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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?

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