to which someone else would be appointed if he were to retire or die. If a constituent
instrument is required, which Mr Cotton does not admit, it is the Code of Conduct, which, at the relevant time, required every
barrister to have the services of a clerk. In so far as a public element is required it is present since the clerk to chambers had a
public function in the provision of legal services to those members of the public who need them.
The speeches in Edwards v Clinch have to be read in their context. Mr Clinchs appointment to conduct an inquiry for the
Secretary of State for the Environment had its origin in statute and required him to perform duties of an obviously public nature.
The question was whether it had the necessary elements of permanence and continuity in the sense that it could be vacated and
filled by someone else; and the House of Lords held that it did not. As Lord Lowry put it ([1981] 3 All ER 543 at 553, [1982] AC
845 at 870):

To be in a position of authority is not necessarily to hold an office, and when you appoint somebody to do something
you do not thereby appoint him to be something (in other words to hold an office), unless the Act or other relevant
instrument says so. (Lord Lowrys emphasis.)

In other cases the area of debate will be different. There must, for example, be many positions in commercial organisations
which will have to be filled by others when the present holders leave; and in some of those cases the name of the holder may be
displayed for the information of the public. But not all such persons could be said to hold offices for the purposes of Sch E: they
are simply employees appointed to perform duties of a managerial or supervisory nature. A hotel manager is an example of that
sort of post. In the end it comes down, we think, to a matter of impression in each case; and reviewing all the relevant
circumstances of this case we conclude that the taxpayer did not hold an office, nor a number of offices. The strongest features in
the Crowns case are that, at the time, barristers were required to have the services of a clerk and that the taxpayers name appears
as clerk both at the entrance to the chambers and in various professional publications, but those features of the case are not
sufficient for the success of their argument. The taxpayers function has been at all times to perform the duties of senior clerk to
the members of the chambers. Those are important duties but we find it impossible to say that when he took them on he was
appointed to a post which can be classed as an office for the purposes of Sch E.
The right conclusion is, in our judgment, that he has performed those duties as an employed person before 7 October 1985
and as an independent contractor, providing clerking services under contract, since that date.
The appeal succeeds and the Sch E assessments for the three years under appeal are discharged.

Launcelot Henderson for the Crown.

Stephen Oliver QC and Timothy Lyons for the taxpayer.
379

7 June 1991. The following judgment was delivered.

SCOTT J. This is an appeal by the Crown against the determination by the Special Commissioners of appeals by the taxpayer
against assessments to income tax under Sch E for the years 198586, 198687 and 198788.
The taxpayer, Mr Diggles, is and was at all material times the senior clerk of a leading set of barristers chambers in
Manchester known as St Jamess Chambers.
The first main question before the Special Commissioners was whether for the three years of assessment I have mentioned
the taxpayer was employed and hence amenable to assessments under Sch E or was self-employed, in which case he would have
been amenable to being assessed for tax under Sch D. The second question was whether the assessments under Sch E could be
upheld, even though on a true view of the relevant facts the taxpayer was self-employed, on the ground that during the relevant
years of assessment he was the holder of an office within the meaning of that word in the relevant provision in the Income and
Corporation Taxes Act 1970.
In the event, the Special Commissioners concluded, first, that the taxpayer was self-employed and, second, that as a matter
of impression the taxpayer was not the holder of an office for the purposes of the relevant statutory provision.
The Crown appealed by case stated against the decision of the Special Commissioners. The grounds of appeal were, first,
that the Special Commissioners were wrong in finding in favour of self-employment rather than employment. That part of the
appeal is no longer pursued. It is accepted by the Crown that the conclusions of fact made by the Special Commissioners in
regard to that issue are such as to prevent the success of the appeal. But the appeal has continued on the second point, namely
whether during the relevant period the taxpayer was the holder of an office. The office the Crown has in mind is the office of
senior clerk to the chambers.
It is accepted by Mr Henderson, who appears for the Crown, that the appeal can succeed only if one of two possible bases is
established. The Crown must establish either that the Special Commissioners misdirected themselves in law or that they reached
a conclusion that no tribunal properly directed could have reached.
I should start by referring to s 181 of the 1970 Act, which contains the relevant charging provision. In sub-s (1), under the
heading Schedule E, it is provided as follows:

1. Tax under this Schedule shall be charged in respect of any office or employment on emoluments therefrom which
fall under one, or more than one, of the following CasesCase I: where the person holding the office or employment is
resident and ordinarily resident in the United Kingdom

I need not read anything further.

In my opinion, the question whether a particular occupation followed by the taxpayer during the relevant taxing period
constitutes an office for the purpose of this statutory provision involves an issue of mixed fact and law. It involves law to the
extent that the meaning to be given to the word office is a matter of construction, and it involves fact because the nature and
incidents of the occupation in question are essentially matters of fact. The determination of the issue requires the application of
the facts, as found, to the proper legal meaning of the word office.
The most recent case relevant to the matters argued before me is Edwards (Inspector of Taxes) v Clinch [1981] 3 All ER 543,
[1982] AC 845. In that case Lord Wilberforce referred to the manner in which the resolution of the question whether or not there
was the holding of an office for tax purposes ought to be approached ([1981] 3 All ER 543 at 546, [1982] AC 845 at 861):
 380

It is necessary to appraise the characteristics of the taxpayers appointment. There is in this task an element of
common-sense evaluation of fact, a task which is committed in the first place to the General Commissioners. Their finding
was for the taxpayer, and though this is far from sacrosanct, indeed I think that they applied the Rowlatt definition [see
Great Western Rly Co v Bater (Surveyor of Taxes) [1920] 3 KB 266 at 274 per Rowlatt J] too literally, nevertheless it is not
in my opinion wholly to be disregarded. They described it as merely a transient, indeterminate, once-only execution of a
task for which [the taxpayer] was peculiarly qualified (see [1979] 1 All ER 648 at 650), adding an analogy which I do not
find appropriate.

The primary facts as found by the Special Commissioners were not the subject of any substantial dispute. The taxpayer had
been the senior clerk at St Jamess Chambers for a considerable number of years before the tax years to which I have referred.
Up until 7 October 1985 it is common ground that he was senior clerk of the chambers under a contract of employment. It is also
common ground that up to that date he was properly amenable to being assessed to tax under Sch E as an employed person.
But on 7 October 1985 new contractual arrangements were brought into effect between the taxpayer and each of the
members of the chambers. There was a written agreement of that date signed by each member of the chambers and by the
taxpayer. The recitals to the agreement included the following:

whereas in this Agreement the expression Full Clerking Services shall include: (a) The provision of the services
of a full-time Head Clerk of not less than 10 years experience in that capacity being either [the taxpayer] or some other
Clerk with that qualification. (b) The provision of a Junior Clerk or Junior Clerks and other ancillary staff (but not
including any typists) whose services may be reasonably necessary to enable the Head Clerk to render efficiently the Full
Clerking Services.

Then followed the operative part of the agreement:

it is agreed as a separate contract between each of the Barristers of the one part and [the taxpayer] of the other part
that [the taxpayer] will at his own cost and expense provide for each of the Barristers a Full Clerking Service at the
Chambers upon the terms and conditions set out in the second Schedule hereto.

The terms set out in the second schedule included provision for a specified percentage of gross earnings to be paid by each
barrister to the taxpayer, and imposed the obligation on the taxpayer to account to each barrister for the gross earnings of that
barrister during the preceding calendar month and to show the amount owed by the barrister to him under the remuneration
provision to which I have just referred.
One paragraph in the second schedule provided as follows:

The Head Clerk and other staff supplied by [the taxpayer] shall be provided with an adequate Clerks Room and
facilities at the Chambers to enable them to carry on the Full Clerking Services efficiently.

As a matter of construction of the agreement, it seems reasonably clear to me that the agreement held it open to the taxpayer,
in rendering the Full Clerking Services to each of the barristers with whom he had contracted, either himself to act as head clerk
or to provide some other suitably qualified or experienced person to do so.
381
After 7 October 1985 the occupation by the taxpayer of the position of head clerk was not a necessary consequence of the
contractual provisions of the agreement. He could, consistently with those provisions, have nominated some other individual as
head clerk while none the less remaining entitled to receive the emoluments due to him under the agreement. In the event,
throughout the relevant period he acted, and I believe still acts, as head clerk. He has been described as head clerk in various
publications and reference books. The services which the taxpayer has supplied in discharging his contractual obligation to
provide Full Clerking Services have included all the traditional services provided by head clerks to barristers chambers.
There is one additional matter of fact on which great reliance was placed by the Crown and to which I must refer. The
barristers profession is, to a degree, controlled by self-regulation. The Bar Council issues a code of conduct approved by the
profession itself. The code of conduct in force during the relevant periodthe three years I have mentionedincluded a rule in
the following terms (Code of Conduct for the Bar of England and Wales (3rd edn, 1985)):

26. A barrister who is a member of professional chambers must: (a) have his name exhibited at the chambers; (b) have
the right to make such use of the chambers, and of its administration and facilities, as his practice requires; (c) have the
services of the clerk of the chambers

It is implicit in that rule that every chambers is expected to have a clerk; otherwise, barristers could not comply with r 26(c).
It was thus argued by Mr Henderson that the structure of the profession of barrister envisaged that each barrister should have the
services of a person occupying the office of clerk of chambers, and in a sense that is so. But it does not follow that a clerk in
barristers chambers holds an office within the meaning of that expression in s 181 of the 1970 Act.
In Edwards v Clinch [1981] 3 All ER 543 at 546, [1982] AC 845 at 861 Lord Wilberforce dealt with the meaning of the
word office:

It would seem to me that the legislature, by continuing to use the word [office] in the taxing words of Sch E without
any corrective definition, showed a general intention to adopt the judicial interpretation of it which, though uncritically, has
been consistent and continuous. For myself I would accept that a rigid requirement of permanence is no longer
appropriate, nor is vouched by any decided case, and continuity need not be regarded as an absolute qualification. But still,
if any meaning is to be given to office in this legislation, as distinguished from employment or profession or trade
or vocation (these are the various words used in order to tax people on their earnings), the word must involve a degree of
continuance (not necessarily continuity) and of independent existence: it must connote a post to which a person can be
appointed, which he can vacate and to which a successor can be appointed. This is the concept which was accepted by all
three of the members of the Court of Appeal, who all desired, in my opinion rightly, to combine some degree of
consistency with what had become accepted notions in the law of income tax, with practical common-sense requirements,
and without treating as authoritative decisions which were reached for reasons which may no longer be appropriate (see
[1980] 3 All ER 278 at 280, [1981] Ch 1 at 5 per Buckley LJ). Thus Buckley LJ accepted that to constitute an office a post
need not be capable of permanent or prolonged or indefinite existence, a development of the law with which I agree.
382

In argument before me Mr Henderson for the Crown and Mr Oliver QC for the taxpayer have referred to various features
which an office might be expected to have. Mr Oliver referred to the circumstance that, in general, one would expect an office
to be associated with some constituent instrument (as he called it) creating and defining the office in question. Mr Henderson for
his part accepted that many, perhaps most, offices caught by Sch E would be offices associated with constituent instruments of
the sort referred to by Mr Oliver. But Mr Henderson said, and Mr Oliver agreed, that a constituent instrument was not an
essential requirement. It was no more than a feature usually associated with a Sch E office. It was also suggested that an
office should have some degree of public relevance. If that is right, a wholly private occupation would never be an office for
the purpose of Sch E. Many posts or occupations which are, beyond argument, offices do involve a public element. But I think it
is accepted that it would be possible to have an office for the purpose of Sch E which was not associated with any public element.
Another feature of possible importance is the manner in which the individual came to hold the alleged office. Appointment
to many offices is made in a formal manner, eg by letters patent, or under the sign manual. Some appointments are made by
formal documents referring to the post to be filled and defining it. Formality of appointment is a feature which may be associated
with most offices falling within Sch E. But again it probably would be going too far to say that without some formal appointment
there could not be an office falling within Sch E.
Mr Henderson referred to the well-known remark about an elephant being a beast easy to recognise but difficult to define.
An office, he suggested, might be in the same state. I think that approach is one that the Special Commissioners may have
adopted. In the case stated they referred to Edwards v Clinch and a dictum of Lord Lowry ([1981] 3 All ER 543 at 553, [1982]
AC 845 at 870):

To be in a position of authority is not necessarily to hold an office, and when you appoint somebody to do something
you do not thereby appoint him to be something (in other words to hold an office), unless the Act or other relevant
instrument says so. (Lord Lowrys emphasis.)

Another way of putting the same point would be that an office is something more than a job description. That this sort of
consideration was in the minds of the Special Commissioners may be seen from their remarks in the case stated:

[The taxpayers] function has been at all times to perform the duties of Senior Clerk to the members of the Chambers.
Those are important duties but we find it impossible to say that when he took them on he was appointed to a post which
can be classed as an office for the purposes of Schedule E.

The bulk of the case stated deals with the main question argued before the Special Commissioners, namely whether the
taxpayer was employed under a contract of employment or was self-employed. The text dealing with the point regarding an
office forms a relatively short part of the case stated. It is no criticism of the Special Commissioners, but it is a fair comment,
that they dealt fairly cursorily with that part of the argument. However, they referred to the leading cases. They cited the tests
which the dicta in those cases suggest should be applied in order to decide whether an individual is the holder of an office.
It is difficult for Mr Henderson to point to any misdirection of law. If there was no misdirection of law, the only remaining
attack on the Special Commissioners conclusion is that the primary facts which they found did not permit the conclusion that the
taxpayer was not the holder of an office for the 383 purpose of Sch E. But if the various indicia of an office to which
reference was made in argument and to which reference had been made in the cases are adopted and if the taxpayers duties under
the 7 October 1985 agreement are weighed against those indicia, it becomes very difficult to apply an Edwards v Bairstow
criticism to the Special Commissioners conclusion (see Edwards (Inspector of Taxes) v Bairstow [1955] 3 All ER 48, [1956] AC
14). There is no obvious constituent instrument in the present case. The best that Mr Henderson can do is point to r 26(c) of the
Bars Code of Conduct. But that code is not precise as to the manner in which barristers chambers are to be administered.
Provided that the arrangements made result in the efficient running of chambers, I do not believe that a disciplinary case for
breach of the code could be made against a barrister on the ground that there was no person specifically appointed as clerk of
chambers.
The taxpayers duties as clerk of St Jamess Chambers were in no sense public duties. His assumption of the role of senior
clerk was not under any formal appointment. He was not so appointed by the written agreement of 7 October 1985 itself. His
assumption of the role of senior clerk was the result of his own decision to fill that role. That was the means most convenient to
him for the discharge of the contractual obligations he owed the individual barristers under the agreement. I find it very difficult
to regard the position filled by the taxpayer as a consequence of his decision thus to discharge his contractual obligations as an
office. I, like Mr Henderson, can picture an elephant but if I try to picture a Sch E office I do not bring to mind a barristers
senior clerkship. I think that the taxpayers senior clerkship was more of a job description than the holding of a Sch E office.
In my judgment, whether or not it is possible for barristers chambers to arrange their affairs so as to constitute their senior
clerk the holder of an officeand it may be possiblethe Special Commissioners conclusion in the present case that that had
not happened was one which it was open to them on the evidence before them to come to. I do not think their decision is
vulnerable to attack on Edwards v Bairstow lines. Accordingly, I dismiss the appeal.
There is a minor point which is not the subject of dispute between the parties. The Special Commissioners discharged the
assessment for 198586 notwithstanding it was common ground that until 7 October 1985 the taxpayer had been working under a
contract of employment and therefore up to that date was amenable to being taxed under Sch E. To that extent, therefore, the
discharge of the assessment cannot be maintained and some appropriate order must be made.

Appeal dismissed.

Solicitors: Solicitor of Inland Revenue; Stephen Oliver QC and Timothy Lyons.

Rengan Krishnan Barrister.

384
[1991] 4 All ER 385

Re Barlow Clowes Gilt Managers Ltd

COMPANY; Insolvency

CHANCERY DIVISION
MILLET J
20, 21, 22, 23, 24 MAY, 6 JUNE 1991

Company Compulsory winding up Liquidator Information provided to liquidator Use in criminal trial of persons
connected with company Information supplied to liquidators voluntarily and in confidence Persons charged with offences
following collapse of company requesting liquidators to provide transcripts of interviews conducted by liquidators Whether
liquidators under duty to assist directors of company in defending criminal charges -- Whether liquidators ought to provide
directors with information given to liquidators in confidence in course of winding up Whether contrary to public policy for
liquidators to disclose information provided to them voluntarily and in confidence.

Following an order for the compulsory winding up of two associated English and Gibraltarian deposit-taking companies after
they had collapsed owing a total liability to investors of over 115m the liquidators of the English company conducted a series of
interviews with persons who had been closely involved, mostly in a professional capacity, with the two companies. The purpose
of the interviews was to establish whether civil claims could be brought on behalf of investors against the companies or by the
companies against third parties. Although the persons interviewed could have been compelled by an order made under s 236 of
the Insolvency Act 1986 to attend for examination by the liquidators, the witnesses attended voluntarily in circumstances of
confidentiality on the assurance, express or implied, that any information given to the liquidators would be used solely for the
proper purposes of the liquidation. Four persons connected with the companies who had been arrested and charged with theft and
fraud and were due to be tried in the Crown Court requested copies of the transcripts of the interviews from the liquidators. The
liquidators applied to the court for a direction whether they were at liberty to disclose the transcripts to the defendants. The
defendants, supported by the Serious Fraud Office, contended that the public interest in ensuring that the defendants had a fair
trial outweighed the assurances of confidentiality and the interests of the liquidation.

Held The liquidators of a company were under no duty to assist directors of the company in defending criminal charges brought
against them by providing the directors with information given to the liquidators in confidence in the course of winding up the
company and it would be against public policy for such information provided voluntarily and in confidence to be disclosed as it
would jeopardise the proper and efficient functioning of the liquidation, the court in its capacity as the Companies Court
responsible for the winding up of the two companies would direct the liquidators not to make voluntary disclosure of the
transcripts to the defendants, to claim public interest immunity if necessary in response to any witness statement issued by the
defendants and not to disclose the transcripts unless ordered to do so by the Crown Court, which was the appropriate court to
weigh the competing interests for and against disclosure and to make a final decision on the matter (see p 391 f to p 392 d, p 393
j to p 394 b e g and p 395 a j to p 396 b j to p 397 b g, post).
Dicta of Sir Nicolas Browne-Wilkinson V-C in Marcel v Comr of Police of the Metropolis [1991] 1 All ER 845 at 853 and in
Cloverbay Ltd (joint administrators) v Bank of Credit and Commerce International SA [1991] 1 All ER 894 at 900 applied.
385

Notes
For liquidators powers and the duty to provide information to the liquidator, see 7(2) Halsburys Laws (4th edn reissue) para
15741575, 16761677.

Cases referred to in judgment

A-G v Guardian Newspapers Ltd (No 2) [1988] 3 All ER 545, [1990] 1 AC 109, [1988] 3 WLR 776, HL.
Air Canada v Secretary of State for Trade (No 2) [1983] 1 All ER 910, [1983] 2 AC 394, [1983] 2 WLR 494, HL.
Cloverbay Ltd (joint administrators) v Bank of Credit and Commerce International SA [1991] 1 All ER 894, [1991] Ch 90,
[1990] 3 WLR 574, CA.
Crompton (Alfred) Amusement Machines Ltd v Customs and Excise Comrs (No 2) [1973] 2 All ER 1169, [1974] AC 405, [1973]
3 WLR 268, HL.
Esal (Commodities) Ltd, Re (No 2) [1990] BCC 708.
Greys Brewery Co, Re (1883) 25 Ch D 400.
Lion Laboratories Ltd v Evans [1984] 2 All ER 417, [1985] QB 526, [1984] 3 WLR 539, CA.
Marcel v Comr of Police of the Metropolis [1991] 1 All ER 845, [1991] 2 WLR 1118.
North Australian Territory Co, Re (1890) 45 Ch D 87, CA.
R v Cheltenham Justices, ex p Secretary of State for Trade [1977] 1 All ER 460, [1977] 1 WLR 95, DC.
R v Flint Justices, ex p Roberts (1 July 1988, unreported), DC.
R v Hallett [1986] Crim LR 462, CA.
R v Skegness Magistrates Court, ex p Cardy [1985] RTR 49, DC.
Tyler, Re, ex p Official Receiver [1907] 1 KB 865, [19047] All ER Rep 181, CA.
W v Egdell [1990] 1 All ER 835, [1990] Ch 359, [1990] 2 WLR 471, CA.

Summons
By summons issued on 11 April 1991, as amended, Michael Jordan and Nigel Hamilton, the joint liquidators of Barlow Clowes
Gilt Managers Ltd (BCGM), applied to the court pursuant to s 168(3) of the Insolvency Act 1986 seeking a direction that they be
at liberty to disclose to the respective solicitors of the defendants, Mr Clowes, Mr Cramer, Dr Naylor and Mr Newman, the
transcripts of the interviews of 16 named persons (the witnesses) which were conducted on behalf of the liquidators between June
and November 1989. The summons was heard in chambers but judgment was given by Morritt J in open court. The facts are set
out in the judgment.

John Lindsay QC and David Ashton for the liquidators.

Anthony Hacking QC and Martin Steiger for Mr Clowes.
Kenneth Hamer for Mr Cramer.
Mary Arden QC and Justin Gau for the Serious Fraud Office.
Michael Crystal QC and Mark Phillips for Mr Connolly and Mr Counsell, two of the witnesses.
Jonathan Sumption QC and Mark Howard for Mr Pilkington, another witness.

Cur adv vult

386

6 June 1991. The following judgment was delivered.

MILLETT J. This is an application by Mr Michael Jordan, chairman of Cork Gully, and Mr Nigel Hamilton, a partner in Ernst
& Young, the joint liquidators of Barlow Clowes Gilt Managers Ltd (BCGM), for directions pursuant to s 168(3) of the
Insolvency Act 1986. I will refer to the applicants as the liquidators.
By their summons as amended, the liquidators seek a direction that they may be at liberty to disclose to the respective
solicitors of Mr Clowes, Mr Cramer, Dr Naylor and Mr Newman (the defendants) the transcripts of the interviews of 16 named
persons (the witnesses) which were conducted on behalf of the liquidators between June and November 1989.
BCGM was a deposit-taking company which attracted investment from members of the public. It was ordered to be
compulsorily wound up by the High Court on 6 July 1988. Shortly afterwards the liquidators were appointed joint liquidators of
BCGM. They have also been appointed joint receivers of certain portfolio investments. Meanwhile a sister company, Barlow
Clowes International Ltd (BCI), had been placed in compulsory liquidation by an order of the Supreme Court of Gibraltar, and
Mr Jordan became one of the two joint liquidators. The affairs of the two companies are entangled.
On 15 June 1988 Mr Clowes was arrested. He was subsequently rearrested, and the other three defendants were arrested, on
7 December 1988. They have been charged with serious criminal offences in connection with the affairs of BCGM and BCI. All
four defendants are charged with conspiracy to contravene s 13(1) of the Prevention of Fraud (Investments) Act 1958 and with
numerous counts of theft. The prosecution allege an investment fraud of enormous proportions carried out between 1984 and
1988. In June 1988 the total liability to investors is said to have been over 115m. The prosecution allege that members of the
public were induced to deposit their moneys in the belief that they would be invested in gilt-edged securities, that only 19m
was in fact so invested and that the rest was taken by the defendants for their own benefit or for the benefit of their families. Mr
Clowes alone faces charges of theft totalling some 62m. The prosecution is being conducted by the Serious Fraud Office in
accordance with the provisions of the Criminal Justice Act 1987. Phillips J has been assigned to try the case. The defendants
have been arraigned and Phillips J is now holding the preparatory hearings. For convenience, the trial has been split into two.
The date for the start of the first trial, in which all four defendants are involved, has been fixed for 2 July. The second trial will
not begin until the first has been concluded. Again, all four defendants are involved, this time with two others.
For the purposes of their own investigations, the liquidators instructed Mr David Graham QC, a partner in Coopers &
Lybrand Deloitte (of which Cork Gully is the insolvency practice) to conduct a series of interviews with persons who had been
closely involved, mostly in a professional capacity, with the various Barlow Clowes companies. Sixteen such persons are named
in the summons. The positions that they held and the parts that they played in connection with the affairs of BCGM or BCI or
their predecessor companies are set out in the affidavit of Mr Richard Smyth and it is not necessary to recite them further. In
addition to the 16 witnesses named in the summons, Mr Graham also interviewed two other witnesses, a Mr Richard Hooper and
a Mr James Levy.
The purpose of these interviews was to enable the liquidators to ascertain the facts generally but with particular reference to
establishing whether or not civil claims could be brought on behalf of investors against BCGM or BCI, or by either of those
companies against third parties. It was no part of Mr Grahams function, 387nor was it the purpose of the interviews, to
investigate whether criminal offences had been committed.
The witnesses were invited to attend and did so on a voluntary basis. Many considered that it was their professional duty to
provide assistance to the liquidators. Some were accompanied by their legal advisers. In every case a record of the interview
was transcribed and retained, and a copy was supplied to the witness and, where appropriate, his legal adviser. In every case the
interview was conducted in circumstances of confidentiality. In many cases this was made explicit, either in correspondence
before the interview took place, or orally by Mr Graham at the outset of the interview. But where it was not explicit it was
certainly implicit. This cannot have been understood to mean that the liquidators could make no use of the information they were
given and could not impart it to anyone if they judged it necessary to enable them to carry out their duties as liquidators. But it is
clear that the information was obtained by means of assurances, express or implied, that it would be used solely for the proper
purposes of the liquidation. Moreover, although the witnesses attended voluntarily, they did so in response to a threat, often
express but always implicit, that if they did not attend voluntarily the liquidators would have recourse to the statutory powers in
the Insolvency Act 1986 to compel their attendance at a private examination conducted by the court.
All 16 witnesses were later interviewed by inspectors appointed by the Department of Trade and Industry. Transcripts of
those interviews were passed to the Serious Fraud Office, and have been duly supplied to the defendants either as annexures to
witness statements or as unused material in accordance with the Attorney Generals guidelines (see Practice Note [1982] 1 All ER
734). The prosecution intend to call eight of them as prosecution witnesses, two of them (Mr Suttie and Mr Walker) at the second
trial only. One (Mr Counsell) is to be called at the second trial, but will be tendered by the prosecution for cross-examination by
the defence at the first trial. Four others have made witness statements, but it is not intended to call or tender them at either trial.
The remaining three (including Mr Connolly) have not given witness statements to the Serious Fraud Office.
In January 1990 the Serious Fraud Office obtained from the liquidators copies of the transcripts of Mr Grahams interviews
of Mr Hooper, Mr Levy, Mr Walker and Mr Suttie. They were supplied voluntarily on receipt of an assurance that they were
required by the Serious Fraud Office for the purpose of their investigations and that their production could if necessary be
compelled by a notice under s 2(2) of the Criminal Justice Act 1987. Copies of the transcripts of the interviews of Mr Hooper
and Mr Levy have been duly supplied by the prosecution to the defence in accordance with the Attorney Generals guidelines.
In March 1991 Mr Clowess solicitors sought and obtained from the liquidators solicitors a list of the names of all the
witnesses who had been interviewed by Mr Graham and the dates of their respective interviews. They then asked to be supplied
with copies of all the transcripts with the exception of those relating to Mr Hooper and Mr Levy, which were already in their
possession. In due course they were informed that the liquidators would not voluntarily release the transcripts, and would if
necessary object to being compelled to produce them on grounds of public interest immunity.
On 5 April 1991 a witness summons was issued out of the Central Criminal Court on the application of Mr Clowess
solicitors. It was directed to Mr Jordan, and called for the production of the transcripts of the interviews given by the witnesses
to Mr Graham. The defendants have since learned that the Serious 388 Fraud Office also have in their possession transcripts of
the interviews of Mr Walker and Mr Suttie (who it will be remembered are witnesses at the second trial only) and intend to
supply them to the defence in due course. The defendants therefore no longer press the liquidators for the production of those
transcripts.
On 9 April 1991 a hearing took place before Phillips J. The liquidators were represented by counsel. He told Phillips J that
he would be applying to set aside the witness summons served on Mr Jordan under s 2(2) of the Criminal Procedure (Attendance
of Witnesses) Act 1965 on the ground that the transcripts were not material evidence within the meaning of the section. He made
it clear that the liquidators did not wish to be unhelpful or unco-operative, but he said that the interviews had been conducted on a
confidential basis, and that the liquidators would claim public interest immunity if necessary. In the course of the discussion,
counsel indicated that the liquidators would wish to seek the directions of the Companies Court, which might be persuaded to
authorise the transcripts to be disclosed on a voluntary basis, in which case there would be no further problem. The liquidators
application was then adjourned to enable the present application to be made. Before adjourning the proceedings, and in an
endeavour to provide some helpful guidance to this court, Phillips J made the following observation:

Perhaps it would not be out of place for me to say simply this. If these individuals are going to be called to give
evidence about the matters about which they have already spoken to the liquidator, as far as the interests of criminal justice
is concerned, it seems to me that those interests would best be served by the defence having the opportunity to see what
those witnesses have said about the matters in question on an earlier and more contemporaneous occasion. I do not think
that I can say more than that by way of assistance to any discretion that a judge may have in the Companies Court.

The present summons was issued by the liquidators on 11 April 1991. The respondents formally represented before me are:
(i) Mr Clowes and Mr Cramer, who also speak for the other two defendants, and who argue that the transcripts should be
disclosed; (ii) Mr Connolly, Mr Counsell and Mr Pilkington, who also speak for the other witnesses, all of whom object to the
disclosure of the transcripts; and (iii) the Serious Fraud Office, who have been allowed to intervene and who support the claim
for disclosure. The fact that the opposing arguments have been advanced by those with a direct interest has allowed the
liquidators to remain neutral, but the evidence filed on their behalf shows that their own inclination would be to oppose
disclosure.
 During the course of the argument counsel for the Serious Fraud Office told me that it was the intention of the Serious Fraud
Office to issue a notice under s 2 of the Criminal Justice Act 1987 upon the liquidators in order to require the production of the
transcript of Mr Pilkingtons interview, and that the issue of similar notices in respect of Mr Tree and Mr Sinsteads transcripts
was under active consideration. Any material obtained by such means will in due course be supplied to the defence in accordance
with the Attorney Generals guidelines. Counsel accepted, however, that such notices could be issued only for the production of
material genuinely required for the purpose of the Serious Fraud Offices investigations, which are continuing, and could not
properly be issued merely to obtain material requested by the defence. I have been much pressed with the argument that the right
of the defendants to have the transcripts made available to them for the purpose of their defence should not depend upon 389 the
fortuitous circumstance that they were also required for the purpose of the Serious Fraud Offices investigations.
The liquidators do not suggest that the transcripts contain sensitive information or that this particular liquidation would be
impeded or made more difficult by the disclosure of the transcripts or any parts of them. In terms of public interest immunity, it
is a class claim and not a contents claim.
The evidence sworn on behalf of Mr Clowes is to the following effect. Mr Clowess legal advisers believe that Mr Graham
interviewed the witnesses because he rightly assumed that they might have evidence relevant to his inquiry. They believe that the
material contained in the transcripts of those interviews is likely to be equally relevant to the preparation and conduct of Mr
Clowess defence and cross-examination of prosecution witnesses at his trial. The transcripts of the interviews of Mr Hooper and
Mr Levy have provided valuable assistance in the preparation of Mr Clowess defence generally and the cross-examination of Mr
Hooper in particular. A sight of the remaining transcripts would enable the defendants to discover whether there is any
inconsistency between the evidence given by a witness to the liquidators and the statements made by that witness to the
Department of Trade and Industry and the Serious Fraud Office; if so, this would be of obvious value in cross-examination. A
sight of the transcripts would also enable the defendants to discover whether any of the witnesses made observations which
would be helpful to the defence, and this would enable a decision to be made whether to require a witness not presently intended
to be called by the prosecution to be tendered for cross-examination by the defence. There is, on the other hand, no evidence that
any of the transcripts actually contains any such material (of either kind), and no particular reason to suspect that it does. Mr
Hacking QC, who appeared for Mr Clowes before me and will be representing him at his trial, frankly told me that until he saw
the transcripts he could not say that they would be of any use. The most he could say was that the transcripts of Mr Hooper and
Mr Levy had proved to be relevant and helpful, and his experience told him that the remaining transcripts might prove to be so
too. The defendants are willing to give undertakings to the court that the transcripts should be used solely for the purpose of
defending the criminal proceedings brought against them.
Mr Cramers solicitor has similarly deposed that

it would substantially prejudice Mr Cramers defence were he to be denied the opportunity to learn what [the
witnesses] said to [the liquidators] during the course of their investigations.

It would not, I think, be unfair to say that the defendants wish to embark upon a fishing expedition, and that what they hope to
catch is not primary evidence but material for cross-examination.
The Serious Fraud Office, no doubt mindful of the danger to the prosecution if the jury should come to believe that material
helpful to the defence was being withheld from them, support the defendants claim. Mr Tate, the assistant director of the Serious
Fraud Office, has deposed that the transcripts (which he has not seen) are or may become relevant to the criminal proceedings,
and gives it as his view that it is in the interests of justice that such interviews should be disclosed.
In the course of the argument a number of peripheral and irrelevant issues have been debated. Two of them can be disposed
of at once. The defendants submitted that the transcripts could be obtained directly from the witnesses themselves, either by the
issue of a witness summons or in the course of cross-examination at the trial. Accordingly, they submitted, they might as well be
390 disclosed by the liquidators now. Mr Hacking was especially confident that skilful cross-examination would flush them
out. I am not satisfied that this is so, certainly in the case of some of the witnesses, and not all of them will be available for
cross-examination. But in any case the fact that a document can be obtained from another source is hardly a sufficient reason for
requiring the liquidators to produce it: quite the reverse.
The second issue is concerned with legal professional privilege. The liquidators are almost certainly entitled to claim such
privilege for the transcripts. This would be a complete answer to a notice requiring production issued by the Serious Fraud Office
(see s 2(9) of the Criminal Justice Act 1987), and would at least have to be considered if raised in answer to a request for
production made by the defendants. The liquidators are not bound to assert their privilege, however, and by seeking the
directions of the court in relation to the defendants request for disclosure they are, inter alia, asking whether they should assert it.
The very facts which make any claim to public interest immunity a class claim and not a contents claim mean that there is no
compelling reason for the liquidators to claim legal professional privilege in respect of the transcripts, or for the court to direct
them to do so in the interest of the liquidation.
In considering the question whether the transcripts should be made available to the defendants, it is essential in my judgment
to distinguish clearly between the functions of this court, which is the Companies Court responsible for the winding up of
BCGM, and those of the Crown Court, responsible for the conduct of the criminal proceedings which have been brought against
the defendants. The present application is made to the Companies Court, and there are, in my view, two questions which fall to
be decided. The first question is whether that court should authorise or direct the liquidators, who are its own officers, to disclose
the transcripts or any of them to the defendants voluntarily, that is to say irrespective of the issue of a witness summons. The
second, which will arise only if the answer to the first is No, is what steps should the liquidators be directed to take in relation to
the witness summons issued by Mr Clowes or any similar witness summons which may be issued by any of the other defendants
hereafter?
Quite apart from any question of public interest immunity, there are powerful reasons for not permitting the voluntary
disclosure of the transcripts by the liquidators. The information was obtained in circumstances of confidentiality and by
assurances, express or implied, that it would be used only for the purpose of the liquidation. Those assurances were given by
officers of this court. They were properly given in order to obtain information necessary to enable this court to carry out its
functions. The information is now sought to be used for purposes collateral to the liquidation and foreign to those for which it
was obtained. It ought to be unthinkable that the court should authorise its own officers to renege on their assurances in such
circumstances in the absence of some compelling reason to do so.
Had the information been obtained by the use of the courts compulsory powers under s 236 of the Insolvency Act 1986,
assurances of confidentiality would not have been given, but they would not have been necessary, for disclosure would have been
permitted only to the extent that such disclosure was for the benefit of the liquidation. The general principle is stated by Sir
Nicolas Browne-Wilkinson V-C in Marcel v Comr of Police of the Metropolis [1991] 1 All ER 845 at 853, [1991] 2 WLR 1118 at
1127:

the underlying principle is that private information obtained under compulsory powers cannot be used for purposes
other than those for which the powers were conferred.
391

In my judgment, it makes no difference that the information is obtained informally, not by the use of the courts compulsory
powers but under the threat of them. In Re Esal (Commodities) Ltd (No 2) [1990] BCC 708 at 723 I said:
 where leave is sought to make use of material obtained by the use or under the threat of sec 268 proceedings, then,
save in exceptional circumstances, leave should be granted only if the use proposed to be made is within the purpose of the
statutory procedure, that is to say, that the use proposed to be made of the material is to assist the beneficial winding-up of
the company.

This provides an answer to a submission of counsel for the Serious Fraud Office, who submitted that in the case of a private
examination r 9.5 of the Insolvency Rules 1986, SI 1986/1925, gives the court a general dispensing power which deprives the
principle of much of its force. I do not accept this. The power to order disclosure under r 9.5 is conferred on the Companies
Court and is exercisable for the benefit of the liquidation. The effect of the rule is that the record of a private examination may be
open to inspection by the liquidator or the Official Receiver or, with the leave of the court, other persons; but such other persons
will need to show that inspection by them is for the benefit of the liquidation. In my judgment, r 9.5 is not a power to dispense
with the general principle but to secure compliance with it.
But the general principle is not unqualified. Like the doctrine of confidentiality itself, it is limited in nature and may be
overridden by a countervailing public interest which favours disclosure: see A-G v Guardian Newspapers Ltd (No 2) [1988] 3 All
ER 545 at 659, [1990] 1 AC 109 at 282 per Lord Goff, Lion Laboratories Ltd v Evans [1984] 2 All ER 417, [1985] QB 526, W v
Egdell [1990] 1 All ER 835 at 848, [1990] Ch 359 at 419 and Marcel v Comr of Police of the Metropolis [1991] 1 All ER 845 at
857, [1991] 2 WLR 1118 at 1128. The defence of disclosure in the public interest is well established in actions for breach of
confidence.
The defendants submit that there is just such a countervailing public interest in ensuring the proper administration of justice,
particularly criminal justice. The reported cases are full of observations to the effect that in a civil action the court should be
possessed of all relevant information to enable it to reach a decision: see eg Alfred Crompton Amusement Machines Ltd v
Customs and Excise Comrs (No 2) [1973] 2 All ER 1169 at 1185, [1974] AC 405 at 434 per Lord Cross; although, as Lord Fraser
pointed out in Air Canada v Secretary of State for Trade (No 2) [1983] 1 All ER 910 at 916, [1983] 2 AC 394 at 434, the general
rule is subject to some qualification: the very existence of legal professional privilege and public interest immunity constitutes
qualification. In Marcel v Comr of Police of the Metropolis Sir Nicolas Browne-Wilkinson V-C held that the public interest in
ensuring that documents obtained by compulsory powers should be used only for the purpose for which they were obtained
should be inviolate, and outweighed the countervailing public interest that all relevant information should be available to a civil
court. In a serious criminal case, however, the defendants submit, the balance falls otherwise.
The defendants rightly submit that where the liberty of the subject is involved the weight of the public interest favouring
disclosure is very great indeed. The police may even be required to disclose the identity of an informer if such disclosure is
necessary to show the innocence of the accused, to prevent a possible miscarriage of justice, or to prevent the possibility that the
accused may be deprived of the opportunity of casting doubt upon the case against him: see R v Hallett [1986] Crim LR 462.
392
National security apart (and perhaps not even then), it is submitted, nothing can override the overwhelming public interest in
ensuring that an innocent man is not wrongly convicted. Private assurances of confidentiality and the interests of the liquidation
must yield to the imperative of allowing defendants facing a serious criminal charge to have recourse to any material which may
however remotely assist their defence. A useful test, it is submitted, can be found in the Attorney Generals guidelines, which
require the prosecution to make available to the defence any material which has some bearing on the offence(s) charged and the
surrounding circumstances of the case. The transcripts plainly come within this description.
This is an attractive argument, but I am satisfied that it is mistaken. It is a feature common to both systems of justice, civil
and criminal, that there is a strong public interest that the court should have all relevant information made available to it. But the
courts have never assumed or been granted the power to compel the production of all such information regardless of its nature
and source. That would amount to an intolerable invasion of privacy. Statute and rules of court made under statutory power have
long established the circumstances in which production can be compelled in the interests of justice, and have thereby resolved the
conflict between the two competing public interests. A sharp distinction has been drawn between the position of those who are
litigants and those who are not. In a civil action, for example, a litigant, whether plaintiff or defendant, must give discovery of all
documents relating to matters in question in the action: see RSC Ord 24, r 1(1). This is a wide test: the documents do not need
to be admissible in evidence; it is sufficient that they are or may be relevant to an issue in the case. But a third party is under no
similar obligation to assist the parties. Save in exceptional circumstances, he is not subject to the process of discovery at all.
In a criminal case, the defendant is under no obligation to assist the prosecution. With certain limited exceptions, he is
entitled to the so-called right of silence. But the prosecution is in a different position. Traditionally it is not regarded as a
combatant. It has duties to be objective and balanced in the presentation of its case, and must not withhold from the defence
matters, whether strictly evidence or not, which may prove helpful to the defence. What is expected from the prosecution is very
different from what is expected from an ordinary litigant. The Attorney Generals guidelines provide guidance to the prosecution
in the performance of its duties. They do not have the force of law. They are independent of the rules of evidence or the
substantive law. They have nothing to do with discovery. But the Crown Court will have regard to them and will ensure that they
are observed so that a fair trial can take place in accordance with the best traditions of English justice.
But all this has nothing to do with the third party who is not himself involved except possibly as a witness. He is under no
obligation to provide voluntary assistance whether to the prosecution or the defence. He is not bound to disclose his private
documents except to the extent that statute has laid such an obligation upon him. The extent of that obligation is to be found in s
2 of the Criminal Justice Act 1987. It is to produce material evidence. This has been defined by the courts and is far narrower
than the class of material which the prosecution must disclose to the defence in accordance with the Attorney Generals
guidelines. This is not fortuitous, for s 2 applies equally whether the documents are required by the prosecution or the defence.
In my judgment, therefore, neither law nor public policy imposes on the liquidators a general duty to assist the defendants to
meet the charges brought 393 against them. The limit of their obligation has been laid down by Parliament, and it is to produce
any material evidence in their possession in response to a properly issued witness summons. Parliament has thus determined
the extent to which the individuals right to privacy may be invaded in the interests of criminal justice, and in my judgment my
discretion to give the liquidators the directions they seek ought to be exercised in accordance with the policy laid down by
Parliament.
Accordingly, I shall direct the liquidators not to make voluntary disclosure of the transcripts to the defendants or their
solicitors. Whether the transcripts do or do not constitute material evidence is a question for the Crown Court, not the Companies
Court, to decide. It is, however, right to say that in my experience whenever there are parallel investigations by the police, the
Department of Trade and Industry and the liquidators of a collapsed company, as in the present case, the task of the liquidators is
to obtain information, not evidence. They do not impound documents; it is sufficient for their purpose to inspect the documents,
to take copies and to note where the originals may be found. If a witness has material evidence in his possession, it can be
obtained by the police or the Crown Prosecution Service, whose task it is not only to investigate the facts but to assemble the
evidence required for a successful prosecution. What the witness says to the liquidators is not evidence; and it will be an
exceptional case in which they have any primary evidence in their possession.
As I say, the question whether the transcripts do or do not constitute or contain material evidence is a question for the Crown
Court, for it goes to the jurisdiction of that court to issue the witness summons. All I need say is that, on the evidence before me,
and as at present advised, it appears strongly arguable that they do not: see R v Cheltenham Justices, ex p Secretary of State for
Trade [1977] 1 All ER 460, [1977] 1 WLR 95, R v Skegness Magistrates Court, ex p Cardys [1985] RTR 49 and R v Flint
Justices, ex p Roberts (1 July 1988, unreported), from which it appears that there is no jurisdiction to compel the production of a
document which is required merely for the purposes of cross-examination. Indeed, it is merely speculation that the transcripts
will even provide material for cross-examination. They may or may not. Accordingly, I shall direct the liquidators to restore
their application to set aside Mr Clowess witness summons and to press for it to be discharged.
This may make it unnecessary for Phillips J to consider the question of public interest immunity. In case it becomes
relevant, however, I shall state my opinion that there is an important public interest against disclosure of the transcripts. Under
our legal system, the compulsory winding up of an insolvent company is entrusted to the judiciary. It is carried out by the
Companies Court through the medium of its own officers, who are registered insolvency practitioners. The courts function is not
limited to deciding issues between litigants. As Farwell LJ said in Re Tyler, ex p Official Receiver [1907] 1 KB 865 at 871,
[19047] All ER Rep 181 at 184:

Our Courts have two functions, one to decide rights between the parties and the other to administer estates. In
administering estates, whether in Chancery, bankruptcy, or the winding up of companies, the Court itself by its officer often
finds itself in the position of a quasi-litigant.

The liquidation of an insolvent company can affect many thousands, even tens of thousands, of innocent people. In the case of a
company like BCGM it can affect peoples life savings. In the case of a major trading company it can affect its customers and
suppliers and the livelihood of many thousands of persons employed by other companies whose viability is threatened by the
collapse of the 394 company in liquidation. An insolvent liquidation cannot be dismissed as just a case about money. There is
a major public interest in ensuring that the liquidation of an insolvent company is conducted by the courts officers in an efficient
and expeditious manner.
In order to enable liquidators to discharge their functions, they need to have access to information about the company, its
assets, liabilities, dealings and affairs from those capable of giving such information to them. These will include not merely the
former directors, but others such as auditors, solicitors and bankers. Most of the witnesses in the present case fall into these
categories. To this end Parliament has entrusted the Companies Court with extraordinary powers. Section 236(2) of the
Insolvency Act 1986 gives the court power to summon a person before it on the application of a liquidator (or any office-
holder) if the person is: (a) an office holder of the company (eg a director); (b) a person known or suspected to have in his
possession any property of the company or supposed to be indebted to the company; or (c) any person whom the court thinks
capable of giving information concerning the promotion, formation, business, dealings, affairs or property of the company. These
powers are granted to enable the liquidator to ascertain the facts about the companys affairs, so that he may carry out the
liquidation in all its various aspects. In Cloverbay Ltd (joint administrators) v Bank of Credit and Commerce International SA
[1991] 1 All ER 894 at 900, [1991] Ch 90 at 102 Sir Nicolas Browne-Wilkinson V-C explained the need for the jurisdiction:

the reason for the inquisitorial jurisdiction contained in s 236 is that a liquidator or administrator comes into the
company with no previous knowledge and frequently finds that the companys records are missing or defective. The
purpose of s 236 is to enable him to get sufficient information to reconstitute the state of knowledge that the company
should possess. In my judgment its purpose is not to put the company in a better position than it would have enjoyed if
liquidation or administration had not supervened. In many cases an order under s 236 may have the result that the purpose
is in such improved position But that is the result of the order not the purpose for which it is made. (Sir Nicolas
Browne-Wilkinson V-Cs emphasis.)

The process is an extraordinary and secret mode of obtaining information required for the proper conduct of the winding up.
The sectionearlier versions of which stretch back into the middle of the last centuryhas been described as conferring an
extraordinary power of an inquisitorial nature and even compared (not, I think, favourably) to the Star Chamber: see Re Greys
Brewery Co (1883) 25 Ch D 400 at 408 per Chitty J and Re North Australian Territory Co (1890) 45 Ch D 87 at 93 per Bowen
LJ. The courts powers under the section are backed by powers of arrest and seizure. The power is potentially oppressive and is
exercised with caution, specially against persons who are not former officers of the company. The court will go to great lengths
to limit the exercise of the power and the advantage that may be taken of it. Rule 9(1) of the 1986 rules provides that the written
record of a private examination is not to be filed on the courts records; and r 9(5) provides that it cannot be inspected without an
order of the court by anyone other than the liquidator or the Official Receiver. Those provisions are a necessary safeguard to
ensure that the information obtained by means of this extraordinary process is used only for the purpose of the liquidation.
Given the liquidators powers to obtain information by compulsion, it has become the widespread practice for responsible
persons to whom requests for information are addressed by liquidators to co-operate with the liquidators and to provide them
with copy documents and other information and to submit to 395 being questioned on an informal basis and without a formal
order of the court. This is done on the implicit (if not explicit) understanding that the information supplied will be treated as
confidential and will not be used except for the purpose of the liquidation. If there comes to be a generally perceived risk that the
records of such informal interviews may be disclosed to third parties, there is an obvious danger that professional men will no
longer co-operate with liquidators on a voluntary basis, but will insist on liquidators having recourse to the courts compulsory
powers so that they may enjoy the protection of r 9. Mr Christopher Morris, a leading insolvency practitioner, has deposed:

It is frequently the case that office holders need to carry out interviews with the relevant individuals within a very
short time of their appointment in order to protect or trace the companys assets or to take other prompt action to avoid the
dissipation or concealment of assets. Speed is frequently crucial and the speed with which the office holders are able to
obtain the necessary information may have a material impact on the sums ultimately realisable for the benefit of creditors
of the company. Anything which delays or restricts the ability of the office holders to obtain information is likely to hinder
their task. Although such requests for information are made pursuant to the powers conferred on office holders by, inter
alia, s 236 of the Insolvency Act 1986, it is my experience, and I believe those of my colleagues and insolvency
practitioners in general, that the greater part of those parties to whom such requests for information are addressed are
prepared to co-operate with the office holders voluntarily without the need for the office holders to seek the relevant court
orders under the Act. I believe that they do so on the basis that the information will be treated as confidential and used only
for the purposes of the office holders functions. I am therefore concerned that if there is a generally perceived risk that the
records of such interviews may be disclosed to third parties, particularly if as a result those records may in effect enter the
public domain, the individuals concerned will no longer co-operate with the office holders on a voluntary basis but will
instead compel office holders to obtain the relevant orders from the court. I am also concerned that the making of such
orders is likely to be more frequently contested on the basis that they would be oppressive. Office holders would in effect
receive the minimum of co-operation rather than the maximum. Applications to the court involve both delay and expense.
Further, if interviews are carried out under the auspices of a court order then I believe that they would inevitably become
more formal. It is likely that interviewees will press for advance notice of the questions which are to be put to them. They
will seek to be legally represented at the interviews. Valuable information may not be forthcoming or only forthcoming
with much less speed. The whole process of obtaining information will become less effective to the detriment of the
company, its creditors and contributors. I believe that there is a serious risk that permitting the transcripts of the interviews
conducted by office holders to be disclosed to parties in criminal proceedings, to be used for purposes unconnected with the
office holders functions, may have adverse consequences for the ability of office holders to fulfil their functions.
 I am satisfied that these are real risks, and that the proper and efficient functioning of the process of compulsory liquidation
would be jeopardised if transcripts of the informal interviews of witnesses carried out by liquidators were to be made generally
available to defendants to criminal proceedings.
If the liquidation of insolvent companies were entrusted to the executive 396 branch of government, the foregoing would be
embodied in a certificate signed by the appropriate minister. As it is entrusted to the judicial branch, the place of the certificate
must be taken by the doctrine of judicial notice. I have set out the position at some length in the hope that it may be of some
assistance to Phillips J should the question of public interest immunity fall to be considered.
Like a ministers certificate, the foregoing is not, of course, conclusive. If any of the transcripts should be found to
constitute or contain material evidence and so be the proper subject of a witness summons, it will be necessary to balance the
competing interests for and against disclosure. That exercise will have to be undertaken by the Crown Court, not (as some
counsel submitted) this court. It may even become necessary for Phillips J to inspect the transcripts to satisfy himself that the
evidence is not peripheral or vestigial but of sufficient importance to the issues in the criminal trial to justify disclosure. In Air
Canada v Secretary of State for Trade (No 2) [1983] 1 All ER 910 at 916917, [1983] 2 AC 394 at 434435 the House of Lords
held that a judge ought not to inspect documents for which public interest immunity is claimed until at least persuaded that
inspection is likely to satisfy him to take the further step of ordering production. Lord Fraser added:

in order to persuade the court even to inspect documents for which public interest immunity is claimed, the party
seeking disclosure ought at least to satisfy the court that the documents are very likely to contain material which would
give substantial support to his contention on an issue which arises in the case, and that without them he might be deprived
of the means of proper presentation of his case

That test would clearly exclude fishing applications. Whether it is an appropriate test in the present context will be for
Phillips J to decide. Air Canada was a civil case in which the documents were sought from the opposite party to the litigation
and were prima facie discoverable, for the mere fact that giving discovery involves a breach of confidence is not of itself an
independent objection to discovery: see Alfred Crompton Amusement Machines Ltd v Customs and Excise Comrs [1973] 2 All
ER 1169 at 1180, [1974] AC 405 at 429. The present case is in some respects a fortiori, for although it is a criminal case the
documents are in the possession of a third party and there is no jurisdiction to compel disclosure unless they constitute material
evidence. The threshold test may therefore be a different one, but it is unlikely to be less stringent or to permit a fishing
expedition.
I shall therefore direct the liquidators to restore the application to Phillips J to claim public interest immunity if necessary
and not to disclose the transcripts unless ordered to do so by the Crown Court.

Direction accordingly.

Solicitors: D J Freeman & Co; Burton Copeland, Manchester; Walker Morris Scott Turnbull, Leeds; Serious Fraud Office;
Freshfields; Linklaters & Paines.

Jacqueline Metcalfe Barrister.

397
[1991] 4 All ER 398

Securities and Investments Board and another v Financial Intermediaries

Managers and Brokers Regulatory Association Ltd and another
BANKING & FINANCE

CHANCERY DIVISION
MORRITT J
13, 14, 21 JUNE 1991

Investment business Investors compensation scheme Liability incurred by authorised persons in connection with investment
businesses Claims against authorised persons unable to satisfy liabilities Scheme coming into operation on 27 August 1988
Provisions defining investment and investment business coming into force on 18 December 1986 Whether compensation
payable in respect of liabilities incurred before compensation scheme became effective Whether compensation payable in
respect of liabilities incurred after 18 December 1986 Financial Services Act 1986, ss 1, 3, 54.

The Financial Services Act 1986 came into effect, as provided by the Act, on such days as the Secretary of State appointed.
Section 1a of and Sch 1 to that Act defining investment and investment business were brought into effect on 18 December
1986 and s 54b, providing for the establishment of a scheme for compensating investors in cases where persons who are, or have
been, authorised persons are unable, or unlikely to be unable, to satisfy claims in respect of any description of civil liability
incurred by them in connection with their investment businesses was brought into effect on 4 June 1987. The powers conferred
by s 54 to establish the compensation scheme were delegated by the Secretary of State to the Securities and Investments Board,
which made rules establishing the compensation scheme with effect from 27 August 1988. The scheme was administered by the
second plaintiff and was financed by a levy on persons authorised to carry on business under the Act. Section 3 c and Ch III of
the 1986 Act provided that it was unlawful to carry on investment business unless authorised and prescribing who were
authorised persons, were brought into effect on 29 April 1988. The second defendant placed 8,000 with an investment company
for investment at their discretion in gilt-edged securities, the money being paid as to of 6,000 on 30 May 1985, ie before the Act
received the royal assent, and as to a further 2,000 on 24 August 1987, ie after ss 1 and 54 and Sch 1 came into force but before
the date (29 April 1988) on which persons could become authorised persons for the purposes of the Act and before the
compensation scheme came into effect. The company with whom the second defendant deposited her money collapsed. She
applied to the second plaintiff for compensation under the scheme. The board and the second plaintiff issued an originating
summons seeking the determination of the court whether on the true construction of s 54 the boards power to make rules to
establish the compensation scheme extended to compensating investors claims in respect of an authorised persons liability
whenever incurred, or whether the scheme only covered liability incurred within the period or periods on or after the
commencement date of the rules or during times at which the person who incurred the liability was an 398 authorised person or
on or after the commencement date (18 December 1986) of the provisions (s 1 and Sch 1) which gave meaning to investment
business in s 54 or any other, and, if so, what other period or periods.
________________________________________
a Section 1, so far as material, is set out at p 400 h i, post
b Section 54, so far as material, is set out at p 400 j to p 401 a, post
c Section 3 is set out at p 401 b, post

Held The compensation scheme established by the Securities and Investments Board under s 54 of the 1986 Act for
compensating investors who suffered loss as the result of the collapse of an authorised investment business was restricted to
liabilities to investors incurred on or after 18 December 1986 when the provisions (s 1 of and Sch 1 to the Act) which gave
meaning to the words investment business in s 54 were brought into effect, since s 54 provided for compensation to be payable
in cases where persons who are, or have been, authorised persons under the Act to carry on investment business incurred
liabilities in connection with their investment business and therefore it was a prerequisite to being entitled to compensation from
the scheme that the liability was incurred by an authorised person in connection with an investment business, which could only
occur after that term was defined by the 1984 Act, ie after 18 December 1986 when s 1 and Sch 1 were brought into effect. It was
not essential however, that the scheme had come into operation or that the person carrying on the investment business giving rise
to the liability was authorised at the time the liability was incurred (see p 408 j to p 409 a f to p 410 a c e to p 411 a d, post).

Notes
For the investors compensation scheme, see Supplement to 30 Halsburys Laws (4th edn) para 343.
For the Financial Services Act 1986, ss 1, 3, 54, see 30 Halsburys Statutes (4th edn) (1991 reissue) 168, 170, 223.

Cases referred to in judgment

Aiden Shipping Co Ltd v Interbulk Ltd, The Vimeira [1986] 2 All ER 409, [1986] AC 965, [1986] 2 WLR 1051, HL.
Arnold v Central Electricity Generating Board [1987] 3 All ER 694, [1988] AC 228, [1987] 3 All ER 1009, HL.
Bradford Union Guardians v Wiltshire Clerk of the Peace (1868) LR 3 QB 604.
Brindle v HW Smith (Cabinets) Ltd [1973] 1 All ER 230, [1972] 1 WLR 1653, CA.
Lauri v Renad [1892] 3 Ch 402, CA.
Lewis v Lewis [1984] 2 All ER 497, [1984] Fam 79, [1984] 3 WLR 45, CA; affd [1985] 2 All ER 449, [1985] AC 828, [1985] 2
WLR 962, HL.
Master Ladies Tailors Organisation v Minister of Labour and National Service [1950] 2 All ER 525.
OReilly v Mackman [1982] 3 All ER 1124, [1983] 2 AC 237, [1982] 3 WLR 1096, HL.
Pearce v Secretary of State for Defence [1988] 2 All ER 348, [1988] AC 755, [1988] 2 WLR 1027, HL.
R v St Mary, Whitechapel (Inhabitants) (1848) 12 QB 120, 116 ER 811.
R v Secretary of State for Trade and Industry, ex p R [1989] 1 All ER 647, [1989] 1 WLR 372, DC.
Solicitors Clerk, Re a [1957] 3 All ER 617, [1957] 1 WLR 1219, DC.
Yew Bon Tew v Kenderaan Bas Mara [1982] 3 All ER 833, [1983] 1 AC 553, [1982] 3 WLR 1026, PC.

Cases also cited

R v Kirk Case 63/83 [1985] 1 All ER 453, [1984] ECR 2689, CJEC.
399
Swain v Law Society [1980] 3 All ER 615, [1980] 1 WLR 1335; rvsd in part [1981] 3 All ER 797, [1982] 1 WLR 17, CA; rvsd
[1982] 2 All ER 827, [1983] AC 598, HL.

Originating summons
The plaintiffs, the Securities and Investments Board and the Investors Compensation Scheme Ltd, sought the determination of the
court whether on the true construction of s 54 of the Financial Services Act 1986 the power conferred on the Secretary of State by
s 54 and vested in the first plaintiff by the Financial Services Act 1986 (Delegation) Order 1987, SI 1987/942, to make rules to
establish a scheme for compensating investors in cases where persons who are or have been authorised persons are unable or
likely to be unable to satisfy claims in respect of any description of civil liability incurred by them in connection with their
investment business extends to compensating investors in respect of such liability (i) whensoever so incurred or (ii) so incurred
only with any period or periods and if (ii) whether the period is or the periods are any one or more of the following, namely (iii)
on or after the commencement date of the rules (27 August 1988), (iv) during times at which the person who incurred the liability
was an authorised person (29 April 1988), (v) on or after the commencement date (18 December 1986) of the provisions (s 1 and
Sch 1) which give meaning to the words investment business in the said s 54 or (vi) any other and if so what other period or
periods. The defendants were the Financial Intermediaries Managers and Brokers Regulatory Association Ltd and Mrs Linda
Susan Kelsey who had lodged a claim with the second plaintiff for compensation from the scheme in respect of moneys deposited
with Dunsdale Securities Ltd which had gone into liquidation. The facts are set out in the judgment.

John Lindsay QC and Michael Green for the plaintiffs.

Robin Potts QC for the first defendant.
Patrick Howell QC and Guy Newey for the second defendant.

Cur adv vult

21 June 1991. The following judgment was delivered.

MORRITT J: The Financial Services Act 1986 received the royal assent on 7 November 1986 but, with one immaterial
exception, was only to come into force on such day or days as the Secretary of State might by order appoint. By such an order
the Secretary of State brought s 1 and certain paragraphs of Sch 1 into effect on 18 December 1986 (see SI 1986/2246).
Subsections (1) and (2) of s 1 provide:

(1) In this Act, unless the context otherwise requires, investment means any asset, right or interest falling within any
paragraph in Part I of Schedule 1 to this Act.
(2) In this Act investment business means the business of engaging in one or more of the activities which fall within
the paragraphs in Part II of that Schedule and are not excluded by Part III of that Schedule.

By a further order made by the Secretary of State s 54 came into force on 4 June 1987 (see SI 1987/1907). Subsection 1 of that
section provides as follows:
 The Secretary of State may by rules establish a scheme for compensating investors in cases where persons who are or
have been authorised persons are 400 unable, or likely to be unable, to satisfy claims in respect of any description of civil
liability incurred by them in connection with their investment businesses.

The powers conferred by that section had already been delegated by the Secretary of State to the first plaintiff (the Securities and
Investments Board).
By the eighth commencement order made by the Secretary of State, S 3 came into effect on 29 April 1988 (see SI 1988/740).
That section provides:

No person shall carry on, or purport to carry on, investment business in the United Kingdom unless he is an authorised
person under Chapter III or an exempted person under Chapter IV of this Part of this Act.

On the same day, and by virtue of the same order, the provisions of Ch III, which prescribe who is an authorised person, also
came into effect. In summary, a person is authorised if he is a member of a recognised self-regulatory organisation, or
professional body, or an authorised insurer, registered friendly society or operator of a recognised collective investment scheme,
or holds the authority of the Security of State, or the equivalent in certain member states.
On 27 July 1988 the Securities and Investments Board made rules, pursuant to s 54, with effect from 27 August 1988, which
were replaced by new rules made on 21 June 1990, with effect from 15 July 1990. Under both sets of rules the compensation
scheme so established was to be administered by the second plaintiff, Investors Compensation Scheme Ltd, and financed by the
levying of contributions from authorised persons, either directly, or indirectly through the recognised self-regulating
organisations or professional bodies, as permitted by s 54(2)(a) and (c).
The first defendant, the Financial Intermediaries Managers and Brokers Regulatory Association Ltd (FIMBRA), is a
recognised self-regulating organisation. It has claimed, on behalf of its members, and on its own behalf, that s 54 does not
authorise the payment of compensation to investors in respect of liabilities to investors, whenever incurred, but only in respect of
liabilities to investors incurred after the compensation scheme came into effect on 27 August 1988 and at a time when the person
incurring the liability to the investor was an authorised person within the meaning of the 1986 Act. It is concerned thereby to
limit the liability to contribute to the financing of the scheme.
Accordingly, the plaintiffs issued the originating summons now before me. They seek the determination of the court of the
questions:

Whether, on the true construction of section 54 of the above-named Act, the power conferred on the Secretary of State
by the said section and vested in the first-named Plaintiff by the Financial Services Act 1986 (Delegation) Order 1987, to
make rules to establish a Scheme for compensating investors in cases where persons who are or have been authorised
persons are unable or likely to be unable to satisfy claims in respect of any description of civil liability incurred by them in
connection with their investment businesses extends to compensating investors in respect of such liability:(i) whensoever
so incurred or (ii) so incurred only within any period or periods and if (ii), whether the period is or the periods are any one
or more of the following, namely:(iii) on or after the commencement date of the rules; (iv) during times at which the
person who incurred the liability was an authorised person; (v) on or after the commencement date (18 December 1986) of
the provisions (section 1 and Schedule 1) which give meaning to the words investment business in the said section 54; or
(vi) any other and if so what other period or periods.
401

As both plaintiffs owe continuing duties to both investors and authorised persons, they were concerned to remain, so far as
possible, neutral between the conflicting arguments. Accordingly, they joined the second defendant, Mrs Kelsey, on her own
behalf, and, if necessary, to represent investors as a class.
Mrs Kelsey placed 8,000 with Dunsdale Securities Ltd for investment at their discretion in gilt-edged securities. She paid
to that company 6,000 on 30 May 1985, that is before the Financial Services Act 1986 received the royal assent, and a further
1,000 on 24 August 1987, which was after s 1 and Sch 1, defining investment and investment business, and s 54 came into
force, but before the date (28 April 1988) on which persons could become authorised persons for the purposes of the 1986 Act,
and before the compensation scheme came into effect.
Dunsdale Securities Ltd has since failed, and Mrs Kelsey has applied to the second plaintiff for compensation. She contends
that s 54 authorises compensation to be paid in respect of a liability to an investor whenever incurred. If, contrary to that primary
submission, the liability must have been incurred after a particular date, then she contends that that date is 18 December 1986,
when the definition of investment and investment business came into force. She claims that s 54 does not require that the
person liable to the investor should have been an authorised person when the liability was incurred.
Two procedural points arise, namely whether these issues can or should be determined by originating summons as opposed
to judicial review and whether Mrs Kelsey can represent all investors whenever the liability to them was incurred.
In OReilly v Mackman [1982] 3 All ER 1124 at 1134, [1983] 2 AC 237 at 285 Lord Diplock, with whom Lord Fraser, Lord
Keith, Lord Bridge and Lord Brightman agreed, said:

it would in my view as a general rule be contrary to public policy, and as such an abuse of the process of the court,
to permit a person seeking to establish that a decision of a public authority infringed rights to which he was entitled to
protection under public law to proceed by way of an ordinary action and by this means to evade the provisions of Ord 53
for the protection of such authorities. My Lords, I have described this as a general rule; for, though it may normally be
appropriate to apply it by the summary process of striking out the action, there may be exceptions, particularly where the
invalidity of the decision arises as a collateral issue in a claim for infringement of a right of the plaintiff arising under
private law, or where none of the parties objects to the adoption of the procedure by writ or originating summons. Whether
there should be other exceptions should, in my view, at this stage in the development of procedural public law, be left to be
decided on a case to case basis

In this case the public authority, namely the plaintiffs, do not seek the protection of RSC Ord 53, but have themselves issued
the originating summons. Neither defendant objected to the procedure adopted by the plaintiffs, which is, in any event, warranted
by Ord 5, r 4(2). Accordingly, in my judgment, the procedure is not an abuse of the process.
The evidence shows that the rules of the compensation scheme limit the amount of compensation which may be paid to any
one investor to 48,000, and that the sum available in any one year for the payment of compensation is 100m. Since the scheme
came into effect, less than 5% of the sum available in each year has been paid in compensation. Thus, although in theory there
are different classes of investor in relation to the questions I have to determine, delineated by the period in which the liability to
them was incurred, there is no distinction in practice, for all eligible investors will be paid up to the limit 402 imposed by the
rules whatever the answer to the questions. Accordingly, in my judgment, these proceedings are properly constituted.
As is apparent from the originating summons, I am concerned only with the power conferred by s 54(1) in relation to
whether liabilities to investors, for which rules may provide compensation, must have been incurred within a particular period,
and, if so, which. This is a question of statutory construction, on which the published views of the plaintiffs, on which FIMBRA
sought to place some reliance, are irrelevant. Moreover, I am not directly concerned with whether any rule made by the
Securities and Investments Board is ultra vires, notwithstanding that it was FIMBRAs contention with regard to a particular rule
which prompted the plaintiffs to issue this originating summons.
Before I consider the rival contentions on the construction of s 54(1) it is convenient to deal with the question of
retrospectivity. FIMBRA contends that if the rules may provide for compensation in respect of liabilities to investors incurred
before the scheme became operative on 27 August 1988 for which their members can be made to contribute then the scheme
would be retrospective in operation. FIMBRA submits, relying on Lauri v Renad [1892] 3 Ch 402, that a statute should not be
construed so as to have a retrospective operation, unless its language is such as plainly to require it, but, even then, the
retrospective operation should be limited to that which the language of the statute renders necessary. For the test by which to
determine whether a statute is retrospective they rely on the advice of the Privy Council in Yew Bon Tew v Kenderaan Bas Mara
[1982] 3 All ER 833 at 836, [1983] 1 AC 553 at 558:

A statute is retrospective if it takes away or impairs a vested right acquired under existing laws, or creates a new
obligation, or imposes a new duty, or attaches a new disability, in regard to events already past.

That test was applied by the House of Lords in Pearce v Secretary of State for Defence [1988] 2 All ER 348, [1988] AC 755
and Arnold v Central Electricity Generating Board [1987] 3 All ER 694, [1988] AC 228 and by the Court of Appeal in Lewis v
Lewis [1984] 2 All ER 497, [1984] Fam 79.
Counsel for Mrs Kelsey did not dispute the rules of construction, or the test for determining whether a statute has
retrospective operation, but claimed, by reference to other authorities, that s 54(1) could not be retrospective in operation as the
inability to satisfy claims in respect of liabilities whenever incurred must arise after the scheme became effective on 27 August
1988. They pointed to the fact that the passage in the advice of the Privy Council, which I have quoted, is itself a quotation from
Craies on Statute Law (7th edn, 1971) p 387, which was sufficient for the purposes of the case before the Privy Council, but that
the quotation from Craies was itself followed by a statement that

a statute is not properly called a retrospective statute because a part of the requisites for its action is drawn from a
time antecedent to its passing.

Reference is made in Craies to four authorities, on three of which counsel for Mrs Kelsey relied. The first is R v St Mary,
Whitechapel (Inhabitants) (1848) 12 QB 120, 116 ER 811. That case concerned s 2 of the Poor Removal Act 1846, which
provided that no Woman residing in any Parish with her Husband at the Time of his Death shall be removed from such Parish
for Twelve Calendar Months next after his death A widow, whose husband died before the passing of the 1846 Act, was
removed after the passing of that Act, but before the 12 months period had expired. The order was quashed. Lord Denman CJ
said (12 QB 120 at 127, 116 ER 811 at 814):
403

Was the pauper irremoveable by [the Poor Removal Act 1846] s 2, which enacted that no woman residing in any parish
with her husband at the time of his death shall be removed, nor shall any warrant be granted for her removal, from such
parish for twelve months next after his death if she so long continue a widow? It was said that the operation of the statute
was confined to persons who had become widows after the act passed, and that the presumption against a retrospective
statute being intended supported this construction: but we have before shewn that the statute is in its direct operation
prospective, as it relates to future removals only, and that it is not properly called a retrospective statute because a part of
the requisites for its action is drawn from time antecedent to its passing. The clause is general, to prevent all removals of
the widows described therein after the passing of the act; the description of the widow does not at all refer to the time when
she became widow: and we are therefore of opinion that the pauper was irremoveable at the time she was removed.

Thus, the test adopted was to consider whether the direct operation of the statute was prospective, even though some of the
conditions for its operation had occurred before the passing of the 1846 Act.
The second authority is Master Ladies Tailors Organisation v Minister of Labour and National Service [1950] 2 All ER 525.
That case concerned the Wholesale Mantle and Costume Wages Council (Great Britain) Wages Regulation (Holidays) Order
1949, SI 1949/1402, which came into force on 15 August 1949, whereby a worker who ceased to be employed after it became
effective became entitled to accrued holiday remuneration assessed by reference to successive periods of 12 months commencing
on 1 May 1948. It was contended that the order was ultra vires the enabling Act because it conferred on workers rights to holiday
remuneration in respect of employment before the date on which the order became effective and was, therefore, of retrospective
operation. Somervell LJ, after quoting the same passage from the judgment of Lord Denman CJ, said (at 528):

The statement I have quoted from LORD DENMAN, C.J., shows that not every matter which is retrospective in a
sense is retrospective in the sense in which I have to apply the words in the present case. I have come to the conclusion
that the effect of these provisions as to remuneration accruing, being, as I hold, to determine and limit the quantum of
prospective payments, do not make this order retrospective in the sense which has to be given to the word in this issue.
The claim, therefore, fails. Most of the cases dealing with retrospective legislation, some of which were cited to me by
counsel for the plaintiff are concerned with a different issue. It has, of course, been laid down in the clearest possible terms
that no statute or order is to be construed as having a retrospective operation unless such a construction appears very
clearly or by necessary and distinct implication in the Act. That most salutary principle does not assist in solving the
problem which I have so far been considering.

Thus, the liability to pay which arose after the order came into effect was prospective, notwithstanding that the amount was
determined by reference to events before that time.
The third authority is Re a solicitors clerk [1957] 3 All ER 617, [1957] 1 WLR 1219. In that case a solicitors clerk had
been convicted of larceny in 1953. By the Solicitors (Amendment) Act 1956 the Law Society was empowered to order that a
solicitors clerk who had been convicted of larceny should not be employed by 404 any other solicitor without the written
permission of the Law Society. The Law Society made such an order in 1957 in respect of a clerk who had been convicted in
1953. The clerk contended that the 1956 Act did not permit such a retrospective operation. This submission was rejected. Lord
Goddard CJ, said ([1957] 3 All ER 617 at 619, [1957] 1 WLR 1219 at 12221223):

In my opinion, however, this Act is not in truth retrospective. It enables an order to be made disqualifying a person
from acting as a solicitors clerk in the future and what happened in the past is the cause or reason for the making of the
order; but the order has no retrospective effect. It would be retrospective if the Act provided that anything done before the
Act came into force or before the order was made should be void or voidable or if a penalty were inflicted for having acted
in this or any other capacity before the Act came into force or before the order was made. This Act simply enables a
disqualification to be imposed for the future which in no way affects anything done by the appellant in the past.
Accordingly in our opinion the disciplinary committee had jurisdiction to make the order complained of and the appeal
fails.
 Counsel for Mrs Kelsey also relied on Brindle v HW Smith (Cabinets) Ltd [1973] 1 All ER 230, [1972] 1 WLR 1653. In that
case the applicant was given notice before, but expiring after, the Industrial Relations Act 1971 came into force to terminate her
employment. She claimed to be entitled to compensation for unfair dismissal pursuant to the 1971 Act. The employer claimed
that such an entitlement would involve giving the 1971 Act a retrospective operation. This submission was rejected by Lord
Denning MR, who said ([1973] 1 All ER 230 at 232233, [1972] 1 WLR 1653 at 16581659):

For a time I was troubled by this illustration, but, on reflection, it seems to me that on 28th February 1972 the Act
would operate prospectively. It would operate on the dismissal which would take place on 8th March 1972. The Act is not
to be condemned as retrospective simply because some of the facts are drawn from the time before it came into
operation. In 1848 in R v St Mary, Whitechapel (Inhabitants) 12 QB 120 at 127, 116 ER 811 at 814, Lord Denman CJ said:
it is not properly called a retrospective statute because a part of the requisites for its action is drawn from time
antecedent to its passing. That observation was applied by Somervell LJ in Master Ladies Tailors Organisation v
Minister of Labour and National Service [1950] 2 All ER 525 at 527. I hold therefore that this statute applies to notices
which straddle the Actnotices which are given before but due to expire after 28th February 1972.

Megaw LJ took a different view. He concluded that the 1971 Act changed the terms of the contract of employment and was,
therefore, of retrospective effect, but that there were clear and unambiguous words which authorised such a construction. Sir
Gordon Willmer agreed with everything that had been said by both Lord Denning MR and Megaw LJ.
I was also referred to Bennions Statutory Interpretation (1984) pp 448451.
By contrast, FIMBRA relied on Bradford Union Guardians v Wiltshire Clerk of the Peace (1868) LR 3 QB 604. That case
concerned a statute passed in 1840, whereby justices were authorised to order that the maintenance costs of a convicted prisoner
who became insane and was removed to an asylum in another county should be paid by the parish in which he was previously
settled. A particular prisoner who became insane was so removed in June 1864, and in 1868 the justices made an order relating to
his maintenance costs for the period between 4051864 and 1867. It was held by a majority that the 1840 Act did not authorise
such a retrospective order. Cockburn CJ said (at 616617):

I am of opinion we cannot so construe s 2 as to make it operate on past maintenance. The justices are to inquire into
the place of settlement, and having adjudged this, they are to make an order for the payment of the costs of inquiry, and of
the conveyance of the lunatic to the asylum, and such weekly sum for his maintenance as the justices think reasonable.
Prima facie this language is prospective, there is nothing which treats of past maintenance, and we start with the
proposition, that in all such cases the rate must be prospective and not retrospective, so that the expenses shall fall on the
ratepayers who are ratepayers at the moment of the expenses being incurred; whereas by doing what in effect would
amount to the same thing as making a retrospective rate, the expenses of past years are made to fall on the ratepayers of the
present year. That being a principle adopted long ago and long acted on, whenever the legislature has thought it expedient
to authorize the making of retrospective rates or orders, it has fixed the period as to which the rate or order may be
retrospectively made; but the effect of holding that the present section authorizes retrospective orders, unless we could find
some reasonable time to which to limit it, would be to allow it to be made with no period of limitation whatever; and it
might extend to a period even to ten years or more.

In concurring, Lush J said (at 621):

Prima facie, a rate cannot be made on the ratepayers of to-day to pay debts incurred five years ago; and on this
principle I cannot so interpret the statute as to enable this to be done by a retrospective order, unless there are clear words
indicating such an intention.

FIMBRA also sought to rely upon European Community law, but not only are these principles in substance the same, there
is in this case no relevant Community legislation, right or obligation to which the principles could be applicable.
In my judgment, the Bradford Union case was not concerned with the question of whether legislation is of retrospective
effect so as to attract the rule of construction, and was, in any event, dealing with a principle respecting the law of rating which
has no application to the case before me. The principle which, in my judgment, I should apply is that stated by Lord Denman CJ
in R v St Mary, Whitechapel (Inhabitants) (1848) 12 QB 120 at 127, 116 ER 811 at 814, and applied in all the subsequent cases to
which I have referred, namely is the direct operation of the statute prospective or retrospective? The operation to be considered is
that stated in Yew Bon Tew v Kenderaan Bas Mara [1982] 3 All ER 833, [1983] 1 AC 553, namely the creation of a new
obligation, the imposition of a new duty or the attachment of a new disability.
For the purpose of considering this question I will assume that the liability to an investor for which compensation may be
paid was incurred in 1984. The person who incurred the liability will remain subject to it, unless and until the Limitation Act
applies, or other circumstances occur to extinguish it. So long as that person remains able to satisfy his liabilities, no obligation,
duty or disability is cast on anyone else, and the investors right remains unimpaired. Section 54 only becomes applicable if the
person who incurred the liability becomes, or is likely to become, unable to satisfy claims in respect of any description of civil
liability incurred by him in connection with his investment business.
As is common ground, that event must occur after the compensation scheme has come into effect. On such a default the
investor would become entitled to 406 compensation, to which authorised persons would be liable to contribute. But the liability
to contribute can only arise on the default after the compensation scheme has come into operation. It is true that a condition of
liability to contribute and its quantum will depend on events occurring before the compensation scheme came into effect, as in all
the cases to which I have referred. But, in my judgment, the direct operation of s 54, on the assumption I have made, would not
be retrospective so as to attract the rule of construction to which I have referred.
For the plaintiffs and Mrs Kelsey it was submitted that, as s 54 is an enabling provision, the purpose of which is to be
implemented by rules, the jurisdiction thereby conferred should not be cut down by implications which are not necessary in the
strictest sense. For this purpose they relied on the speech of Lord Goff, in an admittedly different context, in Aiden Shipping Co
Ltd v Interbulk Ltd, The Vimeira [1986] 2 All ER 409 at 413, [1986] AC 965 at 975. That case concerned the discretionary power
to award costs conferred by s 51(1) of the Supreme Court Act 1981. Lord Goff said:

It is, I consider, important to remember that s 51(1) of the 1981 Act is concerned with the jurisdiction of the court to
make orders as to costs. Furthermore, it is not to be forgotten that the jurisdiction conferred by the subsection is expressed
to be subject to rules of court, as was the power conferred by s 5 of the 1890 Act. It is therefore open to the rule-making
authority (now the Supreme Court Rule Committee) to make rules which control the exercise of the courts jurisdiction
under s 51(1). In these circumstances, it is not surprising to find the jurisdiction conferred under s 51(1), like its
predecessors, to be expressed in wide terms. The subsection simply provides that the court shall have full power to
determine by whom the costs are to be paid. Such a provision is consistent with a policy under which jurisdiction to
exercise the relevant discretionary power is expressed in wide terms, thus ensuring that the court has, so far as possible,
freedom of action, leaving it to the rule-making authority to control the exercise of discretion (if it thinks it right to do so)
by the making of rules of court, and to the appellate courts to establish principles on which the discretionary power may,
within the framework of the statute and the applicable rules of court, be exercised. Such a policy appears to me, I must
 confess, to be entirely sensible. It comes therefore as something of a surprise to discover that it has been suggested that
any limitation should be held to be implied into the statutory provision which confers the relevant jurisdiction. (Lord
Goffs emphasis.)

The plaintiffs and Mrs Kelsey also relied on the problems which would arise in practice if s 54(1) only permitted
compensation in cases where the liability was incurred during a particular period or after a particular time. In many cases, they
submit, it will be impossible for an investor to prove when the liability was incurred.
But FIMBRA does not primarily seek to establish any implied limitation. It relies on the express words of s 54(1). But it
does contend that Parliament cannot have intended that authorised persons should be liable to contribute to the scheme in order to
enable compensation to be paid to an investor in respect of a liability incurred by a person who was not an authorised person
when the liability was incurred, in respect of a transaction which was not investment business, as defined, when it was carried
out. The essential question is whether the liability for which the investor is to be entitled to compensation must be any
description of civil liability incurred by them etc (as described in the second part of the subsection) as FIMBRA contends, or
whether the words, in cases where and those 407 which follow, merely describe the occasion when the compensation scheme
was to operate, namely the inability to satisfy claims, without defining the categories of loss to be compensated, as Mrs Kelsey
contends.
FIMBRA relied on the decision of the Divisional Court in R v Secretary of State for Trade and Industry, ex p R [1989] 1 All
ER 647, [1989] 1 WLR 372. In that case the court was concerned with the power conferred by s 105 to investigate the affairs of
any person so far as relevant to any investment business which he is or was carrying on In May and June 1988 R was
required to produce documents dating from 1984. He did not dispute his obligation to do so if those documents related to
investment business carried on by him after 18 December 1986, when the definition of investment business came into force, but
he objected to producing documents relating to business carried on by him before that date which could not, on that account, be
recognised at the time as investment business. The question for the court was whether business carried out before 18 December
1986 could, or could not, be investment business within the meaning of the Financial Services Act 1986. The court concluded
that it could not for two reasons. The first and narrower reason was given by Mustill LJ, where he said ([1989] 1 All ER 647 at
650, [1989] 1 WLR 372 at 376):

One may now return to the Secretary of States theory of retrospective labelling. In order to decide whether any pre-
Act transaction had those characteristics which would have enabled it to rank as investment business if that concept had
then existed as part of English law, it would have been necessary to know two facts: first, whether the transactions
concerned investments of a type, and involved dealings of a type, described in Pt I of Sch 1; second, whether the dealing
was an excluded activity. Of these, the first fact was objectively ascertainable, its existence being independent of the
coming into force of the 1986 Act, and of anything done under the Act. But in many cases the second fact could not be
ascertained, for where the primary party dealt as principal it would be necessary to know whether the counter-party fell into
one of the three categories referred to in para 17(2)(a), and, as we have seen, these categories could not exist before the
mechanisms created by the 1986 Act were available and were utilized. So far as I can see, the only way to save the idea of
retrospective labelling is to hold either that the impossibility of identifying an excepted transaction meant that all pre-Act
dealings as principals were automatically excluded from investment business (in which case the category would become
larger on the appointed day), or were automatically included (in which case it would shrink). Neither reading conforms
with what the 1986 Act says, or with common sense. To my mind, s 105 just will not work if it is read as applying to pre-
Act transactions.

The second, and wider, reason was given by Mustill LJ in the following terms ([1989] 1 All ER 647 at 651, [1989] 1 WLR
372 at 377):

I do not, however, see any reason why Parliament should have given the Secretary of State powers to investigate
putative investment business before the Act, to underpin the supervision of a scheme and the application of sanctions to
enforce it, when the scheme only began to come into existence on the first of the appointed days.

FIMBRA relies on both reasons to support its contention. It claims that, until the definition of investment business became
operative on 18 December 1986, there could have been no investment business in connection with which the civil liability could
have been incurred, and, by parity of reasoning, until s 3 and Ch III came into operation on 29 April 1988, it could not be
ascertained whether the 408 person liable to the investor was an authorised person. FIMBRA points to the fact that s 54 comes
within Ch V, which deals with the conduct of investment business, which necessarily looks to the future, and should not,
therefore, be applicable to liabilities incurred in the past.
For Mrs Kelsey it was pointed out that the purpose of s 105 is different to that of s 54, and that several provisions contained
in Ch V are concerned with the consequences of events occurring before the 1986 Act came into force, notably s 49 dealing with
financial resources.
With one exception, I have not found the other provisions of the 1986 Act to be of any assistance. The exception is s 53(1),
which provides:

The Secretary of State may make rules concerning indemnity against any claim in respect of any description of civil
liability incurred by an authorised person in connection with his investment business.

That section has not yet been brought into force, but no party suggested that its terms could not be considered in relation to the
question of construction with which I am concerned. Section 53 is evidently seeking to require financial backing to satisfy any
claim as described. That description is substantially the same as the description used in s 54(1). Thus, one might expect s 54(1)
to cater for the consequences to the investor if there were a breach of the indemnity rules. But there are differences. In particular,
the liability under s 53 must, by its express terms, be incurred by an authorised person.
Counsel for Mrs Kelsey frankly accepted that s 54(1) requires that the investor must have a claim against the person who has
defaulted, but he submitted that that was necessarily implicit in the concept of compensation and was not a necessary condition
derived from the description of cases where compensation might be provided. He maintained that that part of the subsection
merely specified the occasions when the scheme is to operate, namely the default of the person who is, or was, an authorised
person.
It was submitted for FIMBRA that the second part of the subsection cannot be read as merely descriptive of the occasions
when the scheme is to operate. It was pointed out that an individual who was an authorised person carrying on investment
business might go bankrupt because of a debt unconnected with his business. In that event, no doubt he would be unable to
satisfy the liabilities referred to in s 54(1) either. But why should Parliament specify the latter default rather than inability to pay
debts if it was not intended to specify the qualification of a claimant for compensation? Unless the cases referred to set out such
qualifications, then the concept of the investor claimant would be deprived of meaning, he would not necessarily have a claim
against a person who is, or had been, an authorised person, and any such claim would not necessarily be in connection with an
investment business, for example the placing of money on deposit.
 I prefer the submissions for FIMBRA. It seems to me that the words, in cases where are not the equivalent of the word
if. Had it been intended that the cases should refer merely to occasions when there was an inability to pay, then the word
when would have been used instead of the word where, and there would have been no reason to define the event by reference
to civil liabilities incurred in connection with investment businesses rather than inability to pay debts generally. Whilst I accept
that the concept of compensation necessarily involves a claim by an investor in respect of a liability to him incurred by another, it
is only by resorting to the later words that such other person can be confined to one who is, or has been, an authorised person.
There can be no reason why Parliament should have intended authorised persons to compensate investors for the failure of a 409
person who has never been an authorised person. Accordingly, in my judgment, s 54(1) does not authorise a scheme for
compensating investors for liabilities incurred at any time. Thus, I reject alternative (i) suggested by the originating summons.
The question then is which of the alternatives suggested in the originating summons is the right one? Given that the second
part of the subsection is not merely stating when the compensation scheme is to operate, but is also prescribing the conditions in
which the right to compensation may arise, then the liability to the investors for which compensation is sought must satisfy three
conditions. It must be a claim in respect of any description of civil liability, such liability must be incurred by persons who are,
or have been, authorised persons, and it must have been so incurred in connection with their investment businesses.
In relation to the third condition, it seems to me to be plain, for all the reasons given by the Divisional Court in R v
Secretary of State and Industry, ex p R [1989] 1 All ER 647, [1989] 1 WLR 372, that there could be no liability incurred in
connection with investment business until the definition of that term came into force on 18 December 1986.
For Mrs Kelsey it was submitted that the subsection does not require that the person incurring the liability should be an
authorised person at the time. It was suggested that that qualification was attached only to the description of the person unable to
satisfy the claims. The words them and their in the phrase, incurred by them in connection with their investment businesses
refer back to persons who are or have been authorised persons. But this does not support the argumen